Proposal to Conduct Market Research by li39023

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									                                      FINAL REPORT
           Market Assessment Study of Organic White Fish
                                   For AgriTECH Park Inc.

                                         Submitted by:




                                          March 2004




Prepared by:                                                Prepared for:

Rob Assels                                                  K. Laurie Sandeson
Research Director                                           AgriTECH Park Inc.
Advocate Communications Group                               90 Research Drive
Box 1000, 181 Brown’s Point Road                            Truro, Nova Scotia
Pictou, NS B0K 1H0                                          B2N 6Z4

1-877-485-8787                                              March 2004
AgriTECH Park                                                                  March 2004
Market Assessment Study


Project Partners
This project was a collaborative effort. The steering committee was comprised of:
   →   Advocate Communications Group – Rob Assels,
   →   Agriculture and Agri-Food Canada – Shelley Manning
   →   AgriTECH Park Inc – Laurie Sandeson
   →   Mena'taqug Aquacultural Facility – Heather Stevens
   →   Millbrook First Nation – David Roberts
   →   Nova Scotia Department of Agriculture and Fisheries – Clare Hanlon-Smith
   →   Nova Scotia Department of Agriculture and Fisheries – Scott Hosking
   →   Nova Mariculture – Brian Ives
The research was completed for:
AgriTECH Park
   AgriTECH Park is a business development and agri-business centre designed to assist
   entrepreneurs in the development of innovative products and services in the
   agricultural, food & environmental sectors in Atlantic Canada.
   The Park is in close proximity to the academic and research resources at the Nova
   Scotia Agricultural College and offers office and lab facilities to the agri-food
   industry along with marketing and management counselling. Laurie Sandeson is the
   Park’s managing director.
The research was completed by:
Advocate Communications Group
   The Group’s research division has conducted research in the Agri-Food sector for:
   A&P Foods, Coca-Cola Foods, Foodland, Grinners Food Systems, Pioneer Organics,
   Sobeys, and West Nova Agro Commodities. Advocate specializes in quantitative
   research methodologies that apply to food systems. These include executive
   interviewing, taste testing, GIS mapping, on-line interviewing, and the test launching
   of new food products. Rob Assels is the Group’s research director and was the
   primary investigator on the project. He has been a member of the Professional
   Market Research Society for twelve years.
Nova Mariculture
   Nova Mariculture provides a wide range of analytic and developmental services to
   aquaculture operations. It has been involved in aquatic farming for over 25 years.
   Nova Mariculture offers site evaluations, consultations on wastewater management,
   advice on appropriate technologies and bi-catch utilization, aquaculture training,
   HACCP services and business plan development. Brian Ives is Nova Mariculture’s
   president and provided the project’s oversight and analytic support. He is also a
   registered organic inspector with the Independent Organic Inspectors Association and
   has carried out over 150 inspections of farms and processing facilities.




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                                                    Table of Contents
1.    Executive Summary .............................................................................................................. 4
2.    Background ........................................................................................................................... 6
3.    Objectives............................................................................................................................... 7
4.    Literature Review ................................................................................................................. 7
        Globally............................................................................................................................... 7
        Asia ..................................................................................................................................... 8
        European Union .................................................................................................................. 9
        Chile.................................................................................................................................. 10
        United States ..................................................................................................................... 10
        Canada............................................................................................................................... 11
5.    Regulatory Environment.................................................................................................... 11
        Bioterrorism ...................................................................................................................... 11
        Country of Origin.............................................................................................................. 12
        Fair Trade.......................................................................................................................... 12
        Eco Labeling ..................................................................................................................... 12
6.    Industry Trends .................................................................................................................. 13
7.    Executive Interviews........................................................................................................... 14
        Restaurant Trade ............................................................................................................... 14
        Producers........................................................................................................................... 15
        Processors ......................................................................................................................... 16
        Wholesalers....................................................................................................................... 16
        Grocery ............................................................................................................................. 17
              Mainstream Grocers ................................................................................................ 17
              Natural Food Market ............................................................................................... 18
        Feed Mills ......................................................................................................................... 19
8.    On-line Interviewing........................................................................................................... 20
9.    Market Opportunities......................................................................................................... 20
        Restaurants........................................................................................................................ 21
        Wholesale.......................................................................................................................... 21
10.   Organic Certification Versus Natural Label.................................................................... 22
11.   Implications ......................................................................................................................... 23
12.   Recommended Next Steps .................................................................................................. 24
13.   Appendix A – Bibliography ............................................................................................... 28
14.   Appendix B – Certification Bodies For Organic Aquaculture ....................................... 29
15.   Appendix C – On-Line Survey Results ............................................................................. 30
16.   Appendix D – List of Companies Interviewed ................................................................. 31
17.   Appendix E – Terms and Acronyms ................................................................................. 32
        Terms ................................................................................................................................ 32
        Acronyms.......................................................................................................................... 32




