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Composition of the Estonian seafood sector
In 2015, Estonian fishing companies generated EUR 15 million in landings income. Processing generated another EUR 127 million in production revenue in 2016.
Estonian maintained a slight trade surplus in fish in 2016 of EUR 22 million. The country exported EUR 142 million worth of fish and fish products, while it imported EUR 119 million. 61% of Estonia’s fish exports were destined for EU countries. The main export destination for Estonian fish products were Finland (20%), Sweden (11%) and the Ukraine (9%). Fish exports accounted for slightly under 1% of Estonia’s GDP.
83% of Estonia’s fish imports originated from EU countries. Its main import partners were Finland (18%), Sweden (18%), and Lithuania (15%). In 2015, there were 1,534 registered commercial fishing vessels in Estonia. These belonged to 1,110 enterprises. 247 enterprises – 22% of all fishing companies – owned more than one vessel. The fish catching segment employed 485 FTE. This, along with the average vessel tonnage of 4 GT, indicates the small-scale and part-time nature of the majority of the Estonian fisheries segment.
The fish processing segment, although generating more income, did so with a smaller workforce of approximately 127 FTE.
The Estonian fish catching sector is composed of four segments: the Atlantic distant water, the Baltic trawl, the Baltic coastal, and the inland water fleets. In 2014, the distant water fleet was composed for six vessels. These were active mainly in the Northwest Atlantic, Northeast Atlantic and Svalbard.
The Baltic trawl fishery consists of approximately 50 vessels, employing 500 workers. The majority of the catch is sprat and herring. These are landed mainly at Estonian ports and sold to fish freezing and processing companies (Eurofish, 2015b). The Baltic coastal fishery consists of approximately 600 vessels, employing 2,500 workers. However, these fishermen are generally only active on a part-time basis. As with the Baltic trawl fishery, the Baltic coastal fishery lands mainly herring and sprat (Eurofish, 2015b).
The Estonian fish processing industry produces a range of seafood. This includes: block frozen pelagics, canned products, and smoked and marinated fish. Products are destined for both domestic and international markets. The most important export products are: frozen northern prawn; frozen small pelagics; frozen, fresh and chilled fish fillets; preserved small pelagics; and smoked fish including salmon and trout (Eurofish, 2015b).
The ITQ system was introduced in Estonia in 2001. This led to a rapid reduction of fleet size. In 2000 there were 197 vessels and 90 companies active in the fish catching segment in Estonia. By 2016 there are only 30 active vessels, and 20 companies according to Mart Undrest, executive director of production organisation Eesti Kalapüügiühistu. The gross tonnage of the fleet has also reduced. Government regulation induced three scrapping rounds aimed at creating a balance between fleet size and fish stock. These scrapping rounds occurred in 2005, 2008 and 2013 (Undrest, 2016).
While the ITQ system reduced domestic competition in the catching segment, membership of the EU has led to greater international competition as well as opportunities. This has created a “healthy industry”, according to Undrest (Undrest, 2016). Mauno Leppik, CEO of producer organisation Eesti Traalpüügi Ühistu, states that the majority of industry leavers left around ten years ago. Now the industry is more or less stable (Leppik, 2016).
As a result of the introduction of the ITQ system and the reduction in fleet size, employment in the fisheries sector also decreased. Undrest states that this process was gradual and adds that there was no shift of employment from the fish catching segment to the fish processing segment. In fact, it is now increasingly difficult for Estonian fishing companies to find qualified personnel (Undrest, 2016).
There are five main producer organisations in Estonia, with five to seven members each. Table 23 provides more information.
