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Composition of the Spanish seafood sector
Spain has the biggest fishing industry in the EU. The country’s location is of geostrategic importance, as it is positioned in the far south-west of Europe, enjoying entry points into both the Atlantic and the Mediterranean, while also offering good conditions for marine and freshwater aquaculture. The country’s coastline is 8,000 km long, representing 7.4% of the total EU-23 coastline (European Commission – Maritime Affairs and Fisheries, 2016, p. 1).
There were 9,686 registered commercial fishing vessels in 2016. These were owned by 8,979 fishing companies. 592 enterprises – 7% of all fishing companies – operated more than one vessel. The fish catching segment in Spain employed approximately 30,015 FTE in 2015 (Table 74).
Half of the Spanish fishing fleet (50%) is located in the Galicia region, Andalusia (15%) and Catalonia and the Canary Islands (9% together) follow with smaller shares (Eurofish, 2015c). 93% of the fishing enterprises in Spain own only one vessel (see Table 74). The most important fished species are tuna, albacore and needlefish, cod, hake, herring, sardines, and anchovies (Eurofish, 2015c).
The Spanish fish processing industry is the largest in Europe. In 2016, its turnover reached EUR 5.2 billion, while total employment was estimated at 17,693 full-time workers (European Commission – Maritime Affairs and Fisheries, 2016, p. 1). The industry is diverse. It is focussed mainly on canning, but also active in frozen and fresh processed seafood. The canning sector has a production volume of 348,000 tonnes and a value of nearly EUR 2 billion. It is mostly composed of medium-sized companies. Tuna is the most important species in the sector, amounting for 69% of the total production volume, while other key species include sardines and anchovies (Eurofish, 2015c).
The Spanish fish and seafood market was estimated to be worth EUR 13 billion in 2015. Indications suggest it will grow to EUR 16 billion by 2020. Spain accounted for 19.6% of European fish and seafood revenue in 2015. Globally, Spain is the fourth-largest market for imported fish and seafood, following the US, Japan and China. It is the largest European importer of fish. Spanish per capita annual fish consumption was estimated to be 26.4 kg per person in 2014 (Infinity Research, 2015a, p.25).
Spanish fishing companies generated approximately EUR 2 billion in landings income in 2015. In 2016, fish processing companies generated a further EUR 5.2 billion in production revenues (Table 74).
Spain had a EUR 2.8 billion trade deficit in fish and fish products in 2016. It imported EUR 6.4 billion in fish products. Only 37% of these imports originated in other EU countries. Spain’s largest import partners were Morocco (10%), France (7%) and Argentina (7%).
Spain exported EUR 3.7 billion in fish and fish products in 2016. 79% of these exports were to other EU countries. The main export destinations were Italy (32%) and Portugal (18%), followed by France (13%).
66% of all fish and fish products that enter the Spanish market are sold as fresh. Canned and frozen account for respectively 17% and 12% of all fish and fish products that enter the market. 82% of all fish and fish products are sold through retailers, the remainder is sold through the food service industry. More than 80% of canned, fresh and dried/smoked/salted fish and fish products are sold through retailers (see Figure 110). 72% of frozen is sold through retailers, the remainder is sold through the food service industry.
In Spain, 95% of fresh fish is sold unbranded (Table 75). Only 2% of fresh fish is sold branded, the remaining 3% is sold with retailers’ own labels. The majority – more than 85% – of canned fish products are sold branded, and the remainder is sold with retailers’ own labels. Almost three quarters of frozen fish and fish products are sold branded, approximately 20% is sold with retailers’ own labels and 11% is sold unbranded. Roughly 60% of dried/smoked/salted fish products are sold branded, a quarter is sold with retailers’ own labels and 15% is unbranded.
In frozen products, Pescanova (see section 23.3.3) holds the largest market share with about 29%. In canned products, Conservas Albo is an important player with a market share of approximately 13%, while Conservas Garavilla with its brand Isabel accounts for another 11%. Pescanova also accounts for about 7% of the market for dried/smoked/salted fish products in Spain, while Lur Berri (France) accounts for about 15% (FFT, 2018).
