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Composition of Finnish seafood sector
Finnish fishing companies generated EUR 35 million in landings income in 2015. Processing companies generated EUR 311 in production revenues.
Finland had a high trade deficit in fish and fish products of approximately EUR 330 million in 2016. The country exported EUR 53 million in fish products in 2016. 70% of these exports were destined for other EU countries. The main destinations for its fish and fish product exports were Estonia (40%), Denmark (14%) and Belarus (14%). Senior Ministerial Adviser for Fisheries, Ministry of Agriculture and Forestry in Finland – Risto Lampinen – believes that Finland could reduce its EU imports of fish, and re-balance their fish trade deficit because they have sufficient resources. The government is currently taking steps to address this issue (Lampinen, 2018).
Finland imported EUR 383 million in fish products in 2016. More than half of these imports came from other EU countries. Finland’s three main import partners were Norway (40%) and Sweden (29%) followed by Estonia (6%).
There were 3,092 registered commercial fishing vessels in Finland in 2016. Less than half of these were active. Vessel were registered to 1,199 enterprises. 287 enterprises – 24% of all fishing enterprises – owned more than one vessel.
The fish catching segment in Finland employed 358 FTE in 2015. The fish processing segment employed approximately twice as many workers, 748 FTE.
84% of fish products sold in Finland are sold through the retail segment, the remainder is sold in food service. About 40% of the fish products that enter the market are sold as fresh, canned and dried/smoked/salted account for approximately a quarter each. As Figure 37 shows, more than 90% of canned fish and dried/smoked/salted is sold in retail outlets. Approximately three quarters of fresh and frozen fish in Finland is sold through retailers.
Table 28 shows that more than 90% of fresh fish in Finland is sold unbranded. The other categories of fish products are predominantly sold as branded products.
Important brands for fresh fish include Chipsters with a market share of approximately 19% of the fresh segment, and Cermaq (Norway, part of Mitsubishi (Japan)) with around 13%. Findus (part of Nomad (UK) holds a market share of around 34% in the frozen fish segment of the country, HKScan accounts for around 30% of this segment. In the canned segment, Orkla (Norway) accounts for approximately 37% of the Finnish market, while the King Oscar brand (part of Thai Union (Thailand)) holds a share of around 23% of the canned segment. Kalaneuvos Oy (formerly known as V. Hukkanen Oy), holds a share of around 28% of the dried/smoked/salted fish segment in Finland, while Saaristomeren (part of Heimonkala) accounted for approximately 19% of this segment (FFT, 2018).
There are no fisheries producer organisations recognized by the EU in Finland. The Finnish Association of Professional Fishers (Suomen Ammattikalastajaliitto – SAKL), represents commercial fishermen in Finland.
Until 2017 the Finnish fisheries were totally “free” for TAC and quota species. The Finnish system was known as the “Olympic fisheries” system. There was a race to the finish approach, where restrictions on fishing efforts were only put in place when Finland’s quota for a particular species was almost used up. These species were therefore especially interesting and lucrative. Before last year (2017), these species were interesting for Estonian fishermen as well as they were subject to quota restrictions in their own country (Lampinen, 2018).
An individual quota system has now been implemented in Finland in 2017. The individual quota system has been introduced for herring and sprat in the pelagic/trawling segment. In the demersal/coastal segment, the individual quota management system was introduced for salmon. The quota is still state-owned; however, it is given to companies. This has moved responsibility of quota management, and sustainable fishing practices, from the state to companies. Quota is allocated per company, not per vessel. Companies can sell the rights/shares between each other. For pelagic/trawling companies, the quota concentration limit is set at 20%. For demersal/coastal fishermen/companies the quota concentration limit is set at 15% for salmon quota per company/group. Companies are granted the rights to use
the common resources for a period of ten years per company, with renewal every five years. The fisheries management system is now fairer, as fishermen can adjust their strategies better to maximize income and minimize costs, and to overcome situations where they may briefly not be able to fish, e.g. if their vessel needs repairs (Lampinen, 2018).
Finland’s responsible agencies have learned from Iceland’s experience regarding the introduction of individual quotas. The pelagic and coastal herring and sprat quotas have been separated. Companies with pelagic herring and sprat quotas cannot buy coastal herring and sprat quota shares. They have been separated to protect employment in the coastal fisheries segment. The separation is meant to avoid negative socio-economic impacts as the coastal segment employs more people but doesn’t have the capital resources that companies in the pelagic segment have (Lampinen, 2018).
