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Aquaculture MarketingHandbook

Carole R. EngleKwamena Quagrainie


Carole R. EngleKwamena Quagrainie

Carole R. Engle, Ph.D., is Professor, Director of the Aquaculture/Fisheries Center and Chairperson of the Department ofAquaculture and Fisheries at the University of Arkansas at Pine Bluff. She has more than 25 years of experience in theanalysis of economics and marketing issues related to aquaculture. She has worked in 20 different countries in all majorworld regions, but much of her work has focused on the economics and marketing issues of U.S. and Latin American aqua-culture businesses. She continues to teach an undergraduate and a graduate course in Aquaculture Economics andMarketing in addition to research and Extension responsibilities in the same area. She is the current President of theInternational Association of Aquaculture Economics and Management, past-President of the U.S. Aquaculture Society, aChapter of the World Aquaculture Society, and was the recipient of the Joseph P. McCraren Award of the National Aqua-culture Association and Researcher of the Year Award from the Catfish Farmers of America.

Kwamena Quagrainie, Ph.D., is Director of Aquaculture Marketing at Purdue University. He has more than 10 years ofindustry and research experience in economics and marketing issues related to both agriculture and aquaculture. He hasworked in Canada and some African countries on economics and marketing issues of agriculture and aquaculture busi-nesses. He teaches quantitative methods in Aquaculture Economics/Marketing and has research responsibilities inagribusiness/aquaculture marketing.

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First edition, 2006

Library of Congress Cataloging-in-Publication Data

Engle, Carole Ruth, 1952-Aquaculture marketing handbook / Carole R. Engle, Kwamena Quagrainie.— 1st ed.

p. cm.Includes bibliographical references and index.ISBN-13: 978-0-8138-1604-3 (alk. paper)ISBN-10: 0-8138-1604-1 (alk. paper)1. Aquaculture industry. 2. Seafood industry. 3. Aquaculture--Marketing. 4. Seafood—Marketing. 5. Aquaculture

industry—United States. 6. Seafood industry—United States. I. Quagrainie, Kwamena. II. Title.

HD9450.5.E54 2006664�.94�0688—dc22

2005015283

The last digit is the print number: 9 8 7 6 5 4 3 2 1

v

This book is dedicated to our familes:Nathan, Reina, Eric, and Cody, and Mildred and Glenn Wambold and

Gifty, Sabina, Joshua, Damaris, and Joseph

vii

Contents

Foreword ix

Preface xi

1 Seafood and Aquaculture Markets 3

2 Demand and Supply, Basic Economic Premises 19

3 Aquaculture Marketing Concepts 37

4 Aquaculture Growers and Their Marketing Choices 57

5 Seafood and Aquaculture Product Processing 71

6 Participation and Leadership in Marketing Channels 91

7 Marketing by Farmer Groups 113

8 Wholesaler Marketing 129

9 Market Trends 141

10 The International Market for Seafood and Aquaculture Products 153

11 Policies and Regulations Governing Aquaculture Marketing 169

12 Planning Marketing Strategies (Identifying Target Markets) 181

13 Marketing Research Methodologies 201

Annotated Bibliography of Aquaculture Marketing Information Sources 229

Annotated Webliography of Sources of Data and Information for Aquaculture Marketing 235

Glossary 245

Name Index 253

Subject Index 259

ix

The growth and development of aquaculture industriesaround the world has transformed and in some casesdominated local, national, and international seafoodmarkets. Yet many aquaculture growers have little for-mal training in marketing and lack the tools to ade-quately evaluate and adapt to changing market condi-tions. Moreover, the stunning diversity of culturedaquatic species, combined with strong local prefer-ences for seafood, present a confusing arena withinwhich to design successful marketing strategies. Thedynamic nature of seafood markets adds additionaluncertainty to marketing decisions.

As aquaculture businesses have emerged from sub-sistence-level, cottage industries and hobbies into com-mercial businesses, interest in marketing has grown.Small-scale businesses continue to seek to capture nichemarkets, while larger industry segments have sought tocreate demand for their products outside traditionalconsumption areas. Vertically integrated aquaculturecompanies have targeted export markets to competewith products grown locally or to introduce their prod-

ucts into larger, more lucrative markets. The interna-tional trade in aquaculture products such as salmon,shrimp, and tilapia has grown to have a substantialeffect on prices and consumption in other markets.Conflicts have developed as this trade has grown overtime.

Markets, marketing, and trade have become evermore important to growing aquaculture industriesworldwide. Yet the diversity and idiosyncrasies ofseafood markets require information that is specific toaquaculture and seafood markets. The AquacultureMarketing Handbook has been written as a step towardfilling a void in understanding both basic marketingconcepts as well as markets for specific aquacultureproducts. It is intended to serve as a guide, textbook, andreference for critical sources of marketing data, infor-mation, and research on seafood and aquaculture mar-kets. Most of all, we hope that this handbook will sparknew ideas and creative new marketing solutions forthose segments of aquaculture searching for new mar-kets and strategies.

Foreword

xi

Many aquaculture practitioners recognize the need tounderstand product marketing. Nevertheless, manyaquaculture growers tend to equate marketing withsales and do not have an adequate level of understand-ing of fundamental marketing principles. Thus, theylack the tools to adequately evaluate and adapt to chang-ing market conditions.