Table 76 gives an overview of the producer organisations in Spain. Due to lack of data availability the number of vessels and members is not provided.
This section provides an analysis of the company structures of seven major Spanish fish catching companies. These companies have been described as significant players in recent market research, with additional companies referred to by interviewees (Infinity Research, 2015a, p.25).
Grupo Freiremar was established in 1974 in Gran Canaria, Spain. The company owns and operates 35 freezer vessels including longliners and trawlers. Grupo Freiremar’s registered gross tonnage is over 13,000 metric tonnes. The group harvests globally – in Europe, Africa, Argentina and Canada (Infinity Research, 2015a, p.42-43). Grupo Freiremar has processing plants on the Canary Islands, and in Valencia and Ria Vigo, Spain. Freiremar has been under insolvency since 2013 (Orbis, 2016m). The company’s total fishing quota in the waters administered by Northwest Atlantic Fisheries Organization (NAFO) was passed on to two other Spanish companies, namely Moradiña and Hermanos Gandon (FIS, 2014).
Table 77 gives an overview of the Grupo Freiremar company structure, reporting on the company’s main subsidiaries and associated companies. (A company is considered a subsidiary company if the parent’s shareholding exceeds 50%). All identified subsidiaries are outside the EU. Vertical and horizontal integration thus occurs domestically in Spain and outside the EU.
The Grupo Freiremar shows a high degree of horizontal integration with investments in a large number of fish catching companies. These companies are largely located outside the EU.
Grupo Calvo (Luis Calvo Sanz, S.A,) was established in 1940 and it is based in La Coruña, Spain (Bloomberg, n.d.). Currently, the company is engaged in fishing, processing (canning) and commercialisation of fish products. It owns a fleet consisting of six purse seiners, two reefer vessels and one auxiliary vessel. The company mainly fishes and processes tuna (Grupo Valvo, n.d.). The company also owns two canning factories in Spain, one tuna loin processing and canning factory in El Salvador, and one multi-product canning factory in Brazil (Grupo Calvo, 2014, p. 15). Its main brands include Gomes da Costa, Calvo, and Nostromo (Grupo Calvo, n.d.). In 2014, the company’s total assets amounted to EUR 372 million, while its revenue was EUR 572 million (ORBIS, 2016n).
Table 78 gives an overview of the Grupo Calvo company structure, reporting on the company’s main subsidiaries and associated companies. (A company is considered a subsidiary company if the parent’s shareholding exceeds 50%). As we can see from the Table, Grupo Calvo, through its subsidiaries and associated companies’ activities, is vertically integrated, covering all activities within the fish industry (fishing, processing, and distribution of fish products). Groupo Calvo holds subsidiaries in Europe, Central America and Africa; thus the company is internationally horizontally integrated. However, Grupo Calvo fish catching companies are either located in Spain or outside the EU.
The company structure of Grupo Calvo shows evidence of both structural vertical and structural horizontal integration. The company has activities in both the upstream and midstream segments through its investments in fish catching, processing and distribution. Grupo Calvo also shows evidence of structural horizontal integration through its investments in a large number of fish catching companies, predominantly located in South America.
Pescanova was established in 1960 by José Fernández López. Currently, the company owns more than 100 vessels, almost 50 fish-farming plants and more than 30 processing plants. Pescanova is a vertically integrated company, present in five continents and more than 20 countries (Pescanova, n.d.). At the end of the 2014 fiscal year, the company’s total assets amounted to EUR 1.2 billion, while its revenue was EUR 901 million (Pescanova, 2015, p. 3, p. 12).
The company’s structure is comparatively complicated as the Pescanova Group comprises more than 160 companies (Pescanova, n.d.). Table 79 gives an overview of the Pescanova company structure, reporting on the company’s main subsidiaries and associated companies. (A company is considered a subsidiary company if the parent’s shareholding exceeds 50%).
