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Composition of UK seafood sector
The UK fish and seafood market was estimated to be worth EUR 5 billion in 2015. It was the fifth-largest fish and seafood market in Europe, accounting for 5.73% of revenue in 2015. The UK is the eighth-largest importer of fish and seafood products in the world. The main import category is prepared fish and seafood products, followed by fresh and chilled fish and seafood (Infinity Research, 2015a, p.30).
In 2015, UK fishing companies generated EUR 1.1 billion in landings income. Fish processing companies added a further EUR 3.3 billion in production revenues (Table 85).
The UK had a trade deficit of EUR 1.7 billion in fish and fish products in 2016. It imported approximately EUR 3.7 billion. Only 33% of these fish product imports originated in EU countries. The UK’s largest fish import partners were Iceland (10%), the Faroe Islands (7%) and Germany (7%).
In 2016, the UK exported approximately EUR 2 billion in fish products. 71% of these exports were destined for EU countries. France was the largest export destination, accounting for 28%. It was followed by the United States (12%) and Spain (10%).
There were 6,304 registered commercial fishing vessels in the UK in 2016, of which 74% were active. These were owned by 5,496 enterprises. 568 fishing companies – 10% of all enterprises – operated more than one vessel.
The fishing segment employed 8,135 FTE in 2015. The fish processing segment employed a larger workforce, approximately 13,271 FTE.
Figure 120 shows that 45% of the fishermen are located in England and 40% in Scotland (Scientific, Technical and Economic Committee for Fisheries, 2015).
There is a fairly even distribution of catches in the UK: 35% of the value of landings are demersal fish, 32% are pelagic and 34% are shellfish. Pelagic fish made up the bulk of the landings in Scotland in 2014, while demersal fish formed a slight majority in England. The main pelagic species were mackerel and herring, while the main demersal species were cod, haddock, and plaice (Dixon, 2015, p. 3-4).
As Figure 121 shows, more than 60% of all landings by UK vessels were harvested in the Northern North Sea or West of Scotland.
Half of the fish and fish products that enter the UK market are sold as fresh. Frozen fish accounts for slightly over 20% of all fish and fish products sold in the UK market. Canned and dried/smoked/salted account for 11% and 16% respectively. Just under three quarters of all fish and fish products are sold through retailers, the remainder is sold through the food service industry. More canned and dried/smoked/salted fish and fish products are sold through retailers, more than 80%. 67% of fresh and 63% of frozen fish are sold through retailers (Figure 122).
Half the fresh fish sold in the UK is sold unbranded (see Table 86). 37% is sold with the retailers’ own labels, and 13% is sold branded. Three quarters of canned fish and fish products is sold branded, the remainder is sold with retailers’ own labels. Slightly more than two thirds of frozen fish and fish products are sold branded, with the remaining third sold with retailers’ own labels. A quarter of the dried/smoked/salted products are sold unbranded, 35% branded and the remaining 40% with retailers’ own labels.
In the UK, Seachill (part of Hilton Group) is an important player in the fresh fish segment with a market share of approximately 28% (FFT, 2018 and Icelandic Group, 2017). Marine Harvest (Norway) accounts for about 15% (FFT, 2018). In the frozen fish product sector, Nomad’s Iglo brand holds the leading position with a share of approximately 33%, while Young’s Seafood (owned by private equity owners Lion Capital, Bain Capital and HPS Investment Partners and currently up for sale) accounts for around 22% (FFT, 2018 and Undercurrent News, 2018b). In the canned fish product segment, John West (Thai Union (Thailand)) is by far the biggest player with a market share of approximately 40%, while Princes (part of Mitsubishi (Japan)) holds about 21% of the market. Young’s Seafood is also an important player in the dried/smoked/salted segment with a market share of approximately 22%, Marine Harvest is accounting for about 19% (FFT, 2018).
There are 24 producer organisations in the United Kingdom. The largest, the Scottish Fish Producers Organisation, represents 190 vessels or 14% of the total fleet. The smallest, the North Atlantic Fish Producers Organisation, represents three vessels.
Table 87 provides an overview of the producer organisations in the United Kingdom.
Among the POs listed above, three are in fact corporations: Interfish, Lunar Group and Klondyke.