A number of companies are members of more than one producer organisation. For example, Hiiu Kalur is a member of Eesti Kalapüügiühistu. Its affiliate, Krapesk is member of Eesti Traalpüügi Ühistu. In fact, Krapesk holds a 20% share in Eesti Traalpüügi Ühistu (Aktsiaselts Krapesk, 2015, p. 16). In its annual report, Eesti Traalpüügi Ühistu, states “Eesti Traalpüügi Ühistu belongs to a group KRAPESK AS, which prepares and publishes consolidated financial statements” (Eesti Traalpüügi Ühistu, 2015, p. 8). Two other Krapesk subsidiaries are also members and 40% owners of Eesti Traalpüügi Ühistu, Eru Kalandus and Kalalaev Kotkas. Additionally, a member of the management board of Eesti Traalpüügi Ühistu, Oleg Omeltšenko, is also the owner of Kajax Fishexport in a joint venture with Hiiu Kalur and the European Fish Investment Company (E-Business Register, 2016d, p. 2 and E-Business Register, 2016b, p. 2).
Fortem Holding management board member, Raivo Baum, is also the only listed management board member of the producer organisation Eesti Kutseliste Kalurite Ühistu, of which Fortem Holding is also a member, and the only listed management board member of Fortem subsidiary Caroline, which is also a member of the same producer organisation. It is also possible that Raivo Baum is related to the owner of Fortem Holding, Ragnar Baum (E- Business Register, 2016f, p. 2; Eesti Kutseliste Kalurite Ühistu, 2015, p. 18; Fortem Holding, 2015, p. 8 and Caroline, 2015). Raivo Baum is the 85% owner of Morobell, which is also a member of Eesti Kutseliste Kalurite Ühistu. Morobell further owns two fish catching subsidiaries in Finland (Morobell, 2015, p.14, p. 32).
In Estonia there is a steady increase in the importance of larger, horizontally and vertically integrated companies. These companies have direct ownership of all production activities in the fish industry value chain, from fish catching to fish processing and export. There is also an increase in long-term contractual supplier-customer relationships between producing and processing companies and supermarkets. In the Baltic trawl fisheries, vertical integration is very common. Vertical integration takes the form of processing or fishing companies owning quotas, hiring external fishers, processing raw materials and managing trade relations including export. Most vertically integrated companies export almost all of their production. In the Baltic Sea fisheries, vertically integrated companies are organized in producer organisations (Eurofish, 2015b).
As mentioned in section 8.1, the Estonian fish catching sector is composed of four segments: the Atlantic distant water, the Baltic trawl, the Baltic coastal, and the inland water fleets. Given the size of the segments, and their relevance to the Common Fisheries Policy, this analysis focusses on the Baltic trawl and Baltic coast fisheries.
Baltic Sea and Gulf of Riga segment
Table 24 provides an overview of the 20 largest fishing companies in the Baltic Sea and Gulf of Riga (Baltic trawl) segment based on total catch between 2011 and 2014. This allows to identify Hiiu Kalur, Morobell and Kaabeltau as the top three fishing companies in the Baltic Sea and Gulf of Riga segment.
After an analysis of the company structures, this research has identified the parent companies of the companies listed in Table 24. Table 25 lists the top-10 Baltic trawl fishing companies by total catch for the period 2011-2014. It shows that the Hiiu Kalur group had by far the largest catch during the period. It is followed by companies owned by Raivo Baum, Fortem Holding and Kaabeltau.
The remainder of this section will provide an analysis of the company structures of the parent fishing companies with accumulated annual catches of more than 5,000 tonnes for the period 2011 to 2014. It should be noted that due to data limitations and the restrictions in functionalities of the Estonian company register, it is not always possible to identify companies on the basis of their owners. For example, it is not possible to extract a list of companies owned by Ragnar Baum. However, it is possible to identify corporate ownership.
As shown in Table 25, Hiiu Kalur had an accumulated catch of 62,675 tonnes in the period 2011 to 2014. Annual catches fluctuated between 14,113 and 16,890 tonnes. In 2014, Hiiu Kalur generated revenues of EUR 3.3 million, a 50% decrease from the previous year. The company owned total assets with a value of EUR 14 million (Hiiu Kalur, 2015).
