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Profitable: Competitive, Efficient and Market Focused
Of the activity suggested in the Sustainable Framework we have concluded that the priority should be given to reducing operating costs in both the catching and processing sectors, maximising value through more collaboration in the supply chain and positioning Scottish seafood to compete in high value global markets through meeting the modern consumer's preference for quality, freshness, taste, sustainability and health giving properties.
Fishing businesses across the whitefish, pelagic and shellfish sectors have become increasingly focused on maximising the value of the catch rather than on volume alone. This trend is driven partly by fisheries issues such as reduced quotas and restrictive management measures, but also by the classic business challenges of operating costs, quality initiatives and market demands.
Strong whitefish prices have contributed to an increase in average vessel earnings for the Scottish whitefish fleet in recent years, but the high costs of fuel and quota trading mean that on average, whitefish profit levels are low even before intrest and depriciation. Fuel costs for a typical >24 metre whitefish trawler have doubled in the past five years to account for approximately 30% of vessel earnings in 2005. So high fuel prices have been a step change in the industry's economic circumstances and there are few suggestions that prices are going to drop significantly in the short to medium term. Quota trading costs take a further approximate 7% of vessel earnings. These costs impact on crew share and have overall implications for financial security, inhibiting investment in new builds, vessel repairs and maintenance. Priority must therefore be given to cutting operating costs. Reducing the costs of leasing 'days at sea' must be considered in addition to quote and find costs.
A shortage of quota compounded by an inefficient quota market has encouraged high trading costs, which is increasing the competitive pressure on all sectors of the fleet. A UK Quota Management Change Programme is now in place with the aims of providing a fair, equitable and transparent system which facilitates the maximum level of UK quota uptake, addresses holding and use of quota by the active fleet and considers the needs of vulnerable communities. Its full implementation is a matter of urgency.
Value and profitability can also be maximised by improving the efficiency and cohesion of the supply chain. In Scotland this tends to be fragmented, with catchers, agents, sellers, processors and retailers failing to co-operate as they might, and instead, duplicating investment in, e.g. cold storage and transport. That is why we recommend a focus on greater collaboration. In addition, there needs to be greater transparency in the supply chain both about how prices are fixed and as a response to growing consumer demand for more traceability of the product.
Scotland already has a reputation for high quality food and drink products such as Scotch beef and Scotch whisky. Consumer demand for fish is on a rising trend and there are significant opportunities to grow high value markets and to position Scottish seafood to ensure that it too is recognised as the best money can buy, by building on its inherent freshness and quality.
There is also scope to enhance the sector's environmental reputation at the same time as reducing costs. In the catching sector, modern fuel efficient engines, gear and fishing methods that reduce both fuel costs and the sector's environmental footprint need to be promoted, starting with identification of funding opportunities. In the processing sector there are also opportunities to reduce costs and environmental impacts through energy efficiencies and innovative approaches to waste management.
Much of this activity is urgent and will bring early benefits. Others will take some time. In the medium to long term, it will be important, amongst other things, to keep under review the balance between fleet, and processing capacity and fishing opportunities and to make sure that the tools are available to allow all parts of the industry to undertake the necessary planning to secure a profitable future.
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