This book presents fundamental principles of mar-keting from a practical how-to perspective for thosewho are already in the business, those who might be inthe aquaculture business someday, and students, scien-tists, and Extension personnel seeking to understandaquaculture markets and marketing. Aquaculture mar-ket synopses are used throughout the book to add thecomplexities of the real world into each chapter. Thisbook can be used as a text for academic classes, as thebasis for marketing workshops, as a self-study guidefor aquaculture entrepreneurs, and as a reference bookfor commercial aquaculture businesspersons.

The book contains both an annotated bibliographyand a Webliography. These describe the marketing in-formation and sources of data available at the time ofwriting of this book. The bibliography and Weblio-graphy include descriptions of key references or a site'scontents and use. Data sources on prices, demograph-ics, trends, and other critical data are described andevaluated in the Webliography.

Chapter 1 presents an overview of seafood and aqua-culture markets and marketing. This chapter establishesthe uniqueness, scope, and diversity of seafood andaquaculture markets. It establishes the global nature ofseafood markets and provides an overview of charac-teristics and trends. The synopsis on tilapia provides anencouraging example of a market that was developed ina relatively short period of time and that continues togrow at a rapid pace.

Chapter 2 defines the fundamental economic con-cepts of demand, supply, and price discovery mecha-nisms of the market. Determinants of demand and sup-ply are reviewed. Inclusion of this chapter allows

readers unfamiliar with economics to understand theuse of these terms in later chapters. Readers who arealready familiar with these concepts can forego Chap-ter 2. The synopsis on shrimp presents an overview of acomplex but highly valued aquaculture product.

Chapter 3 reviews fundamental marketing concepts.This chapter lays the groundwork for defining bothtechnical terms and conceptual understandings for thediscussion that follows in subsequent chapters. Thesynopsis on salmon presents an example of an aquacul-ture product that has come to dominate the overallsalmon market.

Chapter 4 provides an overview of aquaculture sup-ply considerations. Aquaculture products present someunusual characteristics and challenges that have impli-cations for successful marketing strategies. The synop-sis on baitfish markets provides an excellent exampleof the need to constantly align farm production to meetthe changing demand of different market segments.

Chapter 5 reviews the structure of the processingsector for aquaculture products. Processing innovation,branding, and associated challenges are discussed. Thesynopsis on catfish draws upon the history of the devel-opment of the catfish processing sector and supplycoordination to present examples of these challenges.

Chapter 6 discusses the dynamics of channel organi-zation, ownership, and control in aquaculture market-ing. Contrasts are made with trends in agribusiness mar-keting. The trout synopsis highlights a mature industrythat has moved into value-added products to developnew markets.

Chapter 7 covers marketing by farmer groups fromcooperatives to bargaining groups to generic advertis-ing. Aquaculture marketing initiatives are contrastedwith those of other farm commodity groups. The grow-ing markets for farmed seabass and seabream are dis-cussed in the synopsis.

Chapter 8 discusses the wholesale market for aqua-culture products. The respective roles of food servicedistributors and brokers are defined, described, and

Preface

contrasted. The synopsis on carp adds a differentdimension to the discussion on wholesaling and distri-bution of aquaculture products.

Chapter 9 summarizes recent trends in marketing.The role of imports in seafood markets, increasedwholesale-retail integration, food traceability, and tech-nological innovations in distribution are changing thenature of seafood marketing. The giant clam marketsynopsis introduces the complex interactions amongaquaculture, the environment, and markets. As a threat-ened species, giant clams are protected from trade.These same restrictions may limit development of mar-kets for giant clam aquaculture.

Chapter 10 provides a brief overview of the theoreti-cal underpinnings of international trade. Trade disputesrelated to aquaculture products are chronicled and dis-cussed. The crawfish market synopsis traces the entryof Chinese crawfish into these markets, the impact onthe U.S. crawfish industry, and the subsequent anti-dumping lawsuit and its effect in the United States.

Chapter 11 outlines policies and regulations thatgovern aquaculture marketing. The synopsis on mus-sels provides an example of product differentiation andbranding in the French shellfish market.

xii Preface

Chapter 12 develops a framework and methods todevelop market plans based on well-conceived marketstrategies. The synopsis on hybrid striped bass providesan example of an aquaculture product filling a marketniche that became available with the demise of a popu-lar fishery.

Chapter 13 reviews various research methodologiesused in marketing research. The intent of this chapter isto make the reader generally familiar with the termsinvolved, to provide some idea of which methodologiesare best suited to which market questions, and to offersome understanding of interpretations. The synopsis onornamental fish markets further demonstrates the com-plexity and diversity of aquatic products, their markets,and the challenges faced.

We sincerely appreciate the following individualswho reviewed this book and provided helpful andthoughtful suggestions: Robert Pomeroy, Jo Sadler,Aloyce Kaliba, and Nathaniel Wiese.

Carole Engle and Kwamena QuagrainiePine Bluff, Arkansas

3

Successful industries must be successful in market-ing their products. A market can be defined in anumber of ways. It can be a location, as in the FultonFish Market in New York City or the Tsukiji Marketin Tokyo, Japan; a product, as in the jumbo shrimpmarket; a time, as in the Lenten season market in theUnited States or the European Christmas market; ora level, such as the retail or wholesale market.