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1.   Executive Summary
The study conducted twenty interviews with producers, processors, wholesalers,
distributors, chefs and caterers in order to identify whether there is a potential market for
certified organic fish in general, and for farmed white fish in particular. The interviews
were conducted January 27 to March 4, 2004. The results are not intended as a
quantitative assessment and cannot be statistically projected onto the industry at large.
The interviews suggest that there is no immediate market for certified organic fish
products within Atlantic Canada itself, but that there are several markets immediately
outside the region. Those markets are all in their early stages of development, both at the
consumer and retail level.
There is evidence from wholesalers that retail chains and larger restaurants are showing
an interest in acquiring organic fish. Within the U.S. this interest is coming
predominantly from New England and West Coast States. This is consistent with the
Canadian Department of Foreign Affairs and International Trade (DFAIT) studies that
suggest these markets are the number one and two U.S. markets for certified organic and
natural products. There is also a seasonal window for suppliers to sell certified organic
halibut during the three-months period when the West Coast wild fishery is closed.
Interviews conducted with those familiar with the Ontario market suggest that this market
is in the initial stages of small but steady growth. One of the larger Canadian distributors
of natural foods mentioned premiums of 25-50% for a well-branded certified organic line
of fish; however most of the premiums mentioned during the study were in the 10-25%
range relative to farmed fish. The Ontario interviews also indicated receptiveness for
value-added and ready-to-eat organic fish products.
At this time, retail chains in Atlantic Canada do not believe there is sufficient demand to
carry certified organic fish. The exception to this is the customer base of specialty
grocery stores that focus on health and natural foods. These consumers have higher than
average disposable income and currently buy organic products on a regular basis; no
educational efforts are required to get them to add certified organic fish to their weekly
purchases.
The restaurant market may sustain some smaller producers that target restaurants in larger
urban areas. Producers targeting this market in the U.S. will find direct sales difficult to
acquire; upscale U.S. restaurants tend to purchase from wholesalers. This is consistent
with previous studies that indicated that 90% of the supplies to the grocery and restaurant
markets is provided by wholesalers.
The current size and rate of growth of these markets may not be sufficient to be
considered attractive to large aquaculture operations in the short or even medium term,
but they could provide a unique opportunity for family farms. The smaller producers
interviewed saw organic certification as a means of distinguishing their product from that
of larger operations.
Aquatic farmers in Canada may be in the fortunate position of being small enough to
succeed by servicing a small group of restaurants and local farmers markets or grouping