The biggest and most important quota in Finland is the Baltic herring. Last year this quota was so big that it wasn’t filled, i.e. completely harvested. For 2018, it has been cut by 32%, making Baltic herring a scarce resource (Lampinen, 2018).
Coastal, particularly salmon, fisheries are a very sensitive issue in Finland as it affects the livelihoods of coastal fishermen). Salmon is mostly targeted by individual Finnish fishermen. Cod has a small catch history in Finland, and the TACs are kept low to replenish the stocks. Therefore, it is now not really targeted by Finnish vessels (Lampinen, 2018).
The Finnish fisheries are separated into two segments: pelagic and coastal. In the pelagic segment, a small number of large companies operate. The coastal segment is characterized by a large number of small-scale fishermen. There are no large companies in this segment (Lampinen, 2018). The following companies have been identified as the largest fish catching companies in Finland (Svensson, 2016). These companies operate exclusively in the country’s pelagic trawl segment:
- Kotka Fisheries Oy
- Menhaden Oy
- Omega Shipping AB
- Seagull AB Fishing Company
- Troolari Olympos
The remainder of this section will provide a detailed analysis of the company structures of these companies.
Ab Kotka Fiskeri – Kotkan Kalastus Oy is a fish catching company based in Turku, Finland. It is owned – at least in part – by Swedish fishing company Bryngeld Fiskeri. Bryngeld Fiskeri is owned by the Bryngeld family. Bryngeld Fiskeri operates its own fishing vessels directly, as well through its subsidiaries and associates in Sweden, Finland and Senegal (Figure 38).
In 2015, Kotka Fiskeri generated revenues of approximately EUR 738,000. This was approximately half of the turnover it generated in 2014, EUR 1.4 million. The company held total assets worth approximately EUR 2.3 million in both 2014 and 2015 (Orbis, 2018u).
Parent company, Bryngeld Fiskeri, generated revenues of EUR 2.6 million in 2017, up from EUR 2.3 million in 2016. In 2017, Bryngeld Fiskeri owned total assets worth EUR 9.8 million. This was composed of, among others, EUR 6.1 million in vessels, EUR 774,000 in fishing rights, and EUR 1.5 million in receivables from related parties. The company also had EUR 5.4 million in outstanding loans to banks in 2017. In 2016, Bryngeld Fiskeri held total assets worth EUR 10.2 million. This consisted of, among others, EUR 6.5 million in fishing vessels, EUR 890,000 in fishing rights, and EUR 2 million in receivables from related parties (Bryngeld Fiskeri, 2017).. In 2016, the company had EUR 6.2 million in outstanding bank loans.
From the above description and company structure it can be seen that Kotka Fisheries is part of a horizontally structurally integrated fishing group. The Swedish parent company has fish catching activities both in Sweden, Finland and Senegal. Bryngeld Fiskeri does not seem to have engaged in structural vertical integration.
Menhaden is a pelagic fishing company active in Finland. Figure 39 shows that Menhaden is the direct subsidiary of Estonian Krapesk. Krapesk in turn is an affiliate of Hiiu Kalur (see section 126.96.36.199). Krapesk is engaged in fish catching and fish processing itself and through its subsidiaries. The company also owns 60% of an Estonian PO. Section 188.8.131.52 provides more details regarding Menhaden’s Estonian parent companies.
Hiiu Kalur is one of the joint venture partners in Läätsa Kalatööstus. The latter produces frozen seafood, marketed under the Kaluri, Saaremaa and Subland brands (Läätsa Kalatööstus, 2018).
In 2015, Menhaden generated approximately EUR 1 million in revenues, down from EUR 1.5 million the previous year. The company owned total assets worth approximately EUR 1.3 million in 2015, up from EUR 605,000 in 2014 (Orbis, 2018aj). The latter indicates a large acquisition.
From the company structure and description above it is evident that Menhaden is part of a large fully integrated seafood group. The Estonian group which it belongs to has engaged in both structural horizontal integration through its investments in fishing companies in Estonia and Finland, and structural vertical integration through its investments in fish catching, processing and trading companies, as well as wholesale in frozen foods.
Omega Shipping is a joint venture between two Finnish and Estonian companies. Finnish company Selkämeren Jää – owned by Henri Lomppi – owns 70% of Omega Shipping. The remaining 30% belong to the Estonian company Baltish – owned by Egils Kljavin. Lompi and Kjlavin also jointly own two other companies: Hellströmming and Reposaari Fish (Figure 40).