Hiiu Kalur is member of Eesti Kalapüügiühistu PO. Through its subsidiaries it owns and is also a member of the Eesti Traalpüügi Ühistu PO.
Figure 27 provides an overview of the Hiiu Kalur company structure. It shows that the company structure is comparatively complicated. Through several intermediary subsidiaries, Toomas Kõuhkna and Tiit Kõuhkna own Hiiu Kalur and a number of other companies. The main investment subsidiary is Direct Consulting. Direct Consulting is the majority investor in Hiiu Kalur. The investment company also owns port service companies Veere Sadam and Vesilahendused, as well as a number of other non-related companies.
Hiiu Kalur owns 40% of Krapesk, a fish processing company with several subsidiaries. It is possible that the two other shareholders of Krapesk, Klein Holding Group (Panama) and Netwell (Malta), also have a link to Toomas Kõuhkna and Tiit Kõuhkna. Krapesk owns two fish catching companies and 20% of Eesti Traalpüügi Ühistu PO. The two Krapesk fish catching subsidiaries also own 20% each of the Eesti Traalpüügi Ühist PO. One of the Krapesk fish catching subsidiaries, Menhaden OY, is registered in Finland (see section 9.3.2).
Through its 50% ownership of Soome Kala, Hiiu Kalur has three further fishing subsidiaries in Finland. Hiiu Kalur also has a 40% stake in Kajax Fishexport, a fish processing and trading company. Kajax Fishexport also has a fish processing subsidiary in the Ukraine, an important export destination for Estonian fish.
It was not possible to access sufficiently detailed company information from the Panamanian company register to determine the ownership structure of Klein Holding. If Klein Holding is related to Toomas Kõuhkna and Tiit Kõuhkna, then the group has further investments in fish processing in Norway.
Hiiu Kalur exhibits evidence of both vertical and horizontal integration. Vertical integration is found in its investments in fish catching companies, fish processing, trading, a producer organisation, and port services. Horizontal integration is found in its investments in fish catching companies that are members of different producer organisations, as well as fish catching companies in different countries, particularly in Finland. Horizontal integration is also found at the fish processing level with investments in fish processing in at least two countries.
Raivo Baum companies
As seen in Table 25, Raivo Baum companies had an accumulated catch of 26,952 tonnes in the period 2011 to 2014. Annual catch volumes fluctuated between 5,430 and 7,892 tonnes.
Investor Raivo Baum has investments in several fishing sector companies. He is the majority shareholder of both Morobell and Bentros. Both these companies are members of the Eesti Kutseliste Kalurite Ühistu PO. The direct parent of Bentros, Kopeika, also owns a freight company, Morobell transport (see Figure 28).
Subsidiary Morobell generated 70% of its revenue from the wholesale distribution of fish and fish products in 2014. 13% of revenue came from freight transport, and only 11% of revenue was generated by sea fishing (Morobell, 2015). As Figure 28 shows, Morobell has two further subsidiaries. Both are fish catching subsidiaries registered in Finland. In 2014, Morobell generated revenues of EUR 11 million, while in 2013 it had generated EUR 13 million. The company had total assets worth EUR 14 million in 2014 (Morobell, 2015).
Subsidiary Bentros generates 100% of its revenue from sea fishing. In 2014, revenues amounted to approximately EUR 363,000, in 2012 revenues were approximately EUR 272,000. Bentros had total assets of approximately EUR 994,000 (Bentros, 2015).
