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Composition of the Latvian seafood sector
Latvian fishing companies generated EUR 20 million in landings income in 2015 (Table 51). The processing segment generated an additional EUR 153 million the following year. Processing production constituted 0.6% of Latvia’s GDP in 2016.
Latvia had a slight trade surplus in fish and fish products of approximately EUR 10 million in 2016. Latvia sourced approximately 82% of its EUR 170 million fish and fish products imports from other EU countries. 24% of its fish imports came from Sweden, followed by Lithuania (17%) and Denmark (10%).
Latvia exported EUR 179 million of fish and fish products in 2016. Its main export destinations were neighbouring countries Lithuania (20%), Denmark (15%) and Estonia (15%). In total, 86% of Latvia’s fish exports were destined for EU Member States.
There were 332 registered fishing vessels in Latvia in 2016, of which 80% were active. These belonged to 140 enterprises. Approximately 40% of all fishing enterprises operated more than one vessel, indicating a level of horizontal structural integration.
In 2015, there were approximately 345 people employed in the fish catching segment. The processing segment, on the other hand, had more than ten times as many employees – 3,588. As noted above, this is partly reflected in the significant value adding of the processing segment.
Major brands in Latvia include Salas Zivis, Karavela and Gamma-A (see Figure 69). The Abba brand of Norwegian company Orkla is also marketed in Latvia. Karavela also owns the Arnold Sorenson brand, and produces for private labels. It partners with the Princes brand from the United Kingdom, and Danish Salling Group’s Dansk Supermarked, Denmark’s largest retailer with banners Netto, Bilka and Salling. 15% of its products are exported to Sweden, 13% to Denmark and 12% to Russia (Karavela, 2015).
There are four recognized producer organisations in Latvia. Three of them primarily represent the pelagic segment, and one primarily the demersal segment (see Table 52). Due to lack of data availability, the number of vessels and members is not provided.
The company analysis below is based on three sets of companies. The first set includes fishing companies with licenses for offshore fishery in the Atlantic Ocean. The most recent available list with company names was from 2013. The two companies with the highest combined engine power were selected – Baltic Marine Fishing Company and Baltreids (Ministry of Agriculture of the Republic of Latvia et al, 2013).
The second set includes fishing companies with licenses for offshore fishery in the Baltic Sea and the Gulf of Riga. Again, the most recent available list with company names was from 2013. Also, here the two companies with the highest combined engine power were selected – BraDava and Grifs.
Finally, the third set includes industrial fishing vessels in the Baltic Sea and in the coastal waters of the Gulf of Riga in 2017. In this instance, the two companies with the largest combined gross tonnage were selected – Leste and Ramas (Ministry of Agriculture of the Republic of Latvia, 2016).
Baltic Marine Fishing Company
In 1997, Baltic Marine Fishing Company was established when Latvian fishing company Rigas Zvejnieciba was privatized. At the time the company had a fleet of 30 fishing and transport vessels. The company has a history of fishing in the Atlantic Ocean from the Artic to the Antarctic. It currently has a license to engage in commercial fishing in territorial and international waters, but not in the Baltic Sea. Baltic Marine Fishing Company fishes both of its own initiative and on the basis of contracts signed with fishing agencies and fishing companies in the EU. The company supplies customers in the Commonwealth of Independent States, Europe and West Africa (Baltic Marine Fishing Company, 2018a).
Figure 70 shows the company structure of Baltic Marine Fishing Company. Baltic Marine Fishing Company’s subsidiary LZS provides port services at the fishing port of Ventspils. The port is used by Latvian, Lithuanian and Estonian fishing companies. It is currently one of the largest fishing ports in Latvia (Baltic Marine Fishing Company, 2018b).
No consolidated financial statements for the Baltic Marine Holding company could be identified. Consolidated financial statements are not available for Baltic Marine Holding. The company generated a turnover of approximately EUR 6,600 in 2017, while owning total assets worth EUR 4.4 million. In 2016, the holding company generated approximately EUR 5,500 in revenue, with assets worth EUR 3.6 million. It had only one employee in 2017, indicating its role as a holding company (Orbis, 2018i).