The fish quota system in the UK works as follows. There are 44 UK Fisheries Administrations (FAs). They cover the management of UK fish quotas for the International Council for the Exploration of the Sea (ICES) areas I, II, IV, VI, VII and associated areas, and Vb (Faroese waters), for which the UK receives a quota in EU legislation (Department for Environment, Food and Rural Affairs, 2015, p. 1). These areas are spread out between the north of Finland and south west of Ireland, and cover Faroes Grounds.
According to the FQA Register, there are over 8 million FQAs in circulation (Fixed Quota Allocation Register, n.d.).
This section provides an analysis of the company structures of nine UK companies with the highest fixed quota allocation (FQA) units held. Table 88 provides an overview of the parent companies that own more than 2% of the total UK FQA. Due to the large number of FQA licences (1,094) it was beyond the scope of this research to identify parent companies for all FQA licences. The parent companies were identified for the top 100 FQA licences in terms of FQA units held. Furthermore, fishing companies also have access to FQAs through partnership agreements and minority shareholdings. The information below should thus be considered indicative rather than definitive.
Table 88 shows that 13 companies hold 60% of total UK FQA. The three companies with the highest levels of FQA are Interfish, Lunar Fishing and Andrew Marr International. The remainder of this section will describe the company structures of the nine UK companies with the highest levels of FQA.
Andrew Marr International
As shown in Table 88, Andrew Marr International holds approximately 910,109 FQA units, equal to roughly 11% of total UK FQA units.
The director of Andrew Marr International is Alexander George Marr. He is also one of the shareholders. The other shareholders are C. L. Marr, S. A. Marr, N. L. Rathbone, A. J. Panton and A. L. Marr.
Andrew Marr International has 22 subsidiaries that are active in the fisheries sector. Many of these subsidiaries are dormant. Ten of the subsidiaries have their own subsidiaries, of which three in turn also have their own subsidiaries, of which two have yet more subsidiaries. Among the subsidiaries are Humber Fishing and Viking Fishing, the two largest FQA owners in the UK (Table 89).
Humber Fishing owns the most FQA units of all fishing companies in the UK. The ultimate parent is Andrew Marr International. Humber Fishing has four subsidiaries in which it has a 50% stake. The remaining 50% stake is held by Viking Fishing and director of both Humber Fishing and Viking Fishing, M. J. Dougal.
Andrew Marr International generated a total revenue of EUR 644 million in 2015, up from EUR 634 million in 2014. The company generated profits of EUR 18.5 million in 2015, up slightly from EUR 18.1 million in 2014). Andrew Marr International had total assets of approximately EUR 185 million in 2015, up from EUR 164 million in 2014 (Andrew Marr International, 2016, p. 7-8).
Table 89 provides an overview of the Andrew Marr International company structure. The company has investments in fish catching, processing, storage, and trade.
Andrew Marr International shows evidence of vertical integration, from fish catching to cold storage, logistics and trade. The company also shows a large degree of horizontal integration at the fish catching level. This is most likely due to a desire to gain access to quota and to expand production capacity. Investments in other fish catching companies is limited to the UK (McClenaghan and Boros, 2016).
As shown in Table 88, Interfish holds approximately 810,000 FQA units, almost 10% of the UK total. In 2014, the company had a total operating revenue of EUR 109 million, up from approximately EUR 70 million the previous year. The company made a total profit of approximately EUR 28 million in 2014, up from EUR 19 million in 2013 (McClenaghan and Boros, 2016). Interfish had total assets of approximately EUR 198 million in 2014, in 2013 total assets were EUR 170 million (Orbis, 2016b).
Figure 123 provides an overview of the Interfish company structure. Johannus Colam is the company’s majority shareholder. Figure 123 shows that Interfish has a number of fish catching and processing subsidiaries. The company also has fish catching subsidiaries in the Netherlands. Finally, Interfish also has its own producers organisation. This can likely facilitate quota allocation.
The Interfish company structure shows significant levels of both vertical and horizontal integration. Vertical integration is limited to fish catching and fish processing, with no identified investments in distribution or retail. Interfish shows horizontal integration at both the national and international levels, with investments in fish catching companies in the UK and abroad.
