tilapia the world's most popular fish

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Tilapia The World's most popular fish? Industry Report By Laura Cutland, IntraFish Media December 3. 2003 © IntraFish 2002. The content of this report is protected by copyright pursuant to Norwegian, US and European Union copyright laws, international conventions and other copyright laws. The user is specifically prohibited from modifying, publishing, transmitting, selling, participating in the transfer or sale or reproducing, creating derivative works from, distributing, performing, displaying or in any way exploiting any of the materials on this site or the software or materials relating thereto in whole or in part. Although every effort has been made to ensure the accuracy and reliability of the content, IntraFish Media AS or any of its affiliated companies accepts no responsibility for any use or interpretations which could be made based on this content. www.intrafish.com

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Page 1: Tilapia the World's Most Popular Fish

TilapiaThe World's most popular fish?

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By Laura Cutland, IntraFish Media

December 3. 2003

© IntraFish 2002. The content of this report is protected by copyright pursuant to Norwegian, US and European Union copyright laws, internationalconventions and other copyright laws. The user is specifically prohibited from modifying, publishing, transmitting, selling, participating in the transfer orsale or reproducing, creating derivative works from, distributing, performing, displaying or in any way exploiting any of the materials on this site or thesoftware or materials relating thereto in whole or in part. Although every effort has been made to ensure the accuracy and reliability of the content,IntraFish Media AS or any of its affiliated companies accepts no responsibility for any use or interpretations which could be made based on this content.

www.intrafish.com

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Table of Contents 1. Introduction: Tilapia Takes the World by Storm 3

2. Global Production Trends 4 2.1 Top Global Producers 5 2.1.1 China 5 2.1.2 Philippines 5 2.1.3 Mexico 6 2.1.4 Thailand 6 2.1.5 Taiwan 7 2.1.6 Brazil 7 2.1.7 Indonesia 8 2.2 Other Significant Producers 8 3. Export Markets 9 3.1. The U.S. Market 9 3.1.1 Consumption 9 3.1.2 Retail Trends 10 3.1.3 Foodservice Trends 12 3.2 Europe: The Other Export Market 12 4. Future Trends 14 4.1 Marketing 14 4.2 The Carbon Monoxide Issue 15 4.3 Production and Prices 16 5. Major U.S. Importers 18 6. Sources Contacted for this Report 19

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1. Introduction: Tilapia Takes the World by Storm A decade ago, very few people knew much, if anything, about tilapia. Today, tilapia has managed to become the ninth most consumed fish in the United States, one of the world’s top three seafood markets. Imports to the United States have grown over 700 percent in the space of 10 years. Suppliers and sellers of tilapia credit its remarkable rise in popularity to its consistent quality and year ‘round availability at reasonable prices – characteristics often associated with blockbuster sellers like farmed salmon. While numerous countries now produce tilapia, the vast majority of the world’s supply – 2 million metric tonnes – is consumed in the countries in which it is produced. In other words, Asian and Latin American countries are nations of tilapia growers and consumers. As a result, export markets for tilapia are still in their infancy, with the United States considered the only major importer of the fish at present. However, as production increases and the industry matures, producers are beginning to cast about for new export markets for tilapia, such as Europe. In the meantime, tilapia consumption still has room to grow in the United States, and many producers are focused on increasing their market share in America. In addition, as global stocks of whitefish decrease, industry members say tilapia is well positioned as an alternative to fish like cod, sole, flounder and orange roughy.

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2. Global Production Trends

At least 85 countries now produce tilapia, a fish native to Africa and the Middle East that boasts a mild sweet flavor and firm texture. Nations in Asia, Latin America, Africa and the Middle East are expected to push global farmed production to 1.5 million metric tonnes this year - worth an estimated $2 billion. Combined with wild populations, worldwide supply of tilapia will reach about 2 million metric tonnes. By 2010, its value is forecasted to reach $4 billion. China is the world’s leading producer. Combined, China and Taiwan accounts for the majority of frozen tilapia exports to the United States. However, because of their proximity and logistical advantages, Latin American producers have cornered the fresh tilapia market in the United States. While there are numerous species of tilapia, the majority of producers grow Nile tilapia – or Oreochromis nilociticus – because it boasts the fastest growth rates. In addition, most producers targeting the export markets grow all male lines since males tend to grow twice as fast and larger than female fish. Industry members say that because tilapia is inexpensive to produce, disease-resistant and grows well in captivity and in a wide variety of conditions, its popularity as an aquaculture species around the world is skyrocketing. For instance, the fish can grow in freshwater, brackish water and saltwater. Likewise, production systems range from raceways, tanks and ponds to more elaborate net cage operations. Another advantageous trait tilapia boasts is that - unlike salmon or cod – the fish can thrive on a wide variety of diets. However, most producers today feed tilapia pelleted feed that consists of grains like wheat, corn, soybean or sorghum and a small amount of fishmeal or fish oil. Tilapia also reach maturity more quickly than other types of finfish and grow from egg to market size (about two pounds) in 10 to 12 months. The main requirement for growing tilapia is maintaining a water temperature of about 28 degrees Celsius (82 degrees Fahrenheit).

