Denmark
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Composition of the Danish seafood sector
The fishing industry plays a significant role in the Danish economy (Eurofish, 2015a). Landings and fish processing accounted together for nearly 1% of GDP in 2015 (see Table 18).
In 2015, Danish fishing companies generated EUR 440 million in landings income, about 0.16% of GDP. Fish processing companies generated a further EUR 2.6 billion. Fish processing revenue constituted approximately 0.9% of Denmark’s GDP 2016. Denmark reported a EUR 828 million trade surplus in fish and fish products in 2016. Fish and fish product exports worth EUR 3.7 billion accounted for 1.3% of Denmark’s GDP. 82% of exports were destined for other EU countries, with Germany (20%), France (11%) and Italy (9%) as key recipients. In 2016, Denmark imported fish and fish products worth approximately EUR 2.9 billion. Only 16% of this originated from other EU countries. The main import partners were Norway (45%), Greenland (16%) and the Faroe Islands (7%).
There were 1,793 registered commercial fishing vessels in Denmark in 2016. Of these, 77% were active. These were owned by 1,363 enterprises. Only 26 enterprises – or approximately 2% – owned more than one vessel (see Table 18). 81% of the Danish fleet consists of small vessels. Vessels >24m account for only 3% of the fishing fleet; however, these large pelagic trawlers account for 63% of total gross tonnage (Eurofish, 2015a). In the last ten years, the number of vessels of >24 metres have dropped more rapidly than the number of smaller vessels. The capacity of the >24 metres fleet has remained stable though. In the same period, the number of 12 to 24 metres vessels has remained stable, having experienced a rapid decline between 1995 and 2006 (Semrau and Ortega Fras, 2013).
The Danish fisheries sector is composed of three segments:
- Demersal fishery for human consumption
- Trawler fishery for industrial use
- Pelagic fishery for predominantly herring and mackerel (Semrau and Ortega Fras,
2013).
50% of the landed fish is destined for human consumption. The majority of Danish processing acilities are located in northern Jutland, close to major landing sites such as Thyborøn, Hirtshals and Skagen. Together these ports account for almost half of the gross tonnage of the Danish fleet. Preserved and canned fish accounts for 57% in value of total processed fish for human consumption. Smoked fish accounts for 26%. Fish meal and fish oil account for 31% in value of total industrial fish products, and 68% in terms of volume (Eurofish, 2015a).
Herring and mackerel are the two main species harvested in Denmark. Herring is usually exported to Germany (see Chapter 11), consumed domestically, or, to a lesser degree, exported to other Nordic countries. Mackerel is mostly exported to the EU and Japan, according to Sverdrup-Jensen, CEO of DPPO (Sverdrup-Jensen, 2016).
43% of Denmark’s fish that enters the market is fresh fish. Of this volume, 66% is sold by retailers and 34% is sold in the food service industry (see Figure 19). About one fifth of the fish and fish products in Denmark is canned fish, of which 91% is sold by retailers. Dried/smoked/salted fish accounts for a quarter of all fish and fish producers in Denmark. 92% of these products are sold by retailers. Finally, 13% of the fish and fish products are sold as frozen. Of this, 80% is sold through retail, the remainder is sold in the food service industry.
In Denmark, only fresh fish is sold unbranded. Approximately 40% of all fresh fish sold in Denmark is unbranded, 39% is branded and 21% is sold under retailers’ own labels (Table 19. Canned, frozen and dried/smoked/salted fish and products are largely sold branded.
Important brands for fresh fish include Havfisk (formerly Aker (Norway)) with a market share of approximately 22% of the fresh segment, and Royal Greenland with around 19% (FFT, 2018). Royal Greenland also holds a market share of around 14% in the frozen fish segment in Denmark, Fregat Fiskeeksport accounts for around 12% of this segment. In the canned segment, Amanda Seafoods accounts for approximately 23% of the Danish market. Royal Greenland also holds a share of around 21% of the dried/smoked/salted fish segment in Denmark, while Danforel accounted for approximately 17% of this segment (FFT, 2018).
Producer organisations
There are two producer organisations in Denmark, representing respectively the pelagic and coastal segments:
- Danmarks Pelagiske Producentorganisation (DPPO)
- Danmarks Fiskeriforening Producentorganisation (DFPO)
DPPO represents 11 vessels, while DFPO represents approximately 750.
