20/07/2007 - A fascinating market of opportunities

WEEKEND FEATURE: A fascinating market of opportunities

CROATIA
Friday, July 20, 2007, 23:50 (GMT + 9)


The nation's eafood imports are increasing, while local catches fall, despite the country having a lengthy coastline along the fish rich Adriatic Sea. Croatia is in a situation were everything is needed. The small country needs more efficient fishing vessels, better management of fish stocks, development of environmentally friendly aquaculture, and investments in more modern fish processing.

I am sitting at a small restaurant in the Island of Hvar. It is still a few weeks before hordes of tourists invade the small island, classed as one of the 10 most beautiful in the world by a famous international travel magazine.

I have ordered a dish of salmon; imported stuff, not because local seafood products are not available., but when wild salmon from Alaska carries the same price tag as a dish made with local mackerel, horse mackerel, or small undersized sea bream, the temptation to try the imported fish carries more weight.

It is a cutlet from a packet of frozen cutlets produced from whole imported salmon. Served with a thick curry sauce and rice., the cutlet is fried a bit more than any French chef would recommend and is an overall a boring presentation. But there are reasons why the restaurants are not serving better seafood. The market structure for imported seafood makes no incentives towards educating chefs.

Small population – many tourists

Croatia is not a large market., with a population of less than 4.5 million it is in many large exporters’ eyes a small to medium-sized one. This is maybe the reason why it looks like the Greenland-based company Polar Seafood has had success in exporting smoked Norwegian Atlantic salmon. The other salmon, is as earlier mentioned, Alaska salmon and is available in most supermarkets.

So, why go all the way across Europe to Alaska in North America to obtain salmon? Afterall the European market is flowing with salmon produced in United Kingdom, Norway, the Faroese Islands and Ireland... there are two simple reasons:

First off, Croatian consumers have no understanding of salmon. Their chefs have to use what is available, and most of them are uneducated for the most part in fine cuisine even. But they have been given a golden opportunity to make money during the frenzy of tourist season when more than 10 million tourists throng to their restaurants, hotels, and other related venues.

However, Atlantic farmed salmon can not compete in price on a market were salmon is not differentiated into different products and species by consumers.

From communism to semi-monopoly

There is one more important reason why imports are a viable option. Gone for more than a decade, communism and state-controlled life under dictator Josip Broz Tito, is now open to market forces. The Croatian market is dominated by one large conglomerate by the name Agrokor, with 20,000 employees and a turnover of EUR 7-8 billion. In a small country these numbers make them a mammoth.

This conglomerate operates their own supermarket chain, which is the country’s leader, and they dominate the ice-cream market with products from their own factories, as well as margarine and vegetable oils. The largest slaughterhouses and meat processors, the dominating mineral water producers, and of course the import, processing, distribution and retail of frozen seafood is also dominated by Agrokor.

Most of Agrokor's seafood is produced under the labels Irida and Ledo. Irida, a subsidiary of Ledo, has 60 different products varying from herring, horse mackerel, fish fingers, sardines, mackerel, octopus, squid, shrimp and lots of products. Ledo is Croatia’s main importer of hoki from New Zealand, hake and squid from Argentina, Atlantic cod and Atlantic redfish from Iceland, sprat from the Baltic’s, salmon from Alaska, among others. They are sold as cutlets, breaded, fingers, and of course in large catering packs.

Interesting opportunities

The dominating role of Agrokor may result in less choice of products available. Companies able to secure a contract with an Agrokor subsidiary, have the chance to be a main supplier in the Croatian market. For a company with limited resources for marketing is there may better prospects in being the sole supplier of a product in Croatia than being one out of hundreds of suppliers in EU, United States or Japan.

For companies like Ledo, the dominating position in the market is worth gold. Since 1998 they not reported one single year with a negative result. Last year a record profit of HRK 44.1 million (EUR 6.2 million) was posted.

There is of course other opportunities than selling to subsidiaries belonging to Agrokor. But this is a market mainly for smaller nouvelle products. In short, the Croatian market is a fascinating one, with possibilities for making good business if the door has been opened up first by one of the Agrokor subsidiaries.

