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Nordic Marine Innovation Conference - Competition and cooperation Innovation as a driver for competitiveness in the Nordic marine sector

Jens Henrik Møller GEMBA Seafood Consulting A/S

January 25th 2012

Market innovation – sustainability as an issue?

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Intro: GEMBA Seafood Consulting

Report on ”Kartlegning av kunnskab om sjømatmarkedet og

brukerdreven innovasjon i sjømatsektoren”

Sustainability/Innovation some trends in the markets

Cases of innovation

Advices

Agenda

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Intro GEMBA Seafood Consulting A/S

GSC is a consulting company with focus on the seafood sector, economic analysis and innovation in business processes. Examples of works in the field of economic analysis:

– Analysis on different markets (European) for seafood products.

– Market analysis of the cold water shrimp markets and organizer of the

ICWPF-2011 in London.

– Economic Impact analysis and development/strategy processes for Danish ports.

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Intro GEMBA Seafood Consulting A/S

GSC is a consulting company with focus on the seafood sector, economic analysis and innovation in business processes. Examples of works in field of innovation:

– ”Kartlegning av kunnskab om sjømatmarkedet og brukerdreven

innovasjon i sjømatsektoren”

– Development of new packaging material for smoked salmon.

– The use of ozone as a disinfectant tool in the fishing industry.

– Energy optimization - trawl fishery in the Baltic Sea.

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Some of the recommendations in the report: More focus on global market innovation in the Nordic seafood sector. Innovation funds and companies should focus on trends like traceability, documentation and shelf life. It is needed to analyze the type, extend and need for user driven innovation. Especially the market innovation in the salmon sector have been successful, other sectors could benefit from this knowledge. A pan Nordic comparison of the innovation funds and their impact on the sector is needed.

Report for Nordic Innovation Center (NICe) in 2011 Kartlegging av kunnskap om sjømatmarkedet og brukerdreven innovasjon i sjømatsektoren

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Some types of innovation:

Product innovation New products to existing markets.

Process innovation New ways of doing things.

Market innovation Existing products to new markets.

What is innovation? One kind of definition: Innovation is often defined as inventions and ideas that are translated into products or services that are brought into the market:

Innovation is a complex process - normally difficult to control and the results are often surprising!

Typical views on innovation in business

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Some types of sustainability in the case of seafood:

Ecological sustainability, management plan for stocks, by-catch of threatened species. Sustainable fishing methods, reduction of seabed destruction, by-catch and discard. Reduction of CO2 emissions, fuel and transport. Financial sustainability, job creation and welfare.

What is sustainability?

One kind of definition: For humans, sustainability is the long-term maintenance of responsibility, which has environmental, economic, and social dimensions:

Typical views on sustainability in seafood sector

And the normal reaction is to put some logo´s on the product!!

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Do the market ask for sustainability? Not all countries in Europe have the same awareness of sustainability in seafood:

High level of awareness: Germany, Sweden, and UK

Medium level of awareness: Denmark, Finland, Benelux and the north part of France

Lower level of awareness: Spain, Italy, Portugal, Greece and the south part of France

The ”consumer sustainability map” in terms of seafood

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Market trends Germany: 82 million inhabitants – big potential in the market.

Traditionally the market in Germany has always been focused on

price.

Increased focus on traceability, eco-labeling and sustainability at consumer level.

New trends are indicating that quality and especially certification is becoming more important and is now established in many of the biggest supermarket chains (LIDL & ALDI).

The financial crisis in the EU has created insecurity in the German economy.

The ”consumer sustainability map” in terms of seafood

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Market trends Germany: 82 million inhabitants – big potential in the market.

Traditionally the market in Germany has always been focused on

price.

Increased focus on traceability, eco-labeling and sustainability at consumer level.

New trends are indicating that quality and especially certification is becoming more important and is now established in many of the biggest supermarket chains (LIDL & ALDI).

The financial crisis in the EU has created insecurity in the German economy.

The ”consumer sustainability map” in terms of seafood

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Market trends Italy: 58 million inhabitants – Big markets for seafood in the north – interesting market. The financial insecurity has had a big effect on the Italian economy. A strong ”discount trend” is now coming up after several years with stable and increasing prices.

The discount trend may put pressure on “the demand” for sustainability in coming years

The ”consumer sustainability map” in terms of seafood

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Market trends Italy: 58 million inhabitants – Big markets for seafood in the north – interesting market. The financial insecurity has had a big effect on the Italian economy. A strong ”discount trend” is now coming up after several years with stable and increasing prices.

The ”consumer sustainability map” in terms of seafood

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Can innovation and sustainability be combined?