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together into sellers groups to selling in larger quantities to the wholesale market in the
U.S.
Smaller family farms do not need to be certified organic to reach these markets; however,
if they choose not to certify, they will be competing with larger aquaculture operations,
not only on price, but in convenience, packaging and speed of delivery as well. Smaller
aquatic farms will find access to retail markets increasingly restricted. Centralized
purchasing and electronic data interchange are widespread in the grocery industry.
If the market for organic fish follows the market for other organic categories, it should
experience annual growth rates of 10-20% per year for many years to come; however,
there are a number of reasons to believe that this would be an overly optimistic view.
Organic meat sales have been very slow to develop relative to the produce and processed
goods. Furthermore, there is significant confusion over the difference between farmed,
organic and wild fish. Most of the industry stakeholders interviewed felt that significant
public awareness initiatives would be required before organic fish would begin to see and
maintain double-digit growth rates.1 Awareness, even among industry experts, of organic
certification bodies that have standards for aquaculture is quite low.
The market for certified organic fish is in its infancy. Organic aquatic farms will operate
in virtually a competitor-free market for many years to come; however, foreign producers
have begun to target both Canada and the United States for organic seafood.
In the longer-term, as organic fish becomes more mainstream, smaller aquatic farms
should expect to see an increasing number of aquaculture operations enter the market
with a full range of both fresh and frozen product lines. Co-operative marketing
initiatives between smaller scale producers could help maintain or even expand market
access to those buyers requiring larger and consistent year-round supply.
There are several steps that would help the industry establish itself. The development of
national organic standards for aquatic farming will give assurance to all producers and
feed mills that the industry as a whole is on a level playing field. Consumer awareness
initiatives also become easier to implement with federally regulated national standards.
Efforts could be made to develop an inventory of existing aquatic farms as well as a
profile of those that are successful. The inventory and profile are consistent with the
Renewal Pillar of the Federal Government’s Agricultural Policy Framework (APF). The
inventory should be comprehensive enough to culminate in the addition of aquatic
farming to the “Benchmark for Success” program.
A needs assessment should complement the inventory and should investigate husbandry
practices, marketing efforts, distribution channels, size of operation (aquatic and
agricultural), and any other characteristics that could help potential aquatic farmers
determine if this is a suitable crop to grow.
Consideration should be given to the development of facilities that would encourage
research and training specifically designed to meet the needs of agricultural producers
that are considering diversifying into aquatic farming. This would help stimulate wet lab
1
    Pulsifer Associates noted in 1999 that the largest barrier in the development of the organic food
      industry is the lack of consumer awareness.

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applied research and development as well as on-farm trials. Studies that help identify the
most appropriate feed formulations, crop densities, and species diversity for organic
production, will help producers develop the best quality standard operating procedures.
Feedback between researchers and producers would encourage advancement and
innovation in the development of organic aquatic farming standards. Both the research
and the training facilities would be consistent with the goals of the Environment and the
Science and Innovation pillars of the APF.

2.   Background
Aquaculture has seen significant growth in Canada over the past 20 years. Most of the
growth has been on the Atlantic and Pacific coasts, with more than 75% of that growth
being in salmon production. Statistics Canada and Price Waterhouse Coopers collected
data in 2001, which suggest that farmed salmon represented approximately 70% of the
total aquaculture industry value. Salmon farms in British Columbia and New Brunswick,
the country’s two largest producers, raise almost 100,000 tonnes of salmon, valued at
over 400 million dollars.
Over the same period, freshwater fish production remained relatively static at under
10,000 tonnes, a fraction of the annual salmon production. Unlike marine farming,
freshwater production is achieved with smaller scale operations, often under 100 tonnes.
There are larger operations such as a cooperative grain company on Lake Diefenbaker
that produces 1,200 tonnes annually, but this is the exception. Another key distinction is
ownership; many of the larger marine aquaculture operations are foreign-owned
international companies, while their freshwater counterparts are predominantly Canadian
owned.
The rapid development of marine aquaculture was a natural response to the partial
collapse of some components of the ocean fisheries and the federal government’s new
fisheries policy, which placed a high priority on aquaculture in order to revitalize the
coastal economies. This growth is expected to continue as the world’s stock of wild
species continues to decline at the same time as the world population and protein
demands rise.
Both the marine and freshwater fisheries are subject to food safety issues. The single
case of “mad cow” disease in Alberta and subsequent case in Washington State have led
to highly publicized speculation about the safety of the meat industry. This in turn has
played a role in increasing regional demand for fish products.




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Conversely, results published in January 2004 from the University of New York in
Albany that showed higher levels of PCBs in farmed fish than wild fish, could have a
negative impact on consumer purchasing of farmed product.2
Federal and provincial agriculture departments have encouraged producers across Canada
to diversify their operations to minimize their exposure to financial risk. Many
agricultural farms across Canada have the basic requirements to consider aquatic farming
including, a consistent supply of fresh water, a need and destination for resultant fish
waste, and a thorough understanding of livestock husbandry.
The current study is an initial investigation of the market for certified organic
(freshwater) fish. This is the first step in determining the viability of aquatic fresh water
farming as a source of incremental farm revenue and financial stability for family farms
in Canada.