Morobell has an outstanding loan with Bentros, indicating that although there is no formal relationship between the two companies, there is some form of cooperation due to the common owner (Bentros, 2015). Raivo Baum is also the only listed management board member of the producer organisation Eesti Kutseliste Kalurite Ühistu (Eesti Kutseliste Kalurite Ühistu, 2015). He is also related to another fishing sector company: he is the only listed management board member of both Fortem Holding, and its subsidiary Caroline (E-Business Register, 2016f; Fortem Holding, 2015; Caroline, 2015). It is possible that he is also related to the owner of Fortem Holding, Ragnar Baum. Both Fortem Holding and Caroline are also members of Eesti Kutseliste Kalurite Ühistu. Of the five members of the Eesti Kutseliste Kalurite Ühistu PO, only Abimerk does not seem to have an official relationship with Raivo Baum.
Raivo Baum companies exhibit evidence of both vertical and horizontal integration. Vertical integration is found particularly in Morobell with activities in the wholesale, primary processing and fish catching segments. However, vertical integration is also found in Raivo Baum’s role in the Eesti Kutseliste Kalurite Ühistu PO and through his investments in the freight segment.
There is also a degree of horizontal integration. This is found in Raivo Baum’s investments in multiple fishing companies with the same producer organisation, as well as investments in fishing companies in Finland (see section 9.3.5).
Fortem Holding company structure
As seen in Table 25, Fortem Holding had an accumulated catch of 17,682 tonnes in the period 2011 to 2014. Annual catches fluctuated between 3,209 and 5,975 tonnes, with the highest volume caught in 2014.
As Figure 29 shows, Fortem Holding is owned by Ragnar Baum. Fortem Holding is also the parent of Caroline. Both companies are members of Eesti Kutseliste Kalurite Ühistu PO.
According to its annual report, Caroline generates 100% of its revenue through the wholesale of fish and fish products (Caroline, 2015, p.15). This is noteworthy, since it is also a member of the PO, and has a quota allocated, which would imply that it also engages in fish catching. Fortem Holding, on the other hand, reports that 99% of its revenues are generated through fish catching, while 1% is generated through other services (Fortem Holding, 2015, p.27).
In 2014, Fortem Holding generated revenues of approximately EUR 1.2 million, up from approximately EUR 947,000 in 2013. The company had total assets of approximately EUR 4.7 million in 2014(Fortem Holding, 2015, p.4-5).
Caroline generated revenues of approximately EUR 312,000 in 2014, up from approximately EUR 261,000 in 2013. In 2014, the company had total assets of approximately EUR 897,000 (Caroline, 2015, p.3-4).
Fortem Holding exhibits evidence of vertical integration through its activities in both fish catching and fish processing. As noted above, it is curious that Caroline, the fish processing company, is also a member of the PO. This gives Fortem access to a large quota and would thus imply a degree of vertical integration.
There is probably further cooperation with the Raivo Baum companies described above, and possibly influence in Eesti Kutseliste Kalurite Ühistu through the connection with the investor. Ragnar Baum is the only listed management board member of both Fortem Holding and its subsidiary Caroline (E-Business Register, 2016f; Fortem Holding, 2015; Caroline, 2015).
As seen in Table 25, Kaabeltau had an accumulated catch of 17,589 tonnes in the period 2011 to 2014. Annual catch volumes fluctuated between 3,862 and 4,920 tonnes.
Kaabeltau is owned by Mikhel Undrest. As Figure 30 shows, the investor also owns VRHL, a fish processing company. In 2014, Kaabeltau generated revenues of approximately EUR 1.1 million, in 2013 this was EUR 1.3 million. The company had total assets of EUR 4 million in 2014. 100% of Kaabeltau’s revenues are generated through fish catching at sea (Kaabeltau, 2015).
VRHL also had revenues of approximately EUR 1.1 million in 2014, down from EUR 1.2 million in 2013. It had total assets of EUR 1.5 million in 2014. 99% of VRHL’s revenues are generated through fish processing and preservation. The remaining revenues are generated through other services (VRHL, 2015).
75% of the fish sold by Kaabeltau were sold on the Estonian market, the remaining 25% were sold on the Latvian market. Kaabeltau sold the majority of its fish to affiliate VRHL and producer organisation Eesti Kalapüügiühistu, of which it is a member (Kaabeltau, 2015, p. 3).
