Transcript Lecture 10: Seafood Marketing

Seafood Marketing
(Shrimp)
Introduction
 Hundreds
of species of salt water shrimp
in the world; however, industry divides
them into two cateogories:
 coldwater/northern
(F. Pandalidae)
 warmwater/tropical (F. Penaeidae)
8
species dominate U.S. market
 product mix changes when aquaculture
changes
How are shrimp sold?
 Typically
 Example:
counts per lb or counts per kg
16-20 means there are 16 to
20 shrimp per pound
 Range goes from under 10 (giant or
colossal) per lb to over 300-500
(canned)
 Little species difference in packing or
products
 we will focus on warmwater shrimp
Shrimp Forms
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Most common: raw, headoff (green headless) with
the shell on
Heads-on: cephalothorax
included, appearance is
that of entire shrimp
(known as “enteros” in
Spanish)
raw shrimp without shells
are “peeled”
Peeled Shrimp Forms
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PUD: peeled, undeveined
(vein or digestive tract
remains intact, vein varies
in color from dark to
light)
P&D: peeled and deveined
PDI: peeled, deveined,
individually-packed
Tail-on: peeled, but the
tail fin and an adjacent
shell segment are left on
Tail-on round: tail-on,
undeveined
Various
Forms of
Shrimp
Peeled Shrimp Forms
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butterflied: shrimp has been cut
along the vein (split or fan-tail;
split thru first 4 segments =
“Western-style”)
cooked: usually sold IQF
(individual quick-frozen);
varieties include P&D tail-on, P&D
tail-off, and shell-on
Other forms: minced, canned,
dried, value-added (e.g.,
marinated, flavored, breaded)
U.S.D.O.C. has established
standards for green headless
and breaded shrimp
Breaded Shrimp
 Breading
consists of two components:
 wet,
adhesive batter
 dry, crunchy breading
 percentage
breading (by weight) is
critical, regulated by FDA
 labeling standards
 breaded
shrimp (>50% shrimp)
 lightly breaded (65% shrimp)
 imitation breaded (<50% shrimp)
Forms of Breaded Shrimp
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whole breaded: tail-on or tail-off, usually headless
(although called “whole”), deveined if less than 70
count
butterfly breaded: split partway on vein side
(dorsal) and spread open
split breaded: completely bisected (“western” or
“cowboy” style)
hand-breaded: labor intensive, expensive, more
attractive, tail-on
machine-breaded: tail-on or -off; if tail remains, it
may or may not be breaded (not breaded =
“pinched”)
Product Packing
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Green headless: 5lb (net weight) block; add
ice + box = 6-7 lbs.
2.0 kg packs (0.6 lbs lighter, so buyer be
ware!)
blocks packed in two styles:
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layer or finger-packed
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random, jumble or shovel pack
IQF: individual quick-frozen, usually in bags
(1-30 lbs), labeled to net weight, without glaze
Breaded shrimp packed in boxes with
moisture-resistant barrier, completely sealed
Product Packing
Chemical Additives
Usually dipped in solutions to either add weight
or as a preservative
 sodium tripolyphosphate (STP): on peeled and
breaded shrimp to reduce drip loss (keeps
weight up); labels must advise of this
 sodium bisulfite: used primarily for shell-on
shrimp to prevent melanosis (“black spot”); limit
is 100 ppm, higher in Europe
 “Ever-Fresh” (4-hydroxyresorcinol), naturallyoccurring, GRAS, but expensive
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Typical Shrimp Species
Traded
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Chinese whites:
Fenneropenaeus orientalis,
mandarin whites, mediumsized, sell for less, softer
tissue
Gulf brown:
Farfantepenaeus aztecus,
shell color varies
extensively, popular in
Texas (50% of wild
harvest), usually a little
cheaper than whites,
caught offshore
Typical Shrimp Species
Traded
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Gulf pink:
Farfantepenaeus
duorarum, very sweet,
firm flesh, tails turn red
when cooked, most packed
shell-on
Gulf whites: Litopenaeus
setiferus, often confused
with brown shrimp (browns
have groove in last tail
segment), flesh often
colorless, good flavor, pink
when cooked
Typical Shrimp Species
Traded
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Pacific white shrimp:
Litopenaeus vannamei,
mainly imported from
South America, Central
America, Mexico, similar
to Gulf whites, seasonal
black tigers: Penaeus
monodon, dark
dorsal/lateral stripes,
usually peeled, some
adversity to stripes, small
ones = WSSV, big
Japanese market heads-on
Shrimp as a Commodity
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Traded daily as a commodity by many exporters
developing nations to industrialized
similar commodity characteristics:
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price cycles, fluctuating supply/demand
marginal producers
capital requirements
contracts, futures
fluctuating exchange rates
short/long positions
overproduction, speculation
shrimp actually considered a medium for foreign
exchange! Shrimp instead of clams??
