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UK Fish Market Update

September 2005 Edition

The UK Fish Market Update is an occasional publication of the Canadian High Commission (London). It is intended to highlight recent developments and trends in the UK fish market and to provide Canadian readers with a summary of UK fisheries import statistics and prices⁽¹⁾.

Introduction

It is a full year since our last report on the UK fish market - so what’s changed? Perversely, perhaps it may be easier to start with what has stayed the same. The old broad themes remain - at the industry level consolidation and at the consumer level demand for ever more convenient innovative products, notably chilled ones rather than frozen. Consumers also see ongoing stories about the environmental issues linked to fish, and the relationship between food and health. A growing theme at the higher end is increased interest in the provenance of food. At the macro-level, too, there may be a slight wobble in what has been an unparallel period of growth in the economy.

The Trading Environment

The housing market, which has a disproportionate effect on consumer spending in the UK for peculiar historic reasons, started to slow about a year ago. The trend began in the populous south and east. After 10 years of rising prices the annual price increase is expected to be zero this year. The London bombings too seem to have resulted in less visitors and retail sales for the heart of the capital and London tourism will be down, with knock-on effects on restaurants. While it is too early to say how severe this is, it is probably fair to say that the froth will be taken off the food service sector in the most prosperous part of the country, at least in the short term. Retail sales figures just out, however indicate a rapid recovery after the attacks in central London.

Consumer trends

The same drivers we have reported on before - ever-increasing numbers of women working outside the home, increasing single person households and the explosion in leisure options - have lead to ever-diminishing time spent on meal preparation. This is now down to less than 20 minutes for a main meal. Moreover, more than half of meals taken in the UK are by people eating on their own - and the prepared meal market thrives in consequence. This is good for fish sales, as one of the commonest reasons given for not buying fish is that consumers don’t know what to do with it when they’ve got it. There is also a preference for fresh or chilled products, which are seen to be of higher quality than frozen. Of course, the small size but dense population of the UK lends itself more easily to efficient chilled distribution than does Canada’s geography.

Health

Interest in the health aspects of food remains high and fish generally scores well here. The Food Standards Agency (FSA) continues to reinforce the message that a healthy diet should include two portions of fish a week, one of which should be oily fish, because of its beneficial Omega-3 fatty acids. Glycaemic index is another fashionable concept currently and relates to the speed of release of sugars into the blood stream - not only important for diabetics but for weight control. Fish of course scores well here too.

Retail

The UK food retail sector is enormously concentrated. Three supermarkets account for 63% of retail food spend with Tesco alone having 30% - and rising. With fish, as with other food products, an ever-increasing proportion of household spend is through supermarkets as opposed to other sorts of retail outlets.

Food Processing Sector

This industry has struggled to maintain margins in recent years in the face of the strength of the retail sector. The trend of deflation in the grocery sector and continued pressure from private label has maintained the pressure on the food manufacturing sector across the board. Consolidation continues. Frozen fish has been particularly difficult although there has been more scope with faster-growing chilled products. However, according to the latest survey by the Sea Fish Industry Authority (Seafish) profitability has increased slightly across the UK seafood processing industry. The same study highlights the UK’s dependence on imported fish - secondary processors import 70% of the product they need to operate.

Food service

About half of UK seafood consumption is outside the home and seafood supplies to this market are worth some $1.65 billion⁽²⁾ annually. For Canadian seafood suppliers the foodservice sector can be an interesting option because it is not nearly so centralised as the retail market and the processing industry supplying it.

Environment, animal welfare etc

Issues relating to food production methods have increasing profile in the UK. They generally fall under environmental and/or ethical headings. Some of the most prominent ones would include GMOs, organic production, sustainability, including sustainable exploitation of marine resources, animal welfare and “fair trade”. There is currently no appetite for food produced from GMOs in the UK and since it is law that food products derived from GMOs must be labelled as such, there are virtually none on the market. Organic food, while only commanding a small percentage of total food consumption, has seen high profile and rapid growth in recent years, although the double-digit growth of two or three years ago has steadied.

The sustainability or otherwise of commercial fish stock exploitation has attracted considerable media attention in recent years. Given the place of cod in the heart of the average British consumer the news that North Sea cod stocks are in trouble had resulted in a broad perception among the “chattering classes” that it is irresponsible to eat cod - this despite only a small proportion of cod consumed in the UK coming from British waters. The Marine Stewardship Council (MSC) which is headquartered in the UK, seeks to promote sustainable fisheries through a certification system and on-pack label. However a relatively small number of major fisheries have achieved certification to date. Now Seafish has joined the fray. The organisation has been actively seeking to assure consumers that they can still eat seafood with a clear conscience and points out that 95% of the cod eaten in the UK comes from outside of the country anyway. Seafish has always had a fishing technology remit as well as a seafood marketing one, and has now created a new post to help the UK seafood industry develop a co-ordinated approach to responsible fishing, the environment and sustainability.

