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Composition of the Cypriot seafood sector
Cypriot fishing companies generated EUR 8 million in landings income in 2015. Processing companies generated EUR 7 million in revenues in 2012 – the latest year for which figures were available.
Island nation Cyprus had a trade deficit in fish of EUR 40 million in 2016. It exported EUR 30 million worth of fish and fish products, while fish and fish product imports amounted to EUR 71 million. Cyprus’ main export destinations for fish and fish products were Israel (70%), Saudi Arabia (5%) and Spain (5%). It imported mainly from Greece (15%), Thailand (7%) and Vietnam (6%). Only 11% of Cyprus’ fish and fish product exports in 2016 were to other EU Member States, while slightly more than half of its fish and fish product imports originated in other EU countries.
Cyprus had 905 registered commercial fishing vessels in 2015. These were registered to 840 enterprises. In 2015, there were approximately 790 FTEs employed in the fish catching sector in Cyprus. The fish processing sector employed a much smaller workforce of approximately 55 FTEs in 2012. The fisheries in Cyprus are dominated by small-scale vessels spread among many landing places. The vessels use a variety of fishing gears even in the same fishing trip (STECF, 2018).
In Cyprus there are three fishing segments (Ioannou, 2018; Petrou, 2018b).
- The trawler sector, both inland fishing (2 trawlers) and high sea trawlers (5 trawlers).
- Purse seine fishing (3 purse seiners) – one for blue fin and two for pelagic species.
- Coastal fishing with 4 to 12 metres boats.
There are also around 35 polyvalent vessels – vessels that are able to use different fishing gears. These polyvalent vessels can target different species during different seasons.
There are five companies in Cyprus that have a polyvalent fleet (Ioannou, 2018). There are two groups of small-scale fishermen. Full/part-time fishermen account for 327 vessels. Periodic/seasonal fishermen are only permitted to fish 70 days a year. This latter group accounts for 400 fishing vessels (Ioannou, 2018).
The majority of Cypriot fishermen target demersal species with the coastal fleet (Petrou, 2018b). Nearly all demersal catch is consumed domestically. Due to a lack of domestic demand, pelagic fish species and albacore are mostly exported – particularly to Spain. There is little demand for pelagic fish species domestically. However, demersal species are often also imported from Greece as domestic demand exceeds supply (Ioannou, 2018).
In addition to demersal, and pelagic fishing activities, aquaculture is an important segment in the seafood value chain in Cyprus. In fact, aquaculture produce forms the third most important agricultural export from Cyprus. This makes it more important than wild catch. Sea bass and sea bream are the two most commonly farmed fish species. Most of the aquaculture production is exported before it undergoes industrial scale processing (Ioannou, 2018).
There are no producer organisations for wild catch fish in Cyprus (Ioannou, 2018; Petrou, 2018b). However, there are three associations of fishermen: trawlers and purse seiners; small-scale fishermen, and; coastal fishermen (Ioannou, 2018). The European Maritime and Fisheries Fund (EMFF) had promised in 2015 to provide “incentives […] to establish fishery producers’ organisations aimed at improving existing organisational structures and ensuring optimal management of seafood product marketing” (European Commission 2015). However, at present there is still only one producer organisation for aquaculture, the Cyprus Mariculture Association (CMA).
The companies fishing in national waters with trawlers and purse seiners are Ta Psarokaika (trawlers and purse seine) and Seawave fisheries (trawler). Other companies are single vessel enterprises.
Ta Psarokaika is one of the biggest fishing companies in Cyprus, fishing with trawlers and a purse seiner (Petrou, 2018b). Apart from both pelagic and demersal fishing its activities also include aquaculture, retail, export and import (Ioannou, 2018; Petrou, 2018b).
Ta Psarokaika is the only Cypriot company that has five vessels as well as processing facilities (Petrou, 2018b). Most other companies have only one vessel (Ioannou, 2018; Petrou, 2018).
According to Petrou, Ta Psarokaika is a type of conglomerate which makes it difficult for small companies to compete. It started off as a trawling company and developed its other activities later (Petrou, 2018b). Figure 17 presents the company structure of the Ta Psarokaika group that is owned by Aristos Aristeidou. Financial figures were not available for this company.
The analysis above shows that Ta Psarokaika is both vertically and horizontally integrated. It has business activities all down the seafood value chain in Cyprus from fish catching and processing, to trade and retail outlets. Moreover, it is horizontally integrated with two subsidiaries engaged in fish catching with several vessels as well as aquaculture activities.
Seawave operates two vessels: a trawler and a purse seiner (Ioannou, 2018; Petrou, 2018b). While the company started as a buyer of fish, its activities now include fish catching, aquaculture, retail and trade (Petrou, 2018b). It states to be among the top four aquaculture companies in Cyprus (Seawave Fisheries, n.d.).
The bigger companies in Cyprus share the sea with the small companies, as the fishing area is not very broad. Already two or three miles away from the coast, the sea is 1000m deep.
In 2016, Seawave generated EUR 6.3 million in turnover. This was an increase from EUR 5 million in 2015. In 2016, the company held total assets of EUR 5 million, only marginally more than the EUR 4.9 million a year earlier (Orbis, 2018au).
Figure 18 shows the company structure of Seawave with its four Cypriot owners.
From the analyses above it is evident that Seawave, like its peer Ta Psarokaika, has engaged in both vertical and horizontal integration. Seawave has business activities all down the seafood value chain in Cyprus from fish catching and processing, to trade and retail outlets. Moreover, it is horizontally integrated through its two fishing vessels, as well as its aquaculture activities.
Beyond the two examples analysed in this chapter, there has only been very limited vertical or horizontal integration in the Cypriot seafood value chain. There are only two companies with more than one vessel in Cyprus. There has been a reduction in fleet size in the past ten years. This was largely driven by the limits on fish catching due low fish populations. The small-scale fishermen fleet saw the largest reduction, however, also two trawlers were scrapped. The scrapping programme was funded by the EU (Ioannou, 2018; Petrou, 2018b).
There are only two or three fish processing companies in Cyprus. They usually also process other products, including meat. Most fish are sold immediately as fresh on landing as the majority of landings are demersal and/or small fish, both not suited for processing (Ioannou, 2018). Therefore, the composition of landings affects the need and possibility for vertical integration.
The vertical and horizontal integration that Ta Psarokaika and Seawave have engaged in have affected prices. Particularly Ta Psarokaika’s dominant position allows them to sell to the (super-)markets for lower prices than others. The company also owns fish farms that produce fish at cheaper prices than wild catch. This makes the company able to strongly influence the prices (Petrou, 2018b).
There are a number of limitations to horizontal integration in the Cypriot fish catching segment. These all relate to catch restrictions. Firstly, there is not enough fish in Cyprus waters for companies to expand, or to attract larger companies. The limitations of the exclusive economic zones (EEZs) of North African countries and Turkey also limit the areas where Cypriot vessels can be active. The Cypriot government cannot issue new licenses because there are no fishing grounds. Moreover, it is reported that the Turkish navy regularly harasses Cypriot fishing vessels, also in Cypriot own waters (Ioannou, 2018). These catch restrictions are likely one driver of aquaculture in Cyprus. In addition, the profitability of aquaculture is higher in comparison to wild catch fish. Due to the low economies of scale the latter is subject to higher operating costs.