The biggest lesson learned from the four case studies is that there is a severe lack of consistent data at the retail level for seafood products. Obtaining reliable retail data proved very difficult in all cases. Hence, some critical assumptions had to be made about retail prices and their development over the past five years.
This caveat is taken into account when comparing the results between individual case studies. The most relevant comparisons are between Iceland and the United Republic of Tanzania, on the one hand, and Morocco and Denmark on the other. This is because the fisheries and the final products in these two pairs of countries are similar in nature.
In Iceland and the United Republic of Tanzania both fisheries provide a highly developed market with white fleshed fillets distributed and processed through several stages before final consumption. When comparing the value chains directly the most striking difference is in the value represented by the retail sector in each case. Figure 31 shows the two value chains for Icelandic cod fillet on the United States market and Nile perch fillets on the European market.
In the Tanzanian case the retailer absorbs about 60 percent of the overall value in the value chain while in the Icelandic case the retail level represents about 36 percent. This reflects the different structure of the two value chains. Icelandic companies control a bigger share of the value chain than the Tanzanian companies. Icelandic cod is exported to the US as fillets and is often further processed in factories owned by Icelandic export companies. The Tanzanian Nile perch fillet is exported directly from the United Republic of Tanzania to the EU where it is usually sold fresh. Any further value addition is then done by European companies and the distribution is in the hands of European companies. In the case of Icelandic cod the distribution is outsourced to large food distribution companies but the fish is sold through agents that the export companies deal with directly. The Tanzanian processing sector adds about 18 percent of the overall retail value while the Icelandic processing sector adds 28 percent. Unfortunately it was not possible to directly compare individual cost items at this level, due to shortage of data from Tanzania, but different cost structures, such as lower wages in Tanzania might be a plausible reason for this difference. Tanzanian fish traders are also a part of a fish collecting system for the processing factories taking up about 5 percent of the total retail value. In Iceland fish markets and fish processors themselves are the channel for distribution of raw material from dockside to the processors. Hence, some of the value which fish traders receive in Tanzania might be included in the value added at processing and fishing levels in Iceland. The Tanzanian fishermen receive about 15 percent of the retail value versus the 19 percent which the Icelandic fishing companies receive. It is important to make a distinction between these two since in the Tanzanian case most of the fishing is done with low capital highly labour intensive canoes, resulting in low labour productivity, while the Icelandic fishermen receive about 40 percent of the 19 percent (or 7.6 percent of retail value) that the fishing company receives. On the other hand the Icelandic fisherman works in a highly capitalized industry, resulting in high labour productivity and high wages as a result of large quantities of fish per fisherman. Thus the lower share which the Icelandic fisherman receives actually yields higher annual wages for each fisherman. This demonstrates how important it is in value chain analysis not to focus on the absolute percentage each sector receives but rather to compare efficiency and productivity of capital and labour. A comparison between relative costs in the other countries, for instance, reveals that higher prices at the retail level have led to increased fishing pressure threatening the sustainability of the Tanzanian fisheries due to lack of fisheries management. The same situation is described in chapter two Figure 4. Decreased sustainability will result in lower fishers’ incomes and increased poverty. Higher prices in the Icelandic fisheries in 2001 and 2002 resulted in higher wages for the fishers through the crew share system. Due to effective fisheries management the catch only changed according to biological parameters and increased prices did not increase the fishing pressure, at least not in such a way that it threatened the sustainability of the Icelandic cod stock.
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FIGURE 31
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FIGURE 32
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The comparison of the value chains for Icelandic cod and Tanzanian Nile perch has shown the importance for fishing communities to participate in the ever increasing globalization of the export seafood trade to provide both income and foreign currency. However, in order to give Tanzanian fishing communities more influence in the overall value chain they must work together to create strong export structures in order to market their products directly to the large super-market chains which control consumer markets. The immediate danger is that although international trade has benefited local fishers and fishing communities the lack of effective fisheries management and poor infrastructure threatens the sustainability of the fishery. These results also largely confirm a similar analysis of the Ugandan Lake Victoria Nile perch fishery (Ikwaput-Nyeko, 2004).
There are several common factors between the Danish herring fishery and the Moroccan anchovy fishery. Both are pelagic species, high in fat and caught by purse seine. Both need considerable processing before they are put on the market. The Danish herring fishery is larger in volume but fished with fewer and larger boats than in the Moroccan fishery. The Moroccan fishery is based on both small and medium sized vessels. Figure 32 shows the value chains for the Moroccan anchovy fishery and the Danish herring fishery. When comparing these it must be kept in mind that the data for the Moroccan fishery was of considerably lower quality than that for the Danish fishery. Therefore higher variability should be expected in the actual numbers for the Moroccan fishery. The comparison is presented here as an example rather than an accurate comparison of the two fisheries.