The local production

The local seafood industry is mainly based on feeding small bluefin tuna caught in the Mediterranean, processing of mackerel, sardines and anchovies caught by the local fleet, in addition to artisan fisheries with fast diminishing importance.

Most local fishermen are supplying their catches to restaurants catering to tourists. A quick look on the menu shows that many of the available dishes are fish stews made from whatever is available. The dishes are traditional Croatian cuisine, but hardly enough to satisfy the varied demand from the fast increasing numbers of tourists arriving in Croatia. This also explains why the import of seafood to the small country with the lengthy coastline and many islands, is rocketing.

Except for the tuna grown out of farms, the other farms produce species like sea bass and gilthead sea bream of varying technological level. A lack of capital, know how, and an educated workforce makes the development in the aquaculture sector cumbersome. Tuna grow out farms are also facing tougher times as it is getting more and more difficult to obtain small tuna due to increasing restrictions on wild fishery.

Other opportunities

Croatia is looking to introduce new indigenous fish and shellfish species, as well as to modernizing its existing fishing and processing facilities. This also represents opportunities for companies with expertise in aquaculture, seafood processing, distribution, exports, and so on, in addition to those who have gear to supply.

The fish population in the Adriatic Sea is low, but the diversity of species is broad. In 2005, the registered catch of sea-fish and other marine organisms was 34,636 tonnes. Small pelagic fish dominate with more than 80 per cent of the catch. There are more than 30 fish processing businesses that manufacture a variety of fish products and produce about 15,000 tonnes of products annually, of this, 70 per cent of the production is canned sardines. Despite having a number of canneries, the Croatian market is still open for imported canned products. As an example Croatia last year was the second most important non-EU market for Spanish canned seafood for the first quarter of this year.

Imports and exports

Although Croatia exports seafood, imports are also quite significant. Moreover, Croatia’s seafood imports increased from USD 33 million in 2000 to USD 105 million in 2006. This trend is expected to continue. In 2006, Croatia imported fish mostly from Spain worth USD 15.8 million, France USD 10.1 million, Italy USD 8 million, and Sweden USD 7.6 million.

Croatia
Seafood Imports

Destination
USD 1000

2004
2005
2006

World
70,692
96,886
104,757

Spain
17,465
15,973
15,793

France
2,030
9,853
10,145

Italy
7,263
6,586
8,132

Sweden
4,207
5,402
7,595

Falkland Islands
3,139
8,547
7,206

Thailand
4,094
5,282
5,536

Argentina
4,547
4,877
5,527

Norway
3,861
5,452
5,045

Iceland
1,631
2,279
4,251

United States
1,724
2,727
3,683

Denmark
4,310
5,429
3,493

Netherlands
1,310
1,747
3,063

United Kingdom
1,738
2,545
2,658

Libya
0
3,205
2,373

China
64
623
2,032

Slovenia
1,534
1,316
1,776

New Zealand
1,268
1,799
1,677

Poland
865
832
1,207

Morocco
583
899
1,197

Estonia
217
802
1,103

The rest
8,842
10,713
11,265





Croatia
Seafood Exports

Origin
USD 1000

2004
2005
2006

World
103,753
97,117
158,952

Japan
53,754
35,265
88,737

Italy
29,454
38,765
47,520

Serbia and Montenegro
4,332
6,419
6,551

Bosnia & Herzegovina
7,768
7,267
4,609

Slovenia
3,854
3,544
3,577

Spain
87
2,236
2,309

Macedonia
1,138
1,358
1,361

The rest
3,367
2,262
4,288








In 2005, bluefin tuna accounted for more than 63 per cent of total fish exports. Bosnia & Herzegovina, Serbia & Montenegro, Slovenia, and Macedonia are the main market for Croatia’s export of canned sardines, mackerel, and anchovies. Farmed white-fleshed fish is mainly exported to Italy and Spain, while almost all of Croatia’s farmed tuna exports go to Japan.

By Terje Engoe
www.fis.com