This handbook combines marketing concepts andtheory with practical examples from aquaculture.This introductory chapter provides an overview ofseafood and aquaculture markets worldwide, theglobal supply of major seafood and aquaculturespecies, the location of major markets, and interna-tional trade volumes and partners. The chapter con-tinues with a discussion of characteristics of aqua-culture products and the market competition betweenwild-caught and farmed fish. The chapter concludesby summarizing trends in consumption of seafoodand aquaculture products.

GLOBAL TRENDS IN SEAFOODAND AQUACULTURE MARKETSThe earliest recorded evidence of aquaculture datesback to 900 B.C. (Bardach et al. 1972). Althoughthis date places aquaculture as an ancient technol-ogy, it is still quite young when compared to terres-trial agriculture. Diamond (1999) shows that domes-ticated species of both crops and animals were beingcultivated by 8500 B.C. (Table 1.1). Southwest Asiaand China served as the birthplace of much agricul-ture and aquaculture. Diamond theorized that therelative availability of game was one of the factorsaffecting the development of human history. Areaswith abundant game provided little incentive for de-veloping alternative food species, but areas withsparse game would provide greater returns to the ef-fort in developing farming techniques. For mostspecies of fish, scarcities due to overfishing have be-come evident only in the latter part of the 1900s.Thus, the incentive to explore and invest in the do-

mesticated production of aquatic plants and animalshas been of recent origin. The overall level of scien-tific and technological progress in the developmentof aquaculture technologies in the 1900s has al-lowed aquaculture industries to blossom.

Demand for fisheries products has grown as theworld’s population has continued to grow. However,capture fisheries worldwide appear to have leveledoff over the last 15 years while the quantity of aqua-culture production supplied to the world market hascontinued to increase (Fig. 1.1). World capture fish-eries increased most rapidly during the late 1950sthrough the end of the 1960s. From that point, cap-ture fisheries continued to increase, but at a slowerrate until reaching slightly more than 90 millionmetric tons in 1989. Since then, world capture fish-eries have fluctuated from 86 million to 97 millionmetric tons, averaging about 92 million metric tons.It is clear that most of the increase in the world sup-ply of fish and seafood is due to the expansion ofaquaculture production, not to capture fisheries.

Global aquaculture production has increased eachyear since 1984 at an average annual rate of 10%(FAO 2004). By comparison, animal livestock pro-duction has increased by only 3%/yr, and capturefisheries production by only 1.6%/year. Over the pastfive years alone, the annual growth rate of culturedfinfish and shellfish production increased from anannual rate of 5–6% in 1990–1991 to 14% in 1994–1995. Data for capture fisheries over this same timeperiod show either zero or negative growth.

All aquatic farming combined represented a 3%share of the world harvest of fish, shellfish, and sea-weeds in 1950 (FAO 2004). By 2001, this share hadincreased to 34% and consisted of a record 48.4 mil-lion metric tons (MT) of total farmed aquatic produc-tion. Of this, the greatest increase was for finfish andshellfish production that constituted 37.9 million MTin addition to seaweed production of 11.9 millionMT in 2001. The total value of aquaculture produc-tion worldwide increased to $61.5 billion in 2001.

1Seafood and Aquaculture Markets

4 Aquaculture Marketing Handbook

Table 1.1. Dates of Domestication of Various Plant and Animal Crops Important in theCultural Development of Humans.

Earliest attested Domesticated

date of Area Plants Animals domestication

Independent origins of domesticationSouthwest Asia wheat, pea, olive sheep, goat 8500 B.C.China rice, millet pig, silkworm By 7500 B.C.Mesoamerica corn, beans, squash turkey By 3500 B.C.Andes & Amazonia potato, manioc llama, guinea pig By 3500 B.C.Eastern U.S. sunflower, goosefoot none 2500 B.C.Sahel sorghum, African rice Guinea fowl By 5000 B.C.Tropical West Africa African yams, oil palm none By 3000 B.C.Ethiopia coffee, tea none unknownNew Guinea sugar cane, banana none 7000 B.C.

Local demonstration following arrival of founder crops from elsewhereWestern Europe poppy, oat none 6000-3500 B.C.Indus Valley sesame, eggplant humped cattle 7000 B.C.Egypt sycamore fig, chufa donkey, cat 6000 B.C.

SOURCE: Diamond 1999.

Figure 1.1. Volume of capture fisheries and aquaculture production, 1950–2002. (Source: FAO 2004.)

The relative costs of capture fisheries have in-creased over time while those of aquaculture pro-duction have decreased. The 200 nautical miles (370km) Exclusive Economic Zone (EEZ) limits estab-lished by the Magnuson Fishery Conservation andManagement Act, combined with declining abun-dance of many types of fish stocks, require trawlers totravel greater distances to find supplies of fish. Costsof capture fisheries are likely to continue to increaseover time. At the same time, aquaculture costs havedeclined as new technologies have been developedand refined. For example, although feed currentlyrepresents 60% of the cost of raising shrimp (Csavas1994; Valderrama and Engle 2001), improvements infeed efficiency over time and the development ofcheaper feed ingredients will continue to decreasecosts of shrimp production.

WHERE ARE MOST AQUACULTURE CROPS

PRODUCED?