DPPO
As Table 20 shows, and Sverdrup-Jensen (CEO of DPPO) confirms, DPPO is mainly composed of one-vessel enterprises which are owned by the fishermen themselves. This is based on a Danish regulation, colloquially known as the “boots on board principle”, which states that one third of a fishing vessel must be owned by the skipper, private enterprises can own two thirds of a vessel (Sverdrup-Jensen, 2016).
Quotas in Denmark are limited per skipper per vessel. Each company cannot own more than 10% of the Danish, in this case, pelagic quota. In Denmark, only two companies are close to this limit. These are Gitte Henning and Rederiet Ruth, described below. According to Sverdrup-Jensen, these two companies are wholly owned by fishermen (Sverdrup-Jensen, 2016).
In Denmark, quotas are granted to vessels, not to the Producer Organisation (PO) as is the case in some other countries. The PO, therefore, has no role in the quota allocation decision- making process. In 2001, the Individual Transferable Quota (ITQ) system was introduced in the Danish pelagic segment. Allocation was based on a 10-year reference period. After the introduction of the ITQ system, the Danish pelagic fleet decreased from 100 vessels to 20 due to over-capacity. However, the capacity of the remaining individual vessels increased. When the system was introduced in 2001, there was a crisis in the pelagic sector. One reason for this was that the herring stock was severely depleted (Sverdrup-Jensen, 2016).
The introduction of the ITQ system led to a rapid concentration of quotas. Many fishermen sold out. Those that remained increased the capacity of their vessels and the size of their quotas. When the ITQ system was about to be introduced, everyone was aware of the consequences this would have in terms of the reduction of fleet and concentration of quotas. It was a “major political decision”. There were social costs, but the purpose was to reduce the fleet size. With the introduction of the ITQ system, quota prices increased rapidly. According to Sverdrup-Jensen, those that sold out made a lot of money, those that sold later made a fortune. Those that stayed were the “dedicated fishermen” (Sverdrup-Jensen, 2016). This seems to be a rather rosy picture. In fact, employment dropped from 4,032 FTE in 2002 to 1,489 in 2013. Estimates of the total number of affected jobs in the sector ranges from 4,552 FTE to 14,241 FTE (Goulding et al., 2000, p. 69; Sea Fish Industry Authority, 2008, p. 6).
Nevertheless, Sverdrup-Jensen states that the ITQ system “saved the sector”. There is now more stability in the sector. The sector has been more profitable for a while now and the return on investment is very quick. As an illustration of this, five new vessels entered the Danish pelagic segment in 2016. These replaced vessels that were only years old at the time. The new vessels are more efficient and technologically advanced. Furthermore, fishermen are spreading their risk by fishing for more and different species and in different fishing areas, and through portfolio expansion. Fishermen who used to only fish for the human consumption segment are now also fishing for the industrial use segment. In fact, 70% of the pelagic fishermen in Denmark are now fishing for both these segments. Additionally, the ITQ system has led to an increase in the number of working days from 240 days in 2001 to 320-330 days in 2016 (Sverdrup-Jensen, 2016).
DFPO
Table 21 provides an overview of the ten members of the DFPO with more than three
registered vessels. 64 members of the DFPO have more than two registered vessels. The remaining 694 only have one registered vessel.
In 2007, the ITQ system was also introduced in the Danish coastal fishing segment (Sverdrup-Jensen, 2016).
Company analysis
This section provides an analysis of the company structures of six companies in the Danish pelagic and coastal fishing segments. These include for both DFPO and DPPO the three member companies with the highest number of vessels.
Pelagic segment
Gitte Henning
As seen from Table 20 and Table 21, Gitte Henning has one vessel in the pelagic and five vessels in the coastal fishing segment. These vessels are members of the segments’ respective POs.
Investment company Henning Kjeldsen Holding is the parent company of Gitte Henning (see Figure 20). Entrepreneur Henning Kjeldsen is the full owner of the investment company. Gitte Henning has two subsidiaries: Thyborøn Trawlbinderi is also engaged in fish catching, while the Thyborøn Trawlbinderi Hv. Sande department produces rope, netting, and twine used in fishing.
