I was involved in an extensive study last year, and the report has just been published. I am generally weary of big across a sector (landscape type analysis)… in Spanish, we have a saying that states, “he who grasps at too much... adjusts too little” (el que mucho abarca… poco aprieta)…. And I tend to be a floor operator.
hopefully it helps them… they are the resources owners
Yet, the team included some friends and people I respect… and the idea was that I would be a “ground truther” so I was pretty happy to be part of it; while unusual, it was actually a good experience… I took it on as: “one needs a big map. to get to small places”
This project aimed to improve value retention from Pacific tuna resources by being pragmatic and innovative in product/service delivery. The final report is here if anyone is interested.
I quote the executive summary, but is worth having it as a “macro” reference for whatever work people do in the region.
Tuna is a key driver of the Pacific region’s economic growth and there is already coordinated efforts underway between Pacific Island countries to maximise returns while sustainably managing tuna stocks. However, these efforts will need to be accelerated to counteract factors such as climate change, an increasingly complex regulatory environment and emigration of the working-age Pacific Island population. At the annual Pacific Island Forum Fisheries Agency (FFA) officials meeting in May 2021 (FFC118), a mandate was given for a landscape analysis of the Pacific tuna sector to be completed. The focus of the analysis was to consider long-term opportunities and constraints, focusing on feasibility and commercialisation of a short list of opportunities. The Australian Centre of International Agricultural Research (ACIAR) has jointly funded this project with FFA on a 50/50 basis.
GLOBAL TUNA SECTOR
Fish is expected to become an increasingly popular source of animal protein over the next decade, driven primarily by its lower carbon footprint compared to other sources of animal protein and a growing middle class who are health conscious and time poor. Tuna is one of the world’s highest value fish in capture fisheries production, prized for its nutritional content and versatility in terms of end use across biomedical, food, feed and industrial sectors. Tuna is suitable for the significant proportion of the population who do not eat pork, providing an alternative source of protein.
Growth in global tuna landings has steadily increased at a compound annual growth rate (CAGR) of 1.97 per cent over the period 2012 to 2018, with Pacific flagged states experiencing the highest growth rate in landings during this period, i.e., where a vessel is flagged/licenced/registered. The value of the global tuna market for food products was US$42.2 billion in 2022 and is projected to reach US$50.2 billion in 20282. Canned tuna is by far the dominant shelf-stable product while also offering the greatest opportunity for value addition based on dock value of tuna compared to the final consumed end value of tuna product.
PACIFIC ECONOMIC AND SOCIOECONOMIC LANDSCAPE
Pacific Island countries (PICs) are some of the most economically and environmentally vulnerable countries in the world. Natural disasters have resulted in estimated average economic losses to the region of US$1.075 billion per year – equivalent to nearly 5 per cent of the combined Gross Domestic Product (GDP) for Pacific small island developing states. The region’s business environment has also progressively deteriorated with Papua New Guinea the only country to improve its ease of doing business score since 2014.
Health, education and standards of living have improved in the past two decades across the Pacific region. However, urbanisation and the increased availability of cheap, processed foods through imports has contributed to staggering rates of non-communicable diseases, a key cause of death between the ages of 30 and 70. Furthermore, the Pacific is experiencing ‘brain drain’ due to more attractive work opportunities outside the region.
PACIFIC TUNA SECTOR
Tuna is a crucial resource for PICs and is an important part of the cultural heritage of the region. For some PICs, the tuna resources within their exclusive economic zones (EEZ) represent their only significant renewable resource.
Tuna fisheries in the Western and Central Pacific Ocean (WCPO) have contributed approximately 53 to 58 per cent of global tuna catch over the past decade for albacore, bigeye, skipjack and yellowfin tuna1. Purse seine catch volumes within the WCPO have steadily increased over the past few decades, while conversely, longline catch volumes have decreased.
The Pacific tuna sector is export driven, with most processed exports comprising intermediate productsdestined overseas for processing into final product. Key markets are Thailand, the European Union (EU), Japan and the United States (US). Most processing within the Pacific region occurs in Papua New Guinea (PNG), Solomon Islands, Fiji, Federated States of Micronesia (FSM) and American Samoa. Notably, Fiji’s onshore processing volumes significantly exceed catch volumes in national waters.
Increasing pressure to ensure sustainable management of fisheries is creating greater tension between two somewhat conflicting definitions of ‘sustainable stocks’ – biologically sustainable versus economically sustainable for businesses operating in the sector.
This is evident in the expansion of marine protected areas (MPA), despite recent studies finding that large-scale MPAs have limited conservation benefits for Pacific skipjack and bigeye tuna1. For example, Fiji has committed to expanding its MPA to 30 per cent of its EEZ2, resulting in many Fiji harvesters concerned about their future viability.
VALUE CHAIN OVERVIEW
The following key barriers and critical success factors were identified in the Pacific tuna value chain with respect to PIC businesses:
Key barriers
Businesses are typically concentrated on a single value chain segment/function.
Constrained by high costs of entry, high operating costs and challenges with achieving scale.
Lack of infrastructure, particularly port facilities.
High shipping/air cargo costs; infrequent and indirect routes to markets; lack of cold chain.
Challenges with securing skilled employees, as well as cultural constraints of workers not used to the demands of modern work (e.g., regular working hours).
Critical success factors
Vertical integration – To improve the flow of information, certainty of supply/offtake and manage other risks.