Top Tilapia Producers by CountryChinaPhilippinesMexicoThailandTaiwanBrazilIndonesia

Kevin Fitzsimmons, American Tilapia Association

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2.1 Top Global Producers 2.1.1 China China leads the pack as the biggest producer of tilapia in the world. In 2002, the Asian country produced 706,000 metric tonnes and accounted for almost half of global production. However, the vast majority of the fish produced here – about 80 percent - is consumed domestically. Most fish are grown at family-operated farms of one to two acres to be sold to local markets and restaurants. The remainder, meanwhile, is primarily exported to the US market in frozen form – both as whole and fillet.

China is notable for its fragmentation and the lack of vertical integration among tilapia companies. Chinese growers also differ from other major producers in that most treat their product with carbon monoxide – an issue that has stirred up controversy among their competitors. In the future, producers are expected to try to privatize some of the government-run tilapia hatcheries and to place an increased emphasis on boosting product quality through best management practices and quality assurance programs.

2.1.2 The Philippines Tilapia was first introduced to the Philippines around World Word II –most likely by Indonesians or the Japanese. In the 1970s, the U.S. Peace Corps initiated widespread farming efforts and tilapia production has since sprung up on all of the islands in the Philippines. The tilapia industry here is known for its extensive work on breeding and genetic research. Most tilapia is consumed domestically – purchased live or on ice. However, Philippines producers are starting to reach maximum penetration in the domestic market and are increasingly interested in exporting tilapia. Before this will be feasible on a commercial scale, though, companies will need to invest in high quality processing facilities and equipment.

Tilapia Production in China

• 2002 Production: 706,000 metric tonnes • Production Systems: mostly small family-

owned ponds • Markets: 80 percent domestic; 20 export,

mainly United States • Product Forms: frozen whole and fillet • Cost of Production: $0.70/kg

Tilapia Production in the Philippines

• 2002 Production: 122,277 metric tonnes • Production Methods: ponds, some net cages • Markets: mostly domestic • Product Forms: live, whole on ice • Cost of Production: $0.80/kg

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2.1.3 Mexico Tilapia was first introduced to Mexico in 1960s and 1970s and over the past three decades has spread to all areas of the country – making the country the largest producer in the Americas.

Methods of growing tilapia are widely varied in Mexico, ranging from small pond culture to reservoirs to net cages. As the third most popular fish behind tuna and sardines, most Mexican tilapia is consumed locally - sold whole on ice in grocery stores. However, headed and gutted fish and fillets are becoming more common, as the industry matures.

Like many producing nations, Mexico is interested in developing an export market for the product but with the strong in-country demand as well as stable prices, the U.S. market has yet to be tapped by Mexican producers. 2.1.4. Thailand Like China and the Philippines, most tilapia produced in Thailand is grown on small family-operated ponds and is often polycultured with other crops, such as rice and shrimp. The fish first turned up in Thailand in the 1940s and 1950s but large-scale production did not take off until the 1970s. There are a few large tilapia companies in Thailand - such as the Charoen Pokphand Group (CP Group) - that hire contract growers and processes fish for the export market, but the vast majority of the fish is consumed locally. A major local brand is Top Tim – which offers value-added tilapia products for Thai consumers. A trend that is beginning to emerge in Thailand is the switch over to mega-hatcheries, which are now beginning to supply growers with tilapia fingerlings.