Omega Shipping operates two vessels, Hanne and Westfjord. Both vessels target Baltic herring and sprat and are both certified (Selkämeren Jää, 2018a). Selkämeren Jää engages in fish breeding and freezing (Selkämeren Jää, 2018b). Hellströmming sorts and freezes Baltic Herring. This is then delivered to affiliate company Finskis – which is owned by Kljavin – in the same harbour (Hellströmming, 2018).
In 2016, Omega Shipping generated revenues of approximately EUR 2.3 million. A year earlier it generated EUR 1.9 million. In 2016, the company held total assets worth EUR 3.3 million, up from EUR 2.8 million in the previous year (Orbis, 2018ak).
Baltfish reports that due to the closure of the market of the Commonwealth of Independent states, it did not earn any revenue in 2016 (Baltfish, 2017). Affiliate company Baltfish Trade generated approximately EUR 547,000 in 2016. The previous year it generated revenues of approximately EUR 554,000. In 2016 and 2015, Baltfish Trade owned total assets worth approximately EUR 1.9 million (Baltfish Trade, 2017).
From the company structure and descriptions above it is apparent that Omega Shipping is part of a structurally integrated group. Fish catching is predominantly taking place in Finland. However, at the processing and trade level there is structural horizontal integration through the activities carried out in Finland and Estonia. Structural vertical integration is seen in the integration between fish catching, processing and trade activities.
Seagull AB Fishing Company
Seagull Fishing company is a Finnish pelagic trawling company based in Åland. It is owned by two Finnish individuals – Petra Eriksson and Leonard Christensen. At the reporting date in February 2017, Seagull Fishing had generated an annual turnover of EUR 3.2 million. This was almost double the turnover it generated the year before – EUR 1.5 million. In February 2017, the company held total assets worth EUR 3 million, while the year before it held assets worth approximately EUR 693,000 (Orbis, 2018al).
The above company structure indicates that Seagull Fishing has not engaged in vertical or horizontal integration.
Finnish pelagic trawling company Shedfish is part of the Estonian Raivo Baum group of companies (see section 184.108.40.206). With Estonian, Finnish and Lithuanian fish catching affiliates it is part of a structurally horizontally integrated seafood group. Moreover, with its parent company and affiliates engaged in primary processing and distribution, there is also structural vertical integration present in the company structure.
In 2016, Shedfish generated approximately EUR 2.3 million in revenues. The year before it had generated approximately EUR 1.7 million. In 2016, the company held total assets worth approximately EUR 3.0 million, a slight increase from the year before when Shedfish held total assets of EUR 2.8 million (Orbis, 2018am).
As the company structure in section 220.127.116.11 and the description above shows, Shedfish is part of a structurally vertically and horizontally integrated seafood group.
Finnish pelagic trawling company Sonnfish is owned by father Carl and son Andrea Granfors. The company operates one trawler – Sonnskär FIN-13-V (Sonnfish, 2018a). Sonnfish has a fish logistic centre with a capacity of 5,000 tonnes. Most of Sonnfish’s frozen fish is exported to Russia, with a small part sent to Moldova. The remainder is sold to feed producer Molpe Frys to be used as feed in mink farms (Sonnfish, 2018b).
Sonnfish generated annual revenues of approximately EUR 1.7 million at the reporting date in February 2017. A year earlier it had generated slightly more turnover – EUR 1.9 million. In 2017, the company held total assets worth EUR 1.4 million. The year before this was EUR 1.3 million (Orbis, 2018an).
From the company structure and description above, Sonnfish does not appear to have undertaken horizontal integration. There is marginal vertical integration through the cold store facilities.
Finnish pelagic trawling company Trooloari Olympos is part of the Estonian Hiiu Kalur group (see section 18.104.22.168), and an affiliate therefore of Finnish fish catching company Menhaden (see section 9.3.2). Figure 43 presents a focused company structure of companies directly related to Troolari Olympos. Troolari Olympos and its Finnish fish catching sister company Laguna are both owned by Finexport Group, which in turn is owned by Kajax Fishexport. The latter is ultimately owned by Estonian investors Toomas Kõukhna and Tiit Kõukhna, Ukrainian investor Oleg Lushyk, and Oleg Omeltsenko.
Troolari Olympos generated revenues of EUR 2.4 million in 2017, and held total assets worth EUR 2.2 million (Orbis, 2018ao). Kajax Fishexport reports consolidated figures for its subsidiaries including Troolari Olympos and Laguna. In 2017, Kajax Fishexport generated revenues of EUR 8.2 million, an increase of approximately EUR 5 million from 2016 when its turnover was EUR 3.6 million. In 2017, the company held total assets worth EUR 14 million, an approximate EUR 10 million increase from the year before when it held total assets worth EUR 3.8 million. This was due to its acquisition of Troolari Olympos and Laguna, as well as its purchase of an additional fishing vessel with quota in Estonia (Kajax Fishexport, 2018).