Diversification – Distant water fishing nation/foreign companies are generally part of heavily diversified conglomerates.
Scale – The Pacific’s high-cost operating environment, particularly for logistics, power and water, means that scale is vital to operating profitably.
VALUE CHAIN SEGMENTS
Harvesting
The harvesting value chain segment has the highest risk profile with significant costs involved in purchasing, repairing and maintaining vessels, and a limited resale market. Subsidies are a key issue, distorting the market by allowing distant water fishing nations (DWFN) harvesting from the WCPO to operate below break-even point.
Localisation of the harvester workforce is a challenge with senior positions generally held by expatriates. Recruiting and retaining deck crew is becoming increasingly challenging, faced with competition from opportunities with better working conditions (e.g., other types of vessels such as cargo/container vessels and labour mobility schemes in Australia), as well as a lack of career paths.
There is also limited and/or inconsistent fishing-specific training available from local training institutions.
Processing
Processing volumes in the Pacific have increased but the vast majority of processing is primary only, with secondary processing occurring outside of the region. Securing a steady supply of tuna is a key factor impacting throughput and therefore the profitability of processing operations, with many processors operating below capacity. 63 per cent of the Pacific tuna workforce is employed in the processing and ancillary segment1, with women estimated at 70 per cent of the processing workforce.
End markets
The Pacific region’s key export markets are Thailand, Philippines, EU, US and Japan. Exports to Thailand and Philippines are mostly whole round tuna, while cooked loins are primary exported to the EU, US and Thailand. The regulatory environment is becoming progressively complex and stringent, making it increasingly difficult for Pacific exports to compete in the global market.
Regional consumption of tuna varies from country to country, although an overall theme is that consumers are driven primarily by price.
Services
Key services to the Pacific tuna sector are:
Transport – Air freight and sea. The cost and frequency of transport is a key factor impacting the cost structure of the Pacific tuna sector.
Finance – Limited finance options within the region. DWFN/foreign companies rely on non-bank financial support, such as a from a parent company or majority shareholder.
Training – Limited competency-based training for deck crew available from local institutions, resulting in a high reliance on crew from overseas (e.g., Philippines, Indonesia).
Infrastructure and associated services – Limited infrastructure, facilities and expertise in the Pacific region. Parts are expensive given that they need to be imported in.
Crewing can also be considered a service but has been captured under ‘harvester workforce’ in this report.
INCLUSIVE INNOVATION PATHWAY OPPORTUNITIES
A key finding from this project is that businesses need to be vertically integrated, diversified and operating at scale in order to be competitive, given the high-cost operating environment in the Pacific – attributes that are virtually impossible for PIC businesses to achieve. Yet these challenges are not new – they have beleaguered the Pacific tuna sector for decades.
The aim of this project was to use a different lens when tackling the challenge of improving value retention from Pacific tuna resources. Given the Pacific’s inherent constraints, the approach was to be pragmatic regarding the product/service being considered but innovative with respect to how it could be delivered.
Innovation requires both creativity and strategic thinking, but timing is often just as important as the idea itself. The opportunities shortlisted in this report consider short-term benefits while also looking towards the future, addressing foundational factors that need to be addressed now to strengthen the sector’s long-term viability.
The five shortlisted opportunities fall into two categories – products and enablers. An additional section called ‘Looking to the Horizon’ considers early-stage innovations that may deliver benefits to the Pacific tuna sector over the medium- to long-term.
PRODUCTS
OPPORTUNITY 1: Health and wellness inputs
Creating intermediate products for the health and wellness industry. The next step for the Pacific region is producing hydrolysed protein powder from valorised tuna processing waste. This is a valuable input for food manufacturing and the nutraceutical industry, with modest equipment and skill requirements.
OPPORTUNITY 2: Fish meal, aqua, animal feed
Fish meal, aqua and animal feed production to support the Pacific local food system. The next step for the Pacific is valorising tuna processing waste into high-quality fish meal and optimising the production process. This involves low equipment and skill requirements and is a critical input for aquaculture development in the Pacific region, supporting food security.
ENABLERS
OPPORTUNITY 3: Cold chain development
One of the key constraints to growth of the Pacific tuna sector and tuna product innovation is cold chain logistics and infrastructure. For tuna, the next step is to determine the minimum viable production volumes for Opportunities 1 and 2 and associated cold chain requirements. However, a broader assessment of cold chain development opportunities across the Pacific is recommended, recognising that PNG’s current state of cold chain development is more advanced than most other PICs.
OPPORTUNITY 4: Attracting and retaining local talent
To secure a pipeline of Pacific Islander talent as the sector becomes increasingly sophisticated (see ‘Product’ opportunities). The next step is raising the awareness of career opportunities in the tuna sector and future-proofing the Pacific fisheries training network.
OPPORTUNITY 5: Collective approach for small businesses
To achieve the critical success factors of integration, diversification and scale. The next step for the Pacific is to explore opportunities for taking a cooperative approach (e.g., vessel food provisioning) and sharing resources (online second-hand equipment market), as well as development of a Pacific food innovation hub.
LOOKING TO THE HORIZON
POSSIBILITY 1: Community-owned infrastructure
Co-financing infrastructure through models such as a cooperative.
POSSIBILITY 2: Output financing innovations
Assessing financing innovations in other sectors/parts of the world, which could be adapted for the Pacific tuna sector.