Asia is the birthplace of early aquaculture produc-tion technology and continues to be the world’s lead-ing aquaculture region. Production in Asia reached46.7 million MT in 2002, accounting for 92% of theworld’s output (Fig. 1.2). Although aquaculture’scontribution to world aquatic production averaged35% in 2002, it reached 60% in some of the topaquaculture-producing countries. Next to Asia, Eu-rope was the second leading aquaculture-producingregion, but with only 4% of total world production.Europe was followed closely by Latin America andthe Caribbean, North America, and the Near East.Africa, the Southwest Pacific, and other regions pro-duced even less.

The nation that leads the world in aquaculture pro-duction is China (Fig. 1.3). Of the top 10 countriesin aquaculture production, nine are located in Asia(China, India, Japan, the Philippines, Indonesia,

Seafood and Aquaculture Markets 5

Thailand, Bangladesh, Republic of Korea, andVietnam). Chile is the only non-Asian country in-cluded in the top 10 (ranking ninth in terms of quan-tity produced). In terms of value, Norway and Chilereplace the Republic of Korea and the Philippines inthe top 10, but the other countries remain in thesame order of rank.

Much of the aquaculture production in the worldoccurs in lesser-developed nations (FAO 2004). Ofthe top 20 aquaculture producing nations, only two,Japan and the United States, are considered devel-oped nations by the FAO. Moreover, much of the in-crease in aquaculture production has been from low-income, food-deficit countries, such as China.

As mentioned earlier, global aquaculture produc-tion has grown at an annual rate of approximately10% (FAO 2004). This average growth rate has re-mained fairly constant over time even though thereis a great deal of variation from year to year. Aqua-culture production in China has grown at an annualrate of about 14%, substantially higher than theworld average rate of growth. Given that aquacultureproduction levels are very high in China, the contin-uing high growth rate results in large annual in-creases in aquaculture production each year. By com-parison, the Southwest Pacific region of the worldhas had a slight decline in aquaculture productionsince 1999, and production levels in Europe appearto have leveled off since 1999 as well. However, theother regions of the world have continued to demon-strate growth in aquaculture production at rates rang-ing from 5% to 25%/yr.

WHAT ARE THE MAJOR SPECIES CULTURED

WORLDWIDE?

Worldwide, the greatest volume produced of an aqua-culture product in 2001 was that of Japanese kelp(Undaria sp.) (Fig. 1.4). Kelp production is fol-

Figure 1.2. World Aquaculture Production by Region, 2002. (Source: FAO 2004.)

lowed, in descending order, by Pacific cupped oyster(Crassostrea gigas), silver carp (Hypophthalmich-thys molitrix), grass carp (Ctenopharyngodon idel-lus), common carp (Cyprinus carpio), Japanese car-pet shell (Ruditapes phillipinarium), bighead carp(Hypophthalmichthys nobilis), Crucian carp (Caras-sius carassius), nori (Porphyra), Nile tilapia (Oreo-chromis niloticus), Yesso scallop (Patinopecten yes-soensis), Atlantic salmon (Salmo salar), and thegiant tiger prawn (Penaeus monodon). The variouscarp species combined represent the major volume


of finfish harvested, by several orders of magnitude.The top five finfish species harvested, by volume,are all different species of carp, and carp are the onlyfinfish included in the list of the top ten aquacultureproducts (by volume). Nile tilapia places tenth byvolume.

The aquaculture species that generated the great-est value was the Pacific cupped oyster in 2002. Thesecond highest value of aquaculture production wasthat of the silver carp, followed in descending orderby the giant tiger prawn, common carp, Atlantic

Figure 1.3. a. Quantity of world aquaculture production by country, 2002. b. Value of world aquaculture pro-duction by country, 2002. (Source: FAO 2004.)

salmon, grass carp, kelp, Japanese carpet shell,Yesso scallop, and bighead carp. Thus, the second,fourth, sixth, and tenth top aquaculture species andtwo of the top five finfish species by value were allcarp species.


Figure 1.5 compares the value of the most impor-tant aquaculture species worldwide over time. Thevalues used in Figure 1.5 were obtained by dividingthe total value by the total quantity produced fromFAO data (FAO 2004), and they provide general

Figure 1.4. World aquaculture production by species, 2002. (Source: FAO 2004.)

Figure 1.5. Value of aquaculture species, 1984–2002. (Source: FAO 2004.)

trends. The values of the majority of species have re-mained relatively stable over time, with slight de-creases over time. There are two clear exceptions:tiger prawns and Atlantic salmon. The value of At-lantic salmon has declined dramatically over timesince the mid-1980s. This is likely due to the rapidincreases in aquaculture production of salmon world-wide. The value of tiger prawns has generally in-creased over time. It is the only species, of the topaquaculture species, that has exhibited increasingvalue over time. It is unclear whether the decline in2002 represents annual variation or a longer-termtrend.

WHAT ARE THE MAJOR FINFISH

SPECIES CAUGHT AND SUPPLIED

TO WORLD MARKETS?

The Peruvian anchovy constitutes the greatest vol-ume of worldwide capture fisheries (Fig. 1.6). Theprimary use of anchovies is for fishmeal production,not as a food product. The second greatest catch isthat of pollock. Pollock is used commonly in fishsandwiches, fish sticks, and other popular frozenand breaded preparations. It is also used for produc-tion of surimi in many countries. Following pollockare several other types of mackerel, herring, and theJapanese anchovy. Both skipjack and yellowtailtuna, whiting, capelin, sardines, cod, and squid areincluded in the list of the top 15 capture speciesworldwide by volume.