As shown in Table 88, Lunar Fishing holds approximately 739,000 FQA units, equal to roughly 9% of the total UK FQA. In 2014, the company had a total operating revenue of EUR 120 million, up from EUR 110 million in 2013. Lunar Fishing generated a profit of EUR 20 million in 2014, and approximately EUR 13 million in 2013. The company had total assets worth approximately EUR 161 million in 2014, up from EUR 151 million in 2013 (Orbis, 2016e).
Figure 124 provides an overview of the Lunar Fishing company structure. The company is owned by a number of individuals. The largest shareholder, with 27% of total shares, is Margaret Buchan. Lunar Fishing has subsidiaries engaged in both fish catching and fish processing. The company has investments both in Scotland and in Canada. Similar to Interfish, Lunar Fishing also has its own producer organisation.
Lunar Fishing shows evidence of both vertical and horizontal integration. Vertical integration is evident through investments in fish catching, fish processing and cold chain logistics. The company does not, however, have investments in retail.
Horizontal integration is evident through investments in fish catching companies domestically as well as in Canada.
As shown in Table 88, Klondyke Fishing holds approximately 507,000 FQA units, roughly 6% of all UK FQA units.
Klondyke generated a turnover of EUR 35.5 million in the financial year ending on 30 June 2015, down from EUR 36 million the previous year. The net profit was EUR 15.2 million in 2015, and EUR 17.2 million in 2014. Klondykes’ total assets were EUR 44.6 million in 2015, up from EUR 44 million the previous year (Orbis, 2016c).
Figure 125 shows that Klondyke Fishing has 12 shareholders and no subsidiaries. All its FQA is distributed over three vessels (Gov.UK, 2016).
Klondyke Fishing shows a degree of horizontal integration.
As shown in Table 88, Dutch Cornelis Vrolijk (see section 18.3.2) holds approximately 473,000 FQA units, roughly 6% of the total UK FQA.
Cornelis Vrolijk generated a turnover of EUR 288 million in 2013 (the most recent year for which data were available). In 2012 it generated EUR 321 million. In 2013 the company made a profit of EUR 18 million, down from EUR 46 million the previous year. Cornelis Vrolijk had total assets of approximately EUR 301 million in 2013, and EUR 318 million in 2012 (Cornelis Vrolijk Holding, 2016).
Most of Cornelis Vrolijk’s subsidiaries are based in the Netherlands. Only North Atlantic Holdings Limited and its four subsidiaries are based in the United Kingdom (for the company structure of Cornelis Vrolijk see section 18.3.2.)
North Atlantic Fishing Company Limited is one of North Atlantic Holdings’ subsidiaries. North Atlantic Fishing Company had a revenue of EUR 24.2 million in 2014. That was about EUR 800,000 more than the year before. The company made a net profit of EUR 3.8 million, EUR 1.4 million less than in 2013. North Atlantic Holdings had total assets worth about EUR 21.2 million in 2014, and one million less in the previous year (Orbis, 2016f).
Cornelis Vrolijk shows evidence of both vertical and horizontal integration. Vertical integration is limited to fish catching and primary processing. However, horizontal integration has taken place both domestically in the Netherlands, as well as through investments in the UK, France and Spain.
As shown in Table 88, Voyager Fishing holds approximately 406,000 FQA units. This is equal to about 5% of the total UK FQA units.
Voyager’s turnover was EUR 21 million in 2014, roughly the same as the previous year. The company’s net profit was approximately EUR 1.8 million in 2014, down from EUR 8 million in 2013. Voyager Fishing’s total assets were approximately EUR 77 million in 2014, down slightly from EUR 78 million in 2013 (Orbis, 2016g).
Figure 126 shows that Voyager Fishing Company has two shareholders, who each own 50% of the company. There is no information about subsidiaries. In fact, all of Voyager Fishing Company’s quota is concentrated on one vessel (Gov.UK, 2016).
There is no evidence of either vertical or horizontal integration in the company structure of Voyager Fishing Company.
As shown in Table 88, L.H.D. holds about 320,000 FQA units, approximately 4% of all UK FQA units.
