More herring to Egypt?
A rising population and economic growth pave the way for larger exports of Norwegian herring to Egypt. A fresh research report also points to the fact that specific measures can stimulate further export increases.
• Pelagic fish are species that swim in the water column as opposed to resting on the bottom, such as herring, mackerel and capelin.
• These species are important for the Norwegian fisheries industry. The combined export value of these species in 2009 was more than NOK 7 billion.
Norwegian export of pelagic fish is concentrated on a limited number of markets, and profitability has been poor in recent years. It is therefore important to develop profitable markets. Nofima, in collaboration with the Fisheries and Aquaculture Industry Research Fund (FHF) in Norway, has looked more closely at the opportunities for herring in Egypt.
Market development is demanding. International marketing is particularly demanding owing to cultural influence, and parallel to this the success rate can be influenced by several non-controllable elements. As the companies cannot normally control these elements, one needs to identify such elements and adapt so it contributes to a successful result.
Egypt – an interesting market for Norwegian herring
The purpose of this work has been to acquire enhanced knowledge about the central conditions in Egypt so that Norwegian companies can base their strategic choices and actions on a broader foundation. A more fragmented export pattern could reduce the companies’ market risk, increase their distribution strength and protect the interests of their owners and investors. However, it cannot be an overall aim to increase exports to new markets if the companies have better profitability in their existing markets.
Egypt is interesting from a macroeconomic view. The country has an annual population growth rate of around 2 percent and the economic growth rate has been more than 5 percent over the past five years. Nevertheless, more than 40 percent of the population lives on less than $US 2 per day and a high proportion of their income is spent on food. The price of herring, compared to the price of the product’s substitutes, will therefore in great extend influence the total market.
Norwegian companies already export some herring to Egypt. The total market in 2009 totalled about 45,000 tonnes, which was up from 30,000 tonnes in 2007. In 2009 Norwegian companies exported nearly 15,000 tonnes of frozen whole herring to Egypt, while by the end of October 2010 the export was already about 22,000 tonnes. The Netherlands is our largest competitor.
There are currently about 10 importers of herring in Egypt. The number of importers has risen in recent years as a result of lower container rates from the Netherlands. Transport in container is today competitive with freezing vessel. The importers assess several characteristics. Price is the most important product characteristic. There is a preference for herring with roe, which provides the possibility of making both roe and fillet products. Size, fat content and species (North Sea herring or Norwegian spring-spawning herring) are other important characteristics. The market prefers large herring, but owing to price there is a preference for herring weighing around 300 g.
Whole smoked herring is the most common product, but roe and fillet products are also sold. The season for consumption is from October to Easter, but there is also some consumption linked to Ramadan. Herring is an important source of protein for the poor section of the population, while for the few rich consumption has religious and historical links.
Norwegian herring encounters several barriers in the Egyptian market. The rate of customs duty – until the free trade agreement between Egypt and EFTA leads to an exemption from duties in 2013 – and local industry means that only frozen whole herring is exported to Egypt. Consequently, product developments such as growth strategies are ruled out in the short term.
Limited shelf life for frozen fish in Egypt is another major barrier. The market wants herring with roe, but Norwegian spring-spawning herring only contains roe in January and February. As a result of a shelf life of six months for frozen fish, it is only available on the market in the second half of the consumption season (February-April). Consequently, the report recommends that Norwegian companies attempt to change the regulations for the shelf life of frozen fish to Egypt from six months to 12 months. Such a change could stimulate growth for Norwegian herring exports to Egypt.
Opportunities for increasing herring exports
In periods with high prices of and limited access to (Moroccan) sardines, Norwegian herring can be sold as a substitute to sardines. Herring is then sold either directly to the consumer, who prepares it in the same manner as sardines, or to factories which preserve and can the herring. However, these channels are currently developed to an extremely small extent by Norwegian companies, and the report recommends acquiring a greater knowledge about the opportunities for Norwegian herring in these channels. In the short term, profitability in these channels is regarded as limited, as price is the most important product characteristic.
Nevertheless, the factories which process (salt and smoke) the herring are the largest and most important customers. Accommodating their wishes and requirements could stimulate exports most in the short term. The report recommends sorting herring with roe separately from herring without roe. Communication and the measurement of fat content are other specific measures that can give Norwegian companies an advantage in this market.
Owing to economic growth and a rising population in Egypt, one can expect an increase in herring exports to Egypt in the future given that the price of herring does not increase more than the price of the product’s substitutes. However, specific measures can stimulate further increases in exports.