Cod — Building the Future

In recent columns, I have been discussing what the increasing abundance of cod is likely to mean for our capture fishery.

Last month, I asked the question, “Are we rebuilding the past or building the future?” I ended by suggesting we have to build an industry based on cod that has a reasonable chance of being successful —competitive in international markets, economically viable, capable of attracting people and investment, providing good incomes to participants, and ensuring the resource is sustainable over time. So how can we do that?

Nobel Prize-winning physicist Niels Bohr once said, “Prediction is very difficult, especially if it’s about the future.” That is because we cannot know all the things that can happen to influence how the future will unfold. On the other hand, Dennis Gabor, another Nobel Prize-winning physicist said, “The future cannot be predicted, but futures can be invented. It was man’s ability to invent which has made human society what it is.” In other words, the future isn’t something that just happens; it is something we create. And that is how we have to approach building a future with cod.

As a starting point, we need to understand how we can fit into a world already well supplied with cod and similar species that compete with the popular groundfish. What opportunities are available to us? What must we do to take advantage of those opportunities? In particular, what can we do to ensure our products are attractive to buyers? Understanding these things will help us compete in international markets.

Second, we have to recognize that, if our approach to attracting customers is to sell our products cheaply, we probably won’t achieve other important objectives — economic viability, attracting people and investment, or providing good incomes to participants. If we have to sell our products at low prices, it means we still have a competitiveness problem that can only be overcome by selling our products for low prices.

Getting the prices we will need means we will have to concentrate our efforts on serving high-value markets. Those markets are primarily in North America and Europe.

Everyone else with fish products to sell is interested in those markets as well, so our products will have to be different — i.e. better suited to the needs and wants of buyers and consumers than products already available to them.

The market segment that offers, by far, the highest value is the market for fresh fish. When we decide to freeze our products, the market price immediately drops by at least $2/pound — and often more — because we then have to compete with anyone else in the world who also freezes products, which is just about everybody. Selling products fresh is difficult, so there aren’t as many sellers. That is why market demand for them often exceeds supply and why prices for them are high.

Yes, it requires extra work but the extra effort is far more than compensated for by higher prices. The extra effort required to sell fish fresh creates a lot of extra value. As I have said in this column before, the more complicated the problem you solve for your customers, the more value you create. This is a good example.

It is probably unrealistic to expect to sell all our output fresh, even though that is pretty much exactly what the salmon aquaculture industry does. If we can’t sell everything fresh, we need to sell as much as possible fresh and put most of the rest into the highest-value frozen product categories, such as portion-controlled loins and tails.

We also have to ensure we minimize the amount that has to be put into the lowest-value products, notably the block-type products our industry depended on very heavily prior to the moratorium.

Competition in that market segment is so intense that it will be practically impossible to achieve economic viability, attract people or investment, or provide good incomes, if such products are a large part of our output. If you don’t believe me, I suggest you investigate what is happening in Alaska with producers of blocks made from Alaskan pollock, who serve many of the same markets we once did and now have the mantra, “anything but block.”

What all this adds up to is we need to put an emphasis on fresh and high quality. When we were a big player in cod markets before, we were not good at either. That is another reason rebuilding the past is not a good idea.

The good news is that we can create a better future — if we want to. If we are not committed to it, we are unlikely to do the hard work required to invent the future we need to put our industry on a strong foundation.

The entire value chain will have to be engaged in the effort. Marketing high-value cod products will have to start in the boats.

When we catch the fish, how we catch it, how we handle it and how it is delivered to plants for processing will determine what products we can turn the catch into. It simply isn’t possible to turn poor quality raw materials into high-value products. With good quality raw materials, it will be up to the plants to capture the extra value, by turning the catch into top quality products and distribute them to customers willing to pay good prices.

For anyone who may be sceptical about whether or not this is possible, I will say it is already being done. Iceland has been on this path for quite a few years now. Norway is increasingly moving in that direction. Others are trying to get there, too, including the people in Alaska.

Our big advantage is that we are closer to substantial markets in North America that are willing and able to pay higher prices for top-quality products. It is up to us to capitalize on that advantage.

Over the past couple of years, we here at the Canadian Centre for Fisheries Innovation have been investigating what must be done to prepare for a future that includes more cod. We have accumulated a lot of information and we are planning to share that information during an upcoming workshop, as I said last month.

What we can say in advance is that markets for high-value products exist and can be identified. In addition, the technologies and know-how for serving those markets are already in use elsewhere and we can gain access to them. Specifically, we know how to catch fish, handle them, and transport them in ways that preserve quality at a high level. We also know how to process them efficiently into high-value products and how to transport them to market. And we know who is likely to be interested in buying the products.

The question for us — as an industry — is whether we are willing to change old attitudes and ways of doing things to build a modern, competitive industry based on cod. It won’t work well, if only a few people are committed to it, because the people who carry on in the old ways will make it difficult for the ones who want to do better.

If that happens, much of our output will still have to go into low-value products, we will still have the reputation for inconsistent quality that we had prior to the moratorium, and our industry will continue to struggle to make ends meet.

As that famous baseball catcher-philosopher Yogi Berra once said, “The future ain’t what it used to be.”