Fishing subsidiary Baltic Marine Fishing Company generated revenues of EUR 37,800 in 2016, down from EUR 268,000 the year before. In 2016, Baltic Marine Fishing Company held assets worth approximately EUR 2.1 million, up from EUR 1.6 million in 2015 (Orbis, 2018j).
Judging from the company structure and the descriptions above, it does not seem that Baltic Marine Fishing has engaged in structural vertical or horizontal integration in the fishing or fish processing segments. It does have activities in port services. Both Baltic Marine Holding and Leimanis Gulbis Un Partneri have investments in real estate, marinas and seaside resorts. None of these are directly related to the seafood industry.
Baltreids is a Latvian fishing company established in 1998. It is engaged in fishing in Baltic, and as of 2002 also in the Atlantic waters off the coast of Africa with its large freezer trawlers (Baltreids, n.d.). The company has three vessels that it directly manages, and a further three vessels managed by its wholly-owned subsidiary Limmat Inter (Orbis, 2017a). Limmat Inter appears to be registered in the Seychelles (Orbis, 2018bg) (Figure 71).
In 2016, Baltrieds had 27 employees. In the same year it generated revenues of approximately EUR 19 million, EUR 10 million more than in 2015. In 2016, Baltreids had total assets worth approximately EUR 14 million. This was similarly an increase of around EUR 10 million from EUR 3.9 million in 2015 (Orbis, 2018bh).
Shareholder Nikolajs Varušečkins is also the ultimate owner of freight transport company Kenguru SIA (Orbis, 2018b). Although it could not be confirmed, it is possible that Kenguru could also be used by Baltreids.
From the company structure of Baltreids it is evident that there is structural vertical and horizontal integration. Vertical integration as the company is engaged in both fish catching and primary processing. Horizontal integration due to its fleet of six vessels. Baltreids is engaged in fish catching in both the Baltic Sea and in the Atlantic waters off the coast of Africa. It does not seem to be active in other EU Member States.
Offshore fishery Baltic Sea and Gulf of Riga
BraDava is a fully integrated Latvian seafood company. The company was established in 1995 with two fishing vessels, the “Bravo” and the “Daugava”. Within three years the fleet had expanded to eight vessels. However, management gradually started to modernize the fleet in 2004 by acquiring vessels with a larger capacity. By 2010 the fleet had been fully replaced (BraDava, 2018b). According to the company’s own sources it nowadays operates a fleet of three vessels (BraDava, 2018a). These vessels are active in the Baltic Sea targeting primarily sprat, herring and cod through bottom and pelagic trawling. The company, through its fleet, has access to approximately 20% of the Latvian quota. Another source affiliates six vessels to BraDava: four directly under BraDava, one under subsidiary Kursas Jura, and one under the Unda joint venture (Orbis, 2018bj).
Initially the company was only engaged in fish catching, but it gradually expanded into fish processing, cold storage, transportation and ship repairs (BraDava, 2018b, 2018c). BraDava is now no longer dependent on external service providers and is able to meet its own needs from fish catching to delivering the finished product to customers (BraDava, 2018b).
Unda is a joint venture operation between BraDava and shareholder Juris Bubiss. Unda is a canned fish producer. Together BraDava and Unda own “… one of the biggest quota in the region for sprats and herring”. Unda produces a wide variety of canned sprat, herring and sardine products sold in the European Union, the United States, Australia, and the Commonwealth of Independent States (Unda, 2018).
In 2016, BraDava employed 110 people within the consolidated group – excluding the Unda joint venture). In that year, the company generated approximately EUR 6.6 million in revenue, down from approximately EUR 7.5 million in 2015. In 2016, the company had total assets worth EUR 8.3 million, down from approximately EUR 10.1 million a year earlier (Orbis, 2018bi).
Unda generated revenues of approximately EUR 2.6 million in 2016, down from EUR 6.9 million the year before. The company owned total asset worth EUR 1.9 million in 2016, a decrease from EUR 2.1 million in 2015. In 2016, Unda employed 105 workers in its processing and production facilities (Orbis, 2018g).
From the above company structure and description, it is clear that BraDava is a fully integrated seafood company. It has engaged in both structural vertical integration, investing from the upstream fish catching segment in downstream activities including primary processing, cold storage, canned product manufacturing, transportation, and wholesale. The company has also engaged in horizontal integration in the fish catching segment by expanding, and then consolidating its fleet. All processes of integration have so far been limited to Latvia, with no investments in other countries.