3.      Objectives
The specific objectives of the study are to understand industry stakeholders’ expectations
of a certified organic fish product line, including:
•     Expected demand within Canada, the U.S. and overseas markets (frozen & fresh)
•     Demand timeline / Frequency of need
•     Consistency of supply
•     Packaging
•     Marketing requirements
•     Educational initiatives
•     Competitive reaction
•     Industry trends and preferences
•     Anticipated premium for certified organic fish

4.      Literature Review
Globally
Aquaculture production has been growing at rate of 9% each year since 1970; however,
the quantity and variety of organic aquaculture has lagged far behind the agri-food
industry. This is in part due to the lack of universally accepted standards and
accreditation protocols for the production of certified organic aquaculture.
In 2000, the total global production of certified organic aquaculture was estimated at only
5,000 metric tonnes (mt). Eighty percent of this was salmon farmed from Ireland and

2
    The study was made public two weeks before the interviews for the current study began. There
      was significant discussion of the Albany study by interviewees. Many of those that dealt
      directly with consumers had noted an increased concern; however, at the time of this report, it
      is impossible to estimate the long-term negative impact on the purchasing of farmed fish. Its
      impact on certified organic fish sales is expected to be positive. In Scotland on January 18,
      2004, salmon producers indicated that the number of orders for certified organic salmon,
      which represents just two percent of domestic production, had risen by 10 percent since the
      University of New York report suggested that Scottish fish farms were among the most
      contaminated with PCBs in the world.

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Scotland that was subsequently sold to the EU market. Freshwater fish and trout made up
the bulk of the remaining production; this was sold in local markets in Scotland, Austria
and Germany.
The FAO projected in 2002 that the production of certified organic aquaculture to rise
from 5,000 mt to 1.2 million mt by 2030. It anticipates an increase of 30% annually from
2002-2010. This growth rate will fall to 20% (2001-2020) and then to 10% (2021-2030).

       “These estimates are primarily based on existing organic aquaculture
       production levels from developed countries, and the assumption that the
       major markets for certified farmed aquatic products will be Europe and
       North America in the West, and Australia, Japan, New Zealand and
       Singapore in the East. Demand in the latter countries will be fuelled by the
       growing awareness concerning environmental pollution and the safety of
       aquatic products for human consumption, as well as the state of global
       fishery resources and long-term sustainability of current aquatic food
       production systems”. FAO 2002

There are a number of private certification bodies that have developed organic
aquaculture standards in Europe, Asia, Oceania, and North America. In addition France,
the UK, and Australia have adopted their own national standards. Germany has national
organic standards, but at the time of this report, aquaculture was not included. For a list
of private and national certification bodies see Appendix B.
The growth of aquaculture in developing countries and in what the FAO refers to as low-
income, food-deficient countries (LIFDCs), is expected to be six times higher than in
developed countries.

       “In contrast to developed countries where finfish aquaculture production
       currently targets the production of higher-value carnivorous species, the
       bulk (93.7 percent) of finfish aquaculture production within developing
       countries targets the production of lower value (in relative marketing
       terms, and therefore more affordable in economic terms) freshwater filter
       feeding species (28.7 percent total, including silver carp, bighead carp
       and catla) and omnivorous/herbivorous fish species (64.9 percent total,
       including grass carp, common carp, crucian carp, nile tilapia, rohu)
       feeding low on the aquatic food chain.” FAO 2002

Asia
The differences between regions can be more than just economic. Aquaculture, as a
portion of the world’s food supply currently ranks fourth, after pork, beef, and chicken;
however, on Mainland China, aquaculture is second only to pork. Aquaculture’s portion
of the Chinese diet could increase significantly due to the 2004 outbreak of avian
influenza, which required the slaughter of millions of meat birds throughout China.
According to the Department of Foreign Affairs and International Trade (DFAIT) May
2003 Fisheries Market Study of Japan, domestic smoke houses and their preference for
low priced salmon have significantly changed the Japanese import market for salmon and