In 2014, Gitte Henning generated EUR 18 million in gross profit, down from EUR 21 million 2013. The company had total assets worth EUR 174 million in 2014. Approximately EUR 106 million of this was fish quotas, EUR 53 million was vessels (Gitte Henning, 2015, p. 9-10). As Gitte Henning is the only subsidiary of Henning Kjeldsen Holding, the holding company reports the same consolidated figures as its subsidiary. Another fishing company, Nordstrand Fiskeri, owned by Henning Kjeldsen’s wife Birthe Kjeldsen, is registered at the same address as Henning Kjeldsen Holding. The company formerly belonged to the father of Henning Kjeldsen, Erik Kjeldsen (Virk, 2016a, p. 1).
The business activities of Nordstrand Fiskeri are noted as trade, the operation of fishing vessels and to act as a holding company (Virk, 2016a, p. 1). It is remarkable that a company with a turnover of approximately EUR 786,000 and total assets of EUR 11 million in 2014 has no staff costs (Nordstrand Fiskeri, 2015, p. 9-10). With 0.07 the return on assets (ROA) for Norstrand Fiskeri is also considerably lower than that of its peers Hiiu Kalur with 0.40 and Kalalaev Kotkas with 0.23. Nordstrand also has “other debts” of approximately EUR 9.2 million, with no further details (Hiiu Kalur, p. 4-5, p. 31 and Kalalaev Kotkas, 2015, p. 4-5).
The Nordstrand annual report does not contain much detail. For instance, its balance sheet does not refer to its fishing quota or its vessels. However, as the fishing quota is usually the only intangible asset included in the annual reports of fishing companies, it can be assumed that the same is true for Nordstrand. In that case its fishing quota were worth approximately EUR 11 million in 2015, nearly all of its assets. Fishing companies usually include vessels in the tangible assets category in the balance sheets. In this category, Nordstrand has one sub- category, namely ‘plant and machinery’. As vessels are not included in the balance sheet, and the category tangible assets is the logical place to include these, it can be assumed that ‘plant and machinery’ could have been used to refer to the fishing vessels. If this is the case, then Nordstrand has vessels worth EUR 14,500.
The son of Birthe and Henning Kjeldsen, Røn Patrick, also owns a number of companies engaged in the operation of fishing vessels and commercial fishing. Røn Patrick, and the companies with which he is affiliated, are registered at the same address as Henning and Birthe Kjeldsen and their affiliated companies (Virk, 2016b, p. 1). Fiskeriselskabet Jen Granlund was established in 2014. In that year, it generated a gross profit of EUR 37,000, and had total assets of EUR 343,000. The company had no reported labour costs, similar to Nordstrand Fiskeri (Fiskeriselskabet Jen Granlund, 2015, p. 9-12). It is conceivable that Nordstrand Fiskeri and Fiskeriselskabet Jen Granlund do not have labour costs as they are used as quota swapping and/or renting vehicles.
Wholly owned subsidiary August generated a gross profit of EUR 1.3 million in 2014, down from EUR 1.5 million the previous year. August reports labour costs of approximately EUR 800,000. In 2014, it had total assets of EUR 6.9 million. The company reports a cost of quota of EUR 13.5 million; after depreciation and impairments, the quota value is EUR 5.6 million (August A/S, 2015, p. 10-11, p. 13). August’s sister company Polaris generated a gross profit of EUR 448,000 in 2014, down from EUR 605,000 in 2013. In 2014, Polaris had total assets of EUR 3. 4 million. Just over half of this, EUR 1.8 million, was in fishing quota (HG 352 Polaris ApS, 2015, p. 9-10).
The company structure of Gitte Henning does not show significant evidence of structural vertical or horizontal integration. The main business of the company is fish catching, with one subsidiary producing equipment used in fisheries.
However, the findings suggest non-structural integration through cooperation between the companies owned by Henning Kjeldsen, his wife Birthe Kjeldsen and their son Røn Patrick. It is possible that Nordstrand Fiskeri, Fiskeriselskabet Jen Granlund and their subsidiaries are used as vehicles to purchase quotas which are then rented out to Gitte Henning in order for the quota owned by Gitte Henning to remain below 10% of the national quota as legally stipulated, while still allowing the company to increase its harvesting capacity (Scheller, 2016).
Rederiet Ruth
As seen from Table 20, Rederiet Ruth has a vessel in the pelagic fishing segment (SverdrupJensen, 2016). The spokesman from DPPO stated that Rederiet Ruth is one of the largest fishing companies in Denmark in terms of quota ownership. Figure 21 0provides an overview of Rederiet Ruth’s company structure. The company has two owners, Gullak Arngrimsson Madsen and Ole Nattestad, who invest in the company through investment holding companies. Gullak Arngrimsson Madsen’s investment vehicle is also engaged in real estate. Ole Nattestad’s investment vehicle does not report any other investments.