If the volumes of worldwide aquaculture produc-tion (Figures 1.4 and 1.6) are compared with thoseof worldwide capture fisheries, it is clear that more


grass or silver carp are produced worldwide than anysingle marine species used for direct food consump-tion by humans1. There was also more common carpproduced from aquaculture (3.2 million MT) than ofthe next largest volume of wild-caught foodfish, theChilean jack mackerel (1.75 million MT).

Nevertheless, total worldwide production fromcapture fisheries is still much larger than the totalproduction from aquaculture. Culture techniqueshave been developed for only a small percentage offinfish species and a large number of different fresh-water and marine species are caught and sold. Manyof these are caught for production of fishmeal andnot for direct human consumption.

WHAT COUNTRIES ARE THE MAJOR

MARKETS FOR SEAFOOD AND

AQUACULTURE?

Per capita consumption of seafood by world region2

averaged 10 to 48 kg/capita (Table 1.2) (FAO 2004).However, per capita consumption varied tremen-dously, even from 0 to over 100 kg/capita within thesame region of the world. The North Americanregion averaged the highest average per capita con-sumption rate, but this is due to inclusion of Green-land, St. Pierce and Miquelong in the FAO classifi-cation system. Oceania ranked second, followed bythe Near East and then the Caribbean. Table 1.3presents the top five countries in terms of highest percapita consumption of seafood for 2001. The coun-tries with the highest per capita consumption of fishand seafood in the world, Tokelau and the Maldives,are located in the Far East and Oceania world re-

Figure 1.6. Top 15 capture species worldwide by volume, 2002. (Source: FAO 2004.)

gions. However, these same regions included coun-tries such as Guam and Mongolia, with extremelylow per capita consumption rates of 2.9 and 0 kg/capita, respectively. In terms of the percent of coun-tries within a region that consumed more than 25kg/capita, there were 40% of the countries in the FarEast region, 65% in Oceania, and 22% in Europe.

Table 1.3 presents the top five countries in termsof total volume of consumption of fish and seafood.The total amount is clearly related to the combina-tion of per capita consumption and total population.Topping the list is China, which has both a high percapita consumption rate and the highest populationin the world, resulting in consumption of more than


30 million MT. Japan follows, with total consump-tion of more than 8 million MT; the United Statescomes in third with 5.8 million MT. Although percapita consumption in India is among the lowest inthe world, it still ranks fourth in total consumptiondue to its large population. Indonesia completes thetop five countries in total consumption.

TRADE IN SEAFOOD AND AQUACULTURE

Approximately 38% (live weight equivalent) ofworld fish production was traded internationally in2001 (Vannuccini 2003). However, this percentageincreased by only 3% (from 34% to 37%) from 2001to 2002. The percentage increases obscure the total

Table 1.2. Average Per Capita Consumption of Fish and Shellfish by World Region,1997–1999.

Mean � SD Maximum Minimum

Region kg/capita

Africa 12 � 13 63 0.2Caribbean 21 � 12 44 0.7Europe 17 � 21 90 0.1Far East 30 � 40 203 0Latin America 13 � 15 60 1.4Near East 10 � 8 26 0.1North America 48 � 31 84 21.2Oceania 42 � 41 200 2.9

Table 1.3. Top Five Countries Worldwide with Highest Per Capita Consumption and HighestTotal Consumption of Fish And Seafood, 2001.

Per capita Total consumption of consumption Total population fishery products

Country (kg) (million people) (metric tons)

Highest per capita consumptionMaldives 203.3 274 55,692Iceland 90.2 275 24,763Faroe Islands 86.5 45 3,891Greenland 84.3 56 4,719Kiribati 75.1 81 6,084Countries with highest consumption of fish and seafoodChina 24.4 1,231,935 30,061,530Japan 65.2 126,502 8,251,424USA 21.2 277,534 5,872,138India 4.7 976,346 4,542,780Indonesia 19.0 206,412 3,916,836

SOURCE: Holliday 2002.

increase in volume and value of the internationaltrade in fish and seafood. The continued increase inaquaculture production results in continued in-creases in the total supply of fishery products thatresults in lower percentage increases.

ARE AQUACULTURE PRODUCTS DIFFERENT FROMAGRICULTURE PRODUCTS?

CHARACTERISTICS OF AQUACULTURE

PRODUCTS

Aquaculture is a unique form of food production.Most cultured species of fish are not substantiallydifferent from wild-caught species. Common carp,with 2000 years of culture, has been bred selectivelyinto strains of fish recognizably different from wild-caught fish. This is not the case for most other cul-tured aquatic species. Genetic advances may changethis situation rapidly, but unlike animal and row cropagriculture, aquaculture growers find themselvescompeting in the marketplace with wild-caught sea-food products. In many cases, wild-caught productstill dominates the market and has a major effect onprice. Some segments of the aquaculture industryhave been more successful than others in differenti-ating their product from wild-caught supplies.