L.H.D. generated a turnover of EUR 28 million in 2015, down from EUR 33 million in 2014. The company achieved a profit of approximately EUR 3.3 million in 2015, up from EUR 2.3 million the previous year. L.H.D. had total assets worth approximately EUR 36 million in 2015, down from EUR 41 million in 2014 (L.H.D. Limited, 2016, p. 6-8). Figure 127 provides an overview of the L.H.D. company structure.
Between 1969 and 1994, the company took over several other companies. In 1969, L.H.D. acquired the local net manufacturing and repair company D & A Duthie. A new subsidiary company, L.H.D Net Mending Limited, was set up in 1969. In this way L.H.D could continue the net manufacture and repair business and expand the range of supplies and services offered to its customers. L.H.D Net Mending Ltd changed its name to L.H.D Marine Supplies in 1996 (L.H.D. Limited, n.d.).
In 1983, L.H.D. took over the local electronics company H. Williamson & Sons of Scalloway. Then a new company, H. Williamson & Sons (Scalloway) Limited, which specialises in the supply and servicing of electronics for the marine, aquaculture and fish processing industries, was formed (L.H.D. Limited, n.d.).
In 1985, L.H.D took over J&M Shearer Ltd and formed a new company J&M Shearer (Ice Supplies) Ltd. New ice plants were built in Lerwick and Scalloway. The company became part of L.H.D Marine Supplies Limited in 2004 (L.H.D. Limited, n.d.).
In 1994, L.H.D. took over the local company Oceansafe Ltd, which specialised in the production of nets for the salmon and fishing industries. A new company, Oceansafe (Shetland) Ltd, was formed on 5 September 1994. The company ceased trading in February 2004 (L.H.D. Limited, n.d.).
Today nets are designed, manufactured and repaired by L.H.D Marine Supplies Limited. The company also specialises in the supply of ship chandlery, wire rope and chain, fishing gear, lifting gear and the supply of fuel oil (L.H.D. Limited, n.d.).
From the company structure and the description of L.H.D.’s history, it is evident that the company has engaged in a diversification strategy within the fish catching segment. Rather than investing in processing, the company has invested in supplies and equipment, sales and repairs. The company structure also shows evidence of horizontal integration through its investments in a number of fish catching companies. L.H.D.’s access to quota is higher than reported in Table 88 through its minority investments of less than 50% in five fish catching companies.
As shown in Table 88, Don Fishing holds approximately 195,000 FQA units, roughly 2% of the UK total. The total FQA which Don Fishing has access to is likely to be higher given its minority investments in other fishing companies.
Figure 128 shows the company structure of Don Fishing. Don Fishing’s direct parent is J.W. Fishing Vessel Management and the ultimate parent is J.W. Holdings. Ian Wood and his family own J.W. Holdings. Of the 14 Don Fishing subsidiaries, only two are still active, Frozen at Sea (a processing company) and Fishing Vessel Partnerships.
Don Fishing Company generated a gross profit of EUR 2.6 million in 2014, whereas the profit was almost EUR 1.3 million in 2013 (J.W. Holdings, 2015, p. 6-8). The group had total assets worth EUR 28 million in 2014.
Ultimate parent company J.W. Holdings had a turnover of approximately EUR 21 million in 2014, down from EUR 20 million the previous year (J.W. Holdings, 2015, p. 6-8). Profit amounted to EUR 2 million in 2014, up from EUR 0.8 million in 2013. J.W. Holdings had total assets worth approximately EUR 31 million in 2014, EUR 28 million the previous year (J.W. Holdings, 2015, p. 6-8).
In an interview, the managing director of Don Fishing (Bill McKenzie) provided further details regarding the company. Don Fishing does not own its fleet outright. It owns on average 30% of each vessel in its fleet; some more, some less. It calls this kind of relationship with the vessel a partnership. Don Fishing used to have 31 partnerships, in 2016 it still had 16. However, it has now amassed sufficient quota to be profitable. Don Fishing is catching less fish with 16 boats, but not much less as the boats now have more quota. There is also a better business strategy. “The guys that remain are the best at what they do. They are not just fishermen, they are thinkers and business men”. As a result, fishing strategies are far and away better than before (McKenzie, 2016).
Don Fishing does not have formal off-take arrangements but what it calls “understandings”. Some of these are long standing. The understandings imply that some vessels will always supply specific companies. For example, Don Fishing has such an “understanding” with Lunar Freezing and Seafood Ecosse (McKenzie, 2016).