Rederiet Ruth has one full subsidiary that is engaged in trade. The group generated a gross profit of EUR 20 million in 2014, with a similar level in 2013. The group had total assets worth EUR 125 million in 2014. Of this, EUR 79 million was fishing quotas, and EUR 17 million was fishing vessels (Rederiet Ruth, 2015).
Rederiet Ruth shows evidence of vertical integration, through its subsidiary engaged in trade. The trade is, therefore, likely to be in fresh caught and frozen fish and seafood, rather than processed.
Astrid Fiskeri
Table 20 shows that Astrid Fiskeri has two vessels in the pelagic fishing segment, 264 Astrid and E532 Rockall. The vessels, which are members of the DPPO, have a combined gross tonnage of 3,813. Figure 22 provides an overview of the Astrid Fiskeri company structure. The company registered in Denmark is a subsidiary of Astrid Fiske in Sweden (see section 24.3.1.2). Astrid Fiske is owned by the Johansson family. Astrid Fiske’s registered business activities are fish catching, fish processing, and trade. The company further has one other direct subsidiary, Astrid Investment, which is an investment holding company registered in Sweden. Astrid Invest is the parent of Astrid Fiskeexport which is engaged in cold storage and wholesale in Sweden. In 2014, Astrid Fiskeexport divested from a freight company in Denmark, Truck Kompagniet Skagen Aps (Astrid Fiskeexport, 2015).
Truck Kompagniet Skagen is now owned by Werner Larsson Fiskeexport in Denmark. Werner Larsson is part of the Dutch Kennemervis Group with activities in the fish processing and distribution sectors in the Netherlands, France and Denmark (Virk, 2016c, p. 1 and Kennemervis Group, 2014, p. 6).
In 2014, Astrid Fiskeri generated a gross profit of EUR 15 million, down from EUR 16 million the previous year. The company had total assets worth EUR 109 million in 2014. The Astrid Fiskeri annual report does not mention fish quotas or vessels. However, the categories in which these are usually included are intangible assets and tangible assets, respectively. In 2014, Astrid Fiskeri had intangible assets worth EUR 72 million, and tangible assets worth EUR 35 million.
The parent company, Astrid Fiske, generated EUR 36 million in net sales in 2014. This was an increase from EUR 32 million in 2013. The company had total assets of EUR 123 million in 2014. Of this, EUR 79 million was fish quota, and EUR 35 million was fishing vessels (Astrid Fiske, 2015).
Astrid Fiske owns vessels Marie and Martina in Sweden. It also rents vessels Astrid and Falcon in Sweden (Astrid Fiske, 2015). It is noteworthy that Astrid Fiskeri and Astrid Fiske note different ownership percentages for Astrid Fiskeri.
Anders Illeborg, director of Astrid Fiskeri, states that there is vertical integration in Astrid Fiske’s activities in Sweden. In Denmark, Astrid Fiskeri has a long-term and close relationship with the Dutch Parlevliet & Van der Plas Group (PP Group). PP Group has a processing plant in Germany. Almost all of Astrid Fiskeri’s herring goes to PP Group. The off-take agreements between Astrid Fiskeri and PP Group are renewed annually. They have already been renewed for approximately ten years. The two companies also swap quotas. PP Group for example swaps herring for Astrid Fiskeri’s horse mackerel (Illeborg, 2016).
Given Astrid Fiskeri’s close relationship with PP Group, and the fact that investment in downstream processing in Denmark is too complicated and not cost effective, Astrid Fiskeri is not considering vertical integration through downstream investments (Illeborg, 2016).
Astrid Fiskeri’s company structure (Figure 22) shows evidence of both vertical and horizontal integration. Horizontal integration is found in the investments in the fish catching sector in both Denmark and Sweden. Vertical integration is found in the downstream investments of parent company Astrid Fiske, also through its subsidiaries in Sweden. These downstream activities include processing, packaging, cold storage, wholesale and trade. Non-structural vertical integration is also evident through the long-term off-take agreements between Astrid Fiskeri and PP Group.
Rederiet Gifico
Table 20 shows that Rederiet Gifico has one pelagic fishing vessel, S205 Ceton, which is a member of the DPPO. Gifico’s gross tonnage is 1,337 GT.