Mikhel Undrest has created vertical integration in his portfolio through investments in both fish catching company Kaabeltau and fish processing company VRHL. This is further supported by the clear off-take relationship between the two companies as mentioned by Kaabeltau indicating informal vertical integration (Kaabeltau, 2015).
As seen in Table 25, DGM Shipping’s accumulated catch for the period 2011-2014 was 14,907 tonnes. Catch volumes fluctuated between 3,211 and 4,050 tonnes.
Figure 31 shows that DGM Shipping is owned by Dmitri Matvejev, who also owns Baltic Fish Trade. 100% of Baltic Fish Trade’s revenues are generated through freight transport by road (Baltic Fish Trade, 2015, p. 17). Given its relationship with DGM Shipping, and its name, it is likely that this is cold chain transport to support the fish processing sector.
93% of DGM Shipping’s revenues in 2015 were generated through fish processing, the remaining 7% were generated from fish catching (DGM Shipping, 2016, p. 18).
DGM Shipping’s revenue was EUR 2.8 million in both 2015 and 2014. In 2015, it had total assets of EUR 8.5 million (DGM Shipping, 2016, p. 4-5). The company is a member of the same PO as Hiiu Kalur subsidiary Krapesk and its subsidiary, Eesti Traalpüügi Ühistu.
The company markets its fish under the brand Briis. DGM Shipping has at least seven shops in Estonia where its products are sold (DGM Shipping, n.d.).
DGM Shipping’s investments throughout the value chain from fish catching, to fish processing, to marketing are evidence of vertical integration. The company structure does not show any evidence of horizontal integration, nor did this research identify any other investments by Dmitri Matvejev in other fisheries sector companies.
As seen in Table 25, Monistico’s accumulated annual catch for the period 2011-2014 was 11,558 tonnes. Annual catch volumes fluctuated between 1,448 and 2,750 tonnes.
Monistico is owned by Arne Salong and Tiit Sober (see Figure 32). Monistico and its subsidiary Saare Kalapüügi are both members of the Eesti Kalapüügiühistu PO.
The owners of Monistico also own Tiivar Holding together with Ivar Kiil. Kiil is also a member of the management board of Saare Kalapüügi. Tiivar Holding is the parent of Saare Fishexport which, together with Hiiu Kalur (see section 18.104.22.168), owns Soome Kala, a fish catching company with fish catching and fish processing subsidiaries in Finland.
Monistico generated revenues of approximately EUR 920,000 in 2014, down from approximately EUR 1.4 million in 2013. In 2014, the company had total assets of EUR 5.2 million. 75% of Monistico’s revenues were generated through fish catching. The remaining 25% were generated through retail sales (Monistico, 2015, p. 4-5).
In 2014, Saare Kalapüügi generated revenues of approximately EUR 270,000, down from EUR 507,000 in 2013. The company had total assets worth EUR 1.4 million in 2014. 100% of Saare Kalapüügi’s revenues came from fish catching (Saare Kalapüügi, 2015).
Saare Fishexport, the direct parent of Soome Kala which has subsidiaries in Finland, generated revenues of EUR 3.3 million in 2014, down from EUR 5.6 million in 2013. The company had total assets of approximately EUR 5.2 million in 2014. 95% of Saare Fishexport’s revenues were generated through fish processing (Saare Kalapüügi, 2015). 90% of Saare Fishexport’s products are exported to Europe, the majority of which is exported to the Ukraine (Saare Fishexport, n.d.).
The owners of Monistico have created a portfolio that exhibits evidence of both vertical and horizontal integration. Vertical integration is found in the fish catching and retail of fish by Monistico and its subsidiary. There does not seem to be any processing activity. The owners also have investments through Tiivar Holding in Saare Fishexport, which does have fish processing activities.