The British fondness for animals is well know and animal welfare issues, including in food production, are important here. The Royal Society for the Prevention of Cruelty to Animals (RSPCA) runs an on-pack certification scheme for animal products produced to specified welfare standards under the banner of Freedom Foods. A recent extension of this scheme in the aquaculture sector has seen the approval of a well boat to allow harvesting in adverse weather conditions. A Canadian Company, Charlottetown Metal Products, has also benefitted from the UK interest in animal welfare by manufacturing two crustacean stunners for a Devon crab company - one for mass shellfish processing and another for restaurants for use on the single animal.

Companies news

Icelandic companies have an increasing presence in the UK and not only as fish processors - Icelandic banks are also taking an interest. In our last report we talked of the continuing march of Youngs Bluecrest as the UK’s biggest fish processor, and of Coldwater of Iceland’s purchase of an 80% stake in Seachill. Coldwater has since gone on to buy Northern Foods’ two Cavaghan and Gray factories - a Grimsby one and a salmon processing factory in Aberdeen. The closure of the Grimsby plant has subsequently been announced. Since Youngs Bluecrest’s acquisition of Macrae last year there are really only three major groundfish processors in the UK - Youngs Bluecrest, Coldwater, and Thistle Seafoods in Scotland. There is now speculation that Youngs Bluecrest’s financial backers, Capvest, will put the group on the market next year.

There has also been recent press speculation that Unilever is to divest itself of its frozen food operations in the UK which would include its fish finger operations. One of its fish finger plants, Grimsby, closed in the spring. Another multinational, HJ Heinz, has also reported poor performance for its frozen food and seafood sales in Europe. It also owns the John West brand, the biggest canned fish brand in the UK. The company has said it will review the business.

Meanwhile, another Icelandic-owned company, the speciality seafood supplier Lyons Seafoods, has announced plans to build a $6.6 million extension to its plant at Warminster, Wiltshire. The company, which is owned by SIF, has significant presence in the branded shrimp and speciality seafood business.

On the trading side, Andrew Marr International (AMI) has bought Murray Vernon’s controlling interest in Fastnet Fish, a company well known to many in Canada on groundfish and shrimp. Fastnet continues to be run by its founder Peter Doswell and team as an independent group within AMI.

Of the aquaculture companies Johnson Seafarms of the Shetlands has done a very good job of keeping its name in the news. The company, which raised investment of $44 million from venture capitalist AEC, has recently purchased one of the only two cod hatcheries in the EU. Johnson expects to deliver the world’s first organic cod to the market this month and aims to produce 15,000 tonnes per annum by 2010. Meanwhile, consolidation continues in the salmon farming sector. In May Scotland’s two largest fish farming companies - Marine Harvest and Stolt Seafarms - merged. Both companies were owned by Netherlands companies - Nutreco and Stolt-Nielsen. Meanwhile Scotland’s largest independent salmon aquaculture operation, Minch salmon, has become a fully integrated organic unit. The salmon is also accredited to the RSPCA’s Freedom Foods scheme

We have reported on the fortunes of Lock Fyne Restaurants in previous editions. The company has just launched a strategic review which is expected to see the company floated or sold. It claims to be the largest chain of fish restaurants in the UK , with 23 outlets and sales last year of $50 million. As well as emphasising sustainability, the company likes to use small artisanal suppliers “with good provenance and high quality”.

While at retail the share of seafood sales through supermarkets increases steadily, an interesting recent story is the floatation of FishWorks on the AIM stock exchange. This West Country and London based fishmonger and restaurant chain will use the capital raised to grow its store numbers from 5 to 19 over the next three years. The first stage of its expansion has been the opening of a FishWorks concession in the upmarket Harvey Nichols store near Harrods on Knightsbridge.

Main Species

Groundfish

The frozen fillet market is relatively quiet currently, having been fairly buoyant in the first quarter of the year. Little or no hake is coming out of South America and while there are no big landings anywhere currently, demand is slow and margins are slim. The chilled market is strong, however, with a lot of Icelandic product being flown in to Humberside.

Pelagics

The herring price, at $530/ tonnne landed, has been about double that of 2004, despite a North Sea TAC that was 12% higher (90,000 tonnes after quota swaps.) The major part of the UK catch is exported to central and eastern Europe. Poland is a key market and since its recent EU accession, British producers can sell to this market without duty. Previously UK herring attracted 20% while Norway, a major competitor, had enjoyed duty-free access. The scientific advice, however, is for a 50% reduction in the North Sea herring TAC for 2006. Management decisions are expected in November.