Tilapia Production in Mexico

• 2002 Production 110,000 metric tonnes • Production Methods: tanks, raceway, reservoirs,

cages • Markets: mostly domestic • Product Forms: whole on ice in grocery stores • Cost of Production: $1.00/kg

Tilapia Production in Thailand

• 2002 Production 100,000 metric tonnes • Production Methods: mostly ponds • Markets: 90% domestic; 10% export

(mostly US, small amount to EU) • Product Forms: whole, live • Cost of Production: $0.85/kg

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2.1.5 Taiwan

Along with China, Taiwan is a leading exporter of frozen tilapia to the U.S. market. Taiwan is also one of the largest suppliers of tilapia to Europe and to the small Japanese sashimi sector. However, product quality issues have hampered product penetration, according to industry sources, and some say that the pervasive use of carbon monoxide by Taiwanese producers has caused some buyers to look elsewhere.

2.1.6. Brazil Introduced in the 1950s, tilapia aquaculture has grown quickly in Brazil, which boasts compatible environmental conditions and considerable water resources. In fact, some predict that the country may ultimately rival China as the world’s largest producer of tilapia because of its abundant warm waters and the investment funds being poured into tilapia development. Brazil’s tilapia industry is also unique in that in addition to housing some large vertically integrated tilapia companies, it has fairly advanced value-added capabilities and products on the domestic market. About 50 percent of domestic tilapia production in Brazil is sold to fee-fishing operations – mostly in the southeast area of the country. Another portion is destined for the country’s tilapia leather industry, which produces belts, wallets and briefcases. The remainder is sold in grocery stores for the domestic market, while a small portion is exported to the United States and European Union.

Tilapia Production in Taiwan

• 2002 Production: 90,000 metric tonnes • Production Methods: ponds • Markets: U.S., EU, Japan, domestic • Product Forms: mostly frozen whole and

fillet • Cost of Production: $1.05/kg

Tilapia Production in Brazil

• 2002 Production: 75,000 metric tonnes • Production Methods: raceways, ponds,

tanks, cages and ponds • Markets: mostly domestic • Cost of Production: $0.85/kg

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2.1.7 Indonesia Like the rest of Asia, many tilapia producers in Indonesia grow the fish in small ponds for domestic consumption. However, the world’s largest U.S. importer, Regal Springs, has operations in Java’s and Sumatra’s lake areas, and the company accounts for about one quarter of all production in Indonesia.

2.1.8 Other significant producers Other large producing nations include Egypt, Columbia, Cuba, Ecuador, Costa Rica, Honduras and Panama. Egypt, Cuba and Columbia mostly supply product for their domestic markets. Central American countries, on the other hand, are the main suppliers of fresh product to the U.S. market, with Ecuador leading the pack. Many producers in Ecuador turned to tilapia after white spot disease wiped out their shrimp crops, and today, the country boasts about a 50 percent share of the fresh fillet market in the United States. Production is pond-based and competition is said to be tough. Some of the smaller, non-vertically integrated companies have turned back to shrimp or left the tilapia industry. The major producers here are Tropical Aquaculture and Enaca International. Most tilapia exports coming out of Costa Rica are through Rain Forest Aquaculture, the third largest U.S. importer of tilapia. The company owns most of the country’s tilapia farms and also buys product from a few independent producers. Costa Rica accounts for about 20 percent of the fresh tilapia market in the United States. The United States and the European Union are still small producers at this point. Both are hampered to some extent by colder temperatures and higher costs of production. U.S. companies produce about 9,000 metric tonnes annually – predominantly for the Asian and Hispanic markets, which typically desire live or whole fish. In Europe, there are just a handful of producers in countries like Belgium, Netherlands, Switzerland, Spain, Germany, France and the United Kingdom.

Tilapia Production in Indonesia

• 2002 Production: 50,000 metric tonnes • Production Methods: ponds, cages • Markets: 75% domestic; 25% export to US • Product Forms: whole and frozen fillets • Cost of Production: $0.80/kg

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3. Export Markets

3.1. The U.S. Market 3.1.1 Consumption The United States is the only tilapia importer of significance at this point in time and accounts for roughly 75 to 80 percent of all imported tilapia product worldwide. The fish began appearing in Asian restaurants and grocery stores in the early 1980s, where it was mainly sold in live form from tanks. From there, it began to penetrate the Hispanic market, which desired the cheaper product form of frozen whole fish. By the 1990s, as acceptance and interest in the fish began to grow, fresh and frozen fillets began to appear at mainstream grocery stores across the country, and the fish eventually began popping up on the menus of large-scale chain restaurants.