There is also evidence of horizontal integration. Domestically, this is through the membership of Monistico and its subsidiary Saare Kalapüügi in the Eesti Kalapüügiühistu PO. Investments in Finland are evidence of international horizontal integration.
As seen in Table 25, Abimerk had an accumulated catch of 7,599 tonnes in the period 2011- 2014. Annual catch volumes fluctuated between 1,448 and 2,750 tonnes.
Abimerk is a member of the Eesti Kutseliste Kalurite Ühistu PO. It is the only member of that PO for which this research did not identify any links to Raivo Baum.
In 2014, Abimerk had revenues of approximately EUR 340,000, down from EUR 518,000 in 2013. The company had total assets of EUR 1.6 million in 2014. Nearly 100% of its revenues are derived from sea fishing (Abimerk, 2015, p. 3-4, p 22).
As Figure 33 shows, Abimerk is owned by Ain and Magrit Rooslid. It does not have any subsidiaries. This research did not identify any other companies linked to the owners.
The company structure of Abimerk does not show any signs of formal integration.
Keskpunkt had an accumulated catch of 7,223 tonnes in the period 2011 to 2014 (see Table 25). Annual catches fluctuated between 1,762 and 1,862 tonnes.
Keskpunkt is a member of the Eesti Kalapüügiühistu PO of which Hiiu Halur, Kabeltau and Monistico are also member.
Figure 34 shows that Keskpunkt is owned by entrepreneurs Andro and Henry Ots. Kespunkt, together with owner Henry Ots, is also majority shareholder of Ösel Harvest. Ösel Harvest’s parent company, Rembatas, is engaged in an unrelated sector. It generates almost 60% of its revenues from the retail sale of motor vehicle parts and accessories, 19% from freight transport by road, and the remainder from other business activities not related to the fisheries sector (Rembatas, 2015, p. 18).
The Keskpunkt annual report claims that Keskpunkt also owns 25% of Soome Kala, with fishing activities in Finland. However, Soome Kala documentation does not verify this. Soome Kala documentation refers to Hiiu Kalur and Saare Fishexport as its shareholders (E-Business Register, 2016i, p. 2).
Keskpunkt derived 64% of its revenues from fish catching in 2014. A further 34% was generated through the wholesale of fish products. In 2014, Keskpunkt generated revenues of EUR 980,000, down from EUR 1.4 million in 2013. The company had total assets of EUR 5.2 in 2014 (Keskpunkt, 2015, p. 4-5, p. 22).
Ösel Harvest is an aquaculture company: 97% of its revenues were attributed to aquaculture in 2014. The company had revenues of EUR 228,000 and EUR 184,000 in 2014 and 2013 respectively. Ösel Harvest had total assets of EUR 4.2 million in 2014 (Ösel Harvest, 2015, p. 4-5, p. 21).
Keskpunkt shows evidence of integration. Firstly, there is vertical integration within Keskpunkt itself as it is engaged in both fish catching and the wholesale of fish products. There is also a form of horizontal integration through its investment in Ösel Harvest which is engaged in a different, yet very similar, industry segment. Finally, if the Keskpunkt documentation is correct, then Keskpunkt is also engaged in horizontal and vertical integration through its investments in Soome Kala with its activities in the fish catching and fish processing sectors in Finland and Ukraine. However, Soome Kala documentation does not refer to Keskpunkt.
Smaller companies, such as Saare Rand and Novirinia Kalaparadiis, show fewer signs of integration (E-Business Register, 2016c; E-Business Register, 2016h; E-Business Register, 2016g; Novirina Kalaparadiis, 2015).
Baltic coastal fishing segment
Table 26 provides an overview of the 15 largest fishing companies in the Baltic coast segment based on total catch between 2012 and 2014. The remainder of this section will provide an analysis of the company structures of the top-5 companies in terms of accumulated catch in the Baltic coastal segment.