Figure 23 provides an overview of Gifico’s company structure. It shows that the ultimate owners of Gifico ApS in Denmark are the Swedish Claesson family (see section 24.3.1.1). Five of the owners invested through holding companies in Denmark. A further three invested in Gifico ApS through Fiskeri AB Ginneton, a fish catching company registered in Sweden. Fiskeri AB Ginneton has the largest single stake in Gifico ApS. Fiskeri AB Ginneton also has one other subsidiary engaged in fish catching registered in Sweden.
In 2014, Gifico generated a gross profit of EUR 3.2 million, up from EUR 2.1 million in 2013. The company had total assets of EUR 21 million. Of this, EUR 8.6 million were fishing quotas, and EUR 11.2 million were fishing vessels (Rederiet Gifico, 2015, p. 9- 10).
The major shareholder of Gifico, Fiskeri AB Ginneton, does not consolidate Gifico ApS in its annual report because its stake is not large enough. Fiskeri AB Ginneton generated net sales of EUR 4.8 million in 2014, up from EUR 4.3 million in 2013. The company had total assets of EUR 17 million in 2014. Of this total, fishing quotas accounted for EUR 0.9 million and vessels for EUR 4.1 million (Fiskeri AB Ginneton, 2015, p. 2-3).
The company structure of Gifico ApS shows a degree of horizontal integration. The owners of Gifico also have fish catching activities in Sweden. Gifico owns much higher value fishing quotas than its main investor Fiskeri AB Ginneton.
Themis Fiskeri A/S
Table 20 shows that Themis Fiskeri A/S’ pelagic fishing vessel S144 Themis is a member of DPPO. Figure 24 shows Themis Fiskeri A/S’ company structure. The company operates as a wholly-owned subsidiary of Swedish Ryberg AB, which in turn is owned by Björn and Anders Ryberg from Sweden. Karl Lorentsson, also Swedish, has a minority stake. Themis Fiskeri A/S is engaged in fish catching, trade and investment. It does not have other registered subsidiaries.
In Sweden, the Ryberg family owns Themis Fiskeri AB. The family has a registered branch office in Denmark, registered at the same address as Themis Fiskeri A/S. There are 70 companies registered on this same Danish address. An explanation may be that the address is used by a trust company McRevision which provides services to these companies (Bloomberg, n.d.). Themis Fiskeri A/S is the subsidiary of Themis Fiskeri AB. Reportedly, Themis Fiskeri AB does not have fishing rights in Sweden (Svensson, 2015).
In 2014, Themis Fiskeri A/S generated a gross profit of EUR 3 million, a slight increase over the previous year. The company had total assets of EUR 30 million in 2014. EUR 20 million of this was intangible assets, the category often used by fishing companies to refer to fishing quotas. A further EUR 4.7 million of this was in tangible assets, often used by fishing companies to refer to fishing vessels. EUR 5.2 million was a loan to Themis Fiskeri A/S (Themis Fiskeri A/S, 2015, p.10-11, 16).
Parent company Themis Fiskeri AB generated net sales of EUR 2.1 million in 2014. This was up from EUR 1.5 million in 2013. The company had total assets of EUR 10 million in 2014. Of this, EUR 4 million was fish quota. Themis Fiskeri AB sold its vessel (S144 Themis) to Themis Fiskeri A/S in 2011. According to the annual report, Themis Fiskeri AB mans the vessel, although the fishing activities are carried out by Themis Fiskeri A/S. Through the Danish branch of Themis Fiskeri AB, the company acquired Danish fishing rights. These have been leased to Themis Fiskeri A/S (Themis Fiskeri A/S, 2015, p.2).
The company structure of Themis Fiskeri indicates horizontal integration across geographic boundaries. The motivation for the relationship between Themis Fiskeri AB and Themis Fiskeri A/S is clearly described by Themis Fiskeri AB, i.e. to gain access to Danish quotas, although the vehicle through which it does so, namely the Themis Fiskeri AB Denmark Branch, does not have a vessel. Therefore, the integration construction also includes the element that Themis Fiskeri A/S owns the fishing vessel it bought from Themis Fiskeri AB. The latter thus still mans the vessels which Themis Fiskeri A/S now owns.
Demersal segment
Amy A/S
As Table 21 shows, Amy has four vessels in the coastal fishing segment. Amy is owned by two Dutch fishermen. One of whom, Tamme Egbert Bolt, resides in Denmark.
