Industry profit flounders as the cost of inputs rises
London, United Kingdom (PRWEB) January 18, 2013
The Seafood Processing industry comprises operators that fillet, can, preserve, salt, freeze and transform seafood into products that are purchased in supermarkets and by specialist retailers, and sold to food-service and catering sectors. According to IBISWorld industry analyst Temitope Onabanjo, “the industry has struggled over the five years through 2012-13, after coming under increasing pressure from high raw input prices, volatile catch volumes and the sustained economic recession”. Industry revenue is expected to grow at a compound annual rate of just 0.9% over the five years through 2012-13, to total revenue of £2.84 billion.
Seafood catch volumes in the United Kingdom have decreased significantly, causing undersupply to seafood processors and higher prices. As purchases of seafood are the highest single cost for the industry, this effect has squeezed profit margins to breaking point, as processors are forced to keep their selling price low to compete with cheaper, more voluminous imported produce. The industry is becoming increasingly dominated by large-scale supply contracts issued by supermarkets, which have encouraged processors to consolidate operations with the aim of cutting costs and improving competitiveness in such tough market conditions. This difficult operating environment has been exacerbated by the declining economic conditions, which have discouraged consumer spending, with fresh seafood suffering due to its status as a luxury item for many people. IBISWorld estimates that industry revenue will contract by 0.4% in 2012-13, as many operators will undergo restructuring and consolidation.
The future of the industry has been thrown into doubt because of these problems, with overfishing regulation and import competition set to plague domestic supply of processed seafood over the next five years. Meagre growth is forecast for the industry over the five years through 2017-18. The minor growth achieved will stem from increased demand for seafood due to greater health consciousness. However, the industry will struggle to overcome the wider industry influence of diminishing wild fish stocks and a higher level of imports.
Onabanjo adds, “Development of aquaculture fish farming operations will help close the gap between supply and demand for seafood in the long term, but this will do little to alleviate the under-supply and subsequent increased seafood costs in the short term."
The Seafood Processing industry has a low level of market share concentration as the top two players in the industry account for only 37.6% of total industry revenue. While the industry remains fragmented for now, the present trend is towards consolidation, and market share concentration is increasing year on year. The influence of supermarkets is such that far larger supply contracts are up for grabs. This has encouraged firms to unite production in order to pursue economies of scale and scope. Major companies include Young’s Seafood and Icelandic Group UK.
For more information on the Seafood Processing industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
Industry operators process fish, molluscs, crustaceans and other seafood. This industry also includes establishments known as floating factory ships that are engaged in shipboard processing of seafood. The industry excludes processing and preserving fish on vessels engaged in fishing, processing of whales and production of oils and fats from marine material. Prepared frozen fish dishes and manufacture of fish soups also fall outside of the scope of this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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