Shrimp as a Commodity
 Early
development was the result of
Japanese trading companies and American
importers urging developing nations to go
for it in the 50’s and 60’s
 currently U.S. shrimp production only fills
one-third of the demand
 increase in demand is 3x faster than all
meats
 downturns in price are usually 4-year cycle
Price Cycling
Shrimp is a world-traded commodity,
principally in U.S., Japan and Europe
 Not considered solely as a commodity due to 1)
marketed by brand; 2) packaged at source of
production in the container in which it will be
finally sold
 Also: number of colors, sizes, species set
shrimp apart from customary commodities
 difficulty lies in delivering a uniform product
against futures contracts
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Shrimp Price Cycling
Shrimp prices, as mentioned, are cyclical and
subject to a variety of influences (as with any
commodity)
 prosperous and recession years match shrimp
prices
 really based on consumer discretionary income
 price breaks follow sizeable accumulation of
secondary and substandard quality product
 better quality control will reduce extent of
cycling
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International Marketing
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Shrimp is the most important seafood species entering
international trade - about 20% of the total
about one-third of its production enters the intn’l trade
Global production ~ 3 billion MT
40 countries produce (15 produce 80% of total)
principal nations: India, China, U.S., Indonesia, Thailand,
Taiwan, Mexico
U.S., Japan, Europe consumes over 50% of final product
(what is common among these?)
International Marketing of
Shrimp
At least 25 species enter world trade
 in Latin America, best prices are found for 21/25
- 41/50 (best are for 31/35 and 36/40)
 prices depend on size of individual shrimp, quality
and source
 prices affected by the quality record of the
producer/processor
 marketing complicated due to: number of
countries involved, size ranges, species, product
forms, markets
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International Marketing of
Shrimp
Processor is the link between the producer
and the market
 70% originates developing countries and all
must be processed
 farmed or capture fisheries all processed the
same!
 processing has two stages: 1) turning the
shrimp into a form in which it can be traded
as a commodity and 2) changing it from a
commodity into a product form that can be
market-driven (e.g., peeled, cooked, IQF)
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International Marketing of
Shrimp
 Most
processors are now covering
both steps (in the past Step 2 was a
U.S./Japan/European task)
 Step 2: value adding
 packaging is now improving in
developing nations and refrigerated
vessels are available
 air shipments of fresh and live
product are becoming more noticeable
International Marketing of
Shrimp
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International trade almost exclusively takes place
between importer and exporter
financing provided by the importer who opens an
irrevocable letter of credit (LC) in favor of the
exporter
importers are marketers themselves and usually
sell to wholesalers, distributors, re-processors ,
restaurant chains and supermarket chains
financing within the producing country is often
provided by the exporter who finances the
processor, who finances the farmer
all told, major burden falls on importer
International Marketing of
Shrimp
Exporter may be a processor or a farmer or an
independent third party who takes financial
responsibility and communicates with importer
 many governments require that prices be set
before shipment
 others set minimum sales prices and often quality
parameters
 all shrimp move through the same subsequent
channels of distribution to major markets:
import function is the same in all markets
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International Marketing of Shrimp
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Importer may purchase shrimp from foreign traders on
an outright basis, paying for the purchase at full invoice
value either at the time of shipment or upon passage by
the FDA
may work on a consignment arrangement whereby an
advance is made to the exporter by means of an LC
(letter of credit)
in some cases the importer acts as a sales agent
(broker) for the exporter and collects a commission
importers can also make pre-season advances to
producers (therefore tying up their production)
it is by this means that the Japanese typically maintain
a strong grip on Asian sources
Importance of Supply as it
Affects Price
Availability of supply determines the direction
shrimp markets will take
 level of supply determines prices
 prices as they relate to competing products,
determine demand
 if not for aquaculture, world shrimp supply
would have, by now, levelled off
 Question now: Can supply keep up with
demand?
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Importance of Supply as it
Affects Demand
 Major
growth in demand is not in
areas that produce shrimp
 major growth will come in aquaculture
as capture fisheries become more
cost-prohibitive
The Effect of Foreign
Exchange
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Again the big markets for shrimp are: U.S., Japan and
Europe
Japanese and U.S. shrimp markets are interdependent:
prices prevailing in one affect the other
fluctuations in each country’s rates of exchange are
bound to cause a reaction in both markets and elsewhere
even should the value of the U.S. dollar decline on the
foreign exchange market, it remains unchanged in buying
power within the U.S.
if the $ is strong, people want to sell shrimp there
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low $ and yen values favor Europe
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The Effect of Foreign
Exchange
If $ value is low and product flows to Europe, it
must be heads-on
 increased flow to major markets (U.S., Japan,
Europe) means decreased supplies in minor
markets
 result: prices stay firm in minors
 because the U.S.$ is the world’s medium of
exchange, U.S. importers don’t worry about
changing values
 Japanese continuously worry about foreign
exchange markets, future values
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Marketing Shrimp in the U.S.
 Marketing
of shrimp involves everything
(production  consumption)
 better price is reward for quality
product, proper packaging, timely
delivery, accurate sizing, honest weight
 final selling price is the determinant of
profit or loss
Marketing Shrimp in the U.S.
75% of shrimp is consumed outside the
home
 current growing trend is eating in (at
home) = more packaging, different forms
of presentation (cooked, breaded, etc.)
 Where should the added value be done? In
the markets? Or at the source?
 For now, it’s in the markets
 target now: the supermarkets
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