Latvian fishing company Zvejnieku Kompanija “Grifs” was established in 1993 when the collective fish farm Banga was privatized. Initially it only had one vessel (Grifs, 2018a). Since then Grifs has expanded the size of its fleet to six vessels (Grifs, 2018a, 2018b). Grifs currently holds 10.8% of the Latvian cod quota in the Baltic Sea, and 9% of the sprat quota. The company has also been developing its ship repair station capacity (Grifs, 2018a).
In 2016, Grifs generated a turnover of approximately EUR 1.7 million, an increase from EUR 1.3 million in 2015. The company held total assets of EUR 1.8 million in both 2016 and 2015 (Orbis, 2018h).
The company structure and description of Grifs do not indicate vertical integration. There has, however, been some structural horizontal integration through fleet expansion within Latvia.
Coastal fishery Baltic Sea and Gulf of Riga
Leste is a Latvian fishing company. Six individual investors are shareholders of the company. In 2016, the company had ten employees. There are no consolidated accounts available for the company. In 2016, the company generated revenues of EUR 38,100, a decrease from EUR 63,000 in 2015. In 2016, Leste held total assets worth EUR 140,000, down from EUR 173,000 in 2015 (Orbis, 2018l).
In total, Leste has approximately 14 industrial vessels licensed for fishing in the Baltic Sea and in the coastal waters of the Gulf of Riga in 2017. The combined gross tonnage was approximately 24.27GT (Ministry of Agriculture of the Republic of Latvia, 2016). This shows that the company has a large number of smaller vessels.
There is a general lack of information regarding Leste. On the basis of this limited information and the identified company structure, no evidence of vertical integration in the company has been identified. However, given the large fleet operating under the company, there seems to be extensive horizontal integration.
Rāmas is a small Latvian fishing company. The only financial data that could be identified dates back to 2010. Financial data is therefore not reported here. Further information could also not be identified.
In total, Ramas has six industrial vessels licensed for fishing in the Baltic Sea and in the coastal waters of the Gulf of Riga in 2017 (Ministry of Agriculture of the Republic of Latvia, 2016). The combined gross tonnage was approximately 24.21GT. This shows that there are a relatively large number of smaller vessels.
On the basis of this limited information and the identified company structure, no vertical integration has been identified. However, given the relatively large fleet operating under the company, there seems to be extensive horizontal integration.
From the above analysis, it is evident that there is horizontal integration in Latvia, primarily in the Atlantic and offshore Baltic Sea fisheries. More than 40% of fishing companies own more than one vessel. This is mainly in the form of companies buying other companies or vessels that already exist in the sector. There are very few large vessels in Latvia. Representative of the producer organisation Latvijas Zvejas Produktu Ražotāju Grupa – Sandra Raituma – says that there are only 50 to 60 active large vessels left in Latvia. The fleet size decreased when Latvia entered the EU, as there were too many vessels for the quota. Many vessels were sold or decommissioned. Since then, not many new vessels entered the fleet. There was an increase in unemployment at the time, however, an EU funded program helped fishermen to find other jobs. Currently, the driver of horizontal integration is access to quotas (Raituma, 2018).
Informal horizontal integration driven by access to quota is quite common. This is mainly in the form of quota swaps of different species. There is no public information on quota swaps, however, agreements must be sent through the relevant ministry to make them official. Quota leasing also occurs; however, it is not very common (Raituma, 2018).
The above description has shown that a small number of companies have also engaged in vertical integration. Raituma reports that mainly companies that produced canned or smoked sprat have engaged in vertical integration. She refers to companies such as Kolumbia, Grif 93 and Gamma. Gamma also markets the Gamma-A brand (see section 15.1). Both Kolumbia and Gamma no longer own their own vessels. However, they purchase directly from the PO (Raituma, 2018).
The POs all play a role in vertical integration as they have processing facilities. These are used to process most, but not all, the catch harvested by its members. The PO is also responsible for sale. Since the closure of the Russian market, companies have reduced production, others are exploring new markets (Raituma, 2018).