Pescanova, through its subsidiaries and associated companies, engages in activities within the primary (aquaculture, fishing), secondary (processing of products) and tertiary (marketing of products) sectors of the fish industry. Thus, Pescanova can be considered a highly vertically integrated company. Due to the company’s vast presence across many countries, Pescanova is also a horizontally integrated company. However, as with Grupo Calvo, Pescanova’s fish catching companies are located either in Spain or outside the EU.
The Pescanova company structure shows evidence of both structural vertical and structural horizontal integration. Vertical integration is evident through the company’s investments throughout the value chain from fish catching to the marketing of food products. Horizontal integration is seen in Pescanova’s investments in fish catching companies, particularly in Africa, with some investments in fish catching companies in South America.
Portobello Capital is a Spanish private equity company founded in 2010. The company has a diverse portfolio, having invested in companies in different industries, including fisheries (Portobello Capital, n.d.). Portobello Capital has the majority stake in Grupo Iberica de Congelados (Iberconsa) and holds a 9% stake of Angulas Aguinaga (Portobello Capital, 2015). Figure 111 gives an overview of the Portobello Capital company structure.
In 2015, Portobello Capital acquired the majority stake in Iberconsa (Portobello Capital, 2015). Iberconsa was established in 1981 and is based in Vigo, Spain (Bloomberg Businessweek, n.d.). The company owns and operates vessels fishing in the Southeast and Southwest of Spain (FAO 41 and 47 regions respectively). The company catches various species of fish (e.g. toothfish, squid, hake, blue whiting and monkfish) (Iberconsa, n.d.). Iberconsa is a vertically integrated company as besides fish catching, it also engages in fish processing and the distribution of frozen seafood products (Iberconsa, n.d.). It has processing plants in Argentina and Namibia, owns a network of retail stores and has a stake in two cold storage companies in Galicia, Spain (Portobello Capital, 2015). As can be seen in Figure 111, besides in Spain, Iberconsa has subsidiaries in Argentina, Namibia, South Africa, Uruguay, and Portugal. The company is thus also horizontally integrated. In 2014, Iberconsa’s total assets amounted to EUR 160 million, while its revenue was EUR 180 million (Orbis, 2016j).
Portobello Capital also holds a 9% stake in Angulas Aguinaga (Orbis, 2016d). Angulas Aguinaga was established in 1974. The company engages in fish processing and distribution through its brands La Gula del Norte, Krissia, Prawn, Mussel, Salmon, and Octopus. La Gula del Norte offers products that substitute elver-based products on surimi (Angulas Aguinaga, n.d.). The company has subsidiaries in Spain and established partnerships with Japanese companies (Angulas Aguinaga, n.d. and Orbis, 2016d). In 2014, the Angulas Aguinaga’s total assets amounted to EUR 145 million, while its revenue was EUR 96 million (Orbis, 2016d).
From the company structure and the description above, it is clear that Portobello Capital, through its investments in the fisheries segment, shows high levels of both structural vertical and structural horizontal integration. The company has investments throughout the value chain, from fish catching to processing and on to distribution and retail. Additionally, the company also has investments in a large number of fish catching companies; these are located on the Iberian Peninsula, Africa, and South America.
Armaven is a vessel owning company with vessels registered in Spain and the United Kingdom (Marine Traffic, n.d.; Marine Traffic, n.d.; Inter-American Tropical Tuna Commission, n.d.). Figure 112 gives an overview of the Armaven company structure. Armaven is a joint venture between Venta Pescados and Grupo Sotelo Dios (Orbis, 2016i). Venta Pescados is a fish distribution company (Venta Pescados, n.d). Grupo Sotelo Dios holds a 10% stake in Frioantartic, a fish vessel owner fishing in the Atlantic and Indian Oceans (FAO 21, 27, 34, 41, and 51 regions).
The company structure of Armaven shows evidence of both vertical and horizontal integration. Vertical integration is apparent in the investments in fish catching and processing. One of Armaven’s parent companies, Venta Pescados, also distributes fish products. Armaven further shows evidence of horizontal integration through its investments in fish catching companies in both Spain and the UK.
