1. 1 The Changing Seafood Industry Past, Present, Future Robert Verge, Managing Director Canadian Centre for Fisheries Innovation October 8, 2014

2. 2 Global Fish Supply & Utilization SOURCE: UN FAO

3. 3 Global Fish Prices SOURCE: UN FAO

4. 4 US Seafood Prices

5. 5 A Great Business To Be In? ► Steadily expanding market for seafood – since 1950  Increasing population  Increasing per capita consumption  Supply struggling to keep up  Rising prices ► Are we in the seafood industry’s golden age? ► Why don’t we feel better about it?

6. 6 We Are Not Sharing In The Growth

7. 7 Our Share of Key Markets Is Shrinking

8. 8 The Currency Effect

9. 9 What Is Our Share Of Final Value? 35% 65%  Canada represented < 0.6% of the global seafood value chain, 2008  NL represented < 0.15% Total – US$818 billion Source: UN FAO

10. 10 Workshop, Sept 16-17 ► Purpose: to obtain input for designing R&D program  NL CETA fund – $400 million, partly to be spent on R&D ► Attendees  Leaders from aquaculture, harvesting, processing, and support sectors  Academia  Government ► Agenda  Systematic review of markets, resources, industry characteristics, identifying needs and potential for improvement  Each session: speakers to frame issues + challenge attendees to think about them, followed by discussion of issues ► Outcomes  Very positive experience for attendees  Great discussion  Consensus on future direction

11. 11 The Future – Opportunity & Challenge ► Continued growth in market demand for seafood ► Globalizing markets & supply chains + consolidation of seafood distribution ► New free-trade agreements  European Union + South Korea ► Dramatic changes  Resource regime shift – Crab + Shrimp  Cod + Capelin  ENGOs and sustainability  Currency exchange rates  Energy demand, supply, and costs  Technology  Demographics (globally and locally)  NL industry in transition from labour-intensive to capital-intensive ► Intensifying competition  Aquaculture continuing to expand rapidly  Developing countries increasing export market share  Increasing abundance of cod in the Barents Sea  China gaining tremendous scale processing resources harvested elsewhere (e.g. Barents Sea, Alaska, NL)

12. 12 Opportunities vs. Capabilities Demand is growing Wild resources are limited, changing Need new capabilities What capabilities do we need? What opportunities do we want to pursue?

13. 13 Evolution of NL Industry Highest value does not coincide with highest landings

14. 14 NW Atlantic Fish Catches, 1960-2011

15. 15 NAFO Catches, Principal NL Species

16. 16 Changing Resources

17. 17 Extreme Seasonality

18. 18 Fewer Harvesters

19. 19 Fewer Plants

20. 20 Less Plant Employment

21. 21 Annual Incomes, By Source

22. 22 A Diminishing Labour Supply 2014

23. 23 Industry Economics ► Economics – a quest for value  Function of industry structure, competitive behaviour, financial performance  Structure a function of resources, regulation, markets  Competitive behaviour a function of industry concentration, buyer-seller relationships, entry-exit conditions  Financial performance a function of industry characteristics and enterprise circumstances ► NL  Aquaculture concentrated, vertically integrated, expanding  Fishery in decline – not market-driven, structured to under-perform  Shore prices fail to serve the industry  Technology constrained; capacity poorly utilized  Small plants producing commodity products a recipe for disaster  Little time difference between landings and exports – reduced value  Groundfish – it will be different this time  Need to find a balance of social/economic/political objectives

24. 24 What Business Are We In? ► Three models  Market-driven/responsive – e.g. aquaculture, Highliner  Fishing – e.g. Norway  Value-driven – e.g. Iceland ► Consensus that focus should be on adding value, to maximize value from our resources, not just fishing, to export raw materials for processing  That changes everything!

25. 25 Can We Do It? ► Gap analysis: present  future  what we must do to prepare  Markets  Value chain  Processing  Eco-system/resources  Harvesting  Aquaculture  People  Energy  Investment/financing ► Participants concerned that needed changes will require governments to allow/enable industry to do what is needed through regulatory change How much time do we have? Markets – CETA Resource regime shift Demographics