Vinnsla, sala og dreifing á eldisfiski á meginlandi EvrópuNeil Shiran Þórisson

CFO Arctic FishStrandbúnaður 2019, Grand Hótel Reykjavík, 21.-22. mars.

Logistics• From Bildudalur to Rotterdam • Takes between 7-8 days with a

possible deviation of 3-4 more days, most extreme experience in the winter time has been 12 days.

• Several options on how to get the product to a main shipping port in Europe.

• Not able to significantly change the time it takes to deliver the product.

• Air freight should develop more, costs are high and capacity issues are already present. This will have to be addressed. Air freight needs to develop further for future key markets.

Transport from Ship to Factory

12 hours

Delivery zones from

Slupskfactory

LogisticsFrom Westfjords From North Norway example of real costs

Transport time 7-11 days 4 days

Route 1Ocean freight from packing station to Rotterdam, Rotterdam to final destination by truck.

Direct from packing station to Poland through Sweden and Denmark – different ferry options from Sweden and Denmark

Route 2Trucking to Reykjavik, ocean Freight to Reykjavik and final destination by truck

From packing station to warehouse in oslo, from there to Poland

Total logistical cost EUR/KG 0,35-0,47 EUR/KG 0,20-0,25 EUR/KG

Comment: The trucking distances is at least 1.800 km. in Norway vs 380 km in Iceland

• In extreme cases fish can be 11 days en route to its destination. It needs to be taken in to consideration that fish that is being shipped e.g. on a Thursday by ship can have a harvest date that is 1-3 days prior to shipping.

• Buyers of value added processing in fresh fish want the most recent fish. Actually all buyers want the freshest raw material available.

• The logistical chain need to be both efficient and flexible. A new industry is growing rapidly and with increased frequency and quantity the whole shipping and trucking market should be more competitive leading to lower prices in the long term.

Secondary processor in Poland - Milarex

Size and scope• 46 000 m2 production and storage• 4 000 m2 pallets warehouse• 3 000 m2 office and technical building separated

from production, incl. laboratory, workshops, storage, boiler room, transformer stations e.t.c.

• Total plant area 77 000 m2• Total land 100 000 m2• Max height in hall 6,5 m (8,75 m in the highest point

of the roof)

• 1400 people working on 2 shifts

• 21 trucks in / per week of raw material• 16 trucks out / per week of final products (smoked,

marinated, fresh, by-products and heads)

• Smoking capacity 53 t / per day• spiral freezers 60 t / per day

Type of products

Considerations

• Secondary processors that are focussing on value added products is a big market for salmon from Iceland and elsewhere.

• Providing high quality raw material from Iceland will be a key component to success in Iceland with salmon farming.

• Possibilities are to do value added in Iceland, but…• If Iceland is to compete in the value added market several challenges need to

be overcome regarding:• Logistics• Costs

Considerations

• Logistics: fresh products from a secondary processor is normally sold within 4-5 days of it being stocked at a retailer.

• For fresh products a 8 day shelf life is given. • Extending shelf life can be done, but

• Long shelf life after packing des is not well perceived by the consumer.• Tests with subchilling are positive but consumer education is needed on the process and concept.

• Costs:• Logistics costs are significantly higher but are expected to decrease with increased efficiency. • Cost of production labour is 50-70% higher in Iceland than in some competing

countries/companies in secondary processing. • Automatization is an option, but has limitations. Further technological advancements need to take

into consideration the cost benefit of the technology compared to leading producers of value added products globally (not only to Icelandic production labor costs).

• In automatization it is important to remember that technological advancements are needed and will likely be available for all competitors in the industry.

Considerations on competitiveness

• Salmon framing is a growing industry in Iceland. Several obstacles need to be overcome in the whole value chain. We are at the very early stages of developing the value chain. It is a sensitive growth phase.

• Price achievements are lower than in competing nations

• An estimated production cost in Iceland is around 0,8-1 Euro higher than in competing countries

• With lower price achievements and higher production costs, the industry needs more time to reach critical size and efficiency.

• Unfortunately the biggest obstacles are in the external environment and external factors of operations.

Source: Kontali 2015, Kontali 2017

Drivers for success in Iceland

• External business environment has to be stable, considering the volatility of the industry.

• Go for niche markets• Organic salmon - a small, high paying growing market• Storytelling and branding based on origin – build on white fish success• High quality frozen value added products

• Certifications will matter: ASC, Whole foods Standard, Organic…• Joint sales• Joint marketing• New development and technology across the value chain – Innovation is

needed.