Armadora Pereira was established in 1955 (Bloomberg, n.d.). In 2014, Armadora Pereira’s total assets amounted to EUR 101 million, while its revenue was EUR 83 million (Orbis, 2016h).
Figure 113 gives an overview of the Armadora Pereira structure. Through its subsidiaries in Argentina, Namibia, and Senegal, the company fishes in the Atlantic Ocean (FAO 21, 27, 34, 41, and 47 regions) for a variety of species (Armadora Pereira, n.d.). Pereira Fishing Company, a subsidiary of Armadora Pereira, owns four vessels mainly operating along the Namibian coast (Pereira Fishing Company, n.d). Soperka, another subsidiary, operates four frozen fishing vessels engaged in fish catching activities in Senegal, Gambia, and Guinee-Bissau (Soperka, n.d.).
Armadora Pereira has processing plants in Europe, Africa, and South America (Landsea Asia, n.d.). Frigorificos, a subsidiary of Armadora, has a refrigeration processing plant located in Moana, Spain (Armadora Pereira, n.d.). Frigorificos has also facilities used for the classification, transformation, and containing and packing of seafood products (Frigorificos, n.d). Another of Armadora Pereira’s subsidiary companies engaging in fish processing activities is Frio Moaña (Armadora Pereira, n.d.). Argos Pereira and Senegalaise de Thon are also fish catching subsidiary companies of Armadora Pereira operating in Spain and Senegal respectively (International Commission for the Conservation of Atlantic Tuna, n.d.).
Armadora Pereira distributes its products in the Asian market through its subsidiary, Seafood Asia, located in China (Landsea Asia, n.d).
The company is a vertically integrated company engaging in fish catching, fish processing and the distribution of fish products (Armadora Pereira, n.d.). Since Armadora Pereira has subsidiaries in different countries and continents, the company is also horizontally integrated.
As the company analysis presented in section 23.3 shows, the Spanish fish industry is highly integrated vertically and horizontally. Leading Spanish companies engage in fish catching, fish processing, wholesale and distribution of seafood products, while at the same time they hold subsidiaries, vessels, processing factories and distribution centres all over the world.
Structural vertical integration in Spain was initially comprised of upstream companies investing downstream. However, recently downstream companies have also started to invest upstream (Ayala, 2016; Anonymous, 2016; Freire, 2016; Touza, 2016). For upstream companies, the key driver for investing downstream is to gain access to the market. This has been made possible through improvements in logistics. For downstream companies, the key driver for investing upstream is to gain access to quota (Anonymous, 2016; Touza, 2016).
Javier Touza of Cooperativa de Armadores de Pesca del Puerto de Vigo stated that there are a number of examples of fish catching companies taking over the whole value chain in Spain. These companies first invested in the processing segment before investing in retail. Touza named the examples of Grupo Pereira and Pescanova (Touza, 2016).
A small number of retail companies and private equity companies in Spain are investing in the fish catching segment. José Luis Freire of Conxemar noted that private equity company Portobello Capital had invested in integrated fisheries through investments in fish catching, processing, and distribution companies Iberconsa and Angualas Aguinaga. For such companies the motivation to integrate is to reduce costs, to become more competitive, and to compete globally. Upstream companies investing downstream do so in order to assure supply at a good price (Freire, 2016). Companies that have integrated have become more competitive (Ayala, 2016).
A respondent from a large Spanish fishing company stated that from the outset his company was determined to vertically integrate. The fish catching company started with on-board processing and later started investing in on-land processing and distribution networks (anonymous respondent from large Spanish fishing company, 2016).
Freire also described how fishermen have, in some instances, also grouped together to invest in processing companies (Freire, 2016). Touza described another recent initiative undertaken by a number of Spanish fishermen. These fishermen pool together their ITQs or NAFO quotas and distribute them in an efficient manner. For example, one company has NAFO rights for 20 days, another for 25 days, and another for 30 days. They then pool these days together so that one vessel can catch fish for the full 75 days one year, with each company taking it in turn. The benefits are shared each year. Touza states that a similar initiative is being used by fishermen in the Gran Sol (Great Sole Bank) fishing grounds (Touza, 2016).