Aquaculture products offer distinct advantages interms of control over the product. Many aquacultureproducts can be supplied year round. In contrast,most wild-caught seafood is characterized by sea-sonal fluctuations related to weather and fishing reg-ulations that can result in dramatic price swings.The domination of seafood markets by wild-caughtspecies has resulted in a tendency toward high vola-tility. Although aquaculture products offer the advan-tage of controlled year-round supply, these productsmust compete within the volatile seafood market.

Controlled production techniques also allow theaquaculture grower to produce a consistent product.Consistency in supply refers to size, quality, andother product characteristics in addition to consis-tency in the quantity supplied. Consistently suppliedaquaculture products would be expected to lendsome stability to the seafood market as the marketshare of aquaculture products continues to growover time. Enhanced reliability and regularity insupply of farmed product should enable producersto negotiate better prices (Asche 2001). Theoreti-cally, buyers would be willing to pay higher pricesto compensate for reduced financial risk that resultsfrom supply problems. Market sectors, such as the


retail sector, that prefer fresh product might beexpected to prefer farmed supplies (Young et al.1993). Fresh product requires a short re-order pe-riod. Supply chains of captured fisheries products aremore fixed due to seasonality of supply and cannotrespond readily to changes in retail demand.

Consumers in many countries and for many yearshave exhibited strong preferences for fresh seafood.By contrast, one rarely hears an emphasis on thefreshness of beef, pork, or chicken. This strong con-sumer preference for fresh seafood likely derivesfrom the perishability of seafood as compared toother products. Technological advances enable pro-cessors to produce quality frozen and preserved sea-food products. However, the preferences for freshseafood have driven some retail grocers to purchasefrozen product, thaw it, and sell it as fresh.

It is easier to trace farmed product than wild-caught product back to its original source. The com-plexity of market channels for wild-caught productmay obscure steps in the supply chain and maketracing products to their source difficult (Asche2001). Some wild-caught seafood is marked, logged,and stored separately, but this is the exception. Thegreater traceability of aquaculture products shouldbecome increasingly advantageous as the newcountry-of-origin labeling laws take effect in theUnited States. The new labeling laws will requirecertification of product origin. Aquaculture suppliersshould find compliance less onerous than will sup-pliers of wild-caught seafood.

The potential to control attributes and their levelsin a product can offer an opportunity for farmers totarget specific consumer segments (Asche 2001).For example, producing the exact fat content to pro-duce a particular smoked flavor or production of fishof a given size may provide aquaculture growers asignificant marketing advantage over capture fish-eries. In most cases, additional research will be re-quired to develop cost-effective means of producingthese attributes.

Fish and other aquaculture production allows forreliable delivery schedules to comply with contrac-tual agreements to supply fish of a given size andquality grade. The uncertainty of what species, size,and, to some extent, quality of fish will be caught isan important characteristic that can be used to differ-entiate farm-raised from wild-caught seafood.

The management required for successful aquacul-ture businesses can be used to reassure consumers ofthe safety of the product. Consumers increasinglydesire assurances that products are free of chemicals,

pesticides, and other undesirable additives. Thisconcern can include assurance that the product hasnot been modified genetically.

Food scares and concerns over the use of pesti-cides in terrestrial agriculture have raised consumerconcerns about pesticide use in other food products,particularly new ones (Smith et al. 1999). These con-cerns have been extended to seafood. The particularconcerns for seafood are related to concentrations ofdioxin and mercury in seafood products, and the sta-tus of menhaden and other pelagics used for fish-meal in fish diets (Millar 2001).

There has been growing resistance to aquacultureproducts by some activist groups, who consideraquaculture to be unnatural and detrimental to theenvironment. In some areas of the United States, forexample, farmed salmon is considered to be less de-sirable than wild-caught salmon. On the other hand,some consumers may be convinced to pay a pre-mium price for environmentally sustainable prod-ucts. Farm-raised catfish is preferred to wild-caughtcatfish in southern states for a variety of reasons, butprimarily for the consistency of flavor, quality, andthe certainty that it is free of contaminants. Catfishand tilapia are frequently listed as environmentallyacceptable seafood choices by the Monterrey BayAquarium and other groups (such asAudubon LivingOceans).

A major disadvantage of aquaculture products ascompared to wild-caught seafood is the price. Costsof production have frequently been higher for aqua-culture products than for wild-caught seafood. How-ever, as wild fish stocks have declined and boatshave had to travel farther on fewer fishing days,costs of capture fisheries have increased. At the sametime, research and development have reduced costsof producing a number of aquaculture species. Thus,the costs of a number of farmed species are nowmore competitive with costs of wild-caught speciesthan before. However, the consistent production andsupply of aquaculture products results in consistentcosts and prices. Buyers who are accustomed towaiting for periods of abundant supply and low priceof wild-caught seafood may be reluctant to pay aconsistently higher price for aquaculture products.

Market opportunities have developed for aquacul-ture species when declining stocks of the wild-caught species resulted in higher prices. This hasbeen the case for hybrid striped bass in the UnitedStates, cultured turbot, halibut, and other specieseven though turbot and halibut are considered infe-rior to wild-caught product (Asche 2001).


MARKET COMPETITION BETWEEN WILD-CAUGHT AND FARMED FINFISH

Prices for several aquacultured species such asAtlantic salmon, rainbow trout, sea bass, and seabream have fallen as production has increased.These finfish species have grown in importance inseafood markets in the European Union and in theUnited States (Asche 2001). Atlantic salmon, rain-bow trout, sea bass, and sea bream were high-valuespecies before aquaculture production became sig-nificant. The increased supplies from aquaculturehave been accompanied by lower prices.