The mackerel market has also been very strong and the quota, at 128,000tonnes, is 27% down on last year. There are two fishing periods and with prices around $1300-1500/tonne 70–75% of the TAC was caught in the spring fishery. The fishery reopens October 1.

Crustacea and shellfish

It has been an extraordinary year for cooked and peeled shrimp from Canada. The EU reduced -tariff quota was filled very soon after opening in January. However, as we go to press an EU regulation has been drafted which will allow access of cooked and peeled coldwater shrimp in airtight containers and packages not exceeding 2 kg to enter the EU at 7% duty until the end of 2005. Meanwhile warmwater shrimp sales are expanding rapidly in the UK.

Product News

The Sea Fish Industry Authority launched a new competition, the UK Seafood awards, this year. There were so many entries for the Best New Seafood Product that the class was split into four sections. The winners were: Best New Groundfish Product - Sainsbury’s Smoked Haddock Fishcakes: Best New Shellfish Product - Scottish Live Oysters, prepacked in their shells from the Scottish Shellfish Marketing Group; Best New Pelagic Product - Tinned Smoked Pilchards from the Pilchard Works; and Best New Salmon Product - Tesco Finest Salmon on Croute, produced by Young’s Bluecrest. A number of other awards were made at the same time, including Supermarket Seafood Retailer of the Year, which went to Waitrose and Independent Seafood Retailer of the Year, won by Ramus Seafoods.

Examples of other new seafood products launched over the past twelve months follow. Frozen Seafood Sausages have been launched onto the retail market by Paramount 21 in two varieties - Smoked Haddock and Tuna, Mustard and Mint. The sausages, which can be cooked from frozen in 10-12 minutes under the grill, are made from fish, potatoes herbs and seasonings. The company has also launched a Brixham Best line for the foodservice industry - Plaice filled with Prawn and Mushroom and Lemon Sole filled with Crab and Seafood Sauce.

Princes has become the first company to launch Albacore tuna on the UK market, albeit in canned form. The product joins its canned tuna range in an 80 g single serving can.

Birds Eye have extended their SteamFresh range to include SteamFresh Fish. The products so far are Wild Pink Salmon Fillets in a Dill Sauce; Haddock Fillets in Cheese and Leek Sauce; and Haddock, Wild Salmon and Pollock Medallions in a Butter Sauce. The products are sold in a bag in which can be microwaved from frozen.

The Macrae Food Group (part of Youngs Bluecrest) has a new Simply Steam range. The current products are Peppered Mackerel with Broccoli and Cauliflower, Seville Orange Tuna with Green Beans, and Kippers. Packaged in steam pouches, they can be microwaved in less than 5 minutes. Another interesting new product from Macrae is a Mackerel Kebab. It is made of a fillet of fresh peppered mackerel skewered on a stick to make a ready-made kebab that can be barbequed grilled or oven-cooked.

Marks and Spencer has introduced Gastropub - a range of ready meals inspired by modern pub dishes. The new range includes starters such as Crispy Wrapped King Prawns with Chilli Dipping Sauce; Baked Scallops with Garlic and Gruyere Cheese; and Salmon Fishcakes with Lemon Butter Sauce. Main courses include Salmon Kiev with King Prawns, Lemon and Herbs: Smoked Salmon Asparagus and Prosciutto Risotto; Cod Prawn and Smoked Haddock Pie and that traditional northern favourite, Fish, Chips and Mushy Peas. The products can be quickly heated in conventional or microwave oven.

Another offering from the up-market food retailer is Prawn Cavatelli, an addition to its low-calorie, low fat Count on Us range. The product, which is cavatelli pasta and king prawns in a tangy tomato sauce contains less than 3% fat and 400 calories, and is labelled with a low glycaemic index.

Children’s food manufacturer Miniscoff has added Creamy Salmon Pasta and Salmon Ocean Pie to its range. Both use organic salmon and contain no flavourings, colourings or preservatives. Initially they will be offered through foodservice, although the company hopes to introduce them to retail soon.

Upcoming events

The dates for the next Brussels European Seafood Exposition, the major seafood show in Europe, are May 9-11 2006.

International Trade Data/Port and Wholesale Market Prices

If you would like to receive the latest published trade data and/or wholesale market prices, please advise us of your fax number and we will transmit this information to you.

For further information on the UK fish market, please contact Janet Farmer at the Canadian High Commission, 1 Grosvenor Square, London W1K 4AB fax 001+44+20 7258 6384

(1) The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organization listed herein. Readers should independently verify the accuracy and reliability of the information.

(2) All monetary amounts are expressed in Canadian dollars, unless otherwise indicated. The conversion rate to Canadian dollar in based on £1= $2.2