In 2014, Amy generated a net profit of EUR 454,000, up from EUR 284,000 in 2013. The company had total assets worth EUR 4 million in 2014. Of this, EUR 2.8 million were fishing vessels and EUR 1.3 million were quotas (Amy, 2015, p. 7-8).
Amy does not show evidence of vertical integration as no downstream activities were identified. With its four vessels, it has a significantly sized fleet. Although the owners of Amy are both Dutch, this research could not find evidence that the owners also had investments in the Netherlands.
H W Larsen & Sønner I/S
As Table 21 shows, five of H W Larsen Sønner I/S’ fishing vessels are members of the DFPO. Figure 26 provides an overview of the H W Larsen Sønner company structure. It shows that the company is owned by Flemming Moestrup Larsen and Bjarne Larsen Moestrup. The company does not have any further subsidiaries. However, the company’s registered business activities include fish catching, trade and fishing gear.
H W Larsen Sønner I/S made a gross loss of EUR 1,823 in 2014, this was lower than 2013 when it made a gross loss of EUR 7,035. The company had total assets of EUR 368,000 in 2014 (H W Larsen Sønner I/S, 2015, p. 10-12).
Integration
The company analysis in section 7.3 has shown that integration is taking place in the Danish fisheries industry. No vertical integration was identified in the analysed companies. SverdrupJensen of DPPO affirmed that there are very few if any examples of vertical integration in the Danish pelagic fisheries industry. He could only think of one example of a company that had sold off its fleet to focus on the processing segment. Initially the company sold its quotas to finance the processing plant. However, as it was unable to generate sufficient revenues as an integrated company it decided to focus on processing (Sverdrup-Jensen, 2016).
Lunderg Larsen of the Danish Fish Producers Organisation (DFPO) stated that there is also no vertical integration in the Danish demersal fisheries segment. According to him this lack of vertical integration is in large part due to the fact that demersal fish species lose value with every processing step. Therefore, the sale of demersal species tends to be in the form of fresh fish at auctions and markets. Furthermore, demersal fishermen in Denmark believe that they are already receiving a fair price at auction and a stable level of sales. For these reasons, Danish demersal fishermen are not motivated to invest in downstream segments. Lundberg Larsen attributes this lack of downstream investment to the strict regulation regarding investments in the fish catching segment. These Danish regulations stipulate that a company investing in the fish catching sector should earn at least 60% of their income from fishing. This is to protect the sector against capital speculation and to stop quotas being owned by investors such as pension funds. However, it also makes it difficult for downstream companies to invest upstream (Lunderberg Larsen, 2016).
The fish catching sector is more profitable in Denmark than the fish processing sector. The main species harvested in Denmark are mackerel and herring. There are high national quotas for these species, and there is a strong market. Furthermore, the reduction in fleet capacity and fleet size has resulted in less competition, thus ensuring that the remaining individual companies and fishermen have access to sufficient resources. These companies have also been able to lower the costs, improve fuel efficiency and introduce better management. They have also deployed newer vessels. On the other hand, margins in the processing segment have dropped. According the Sverdrup-Jensen there is a lot of competition in the market. He states that many European supermarkets have merged. Because of this there are fewer buyers, enabling these buyers to use their leverage to push down prices (Sverdrup-Jensen, 2016).
A number of the analysed companies have trading activities, either through their affiliates/subsidiaries or as part of their own business activities. This suggests a degree of vertical integration in the form of fish catching and trade of frozen and chilled fish.
As the company analysis in section 7.3 has shown, horizontal integration is the dominant form of integration in the Danish fisheries sector. Only one of the analysed companies is active in both pelagic and coastal fisheries, and another one or two pelagic fisheries companies have invested in the demersal segment (Lunderberg Larsen, 2016). However, four of the six analysed companies have foreign owners. This is particularly the case for the pelagic fishing sector with many Swedish investment companies. Horizontal integration in these cases is international horizontal integration to gain access to fishing quotas. According to Danish law, only Danish companies or Danish people may buy Danish fish quotas. But the Swedish-owned fish quotas are mainly controlled by persons living in Sweden who established Danish companies with Danish addresses in order to access quotas. Several of these Swedish companies do not have offices in Denmark, but only one postal address. The postal address is sufficient to meet the Danish legal requirements. Through such constructions, four Swedish companies own just under a quarter of Danish quota. In Sweden, however, there is a requirement that the majority of the owners behind the companies that own Swedish fishing vessels shall be Swedish citizens (News Øresund, 2017). This explains the lack of foreign investment in the Swedish fisheries industry (see Chapter 24).