As seen in Table 26, Japs had an accumulated catch of 1,206 tonnes in the period 2012- 2014. Annual catch volumes fluctuated between 285 and 490 tonnes.
Figure 35 shows the company structure of Japs. Japs is owned by Arved and Liidia Soovik, also through another company they own, Marcopodus. Japs has one fish processing and storage subsidiary, Freshex Group, which is partly owned by Urmas Siidirätsep.
In 2014, Japs generated revenues of EUR 6.2 million, down from EUR 6.3 million in 2013. The company had total assets of EUR 5.6 million in 2014. Nearly all of Japs’ revenue is generated through its processing segment (Japs, 2015, p. 4-5, p. 22).
Japs subsidiary Freshex Group generated EUR 976,000 in revenue in 2014, down from EUR 1.1 million in 2013. The company’s total assets were approximately EUR 869,000 in 2014. As with Japs, Freshex’s revenues were almost all derived from fish processing (Freshex Group, 2014, p. 4-5, p. 22).
Japs shows signs of vertical integration through its investments in both fish catching and fish processing segments. The owners also have a diversified portfolio of investments likely designed to spread risk.
In the period 2012 to 2014 Margus Post had an accumulated catch of 1,192 tonnes. Yearly catch volumes fluctuated between 358 and 420 tonnes (see Table 26).
Margus Post is registered as a sole trader, or individual entrepreneur (E-Business Register, 2016e).
As seen in Table 26, Ain Mango had a total accumulated catch of 985 tonnes in the period 2012 to 2014. Annual catches varied between 304 and 369 tonnes.
Ain Mango is registered as a sole trader, or individual entrepreneur (E-Business Register, 2016a).
Krüger & Mets
In the period 2012 to 2014, Krüger & Mets had an accumulated catch of 946 tonnes, with fluctuations between 286 and 374 tonnes (see Table 26).
As Figure 36 shows, Krüger & Mets is owned by Kauri Krüger and Toomas Aab, it does not have any registered subsidiaries.
In 2014, Krüger & Mets generated revenues of EUR 130,000, up from EUR 108,000 in 2013. Total assets were EUR 273,000 in 2014. 84% of revenues were derived from fish catching, the remaining 16% were generated through maintenance services (Krüger & Mets, 2015).
Valdo Palu Rannametsa talu
As seen in Table 26, Valdo Palu Rannametsa talu had an accumulated catch of 656 tonnes in the period 2012 to 2014.
Valdo Palu Rannametsa talu is registered as a sole trader, or individual entrepreneur (E-Business Register, 2016j).
There are pronounced differences in the levels and forms of integration in the two main sea fishing segments in Estonia. Little integration is observed in the Baltic coastal fishing segment. Most of the fishing companies are in fact sole traders or individual entrepreneurs. Only Japs AS shows a degree of vertical integration within the Baltic coastal fishing segment.
In the Baltic Sea and Gulf of Riga fishing segment, both vertical and horizontal integration are more common. Vertical integration is found most commonly in the form of integration in the fish catching and fish processing sectors, and slightly less commonly also in distribution.
Horizontal integration is common in three forms. Firstly, through investments in companies belonging to the same PO. Secondly, through investments in fish catching companies in other POs. Finally, investments in companies active in the fisheries of another country.
In an interview, Mart Undrest, executive director of Eesti Kalapüügiühistu, stated that vertical integration in Estonian fisheries had reached its limits after 15 years. Most fishing companies own their own processing and storage facilities. Additionally, his PO also has processing and storage facilities (Undrest, 2016). Mauno Leppik, CEO of Eesti Traalpüügi Ühistu, also states that his PO has processing and production facilities. The PO further provides trade and distribution services to its members (Leppik, 2016).