The seafood market

Food safety

Innovation

20 years ago

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Can innovation and sustainability be combined?

The seafood market

Traceability

Innovation

10 years ago

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Can innovation and sustainability be combined?

The seafood market

Sustainability

Innovation

Now!

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Can innovation and sustainability be combined?

The seafood market

Creativity – Trustability??

Innovation

Future?

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Can innovation and sustainability be combined?

Catch/ Production

Processing

Sale

consumption

Sea food

sector

The market

Push for sustainability from the market

Push for innovation from the sector

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Most people think in terms of product innovation.

But classic product innovation is not always the best answer. Product innovation?

Sustainability as a product innovation leads to better prices and secure sales.

Product innovation

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The export of herring to the seafood market in Nigeria is a prime example of market innovation!

The figure below shows that it is possible to expand the market drastically. But how do the market regulate innovation?

Case: Market innovation in Nigeria - Herring

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Norwegian export of frozen herring to Nigeria

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And what did happen in 2011??

Case: Market innovation in Nigeria - Herring

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Norwegian export of frozen herring to Nigeria

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Probably due to increase in price due to lower quota for Norwegian spring spawning herring The example shows that market innovation can lead to improved export but change in demand, surplus and prices can change effort in market innovation in short time.

Case: Market innovation in Nigeria - Herring

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Norwegian export of frozen herring to Nigeria

Eksport/ton

NKR/kg

Price jump!: 2010: 4.40 Nkr. 2011: 7.00 Nkr.

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MC Donalds chose Espersen A/S due to sustainability/traceability

Espersen A/S chose Hermes A/S due to sustainability/traceability Prices for certified fish are not always higher.

But the sale is more secure.

Hermes had less problems during the ”cod crisis”

Case: The MC Donald case

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MSC certified plaice from the North Sea have been sold for 2 - 4 DKK above the price for non - certified plaice.

This example shows it is possible to gain better profit margins by certification (MSC).

Case: Product innovation in sustainability – MSC certified plaice

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Average price for plaice sold at the fish auction in the Port of Hvide Sande in 2011

MSC

Conv.

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Case – Process Innovation

Proces innovation: Prawns from Ilulissat: 199 DKR/kg.

Prawns from City of Matane: + 8 % A new product line and new packaging - made for TESCO telling the story about sustainability in fishery and sustainability in the processing – wind energy from local area!

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Experiments from the Baltic cod trawler fleet shows it is possible to reduce fuel consumption up to 38 % per kg. cod.

The project utilized Dynema-wires, pelagic trawl doors and Dynema panels in the trawl.

The example shows that sustainable process innovation is very important way to secure the profitability in the fishing sector.

Case: Process innovation and sustainability – Katrine Kim R 254 - NEXØ

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What is next step? A new project in North Sea to convince the fishermen at the west coast!

But the results need to be communicated throughout the whole value chain so processors and traders are able to gain from the results!

Case: Process innovation in sustainabillity

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Case: Product innovation in Europe - trendsetters

The trendsetters in product innovation are typically located close to the markets

Seafood Prix d'Elite that is a competition in European Seafood Exhibition goes to new and innovative products in the European seafood market.

I the period 2008-2010 the competition was won by 2 German enterprises 1 UK enterprise 1 Spanish enterprise 1 Dutch enterprise 1 Danish enterprise

Apparently the Nordic seafood sector is not doing so much in product innovation

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Summary:

The “cases”: Sustainability in market innovation: It can work without sustainability - but demand/ supply and price can easy change the situation (Herring in Nigeria) – sustainability can secure the market position and reduce the downs (Hermes/Espersen). Sustainability in product innovation: The MSC may work and give higher prices (Plaice from Hvide Sande) – but nothing is sure!! Sustainability in process innovation: Some companies try to tell the story (Prawns from City of Matane)– but it must be told throughout the whole value chain (Energy consumption in the fishery)! Nordic trendsetters in product innovation: Non or few!

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Some good advices!!

Market innovation can expand the market, which secures the

prices. Markets like Africa, Brazil, India and China are opportunities for even

more seafood.

Innovation in sustainability gives better profit margins and/or secures the sale of the product.

Ongoing process innovation are very important to keep the sector competitive - but the results need to be communicate in a better way throughout the value chain into the market – if the seafood sector should gain the full potential and benefit from the work with sustainability and innovation.

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Jens Henrik Møller GEMBA Seafood Consulting A/S JM@GEMBA.DK WWW.GEMBA.DK

Thank you for your attention!

Nordic Marine Innovation Conference - Competition and cooperation Innovation as a driver for competitiveness in the Nordic marine sector