Non-structural vertical integration is also present in Spain. A respondent from a large fishing company and Touza both stated that this is still more common than structural vertical integration (anonymous respondent from large Spanish fishing company, 2016 and Touza, 2016). This is generally in the form of off-take arrangements between producers and processors. However, given the recent developments in ease of access to markets, structural vertical integration is becoming increasingly common. The respondent noted, however, that one difficulty was that the market was becoming increasingly concentrated within a small group of large buyers (anonymous respondent from large Spanish fishing company, 2016).
There is not a lot of structural horizontal integration taking place within Spain, although a few companies are acquiring other fishing companies in Spain (Ayala, 2016). A respondent from a large Spanish fishing company with fishing activities exclusively outside Spain and the EU, stated that his company had engaged in structural horizontal integration from the beginning. In the 1990s and 2000s, horizontal integration took place at the fish catching and processing levels. This was in order to expand production capacity, and to expand the species and product portfolios. The respondent added that horizontal integration was more common at the processing level than at the producer level. He attributes this to the fact that quotas and catches are relatively fixed and stable, and given the highly competitive state of the Spanish fish catching sector due to overcapacity, it is more difficult to engage in horizontal integration at the fish catching level. Touza corroborates the statement that horizontal integration was taking place at the processor level. However, he also notes that there are increasing concerns about quota concentration, which can only occur with horizontal integration at the fish catching level. Touza argues that safeguarding mechanisms are needed to prevent the formation of monopolies. He believes that there is an increasing tendency, particularly in the Gran Sol (Great Sole Bank) fishery, of quota concentration (Touza, 2016). POs and the Spanish authorities are already undertaking steps to identify suitable limits and control mechanisms (anonymous respondent from large Spanish fishing company, 2016).
Spanish companies that did not have fishing activities in the EU and certain non-Union waters when Spain joined the EU in 1986, do not have a fishing track-records in the regulated waters. This has meant that they are not allocated quotas in the EU and certain non-Union waters. For these companies it is now very difficult to invest in the fish catching sector in Spain, particularly given the high level of competition in the sector due to the overcapacity of the Spanish fishing fleet (anonymous respondent from large Spanish fishing company, 2016).
Freire noted that horizontal integration at the fish catching level in Spain tends to be international, and particularly outside the EU. However, he added that there are also several Spanish fish catching companies with investments in France and Ireland. There are a number of barriers to Spanish horizontal integration in the EU. Firstly, according to Freire, the cost of labour is too high in most other EU countries,. Another consideration is the quota allocation of species interesting to the Spanish market. Further barriers include general concerns by fishing companies about investing in unfamiliar countries (Freire, 2016).
Touza similarly describes international horizontal integration at the fish catching level. He stated that over the last two years 14 vessels from his PO have flagged in France to gain access to more quotas. Some have also gone to Ireland and the UK, but most have gone to France. He believes that this is a growing trend. The companies still maintain their companies in Spain, but also set up in France with vessels and become members of the French POs. The flagging in France is primarily undertaken in order to gain access to quotas. This is to get around the EU’s ‘relative stability key’ issue. This tendency reflag in France is done most often by Spanish fresh fish ship-owners. They buy old ships in France, decommission them or sell them after transferring the quota and bring in newer vessels. An example of a company that is doing this is Armaven SA in Spain and France. Touza states that France has more quotas than Portugal, and the quota species in France are more interesting for the Spanish market. Additionally, France has a small fleet and Spain and France have good relations. Portugal and Spain have similar problems in relation to the ‘relative stability key’ (Touza, 2016).
In terms of non-structural horizontal integration, there is quota swapping in Spain. Quota swapping can occur between companies and POs, both domestically and internationally. International quota swapping is usually undertaken by the POs.