The Danish harvesting sector receives about 8 percent of the retail value while the Moroccan fishery receives about 4 percent. When comparing individual cost items for the fishing sectors it comes as a surprise that the share of wages in the total costs for the Danish fleet is lower than the Moroccan fisheries. The Moroccan fleet paid 39 percent of total revenues as wages while the Danish fleet paid 29 percent. There is no apparent reason for this but a plausible explanation might be that the Danish fleet is more capitalized than the Moroccan fleet. A more capitalized fishery should have a higher operating margin in order to pay for the extra capital expenses but in this case it is not explained by differences in operating margins which are approximately the same for both fisheries. Fishing gear and maintenance is considerably higher in the Danish case, or 16 percent of total revenues, compared to only 6 percent for Morocco. Since all other costs are similar the higher maintenance costs are the only indication of differences in the two fisheries. This is also interesting because the Danish fleet operated at a loss over the period while the Moroccan fleet was still profitable after deduction of interests, taxes and other capital expenses. This warrants further investigation in the future, including comparison of wages of the fisherman and more detailed study of each cost category.
The Danish and Moroccan primary processing sectors receive 17 and 21 percent respectively. Comparing individual cost categories for processing sectors in each country reveals that the Danish industry pays just over 70 percent of their total revenues for raw material, i.e. herring at the dockside or imported, compared to 57 percent in Morocco. Wages and other costs are similar but the main difference is in the operating margins where the margin for the Danish industry is about 5 percent while it is about 30 percent for the Moroccan industry. This difference might reflect the fact that Moroccan processing takes more time and requires more specialized facilities, while the Danish herring processing is fairly standardized, requiring a relatively shorter processing period. To fully understand this difference a more detailed analysis is needed, especially in the Moroccan case where the information is based on a representative firm rather than a collection of firms as for Denmark
When comparing the secondary processing and retail levels for each country an interesting fact is revealed. In Denmark the retail level adds 38 percent and the secondary processing adds 37 percent of total value to the overall value chain, while in Morocco the retail value adds up to 75 percent of the total value chain. Hence, the Danish processing sector receives a considerably higher portion of the value chain. It was not possible to confirm that no additional repackaging or storage is done at the retail level in Italy and hence the Italian retail sector is left with yellow and orange stripes in the graph, indicating that some secondary processing occurs at this stage. There could be many explanations for this difference in the structure of the two value chains, including differences in import duties (Denmark is within the common European market while import duties must be paid for the Moroccan products imported to the common market), greater competition among suppliers of anchovies or lack of competition among retail stores in Italy. None of this can be confirmed without a detailed study of the retail markets for each product.
The comparison between the Danish value chain for herring and the Moroccan value chain for anchovies have yielded some interesting differences. Though in principal the products have common features their value chains are quite different. Throughout the entire value chain the operating margins are higher for the Moroccan products and yet they receive a lower share of the entire value chain. In order to explain these differences one would have to go into a detailed description of each industry with emphasis on explaining institutional organizations, such as industry and market structure.
Figure 33 shows all four value chains on one graph with two striking differences. First, the Danish and Moroccan harvesting sectors (pelagic fisheries) receive a lower share of the value chain than the Icelandic and the Tanzanian fisheries (demersal fisheries).
The value chains for pelagic fisheries show similar characteristics to value chains for highly processed agricultural products on the US market. In Table 4 it was shown that for highly processed products such as canned tomatoes or corn flakes the farmer received between 4 and 7 percent. At the same time pork, poultry and beef products (often seen as substitutes for fish proteins from whitefish such as cod or Nile perch) returned between 30 and 50 percent of the retail value to the farmers. This difference between fish proteins and animal proteins is interesting and is discussed further in the chapter on the Icelandic value chain for cod. The second interesting comparison is that despite the low quality of some of the data from Morocco and Tanzania the pelagic and demersal industries show similar characteristics in the value chain structure. For pelagic fisheries the retail and secondary processing sectors combined receive about 75 percent of the retail value while in demersal fisheries this combination represents 55-60 percent of the total retail value.
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FIGURE 33
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Comparing the four value chains highlights some important facts for seafood value chains, including similar trends to those for agricultural products. This means that the share of farmers/fishers becomes relatively lower as the product becomes more processed. It also shows that the share in the value chain does not reflect the profitability of firms or well being of fishermen. An example is in Iceland where fishers receive higher wages than the national average but a lower share of the total retail value than their Tanzanian counterparts. In the Danish fishery the fishermen receive good wages but the fishing companies are run at a low operating margin, resulting in net loss after capital expenses. However, the Moroccan industry pays a higher share of revenue as wages, and yet operates at a higher operating margin than its Danish counterparts.
There are also lessons on the usefulness of analysing value chains and the potential pitfalls. Value chain analysis only becomes meaningful to compare the net value added at each level, however, as this research has shown, obtaining information on that is very difficult. Another difficulty is comparing profits between countries where tax codes are different and accounting for capital costs is done in different ways. This would require detailed studies of company level data that would be very costly. These difficulties make it clear that value chain analysis should be interpreted carefully and not taken out of the context of its environment.