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trout. Imports of smoked salmon products from Canada have steadily declined from 338
metric tonnes in 1995 to 87 metric tonnes in 2002.
Japan is well known for its very high organic certification standards (JAS); however, the
Japanese have a particular affinity for a darkly pigmented fish. This is particularly true of
salmon because the colour red signifies health and prosperity and the assumption that the
colour of a fish’s flesh is indicative of its health and eating quality.
In Korea, where Canada has a reputation as a good supplier of quality fish at reasonable
prices, consumption of fish is increasing; however, demand for organic fish products has
not yet materialized.
European Union
DFAIT studies on France and Germany suggest the EU is a different market from Asia.
France leads the EU in salmon consumption. This consumption, while high, is in decline
due to negative publicity and environmental concerns.
In October 2003, scientific evidence indicated that EU cod and haddock quotas were still
above sustainable levels. The decision was made to cut North Sea harvest 45% against
the 2002 quotas along with a compulsory reduction in the number of vessel-days at sea.
Total allowable catches were cut by 50% for haddock. These decisions have compelled
EU countries such as Germany and France to import more of their seafood from non-EU
countries.
EU members such as the United Kingdom, Spain and Holland have preferential access to
the French and German markets. Compared with Canadian suppliers, European
companies have a proximity advantage that both minimizes shipping costs and
maximizes product freshness. Non-EU countries such as Norway have negotiated
bilateral agreements that allow them to avoid costly tariffs. This is particularly true for
processed seafood.
The French are also developing a preference for prepared and ready to eat foods. The
DFAIT believes that by 2010, 32% of French fish counter sales will be prepared cooked
product. Another 32% will be smoked and cured product; ready to use product will
account for an additional 12%.
Hotel and restaurant sales of seafood in France represent 28% of national consumption.
Large grocery store chains dominate the food market in France. Collectively the
supermarket chains sold 67% of the fresh fish in France. The chains are offering a
greater number of prepared and ready to eat products in an effort to steal market share
from the restaurants. Consumers in France are becoming more time conscious and are
willing to pay a premium for convenient and attractively packaged fish products.
The UK Soil Association, which overseas British organic food, announced on December
7, 2003 that it is going to bring in much more rigorous standards for organic fish farms.
This is expected to drive the price higher. Marks and Spencer, Sainsbury, Waitrose, and
Tesco all have organic product lines, and have all doubled their sales over the past three
years.




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Chile
In December 2003, the Falklands-Mavinas newspaper reported that the University of
Magallanes in Chile has finished its five-year pilot project for farmed Atlantic halibut and
is ready to transfer the production techniques to the private sector. The now fifth
generation Chilean halibut, which were originally imported from Canada, have a much
faster growth rate than their progenitors.
United States
According to the Canadian government’s infoexport website, there are opportunities in
the U.S. market for a variety of fish products, including private label, gourmet, ethnic,
food service and natural products.
Ninety percent of the fish sold to retail establishments and food service businesses is
through wholesalers. Of the major supermarket chains that carry natural or organic
products, only Trader Joe’s buys directly from producers.
To meet wholesaler expectations, suppliers must be able to provide product within 48
hours, ensure a consistent supply, have competitive pricing and be able to meet a
minimum of 100-500 lbs per week.
A study of 3,600 U.S. consumers sponsored by The U.S. Trout Farmer’s Association in
1996 suggested that a marketing strategy that targeted high-end restaurants would be very
successful. The study found five distinct clusters of attitudes toward fish. Four of the five
clusters were favourable to purchasing fish regularly. These represented 84% of the
sample. Twenty-five percent of the sample were very favourable to purchasing fish
regularly and were not concerned with price.
According to the May 2003 Midwest Frozen Food Market Summary, American retailers
view Canadian private label suppliers as very sophisticated with innovative ideas and
products.
The mid-Atlantic market is dominated by supermarket and club chains that claimed over
93% of the region's $50.5-billion food business in 2001. Seventy-five new supermarket
and club stores are scheduled to open here over the next 12-18 months.
In all stores in the region, there is a greater emphasis on perishables, home meal
replacement (HMR) and natural foods and wellness products. Kosher-certified products
across all categories are increasingly in demand. HMR consumers are looking for chilled
prepared food or value-added ingredients that can be prepared at home. While produce,
deli, bakery and convenience foods are all growing categories, the category with
strongest growth is natural.
The New England market includes Maine, Vermont, Connecticut, Rhode Island, New
Hampshire, and Massachusetts. According to the Spring 2002 report on Organic Food
Sector in the New England Region, the East Coast of the United States was the second
leading developing market for organic products.
According to A&L Goodbody Legal News and Publications, in August 2003, Emerald
Island Global Trading (EIGT) closed a deal with Wild Oats and will supply Irish organic
seafood products for all Wild Oats’ stores. Wild Oats’ seafood programme is one of the
fastest growing sectors of their company, and enjoyed 32% sales growth in 2002.