Within POs there is also integration. Both Undrest and Leppik report that their POs have processing and storage facilities. Leppik, of Eesti Traalpüügi Ühistu, states that the PO also markets the fish. It does so under the Krapesk brand which belongs to Krapesk, and ultimately Hiiu Kalur. He argues that this is because Krapesk has a traditionally strong brand name. The prices for fish sold by the fish catching companies to the PO are a matter of negotiation, essentially a “friendly discussion with yourself”, according to Leppik. He states that the PO was created to produce more efficiently and to improve sales. It was created by fishermen for fishermen. Profits are split between the members, although the PO has not made significant profits to date according to Leppik (Leppik, 2016). In fact, in 2014 the PO made a loss of EUR 61,000, and in 2013 it made a loss of EUR 46,000 (Eest Traalpüügi Ühitsu, 2015).
The producer organisation Eesti Traalpüügi Ühistu is majority owned by Krapesk (see section 22.214.171.124), and by extension its parent Hiiu Kalur. Leppik could not comment on what this ownership structure implied for the running of the PO, beyond stating that the PO was created by and for the fishermen (Leppik, 2016).
Regarding investments by fishing companies in more than one PO, Undrest states that individual companies that are a member of one PO cannot be a member of another PO in Estonia. There are historical and legal reasons for this. However, the owners can have several companies active in different POs. Hiiu Kalur is the only example Undrest is aware of where the owner makes use of such a construction (Undrest, 2016).
The dominant form of horizontal integration in the Estonian fisheries sector is international investment, particularly Estonian fisheries sector companies investing in Finland. Finnish companies do not invest in the Estonian fisheries sector (Leppik, 2016). This is because it is cheaper for Estonian companies to invest in the Finnish fisheries sector than vice-versa (Undrest, 2016).
Both Undrest and Leppik state that Estonian investments in the Finnish fisheries sector can be attributed to a number of factors. Firstly, Leppik reports that there has been a reduction in quotas available in Estonia, while there has been an increase in market demand. Fish catching companies are therefore investing in Finland to gain access to more quotas.
Additionally, fish processing companies (often part of the same group of companies) are concerned by the surplus capacity caused by a reduction in Estonian quotas which would decrease the economic efficiency of the processing and distribution facilities (Leppik, 2016).
Undrest adds that Estonian quotas have sold out, whereas in Finland they have not. Investments are made into existing Finnish fishing companies to gain access to the quotas. Finland operated what is known as the Olympic fisheries management system, also known as the “race for fish”, until 2017. This refers to a management system that sets a quota and start date for the entire fishery and then individual boats “race” to get as much of the Total Allowable Catch (TAC) as possible before the fishery closes. It was therefore an attractive investment opportunity for Estonian fishing companies (Undrest, 2016).
However, as of 2017 Finland no longer uses the Olympic system (see Chapter 9). Undrest believes that this will have a positive impact on the Estonian fishing companies, active in Finland. There will be less pressure, better management of the fishing vessels, and the companies will become more cost effective (Undrest, 2016).
In terms of non-structural forms of vertical integration, Leppik states that a number of Finnish fish catching companies have off-take contracts with Estonian fish processing companies. He says that often these Finnish fish catching companies are actually owned by Estonian parent companies (Leppik, 2016).
Further non-structural forms of integration include the renting and swapping of quotas. Undrest states that quotas are not often bought and sold anymore. However, swapping and renting quotas is quite common. There is no formal system of swapping and renting. A system known as FishQ will be launched to provide such a service. Initially it will focus on the Baltic region, facilitating quota flexibility both nationally and internationally. Undrest reports that quota swaps and renting can currently take place at three different levels: inter- governmental, inter-company, or between individuals. There is no financial compensation for quota swaps. Differences in tonnage are used to represent the values of the different species of quota being swapped (Undrest, 2016).
In sum, there is both vertical and horizontal integration in the fisheries industry in Estonia. Vertical integration is already well-established with investments in fish catching, fish processing, and trade. Horizontal integration is driven by access to quotas. One key form this has taken is investment in the Finnish fish catching segment due to its easily accessible fish management system.