Fish and Seafood Sector Profile - New England, United States

May 2010

Ms. Colette Lekborg
Trade Commissioner
Boston, United States of America

1. Sector Overview

In 2008, Canada was the main supplier of seafood to the United States in terms of value, and the third in terms of volume, behind China and Thailand, with Boston and Maine being the main ports of entry for Canadian seafood imports. While Canada is the major supplier of lobster and crab to the United States, exporting approximately C$1 billion in 2008, it is also a significant supplier of cold water shrimp, salmon, halibut, flounder, sole, and scallops.

New England is the seafood gateway to the U.S. Approximately 60% of Canadian imported product enters the U.S. market through New England. Massachusetts and Maine are the two main ports of entry for Canadian seafood imports. In 2008, Canada's seafood exports to New England were equal to C$1.07 billion. With Canada's worldwide fish and seafood exports valued at C$3.4 billion, New England is responsible for 30% of the total value of Canadian seafood exports.

In addition to fishermen and boats, New England has an extensive shore-side industry which includes primary processors, secondary processors, marketing and sales and distribution companies. This industry supplies thousands of restaurants, supermarkets and fish markets throughout the U.S. with fresh fish and employs entry-level and skilled workers.

The fishing ports of Gloucester, Massachesetts; Point Judith, Rhode Island; Portland, Maine; and New Bedford, Massachesetts have consistently ranked in the top 20 ports in the United States. According to the National Marine Fisheries Service, the Port of New Bedford is currently ranked as the number one seafood port in the nation in terms of value, producing 146.4 million pounds of seafood annually, valued at USD $241.3 million.

There are more than 430 seafood companies and 170 seafood industry processors in New England which have a total combined annual sales of USD $5.2 billion and USD $2.9 billion, respectively. The seafood industry (companies and processors) employs nearly 20,000 people and provides more than USD $600 million in annual wages.

2. Market and Sector Challenges

Challenges in the U.S., in general, and the New England region, in particular, are numerous. In addition, Canadian companies face their own unique obstacles to market access.

U.S. food service margins are declining and profits for processors and distributors are shrinking. In a recent survey, the average profit margin for seafood distributors in the U.S. was 13.9% down from 19.9% in 2006. Producers continue to cite high energy costs as a factor that leads to increased transportation and production costs.

Per capita consumption of fish in the U.S. was 16.0 lbs in 2008, down .5lbs from 2006. In the current economic downturn, consumers are favoring lower cost seafood alternatives. This trend is coupled with increased competition from Asian producers. In this economic climate, it may be very hard for buyers to accept and pass on higher seafood costs.

The seafood industry is also up against non-market factors which are driving up costs at a time when margins are already tight. Tighter security and bioterrorismcontrols are raising costs for importers while the U.S. COOL (country of origin labeling) requirements possibly represent an even greater added expense.

The demand for certification (ecolabeling) must be recognized, accepted and implemented in order to be a factor in the market place. In addition, there is an increasing trend by retailers and restaurants to implement their own sustainability programs. For example, New England companies such as Ahold USA , Darden restaurants, and Gorton's Inc. have partnered with the New England Aquarium to develop and implement sustainable seafood buying programs.

In addition, there is increased political pressure to put more restrictions on fishing. It has been argued that fishermen in New England are facing more serious challenges than those in other parts of the country due to the rebuilding of stocks in New England and a greater variation in species.

Overall, fishing fleets in the region are diminishing. This is due to a number of factors in recent years which make it difficult for New England fishermen to earn a living, including the heavy regulation of the total allowable catch (TAC) of certain species, the rising cost of fuel, and the limited number of days they are allowed at sea. In 2010, the New England Fisheries Management Council will implement a new groundfish management system. Many members of the New England fishing industry have raised concerns that the new catch-share system, designed to help rebuild fish stocks and eliminate the “race-to-fish” system, will drive smaller fisherman out of business leading to further consolidation of the industry.

Despite the fact that many stocks are shrinking, scallops are still very healthy and remain extremely profitable. Cod, crab, flounder, haddock, lobster, farmed salmon, and tuna represent the other species most widely harvested within the region. As a result, in order to maintain continuity of supply, the industry is looking increasingly to imports.

Canada-United States currency levels have fluctuated erratically and strongly influence competitive pricing. Because of the strong Canadian dollar, 2009-2010 will not offer any easy solutions for maintaining profitability, but will continue the profit squeeze conditions we are currently experiencing. To improve return on investment, the Canadian seafood community will need to move further down the distribution chain towards the end user.

Sealing issues, the Seafood Boycott, environmental issues (especially for farmed salmon), consumer group health claims (impacting Canadian salmon sales) are all challenges that the Canadian fish and seafood industry faces in entering the market.

Furthermore, USDC/ NOAA (National Oceanic and Atmospheric Administration) has been conducting periodic inspections of lobster and groundfish trucks coming from Canada in search of short, undersized, female lobsters and seafood (haddock). NOAA will continue this practice until compliance is achieved and furthermore has indicated that if compliance levels do not improve, they could possibly begin turning trucks around at the border.

If the above issues are not dealt with on the front line in New England, the most important entry-point market will suffer and the possibility is quite real that issues will spread in domino effect throughout the U.S.

3. Market Opportunity

As global demand for a finite supply of seafood grows, the need for U.S. investment in the Canadian fisheries increases. U.S. buyers must secure continuity of supply to retain their status in this sector.

Canadian exporters should: a) consider formulating an addendum to their business plans that encourages U.S. companies to view investment as a viable solution to supply problems and b) research a targeted group of importers and analyze related product- form needs.

Canada's fisheries are a well-managed resource. At this time, the majority of quotas are fished to their limits, thus restricting the ability to expand the market of wild fish in product forms as they are today. The main opportunities for growth are in the areas of value-added product and aquaculture. In an economic climate where consumers are dining out less often, retailers are seeing growth in sales of prepared seafood. This presents an opportunity for Canadian companies who can offer innovative ways to add value to seafood for the retail trade.

A recent survey of U.S. chefs by the National Restaurant Association listed locally sourced seafood and sustainable seafood has one of the top industry trends for 2010. With local demand far outstripping supply for seafood, Canadian companies have an opportunity to position themselves as “local” sustainable seafood partners with a reduced carbon footprint. In addition, U.S. consumers are increasingly concerned with food safety and security. Canadian companies can differentiate their product offerings from competitors by emphasizing the high quality and traceability of their products.

There is a growing preference for fresh fish. Ideal logistics, daily deliveries and close proximity of plants can and should engender constant communication with the goal to spec packing and long term commitments.

In conclusion, the Canadian export community may help improve their margins by:

  1. Circumventing the multi-layered United States “traditional distribution” system. In some cases, as goods flow through two to three brokers, agents, etc. profit margins are subject to claims and adjustments that directly affect the bottom line. As a result of this distribution pyramid it is surprising how many exporting firms are not aware of their final customer in the U.S. market and therefore lack the advantage of direct communication and potentially long-term relationships.
  2. Diversifying marketing areas and customers. The Canadian exporter needs to target a manageable potential client group in a specific region, determine what product forms these businesses are currently purchasing, and attempt to fit product to customer. The sales philosophy of “this is what I am offering” as opposed to processing for the specific product-form requirements, in most cases, reduces the exporters' goods to a commodity level and subsequently reduces returns. To identify the key players in a targeted region exporters are encouraged to utilize the regional consulate staff.

Canadian Government Contacts

Consulate General of Canada in Boston

Foreign Affairs and International Trade Canada
125 Sussex Drive
Ottawa, Ontario K1A 0G2

Useful Internet Sites