Over the past 10 years, shipments into the United States have risen an astounding 700 percent. Last year, America imported 67,000 metric tonnes of the fish, and the trend is set to continue in 2003. For the first half of 2003, U.S. tilapia imports were up 43 percent. While producers expect this rate to slow a bit in the coming years, few industry members doubt that tilapia consumption will continue to grow in the United States and gain an increasing share of the U.S. seafood market.

“It’s still going into mainstream,” says Robert Tate, regional sales manager for Mountain Stream Tilapia, a large U.S. importer. “We haven’t scratched the surface…it’s where farmed salmon was six or seven years ago.” Suppliers of tilapia credit its popularity in the American market to its mild taste, inexpensiveness and year ‘round availability. “You’re looking at product that is reasonably priced and gives consumers what they want -- white flesh fish that is mild in flavor and that can be cooked in a number of ways,” says Carlos Sanchez of Beaver Street Fisheries, a seafood importer. “It hits the right price points and profiles. I don’t think that there’s a fish that has crossed those barriers as well as tilapia.” The rapid acceptance of tilapia among U.S. consumers is evident in consumption statistics over the past decade. In the early 1990s, for instance, Americans consumed 5,000 metric tonnes (11 million

“It hits the right price points and profiles. I don’t think that there’s a fish that has crossed those barriers as well as tilapia.” – Carlos Sanchez, Beaver Street Fisheries

Source: Kevin Fitzsimmons, American Tilapia Association

US tilapia imports 1998-2003

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80,000

100,000

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1999

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2001

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2003

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Fresh fillet

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pounds). By mid-decade, tilapia sales surpassed trout, and by the end of the 1990s consumption reached 84,000 metric tonnes (185 million pounds). This leap also managed to land tilapia on the top ten most consumed species list in 2001, where it beat out scallops for the first time. By 2002, tilapia climbed to the number nine spot, with the average American eating close to half a pound of the fish. According to Linda Candler, vice president of communications at the National Fisheries Institute, this trend is expected to continue for the foreseeable future. “Everybody is looking at the next mild white fish that is consistently available and the price is right. Tilapia has fit the bill,” she says. “It would not surprise me to see it continue to climb over the next four of five years as it becomes more familiar and people see it in more grocery stores.”

3.1.2 Retail Trends Tilapia began as a retail fish in the U.S. market, reaching consumers at seafood counters and display cases, long before it appeared with any consistency on menus. Over the past decade, the fish has gained popularity with large supermarkets, and many of the nation’s major chains, , such as Costco Wholesale Corporation, Sam’s Club and Kroger Company, now have tilapia programs in place. However, most estimates put supermarket penetration at less than 50 percent at this point in time. Mark Tupper, sales manager for Seattle seafood wholesaler Orca Bay Foods, Inc., says that it is just a matter of time before all of the other big chains embrace tilapia. “I think all the major ones that don’t are looking at it.” Tupper says that since his company began selling individually quick-frozen (IQF) tilapia to the retail sector a year ago, sales have risen 225 percent. In order to keep up with demand and find high quality frozen product, the company’s tilapia buyer has been visiting Chinese producers. Another large wholesaler to find success with tilapia is Costco, which sells huge volumes of fresh fillets every week in giant packs. While the company would not disclose sales figures, it did say that the product is the second most popular fresh seafood item, after salmon, and that it sees a lot of promise in the species. In fact, based on the success of their fresh tilapia programs, a number of major chains are currently considering a frozen bagged tilapia program, and some industry members speculate that this will become an increasingly popular product form in 2004. “I expect you’ll see a lot of frozen sealable bags in grocery stores,” notes Kevin Fitzsimmons, treasurer of the American Tilapia Association and a professor at the University of Arizona.