A farmed product that competes in a large marketwill face limited price effects from increased aqua-culture production. As long as supplies of the farmedspecies are low in comparison with wild-caughtspecies, the impact of the farmed quantity suppliedon price will be small.

When the supply of the farmed species is high,farm-level production is likely to determine marketprice because of the greater control that farmershave over the production process (Asche 2001).Salmon (Asche et al. 1999) and catfish (Quagrainieand Engle 2002) are examples of seafood marketsthat are dominated by farmed production. With fewor no substitutes, it may be more difficult for the in-dustry to grow because farmers will then have tocreate and promote the market for their product.

U.S. catfish was a low-value species prior to de-velopment of the catfish farming industry. Althoughprice in recent years has been low, there is no clearlong-term trend. The U.S. catfish industry has suc-cessfully moved its product into new markets, thussustaining price even with consistent growth in vol-umes produced and sold. New market developmentwas predicated upon changing consumer attitudestoward what had been regarded as an inferior, scav-enging fish.

Most seafood demand studies show that the sea-food market is highly segmented. Farmed speciesseem to compete mainly with similar, wild species,but not with other species (Asche 2001). However,trout was found to be a low-fat, healthful substitutefor meat in Europe (Gabriel 1990). Aquaculturegrowers are capturing market share even though de-mand studies have not determined clearly what mar-ket is being captured. Aquaculture products maycreate new market segments and may win parts ofmarket shares from a variety of goods such that theeffects on individual goods are not measurable(Asche 2001).

CONSUMPTION TRENDS IN SEAFOOD AND

AQUACULTURE MARKETS, EXPENDITURES,EFFECTS OF INCOME, AND AT-HOME VERSUS

AWAY-FROM-HOME PURCHASES

Until relatively recently, the majority of seafoodconsumed was wild-caught. Until the developmentof advanced transportation and refrigeration andfreezing technologies, the only seafood availablewas what could be caught locally. There remains astrong tendency for consumers to prefer species thatlive in nearby waters (See Inset 1.1 for an exampleof regional preferences in the United States).European research showed that fish were associatedwith the natural environment in which they werefound, that is, the sea, rivers, lagoons, and ponds;this leads to regional preferences for fish in Europeas in the United States (Gabriel 1990). Kinnucan etal. (1993) supported this by showing that prefer-ences for fish products were influenced to a large de-gree by source availability.


Gabriel (1990) showed that the image of fish inEurope was changing. Traditionally, fish was con-sumed once a week at home as an inexpensive pro-tein source that was prepared in simple forms.However, fish is increasingly viewed as a more ex-pensive item to be prepared in more refined culinarydishes.

Preparation methods also vary by region and theassociated culinary traditions. Northern Europeans,for example, prefer fish fried, in breadcrumbs,soused, smoked, and cooked in foil (Gabriel 1990).In Central Europe, French cuisine dominates, andfish are steamed, poached, fried, smoked, simmered,and wrapped in foil. In southern Europe, fish is mostoften fried, grilled, simmered, or eaten dried.

Consumer tastes and preferences change overtime. In the United States, for example, beef con-sumption has declined whereas poultry consumptionhas increased. This is presumably due to increasinghealth concerns and choices of lower-fat protein

People Prefer to Eat What They Have Traditionally Been Able to Catch Close to Their Homes

Many people are conservative and traditional about the fish and seafood that they eat. Consumerpreferences typically are based on what they, their family, and their friends have been able to catchor gather from their hometown areas. For example, Engle et al. (1990) asked consumers nationwidewhat their most preferred type of finfish was. From the following table, the regional nature of seafoodpreferences can be seen clearly. For example, the preferred finfish on the Pacific Coast of the UnitedStates was salmon. Consumers in the Mountain region preferred trout that is caught widely in themountain streams in the region. Catfish was the most preferred in the West South Central and EastSouth Central regions where catfish are abundant in the Mississippi River and its tributaries in thesouth. Catfish was also most preferred by consumers in the West North Central region through whichthe Mississippi River flows, but which also has a large number of inhabitants who have moved therefrom the south. The East North Central region has a tradition of Friday night fish fries that are basedon the catch of the locally available yellow perch. The Middle and South Atlantic regions have pro-vided consumers with an abundant flounder fishery, and the 1989 survey showed preferences byMiddle and South Atlantic consumers for flounder. Haddock was most preferred by consumers in theNew England region.

