Project Year 2018
Ingredients made from marine by-products are often held up as a potential gold mine. But what is the financial reality in the industry?
In a forthcoming Nofima report, the scientists have analysed the profitability of the marine ingredients industry in Norway, with the aim to aid the seafood industry in assessing the potential for additional value creation of the total biomass. The results show that profitability varies greatly. The marine ingredients industry is an umbrella term for companies that use residual biomass from the fisheries and aquaculture industry to produce ingredients for use in, for example, food and drinks. The ingredients produced come in the form of oil, powder and silage (raw materials conserved in acid). The residual raw materials used vary and can include everything from fish heads and entrails to shrimp and crab shells. “People talk about the huge potential for value creation from residual biomass. The goal of the analysis was therefore to get an overview of the marine ingredients industry, study profitability, and identify common factors that can help cast light on financial success and challenges,” says Nofima scientist Ingelinn Pleym.
Mapping and interviews
The project started with a mapping of the industry in Norway. This turned out to be surprisingly difficult, according to Pleym.
“The marine ingredients industry is a made-up term. Most companies operate under a variety of different industry codes. In addition, not all are exclusively engaged in ingredient production from residual marine biomass,” she says.
The scientists mapped a total of 61 relevant, active businesses and conducted interviews with 28 of these. In addition, they compiled and analysed data from public accounting figures and other secondary sources for all 61 businesses.
The results of the analysis show that profitability in the industry is very fragmented. Over a period of three years (2014–16), almost 40% of the companies had very good profitability, while 25 % underperformed. By comparing specific factors between companies, the scientists were able to ascertain the following:
• Businesses that exclusively produce ingredients from residual biomass from whitefish experience satisfactory to very good profitability.
• Production of oil is most common, and businesses that include oil in their production experience better profitability.
• The companies that include powder in their production have slightly weaker results, usually due to market challenges.
• Companies that do not take on the entire value chain achieve better profitability.
• Going from raw material to finished consumer product is more costly and affects profitability, although this does not mean that companies should not try to go it alone on the market.
It was nevertheless demanding to find strong common denominators that explain positive or negative financial results, the scientists admit.
“The data must be handled with some caution, in part because the companies focus on different raw materials, value chains and end products. In addition, several are part of a larger corporation, making the financial figures less precise,” says Nofima scientist Marianne Svorken.
The market is the biggest challenge according to the companies that were interviewed. Many of the companies would like to enter the global market, but find it too large and confusing. Others cited challenges related to access raw materials, supply chain flow, technology, legislation and financing. “This is an industry with a lot of potential, but also with challenges that mean it will take time to create sustainable profitability. So the question then is how long can a company survive without making a profit?” asks Svorken.
Nofima. Strategic Institute Initiative. The Seafood Quality projec