US Tilapia Consumption

020,00040,00060,00080,000

100,000120,000140,000

1986

1989

1992

1995

1998

2001

Metric Tonnes

Kevin Fitzsimmons, ATA

“To me, it’s an item that has great potential.” –Tom DeMott, Encore Associates

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Tilapia appears to be the most popular in the Southeast region of the United States, with perhaps the highest consumption rates in the Florida area. Some retailers say it is even outselling salmon and catfish in the state. The fish has also gained popularity in the Midwest and Northeast, too, but has yet to be fully embraced on the West Coast, suppliers say, where fish like salmon and halibut reign supreme. “In places where there is good quality seafood, it’s going to take longer,” suggests Fitzsimmons. However, some industry members feel that supermarket penetration has been rather slow and that it will be some time before tilapia is a serious seafood contender. Tom DeMott, a former seafood buyer and retail consultant, says that aside from a few players, many of the leading grocery stores have yet to display confidence in the fish. “Costco has quite a commitment to the item, but I don’t see that commitment with other retailers,” he notes. “Tilapia has grown some but it’s really not become a major part of seafood sales. It’s not challenging fish like salmon or shrimp.” Francisco Murillo, chief financial officer for Rain Forest Aquaculture, agrees “Despite the fact that it has grown rapidly, I believe supermarkets are where tilapia doesn’t have deep penetration.” However, by and large, most companies are optimistic about tilapia’s prospects. “To me, it’s an item that has great potential. It’s so mild. It’s a good substitute for anything,” says DeMott. “It has no aftertaste and it lends itself to many flavors.”

Jim Nunneley of Enaca International in Miami, the fourth largest fresh tilapia importer in the United States, also sees big things for the fish. “Catfish outsells it two to one, but I think we’ll catch catfish in a year or two,” he says. “One surprising thing is that kids really like the fish. If we can get kids to eat the fish --that says a lot about the potential of tilapia.” Meanwhile, although fresh fillets are considered the biggest product form in the U.S. market, some have their eye on whole fish, due, in part, to the tremendous growth of minority populations in the States. – particularly Hispanic and Asian. These groups typically prefer whole fish and, in the case of Hispanics, frozen. Suppliers say that they see these areas for future growth.

In addition, as with most of other seafood items, suppliers are also moving into more advanced value-added products. For instance, one of the leaders in this category - Enaca International – is in the process of rolling out a new line of individually packaged, frozen marinated red tilapia fillets this fall under its BioMar brand. The product, which is available in three flavors – Pesto Italiano, Fiesta Lemon-Pepper, and Carnival Cajun – will be introduced to foodservice and retail buyers in the U.S. market by mid-February, Nunneley says. Other producers are expected to move further into this category in the near future.

Top Ten Most Consumed Seafoods in United States 2002 Shrimp 3.70 lbs. per person Canned Tuna 3.10 lbs. per person Salmon 2.02 lbs. per person Pollock 1.13 lbs. per person Catfish 1.103 lbs. per person Cod .658 lbs. per person Crabs . .568 lbs. per person Clams .545 lbs. per person Tilapia .401 lbs. per person Flatfish .317 lbs. per person

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3.1.3 Foodservice Trends The tilapia foodservice sector has been growing at a rate of about 45 percent for the past three years. Many of the nation’s largest restaurant chains now have tilapia on their menus including Red Lobster, Outback Steakhouse and Applebee’s International Inc. In fact, Red Lobster, the nation’s largest seafood casual dining chain, says that tilapia is the second most popular species on the menu after salmon. Some restaurant chains source fresh fillets, but the majority order frozen fillets. John Pollock, director of seafood merchandising for SYSCO Corporation, the nation’s largest foodservice distributor, sums up tilapia sales this way: “We’re selling boatloads of it.” Pollock says that demand in the past year has increased 13 percent. Fresh fillets represent 5 percent of total sales for the company while frozen fillets account for over 90 percent. However, like some retailers, he sees growth in whole frozen tilapia because of the fast growing Hispanic population in the United States. The group tends to prefer using whole fish because of the lower price point, he says. Tilapia penetration of the white tablecloth restaurant sector, however, has been less pervasive. While it has turned up on the menus of some upscale restaurants such as those owned celebrity chef and cookbook author Tom Douglas, other chefs still perceive it as a fish that lacks unique appeal. Wade Wiestling, the vice president of culinary development for Oceanaire Seafood Room, a chain of upscale seafood restaurants in the United States, said that the fish is too mass-produced to be attractive to the company. “Oceanaire is a bit more upscale. Tilapia has really gotten into the mid-scale restaurant chains.” Perhaps reflecting this phenomenon, Flying J Restaurants - a nationwide chain for long-haul truckers - recently started serving tilapia after customers began requesting it, according to director of concept, product and menu development Rich Mararasco.