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EIGT has committed to a three-phase program. Firstly, Wild Oats’ weekly usage of
8,000-12,000 lbs of salmon will be sourced exclusively from the Clare Island Sea Farm.
In September, premium smoked salmon, prawns and scallops will commence shipment.
In October mussels and value added salmon products will help meet the US market
demand for organic fish.
Canada
According to the December 29, 2003 edition of the Western Producer, the Manitoba
towns of Killarney and Boissevain and four adjoining rural municipalities formed Turtle
Mountain Sustainable Ventures in an effort to farm fish indoors in large tanks. The
venture is expected to fit in well with livestock operations that want to convert their
barns. In 2002, Manitoba fish farms sold 16,000 kilograms of rainbow trout and 47,000
kilograms of arctic charr.
Mike Dolinski, the organic specialist for the Agriculture, Food and Rural Development
department of Alberta noted in March 2001, “since we all know that the first specialized
products in the marketplace frequently bring the highest prices, organic fish production
may be an opportunity for some Alberta aquaculturists. The one thing Dolinski is sure of
is there will be a demand for organic aquaculture products in the near future, and those
that are ready will have an opportunity to capture that niche market”.

5.   Regulatory Environment
Bioterrorism
The Bioterrorism Act, officially known as the Public Health Security and Bioterrorism
Preparedness and Response Act, became law on June 12, 2002. It has created significant
bureaucracy for Canadian exporters to the U.S. Prior to goods entering the U.S., the
Food and Drug Administration (FDA) requires notification and documentation for every
shipment. In some cases, exporters have shouldered the responsibility themselves, by
hiring additional staff or by increasing the workload on existing staff. Others have
passed the cost on to their customs broker who charges the shipper $20-25 US per load.
Most treat this market hurdle as the cost of entry; however, some of the respondents
interviewed noted that they know of some smaller producers that no longer ship to the
U.S.




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Country of Origin
A number of respondents were concerned with the pending “Country of Origin”
legislation that is expected to come into effect on September 20043. While several of the
producers that are exporting to the U.S. have some concerns about decreased demand for
Canadian product, the John Nagle Company out of Boston, which is a leading buyer of
Atlantic Canadian product expects no impact, and has no intention to change its
purchasing volumes from the region.
Country of Origin labelling has been required for frozen packaged products for several
years. The new legislation requires labels for seafood, meat and produce by September
30, 2004. The Farm Security and Rural Investment Act requires retailers to inform
consumers about a product’s country of origin at the point of purchase. They must also
distinguish between farmed and wild fish.
The EU has had similar country of origin labelling requirements since January 2003.
Fair Trade
The Fairtrade Labelling Organizations Interantional (FLO) is responsible for issuing
fairtrade labels. Over 300 producer organizations have been inspected and certified
fairtrade in Africa, Latin America and Asia. While fairtrade standards are primarily
concerned with workers’ wages and working condition, they also address a company’s
environmental practices, particularly as they affect the workers’ health. FLO certification
also has resonance with consumers’ predisposed to purchase product for social and
environmental reasons. Currently, canned tuna as well as some frozen or processed fish
are being sold in Germany carrying the fairtrade label.
Eco Labeling
Eco-labelling has been discussed at multilateral meetings of the World Trade
Organization (WTO) without a great degree of success. The U.S. is in favour of
voluntary standards, claiming that mandatory eco-labelling could be used in a
discriminatory method to restrict a country’s market access. The U.S. position is that if
mandatory standards are adopted, world seafood markets will be segmented because
those countries unable to meet the entrance requirements of the EU countries would seek
out other countries with less rigour in their standards.


