Market Analysis – 70101702 – Fishery by products production services

Market Analysis Brief: Fishery By-products Production Services (UNSPSC 70101702)

Executive Summary

The global market for fishery by-product production services is estimated at $2.6 billion and is intrinsically linked to the ~$14 billion fishmeal and fish oil product market. Driven by growth in aquaculture and the demand for nutritional supplements, the service market is projected to grow at a 5.2% CAGR over the next three years. The primary opportunity lies in shifting from traditional feed-grade output to high-value nutraceutical and pharmaceutical ingredients, capturing significant margin uplift. Conversely, the most significant threat is raw material volatility, dictated by unpredictable fishing quotas and climate-related impacts on fish stocks.

Market Size & Growth

The Total Addressable Market (TAM) for outsourced fishery by-product processing services is currently estimated at $2.6 billion. This service market's value is derived from the broader fishmeal, fish oil, and marine ingredients market. Growth is propelled by the aquaculture industry's insatiable demand for feed and the expanding human wellness market for Omega-3 and marine collagen. The three largest geographic markets for these processing services, mirroring raw material availability, are 1. Peru, 2. China, and 3. Chile/European Union (primarily Denmark & Norway).

Key Drivers & Constraints

1. Demand from Aquaculture: The aquaculture industry consumes over 65% of global fishmeal production, making its continued expansion the primary demand driver for processing services. [Source - IFFO, The Marine Ingredients Organisation, 2023]
2. Nutraceutical & Pet Food Growth: Rising consumer demand for Omega-3 fatty acids, marine collagen, and high-protein pet food ingredients is creating new, higher-margin revenue streams for by-product processors.
3. Regulatory & Quota Volatility: Supply is constrained by government-managed fishing quotas, particularly for anchoveta in Peru, the world's largest single fishery. Quota reductions, often linked to El Niño events, can idle processing capacity and cause severe price shocks.
4. Sustainability & Circular Economy Focus: A strong "zero-waste" mandate in the food industry pressures seafood companies to valorize all parts of the catch. This increases the addressable volume of raw material (offal, trimmings) for processors, turning a waste disposal cost into a revenue stream.
5. Energy & Logistics Costs: Rendering and drying are highly energy-intensive processes. Volatility in natural gas and electricity prices directly impacts processing costs and service fees.
6. Technological Advancement: Innovations in enzymatic hydrolysis and gentle drying techniques enable the production of high-value fish protein hydrolysates (FPH) and other bioactive compounds, shifting the service offering from bulk commodity processing to specialized ingredient manufacturing.

Competitive Landscape

Barriers to entry are High, driven by significant capital investment for processing facilities (est. $30-50M+), the need for secure, long-term access to raw material from fishing fleets, and complex environmental permitting.

⮕ Tier 1 Leaders * TASA (Peru): World's largest single producer of fishmeal and fish oil, leveraging immense scale and direct access to Peru's anchoveta fishery. * Austevoll Seafood ASA (Norway/Global): Vertically integrated powerhouse with global operations in fishing and processing, offering services for diverse species like salmon, pelagics, and whitefish. * TripleNine Group (Denmark/Chile): A key player in Europe and South America known for high-quality fishmeal/oil and a strong focus on process efficiency and sustainability. * Copeinca (China Fishery Group) (Peru): A major Peruvian processor, now part of a global conglomerate, with significant capacity and logistics infrastructure.

⮕ Emerging/Niche Players * Hofseth BioCare ASA (Norway): Specializes in proprietary enzymatic hydrolysis technology to produce high-value, human-grade salmon oil, protein, and calcium from by-products. * Bio-marine Ingredients Ireland (Ireland): Focuses on producing specialized protein hydrolysates and lipid ingredients from blue whiting by-products for the food and beverage markets. * Local/Regional Renderers (Global): Numerous smaller operators provide processing services to local fishing communities, often with less advanced technology but greater logistical flexibility for smaller volumes.

Pricing Mechanics

Pricing for by-product production is typically structured as a tolling service fee, charged per metric ton of raw material processed. Alternatively, a shared-revenue model may be used, where the service provider receives a percentage of the market value of the finished product (e.g., fishmeal). The price build-up is dominated by variable costs, making it highly sensitive to market fluctuations. Key components include raw material logistics, energy for drying and pressing, labor, environmental compliance (effluent treatment), and capital equipment depreciation.

The three most volatile cost elements are: 1. Raw Material Access/Price: The cost of acquiring fish offal is tied to fishing seasons and wild catch volumes. The Peruvian anchoveta quota reduction in mid-2023 caused spot prices for raw material to surge an estimated +40-60% in the region. 2. Energy Costs (Natural Gas/Electricity): Constituting up to 20% of the direct processing cost, energy prices have seen global fluctuations of +/- 30% over the last 24 months. 3. International Freight: The cost to ship finished goods (often from South America to Asia) remains a volatile input, though it has retreated from its 2021 peaks.

Recent Trends & Innovation

• Shift to Human-Grade Ingredients (2022-Present): Leading processors are investing heavily in food-grade facilities to produce marine collagen, peptides, and high-purity Omega-3 oils for the $1.1B marine nutraceuticals market, moving away from reliance on animal feed.
• Consolidation in Parent Industry (Ongoing): Major seafood players continue to acquire competitors to secure supply chains. For example, Cooke Inc.'s acquisition of Slade Gorton (May 2024) and Tassal (November 2022) consolidates raw material streams, impacting the supply available to third-party service providers.
• Digital Traceability (2023-Present): Implementation of blockchain and sensor-based platforms is accelerating. This provides verifiable proof of sustainable sourcing and chain of custody, a growing requirement from major food and retail customers.

Supplier Landscape

Regional Focus: North Carolina (USA)

North Carolina presents a localized but growing opportunity. Demand is driven by its commercial fishing industry (est. 75M lbs/year landing), a developing aquaculture sector, and its position within a large agricultural region requiring animal feed. Currently, local processing capacity is fragmented among smaller renderers and seafood processors who handle their own by-products. The primary large-scale processor in the mid-Atlantic is Omega Protein (a Cooke Inc. company) with facilities in neighboring Virginia, which likely services some of NC's volume. North Carolina's favorable tax climate is an advantage for new investment, but stringent environmental regulations from the NC Department of Environmental Quality (DEQ) on water and air discharge would be a critical hurdle for any new processing plant.

Risk Outlook

Actionable Sourcing Recommendations

1. Qualify High-Value Suppliers to Mitigate Commodity Risk. Initiate RFIs with niche suppliers (e.g., Hofseth BioCare, Bio-marine Ingredients) specializing in high-value hydrolysates and human-grade oils. Target a pilot program to qualify at least one non-traditional supplier within 12 months. This strategy diversifies away from volatile feed markets and captures margin from the growing nutraceuticals segment, aligning with sustainability goals by upcycling waste into premium products.

2. Implement Formula-Based Pricing & Traceability Mandates. For Tier 1 suppliers, negotiate 24-month contracts with pricing based on a public index (e.g., FAO Globefish) plus a fixed tolling fee to smooth volatility. Mandate clauses requiring quarterly, digitally-verified traceability reports from catch to processing. This de-risks both price shocks and ESG exposure in the supply chain, ensuring greater transparency and budget stability.