3.2 Europe: The other export market The European market for tilapia is still in its infancy. Most estimates put global imports into the European Union at less than 20 percent, while domestic production is just a drop in the bucket at this point. But with Europe’s high rates of seafood consumption, it is a market that many producers have their eyes on for future growth. Among them are Tropical Aquaculture, Regal Springs and Lake Harvest Aquaculture, a large tilapia company based in Zimbabwe that ships 80 percent of its production of fresh and frozen fillets into Luxembourg three times a week. Suppliers credit tilapia’s slow growth in Europe, in part, to logistical hurdles. “The biggest issue is transportation…the logistics of it are a nightmare,” says Mountain Stream’s Tate. In addition, many producers say that they have their hands full supplying the U.S. market and, therefore, have been unwilling to invest the money necessary to develop markets in Europe. “The US market is so good that they don’t see a reason to go to Europe,” notes Fitzsimmons. On top of that, some say that Europeans have more entrenched tastes. Lake Harvest’s sales and marketing director Damien Legros explains, “This product was not easy to introduce as the variety of fish offered on the market is wide and tilapia was not known at all. The commercial name of tilapia is not attractive to any of the European languages and this did not help.”

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Legros says that the wide range in product quality offered to European consumers has also made it difficult to break into the market. “The second problem for the introduction was the variable quality offered to the market, especially for frozen products, where you can find the best and worst products. This has translated into various problems -- such as the actual ban on Taiwan and China [product] for presence of antibiotic in the fillets or whole fish. This does not contribute to the reputation of the product in general, and it takes even more effort to differentiate high quality products from low quality, cheap ones,” he says. However, despite the initial challenges, some companies are increasingly finding success in Europe. John Schramm, president of Tropical Aquaculture, says that the company is targeting Western Europe with fresh product and that it has shipped more tilapia in 2003 than it did last year. Regal Springs Tilapia, meanwhile, has been able to sell both fresh and frozen tilapia to the grocery sector in Western and Eastern Europe, according to President Mike Picchietti. Lake Harvest, on the other hand, has its eye on Northern Europe and is targeting Germany, the United Kingdom, Belgium, Holland and France. “Lake Harvest targets the entire Europe as a market but the response has been better in the Northern part so far,” Legros notes. In order to gain more market share, Legros says that traceability will be key. “There is room in for high quality tilapia fillets in the EU, as its ...characteristics correspond to the customers’ demand -- white flesh, firm, no bones, low fat, easy to cook, very few smells at cooking. The market is growing slowly but steadily, although tilapia fillet has still a very small market share in the Europe. We feel that only high quality and safe products will find their way to the market. It implies good farming practices with fish fed from high quality feed with no additives of any kind and very strict processing methods on line with the EU regulation.” While there are few statistics on tilapia consumption in the EU -- because it is not singled out as a separate commodity item in most countries -- the United Kingdom’s Sea Fish Industry Authority (Seafish) data in the table below give some indication of the fish’s potential there.

52 weeks ended 19-Aug-01

52 weeks ended 18-Aug-02

52 weeks ended 17-Aug-03 ’03 vs ‘02

UK Tilapia imports Expenditure (£000s) 463 791 1054 33% Volume (tonnes) 83 89 160 80% Penetration (% of population) 0.3 0.5 0.5 0% Frequency (no of times) 1.8 1.4 1.9 32% Average Weight of Purchase (kg) 1.2 0.7 1.2 84% Average Volume per Trip (kg) 0.7 0.5 0.7 39%

Average Price (£/kg) 5.56 8.93 6.6 -26%

Meanwhile, in another indication of tilapia’s growing popularity in Europe, Taiwan has managed to boost its imports into the Europe from 889 metric tonnes in 1996 to almost 8,000 metric tonnes in 2002, according to Eurofish statistics. Fitzsimmons notes that at a recent conference in London, industry members said they saw huge promise in ready-made tilapia meal options for the EU market. “A lot thought it was just a matter of time before Europeans embrace it the way Americans have.”