Don Fishing also engages in quota leasing (i.e. for cash), quota swapping (i.e. for quota of different species), and borrowing quota from the PO (McKenzie, 2016).
From the company structure of Don Fishing it is apparent that Don Fishing has engaged in both vertical and horizontal integration. Vertical integration is evident through its investments in both fish catching and fish processing companies. It does not, however, have investments further downstream in distribution and retail. The company also shows evidence of horizontal integration through its investments in a number of fish catching companies and through its Fishing Vessel Partnerships. However, horizontal integration is limited to the UK.
As the company analysis in section 25.3 shows, there is a high degree of structural vertical and, particularly, structural horizontal integration in the UK fisheries. Several of the analysed companies have investments both in the downstream and midstream segments, from fish catching to fish processing, and in a number of instances also cold chain logistics. This research did not identify any UK companies with complete vertical value chain integration. A significant characteristic of the UK fisheries is that three companies also own their own PO. This is similar to findings in Estonia (see Chapter 8). David Anderson of the Aberdeen PO states that structural vertical integration is more common in the pelagic segment, although there is some vertical integration in the whitefish segment as well. For example, Lunar Group has both a whitefish and pelagic fleet, and has processing facilities for both whitefish and pelagic fish species. The general trend, in cases of structural vertical integration, has been fish catching companies investing in downstream segments (Anderson, 2016).
During the decommissioning schemes in 2003-2004 and 2011, many smaller companies sold out, and bigger companies, such as Don Fishing and Andrew Marr International, bought up the quotas. Alan Coghill of the Orkney PO reports that a number of large companies, such as those mentioned above, have “interests” in fishing vessels in different POs. They help fishermen obtain boats and quotas, as well as owning and leasing out their own quotas. Given that banks have lost confidence in government policies and deliberations regarding quotas, they are no longer eager to accept FQAs as collateral for bank loans. Now the big companies help attract bank finance for small fishing companies and fishermen through partnership agreements, as for example Don Fishing does (Coghill, 2016).
There is also a high level of structural horizontal integration. This is evident in the fact that 13 companies hold approximately 60% of total UK FQA (see Table 88). These companies are likely to have access to even higher levels of FQA through their minority investments in a number of fish catching companies. The high level of quota concentration is likely to be the result of the UK not imposing quota limits (McKenzie, 2016 and Coghill, 2016). There is government oversight through the UK quota trade register (McKenzie, 2016).
Coghill argues that there is no flagging protection, i.e. there is no protection against high levels of beneficial owners being foreign. As a result, there are a large number of ultimately foreign owned vessels in, for example, Scotland. However, Coghill notes that these are not necessarily in direct competition with Scottish fishermen as the foreign vessels target different species (Coghill, 2016). Anderson adds that vessels in the Scottish fisheries tend to be family-owned, or a combination of family-owned with a fishing vessel partnership such as with Don Fishing (Anderson, 2016).
The level of horizontal integration is also dependent on the targeted segment. Kevin McDonell of the West of Scotland PO states that there is hardly any horizontal integration in the nethrops segment (McDonnel, 2016).
Anderson argues that both structural vertical and structural horizontal integration is motivated not only by the needs of the business but also to cut costs. There are three big cost factors in the fisheries industry. These are quota, fuel and labour. The main drivers for change are quota and fuel (Anderson, 2016).
The UK fisheries also have forms of non-structural integration. Coghill states that there are forms of non-structural vertical integration in the UK fisheries. In the Orkney region there are no processing facilities, therefore, fishing companies located in Orkney tend to land there catch on the mainland of Scotland, the Shetlands or Denmark (Coghill, 2016). Fish catching companies often have off-take arrangements with processing companies, although these are not necessarily formalised (McKenzie, 2016 and McDonnel, 2016).
Anderson states that the FQA system has been in place since 1999, and quota/FQA trading started from day one (Anderson, 2016). Coghill reports that quota leasing is common in the Orkney PO. Quota leasing is done through agents and between POs (Coghill, 2016). Companies also engage in quota swapping within the PO, both domestically and internationally (McKenzie, 2016).