It should be noted that the managing director of Troolari Olympos and Laguna – Mauno Leppik – is also the managing director of Estonian pelagic fisheries producer organisation Eesti Traalpüügi Ühistu (Orbis, 2018ap; Eesti Traalpüügi Ühistu, 2018).
From the company structure and description above it is clear that Troolari Olympos and its sister company Laguna are part of a large structurally vertically and horizontally integrated seafood group. The group has fish catching activities in Finland and Estonia, and fish processing activities in Estonia. The level of integration is characterized by the fact that the managing director of the two Finnish fish catching companies is also the managing director the Estonian pelagic fisheries producer organisation.
The analysis above has shown that there is significant horizontal integration in the Finnish pelagic segment. This is predominantly foreign investment in Finnish trawlers – particularly by Estonian fishermen. There is no horizontal integration in the demersal segment, as this remains largely small-scale. Approximately 300 coastal fishermen catch 25,000 individual salmon. Therefore, salmon fishing can only be one part of their income. Moreover, in Finland, demersal fishermen are scattered all along the coast. There are no real fishing ‘villages’ as you might find in other countries. There are also no villages that are totally dependent on fisheries, potentially limiting the ability or need to horizontally integrate. Previously, the coastal segment was seen as a low-cost segment, however, the costs are now increasing due to measures that need to be taken to mitigate seal damage. Given these costs, and the limited scale of coastal fishing in Finland, the segment is not very lucrative and therefore not attractive to larger companies (Lampinen, 2018).
There has been limited vertical integration in both the demersal and pelagic segments. This is mainly due to instability of raw material supply (Lampinen, 2018). There has been vertical integration in aquaculture though. One of the biggest processing companies bought the biggest aquaculture companies. It can be observed that processing companies apply for aquaculture licenses in order to guarantee supply of raw materials (Lampinen, 2018).
Senior Ministerial Adviser for Fisheries, Ministry of Agriculture and Forestry in Finland – Risto Lampinen – believes that this thinking may also start to apply to coastal and pelagic/trawling segments. In the pelagic/trawling segment there has not been much vertical integration so far, but there is the expectation that this will increase in the future. The individual quota management system brings more stability in the supply of raw materials. This stability is a key component in considering the development of processing facilities. Now, because the resource is scarce, processing companies mostly make (long-term) deals with fishing companies. Lampinen believes that in the future there will be full value chain integration and optimization in the Finnish fisheries (Lampinen, 2018).
There is not much vertical integration in Finnish coastal fisheries. Almost all coastal fishermen are doing some processing of their own catch, e.g. head-gut(-tail) and/or fileting. Lack of raw material is an issue for all sectors. If there were more fish it would be easier to engage in vertical integration. Lampinen states that the pelagic/trawling segment has overcome its raw material problem, and it is now time for the coastal segment to do so too. The goal of the introduction of the TAC quota management system for salmon was to incentivize fishermen to concentrate more on generating value from salmon rather than increasing income from the amount of salmon they harvest (Lampinen, 2018).
Lampinen believes that the individual quota system will be the main driver for vertical and horizontal integration. Fishermen need to be more business-minded under the new management system. It is expected that fleet sizes in both the pelagic and demersal segments will decrease as fewer vessels are needed to catch the full quota. In the pelagic/trawling segment it has already been observed that smaller vessels have been sold to bigger companies. Lampinen argues that some concentration is good, but employment is also important. Concentration is good for profitability. Fishermen can buy shares from retired fishermen or those that no longer want to fish, as happened for example in Denmark (see Chapter 7) and the United Kingdom (see Chapter 25) (Lampinen, 2018).
As has been noted above, there is significant foreign investment – particularly by Estonian companies – in the Finnish pelagic segment. Lampinen argues that Estonian companies had a clear advantage over Finnish companies because the ITQ system was introduced in Estonia in 2004. Estonians were very interested in buying Finnish vessels. The most important markets for Baltic herring and sprat are Eastern Europe and Russia. Estonian fishermen are more familiar with these markets, explaining their interest in Finnish quotas for these species (Lampinen, 2018).
There has also been some interest from Swedish fishermen to invest in the Finnish pelagic segment, however, less than from Estonians. This is likely because in contrary to Estonia, for Sweden fishing activities in the North Sea are more important than in the Baltic Sea (Lampinen, 2018).