Lundberg Larsen notes that there is, in contrast to the pelagic segment, very little foreign investment in the Danish demersal segment. He states that this can again be attributed to the strict regulations in the Danish fisheries industry, as well as to the fact that the companies active in the demersal segment are financially strong, and thus less likely to face buyouts (Lunderberg Larsen, 2016).
Aside from the corporate structures that indicate formal types of integration, this also takes other forms. In terms of non-structural forms of vertical integration between the fish catching and fish processing industries, Sverdrup-Jensen reports that some pelagic fishermen negotiate off-take agreements with processing facilities. These are not exclusive, i.e. the fisherman also sells his fish at auction (as will be described in more detail below). Off-take arrangements are usually short term, between one and half a year and one year. The price is usually the auction price plus a premium. Off- take arrangements are slightly more common in the industrial use fishing segment than in the human consumption segment. Off-take arrangements are sometimes made because the fishermen own minority stakes in the fish processing companies (Sverdrup-Jensen, 2016). Lundberg Larsen of the demersal segment states that in this segment fishermen in the East of Denmark tend to have off-take agreements with processors, while fishermen in the North and West tend to sell their fish at auction. This is because of the long distance to auction from the East of the country (Lunderberg Larsen, 2016).
Danish pelagic fishermen sell most of their harvest at auction, in particular on the Norges Sildesalgslag online auction. The fishermen put their catch in the online auction system. Buyers then bid online, and the fishermen land the fish at the port of the highest bidder. Landing sites include: Norway, Shetland Islands, the Faroe Islands, Germany and the Baltic. The catch, however, still comes off the Danish quota. The system, according to SverdrupJensen, is very transparent. There are no tax levies on fresh fish landings. Norges Sildesalgslag is so popular because it was the first to offer such a service, it is the largest, it is transparent, and it guarantees a buyer. There are Norges Sildesalgslag staff at the landing sites to ensure that the volumes and qualities meet the deal requirements. There is also insurance in case the processor is suddenly unable to pay for the transaction. The system avoids conflict between the vessels/skippers and processors. The focus of the system is the North Atlantic and is mainly used by Swedes, Norwegians, Scots and Danes (SverdrupJensen, 2016). Due to the low margins in the processing segment, the profitability of the catching segment, the efficiency of the Norge Sildesalgslag auction, and the balance of the fleet capacity and fish stock in the Danish fisheries, there does not appear to be a significant driver for more structural vertical integration.
As noted above, there is strong evidence of horizontal integration in Danish fisheries. Non- structurally there are also systems of integration focused mainly on access to quotas. Sverdrup-Jensen notes that there are registers of the trade in quotas. Although these records are online, the deals are private. Bidding is usually in the form of closed bids facilitated by consultants. Banks are key financiers of the quota trade. Since the introduction of the ITQ system, quotas can be used as collateral for bank loans. Quota prices are determined by free market prices. Quota trade is free within a 10% cap per individual. Sverdrup-Jensen states that DPPO recently conducted a study which found that only 2% of current quota allocation is based on the original 2001 allocation proportions. He adds that quotas in the pelagic sector are pretty much fixed, and that there are only a few examples of small quantities being bought or sold: renting out and in is more common (Sverdrup-Jensen, 2016).
In addition to quota trade, there is also a system of renting and borrowing quotas. SverdrupJensen reports that this an online system. He states that, using this system, renting and borrowing can be taking place in Denmark as well as internationally. Quotas are put up for rent online and interested parties can then rent the quota. This is more often used in the demersal segment according to Sverdrup-Jensen. At the beginning of the year there are a lot of internal transactions (Sverdrup-Jensen, 2016). The renting in and out of quotas is a mechanism that can be used by companies which are close to the legal limits of quota ownership, such as Gitte Henning, to gain access to more quotas (Scheller, 2016).
In summary, both the structural and non-structural forms of integration in the Danish fisheries industry are predominantly in the form of horizontal integration driven by the desire to access quotas. There is very little structural, vertical integration, as most of the fish in both the pelagic and demersal segments are sold at auction, with a minority being sold through off-take arrangements.
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