United Kingdom’s Sea Fish Industry Authority (Seafish)

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4. Future Trends 4.1 Marketing Virtually everyone in the tilapia industry agrees that consumption of the product will continue to rise in the coming years given its track record and how quickly U.S. consumers have embraced the fish. The question at this point is: What is needed to push tilapia sales to the next level? At one point in time, producers had the idea of launching a generic marketing campaign. In 1999, under an association called the Tilapia Marketing Institute, some large producers got together to advertise the fish but disbanded because of funding issues. Since then, most U.S. importers have spent their time building their own brands, gaining more market share and venturing into more value adding – such as IQF and seasoned fish. In addition, some have considered smoked tilapia for use in products like dips and spreads. However, while a number of companies have experimented with it, the idea has yet to pan out, according to Nunneley. “It’s fairly lean,” he explains. “It’s a fish that doesn’t lend itself to smoking.” Meanwhile, some suppliers are hoping to cash in on the fish’s reputation as an eco-friendly seafood. Because tilapia are herbivores that require little fishmeal, environmental organizations such as the Monterey Bay Aquarium consider the fish environmentally friendly and recommend it as seafood choice to consumers. Companies say that this issue could emerge as a major market advantage in the future, especially in light of the negative publicity encountered by the farmed salmon industry. Almost all of the major producers interviewed for this report say that they are considering some kind of certification or labeling to highlight the product’s environmental attributes. Foremost among them are Tropical Aquaculture and Regal Springs. Schramm says that producers that cannot show traceability back to the fingerling will lose a serious market advantage in the future, while Regal Springs is actually pursuing organic certification under EU standards and plans to sell the product under that label with additional U.S. accreditation. Regal Spring’s Magdalena Lamprecht, the company’s organic project manager, says that the company began the organic certification process over a year ago because of the interest in organic and natural foods in Europe. “European retailers are very interested in organic fish. The distributors we know in Europe are constantly getting calls about organic seafood.” Regal Springs says that the feed costs associated with organic tilapia will be about 50 percent higher but claims early entry into the market will give the company an important advantage. “We definitely feel the market niche is growing,” Lamprecht said, adding that Regal is already in purchasing talks with Coop, one of the largest grocery chains in Switzerland. The company is hoping to introduce its organic tilapia product by late 2004.

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4.2 The Carbon Monoxide Issue There is a fair amount of controversy within the industry over the use of carbon monoxide – bothstraight CO and filtered smoke, also known as “tasteless smoke” – to give tilapia a fresh look.While China and Taiwan producers are known to use CO on a regular basis, only a few producersoutside of Asia are thought to use this treatment. The reason the issue is so contentious is because many tilapia importers fear that others are usingcarbon monoxide in order to disguise poor quality product and that this could ultimately tarnishthe image of tilapia. Moreover, while the U.S. Food and Drug Administration (FDA) requires suppliers to label theproduct as treated, importers say that compliance is weak and that the agency does not enforcethe regulation. “Within the industry, it is commonly known that it is being done,” says Fitzsimmons, treasurer ofthe American Tilapia Association. “The consensus is that it should be labeled as such.” Most major U.S. importers - such as Tropical Aquaculture, Regal Springs, Rain Forest Aquacultureand Mountain Stream - say that they do not use carbon monoxide. Enaca International, on theother hand, says that it will use carbon monoxide only if its customers request it. In his opinion, Mike Picchietti, president of Regal Springs Tilapia, says it is time for the use ofcarbon monoxide to stop. “We have no enemies except ourselves and how we handle itswholesome image. This is why we have been against carbon monoxide for tilapia,” he explains.“We feel it’s not necessary and carbon monoxide is not an additive the consumer will demandonce they truly know about it.” “It’s not a competitive edge, it’s very simple for anyone to use on your fish,” Picchietti adds. “Butthe impact on tilapia’s future with a controversial additive like this worries the long termpioneers.” This sentiment is echoed by Schramm. “If you taka a product of questionable integrity and [treatit], it opens up a Pandora’s Box,” he notes. “As long as the gassing process is an option,consumer will never know the initial integrity.” Meanwhile, a number of U.S. distributors and retailers have also come out against the use ofcarbon monoxide, including Orca Bay Foods, Costco and SYSCO.

