Industry Challenges … & Potential Solutions It’s not just about demographics! Robert Verge, P.Eng., MBA, CA, CMC Managing Director, CCFI November 15, 2016

Fish – A High-Growth Industry 200-Mile Limit Moratorium SOURCE: UN FAO

Different Worlds Growth in supply is from aquaculture, developing countries Developing countries now represent 2/3 of global fish exports

Canada Not Participating in Growth Decreased landings from capture; no increase from aquaculture 26% Drop

Currency Exchange

Diverse Species  Niche Markets

Variable Catches by Species Rising Prices, Exchange Rates Climate Change Shellfish Groundfish & Pelagics Increasing lobster catches offsetting decreasing shrimp, crab catches Rising Prices, Exchange Rates Climate Change Dramatic changes in catches, values Groundfish & Pelagics Shellfish

Variable Catches by Province Rising Prices, Exchange Rates Climate Change Shellfish Dramatic variations in catches, especially in NL, NS Groundfish & Pelagics Rising Prices, Exchange Rates Climate Change Shellfish Rising prices, exchange rates now offsetting decreased catches Groundfish & Pelagics

We need to make better use of our decreasing labour force Seasonality Avg. No. Sea Days by Vessel Home Port, 2010 We need to make better use of our decreasing labour force

Variable Prices SOURCE: John Sackton

KPIs – Canada Not Doing Well $000

Low Returns on Capital SOURCE: AAFC

Processing Plants, NL 77 171 Source: DFA

Plant Worker Incomes, NL (Inflation adjusted: Constant 2010$) Special Taxfiler Tabulations from STC for NLSA, GovNL

Processing Employment, NL Source: DFA

Not Enough People Owners of fishing enterprises and processing plants complain they can’t find enough people to run their operations CCFI is continually being asked to find ways to automate processes on fishing vessels and in processing plants And the problem is expected to get worse!

Availability of People Short-Term How many want to go into the fishery? Long-Term

We Have a Labour Supply Problem Reasons No growth in industry output Seasonal employment Low incomes Dependence on EI Smaller population cohort after baby boomers More attractive opportunities elsewhere Automation can be only part of the solution – we must also Increase industry output value Provide better employment opportunities – longer periods of employment, better incomes, less dependence on EI, career progression It’s not just about demographics!

NS: Ivany Report, 2014 “ … it will not be possible to turn around our economic outlook as a province unless we significantly improve productivity and competitiveness in our traditional rural industry sectors.” “For many years the highest public policy priority for these sectors has been simply to maintain jobs in rural communities. But today we find that many business operators are insufficiently profitable to support the investments in product quality, plant productivity, worker training, and market expansion that are needed to maintain and grow market share. In some sectors it is increasingly difficult to find local workers to take the low-wage and seasonal jobs many employers offer. As a result, young people are leaving rural communities, other countries are out-competing us in the marketplace, and the province is not realizing the full value of our asset base. These business models need to be revised if the province and our rural communities are to escape the current pattern of weak economic growth and population decline.”

Technological Change Amazon Fresh/Santa Monica Seafoods Superchilling + Controlled Atmosphere Every link of the value chain Craemer’s new Tracking & Tracing Fish Box

Reasons to Automate Tasks that could not be done otherwise Unique capabilities Time Economics Process optimization (business processes + production processes) Production planning Assessing possibilities to identify best outcomes Scheduling Process coordination, monitoring, and control Compliance with regulatory requirements Quality consistency Flow control/process reliability/error reduction Energy efficiency Safety Increase revenue/reduce costs Increase throughput, product yield, quality, output value Reduce labour, waste

Challenges It’s not just about reducing the need for labour We need capabilities that can only be provided through technology Automation will mean People will need more technical skills – which are also in demand elsewhere Higher incomes, better benefits, and good lifestyles will be needed to attract them We transition from a labour-intensive industry to a capital-intensive industry Can the industry attract the capital? Already struggling with profitability and low ROI Variable raw material supply – species, quantity, size, quality, price Uncertainty, due to resource regime shift Longer operating seasons needed to justify the investment Can we change the business model? Long-term investments require greater stability and predictability