Top-Selling Fish/Seafood by Region

Consumers

Most preferred Second most Third most Region species preferred preferred

Pacific Salmon Halibut CatfishMountain Trout Halibut SalmonWest North Central Catfish Trout CodWest South Central Catfish Flounder TroutEast North Central Perch Catfish WhitefishEast South Central Catfish Flounder BassMiddle Atlantic Flounder Haddock SalmonSouth Atlantic Flounder Trout Red snapperNortheast Haddock Cod Swordfish

sources. However, dramatic declines in the cost ofproducing chicken in the United States no doubt havecontributed to increased consumption of chicken.Pork and seafood consumption patterns, on the otherhand, have changed little. Quality and flavor percep-tions often have the greatest impact on preferences(Kinnucan et al. 1993). Other variables such as price,household size, coupon value, household income,geographic region, urbanization, race, and season-ality have been shown to explain the variation inhousehold expenditures on fresh and frozen seafoodcommodities (Cheng and Capps 1988). Moreover,household size was found to be more important thanhousehold income. Kinnucan et al. (1993) also foundthat preferences for fish and seafood in the UnitedStates were generally not related to income, with theexception that lobster was preferred by high-incomeconsumers and catfish by low-income consumers.The most promising target for efforts to increaseoverall seafood purchases in restaurants was higher-income, white, well-educated consumers in familieswith no young children present. These individualswere likely to be responsive to the nutritional bene-fits and other favorable attributes of fish.

The most promising customers for at-home saleswere shown to be older, well-educated (four ormore years of college), higher-income (more than$30,000), nonwhite urban-suburban residents infamilies without young children (age 10 or underpresent) (Rauniyar et al. 1997). New England house-holds were significantly more likely to be frequentpurchasers for at-home use as compared to house-holds in the West North Central and West SouthCentral regions.


Frequent purchasers at restaurants were morelikely to have annual incomes above $20,000, andespecially above $40,000 (Hanson et al. 1994). Therole of income, race, seasonality, few small childrenand adherence to the Catholic faith were found to beimportant to restaurant consumption. The recogni-tion in all consumer profiles of fish as a nutritiousand healthful product represented an advantage forfuture marketing strategies in aquaculture.

AQUACULTURE MARKETSYNOPSIS: TILAPIATilapia (Oreochromis sp.; Tilapia sp.) are some ofthe most widely cultured species of fish worldwide.Tilapia have been introduced from their native rangesin Africa and have been spread widely across theworld (FAO 1997). The early introductions of tilapia(1950s–1970s) were part of development projectstargeted toward increasing the availability of animalprotein in subsistence farming areas. Surplus tilapiawere sold as a means of generating cash income.

Large commercial tilapia ventures began to emergein the 1990s. These businesses developed techniquesthat led to the production of export-quality fresh andfrozen tilapia fillets. The availability of supply ofhigh-quality fillets and marketing expertise has re-sulted in the successful introduction of fresh andfrozen tilapia fillets into the U.S. and Europeanmarkets.

World tilapia production has climbed steadilyover the last half a century, with a marked increasein the rate of growth in the 1990s (Fig. 1.7). Totalworldwide production of tilapia and cichlids reached

Figure 1.7. World tilapia and cichlid production, 1950–2002. (Source: FAO 2004.)

1.4 million MT in 2001. Average annual growth intilapia production averaged 12.5% from 1991–2001.

Much of the growth in tilapia aquaculture is aresult of the development of improved productionpractices and both domestic and export market de-velopment (Engle, in press). The development of ex-port markets has resulted in a change in the majortilapia production centers and a shift from a domi-nance of tilapia from capture fisheries to tilapia pro-duced on farms. In 1971, for example, the five lead-ing tilapia-producing countries (Tanzania, Uganda,Mali, Madagascar, and Senegal) were all African


countries with endemic tilapia populations (Fig.1.8a). All this supply came from capture fisheries.Only Indonesia and Nigeria registered measurableamounts of tilapia production from aquaculture, andthese were negligible. By the year 2001, only one ofthe five leading tilapia-producing countries (China,Egypt, Thailand, Philippines, and Indonesia) was anAfrican country (Fig. 1.8b). Of these countries, onlyEgypt and Indonesia have endemic populations oftilapia; tilapia were introduced into the other coun-tries. Moreover, the supply of tilapia had shiftedheavily to production from aquaculture.

Figure 1.8. a. The top ten tilapia producing (capture fisheries and aquaculture) countries, 1971. b. The topten tilapia producing (capture fisheries and aquaculture) countries, 2002. (Source: FAO 2004.)

China emerged as the dominant world producer oftilapia in the late 1990s (Fig. 1.9). Over the 10-yrperiod from 1992 to 2001, tilapia production in-creased by 327%, with an average annual increaseof 19%/yr. Some of this production is exported,whereas other portions of the production are con-sumed in the domestic market.

Tilapia continue to be raised for subsistence pur-poses. In subsistence farming areas, tilapia are con-sumed whole, gutted, scaled, and either fried orroasted. Tilapia is now accepted in many nationaldishes around the world and is popular in manyforms, including smoked, as sashimi, and even asfried tilapia skins. Whole-dressed tilapia are com-


mon in many open-air markets around the world.Export markets, however, require primarily filletedproducts although there is also international trade infrozen whole tilapia. Frozen whole tilapia importedinto the United States is targeted toward Asian gro-cery stores throughout the United States. Taiwan hasdominated the supply of frozen whole tilapia to theUnited States for many years, but China increasedthe export volume of frozen whole tilapia to theUnited States in the early 2000s.

The United States is the major export market fortilapia. Imports of tilapia into the United States havegrown rapidly, particularly since 2000 (Fig. 1.10).The majority of this growth has been in the form of

Figure 1.10. Imports of tilapia into the United States, 1992–2003. (Source: FAO 2004.)

Figure 1.9. Tilapia production in China, 1950–2002. (Source: FAO 2004.)

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