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4.3. Production and Prices There seems to be some dispute as to whether or not too much production has glutted the U.S. market this year. While there was an estimated 35 percent increase in fresh fillet imports to the States during the first half of 2003 and slight downward pressure on price as a result, producers are offering different opinions as to how much product the U.S. market can absorb. For his part, Schramm says that producers learned a hard lesson this year “Production exceeded sustainable price levels. A lot of producers got hurt very badly this year. Production will not grow as much in 2004.” However, Picchietti thinks that, like most businesses, producers will continue to ramp up production in the coming years despite the possible implications on price. “Production will go up,” he says. “Everyone is rushing as fast as they can. Then there’s going to be a bomb like farmed salmon.” Nunneley, meanwhile, predicts that production will grow by 15 to 20 percent annually in the coming years, a belief shared by Fitzsimmons, who says he expects global tilapia production to reach 2 million metric tonnes by 2010 at an estimated worth of $4 billion. Fitzsimmons also predicts that the industry will move toward larger size fish in the future - such as 4-6 ounce and 5-7 ounce sizes - as restaurant demand for 3-4 ounce fish dries up. Consequently, production will head toward bigger, wider-bodied fish, in order to boost recovery rates. As it now stands, the recovery rate for fillets is about 33 to 35 percent. Smaller fish is even less at 25 to 28 percent.

While there has been some work on growth hormones and transgenic research to improve growth and recovery rates for tilapia, Fitzsimmons says that investment and interest in this area has been slow to develop because researchers are still working on some basic science issues at this point.

“Production will go up…Everyone is rushing as fast as they can. Then there’s going to be a bomb like farmed salmon.” – Mike Picchietti, Regal Springs

US Import Prices for Fresh Fillet

$1.50$1.70$1.90$2.10$2.30$2.50$2.70$2.90

1992

1994

1996

1998

2000

2002

Price

Source: National Marine Fisheries Service

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Prices, in the meantime, have decreased a bit, but most producers characterize the market for tilapia as stable and say that prices will continue to be maintained at close to current levels in the future. “We don’t see any major changes in price,” says Nunneley, a belief shared by Fitzsimmons. “My opinion is that price will stay in the window that it has pretty much been in but the product quality will improve,” Fitzsimmons says.

The one point of consensus seems to be that tilapia is here to stay. “Tilapia is a sustainable protein. It will go through some adjustments with regard to processing and packaging. Once those kinks are worked out, tilapia in all terms will increase,” Schramm notes. “It’s still a relatively young product in the U.S. market.”

US Import Prices for Frozen Fillet

$1.0$1.2$1.4$1.6$1.8$2.0$2.2

1992

1994

1996

1998

2000

2002

Price

Source: National Marine Fisheries Service

US Import Prices for Frozen Whole

$0.00$0.20$0.40$0.60$0.80$1.00

1992

1994

1996

1998

2000

2002

Price

Source: National Marine Fisheries Service

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5. Major U.S. Tilapia Importers 1) Regal Springs Tilapia President: Mike Picchietti 2003 Production: 44 million pounds live weight Farms: Indonesia and Honduras Headquarters: Bradenton, Florida Founded: 1992 2) Tropical Aquaculture President: John Schramm 2003 Production: 38 million pounds live weight Farms: Ecuador Headquarters: Rutland, Vermont Founded: 1996 3) Rain Forest Aquaculture President: William Marshall Production: 28 million pounds live weight Farms: Costa Rica Headquarters: Fort Lauderdale, Florida Founded: 1992 4) Enaca International Executive Vice President: Vincent Erenst 2003 production: 22 million pounds live weight Farms: Ecuador Headquarters: Miami, Florida Founded: 1965 5) Mountain Stream Tilapia President: Rodrigo Albir Production: unknown Farms: Honduras Headquarters: Miami, Florida Founded: 1998

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6. Sources Contacted for this Report

• Mike Picchietti, Regal Springs Tilapia • John Schramm, Tropical Aquaculture • Francisco Murillo, Rain Forest Aquaculture • Jim Nunneley, Enaca International • Robert Tate, Mountain Stream Tilapia • Kevin Fitzsimmons, American Tilapia Association • Carlos Sanchez, Beaver Street Fisheries • Wade Wiestling, Oceanaire Seafood Room • Mark Tupper, Orca Bay Foods • John Pollock, SYSCO Corporation • Tom DeMott, Encore Associates • Linda Candler, National Fisheries Institute • Damien Legros, Lake Harvest

Additional source material

• National Marine Fisheries Service • United States Department of Agriculture • American Tilapia Association • EuroFish • Seafish • IntraFish • The Wave