3
    Section 10816 -- Requires mandatory country of origin labeling for beef, lamb, pork, fish,
      perishable agricultural commodities and peanuts after a two-year voluntary program. The
      Secretary is prohibited from establishing a mandatory identification system to verify the
      county of origin of a covered commodity but the Secretary may use, as a model, certification
      program in existence on the date of enactment, including the carcass grading and certification
      system, voluntary country of origin beef labeling system, and those systems used to carry out
      the market access program under the Agricultural Trade act and the National School Lunch
      act. Any suppliers of covered commodities must provide information to the retailer indicating
      the products country of origin. If a retailer willfully violated this Section, they face a fine of
      not more than $10,000for each offense. Guidelines for the voluntary program must be issued
      not later than September 30, 2002, and regulations for the mandatory program must be
      promulgated not later than September 30, 2004.

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In the face of a lack of international standards for aquaculture, eco-labelling has become
one of the methods that aquaculture operations and retailers can rely on to demonstrate to
environmentally conscious consumers that a particular fish was raised and harvested in a
sustainable manner. One such label is the Marine Stewardship Council (MSC). MSC
has developed environmental standards and management practices for sustainable fishery
operations (both wild and farmed). MSC has better recognition currently with those
interviewed than any one particular certification body; however, at least part of MSC’s
funding comes from corporate stakeholders. This could call its integrity into question in
the future. It has been adopted by a number of fish food retailers such as Whole Foods,
Wegmans, and Whole Oats. It was beyond the scope of the current study to investigate
the brand recognition of MSC among consumers.

6.   Industry Trends
The Aquaculture Association of Nova Scotia held its Conference and Annual General
Meeting on January 23-24, 2004. Several of the conference sessions dealt with the report
on farmed salmon from the University of Albany in New York. This report had
documented higher levels of Polychlorinated biphenyls (PCBs) in farmed salmon than in
their wild counterparts.
Most of the attendees at the conference were producers, suppliers to the industry,
government agencies, or media representatives. There were few buyers.
Feed mill representatives were interested in the availability of certified organic inputs to
feed. Two of the larger feed mills suggested that if there were market demand, they
would like to be able to formulate a certified organic feed. One said that they have
already begun investigating what would be required.
Producers at the conference anticipate a demand developing for certified organic fish, but
didn't see one currently. Some producers noted that buyers had asked them if they could
obtain certified organic product (specifically salmon). At least one producer at the
conference was interested in obtaining information about the certification process.
The majority of those at the conference believed that the growth of organic certification
in aquaculture would begin in niche markets until the public started to demand it in
mainstream distribution channels. Others noted that North America would have to offer a
certified organic option to customers if only in response to EU producers that are already
offering it.
One often mentioned trend was the increase in food safety regulations. Producers
commented that as an industry they have developed rigorous systems that are grounded in
science that are aimed in part at enhancing best management practices and in part to both
protect the public and comply with federal and provincial regulations. The general
feeling at the conference is that food safety regulations will only become more stringent
in the future.
The conference took place within days of the release of the Albany New York report that
showed higher levels of PCBs in farmed fish. The large majority of conference attendees
felt that the media coverage of the report was misleading and intended to create fear
among members of the public. There was consensus among key industry stakeholders

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that media coverage of the aquaculture industry will continue to show it in an
environmentally unfriendly light.

7.      Executive Interviews
A total of twenty interviews were completed from January 27 to March 4, 2004. These
have been grouped into restaurant, producer, wholesaler, and grocery interviews.
Restaurant Trade
Interviews were conducted with two luxury restaurants (one in Boston, one in Halifax),
one national restaurant supply company, and one catering firm for large events in Florida.
Both restaurant chefs have purchased certified organic fish for their restaurants.
The interviews suggested that restaurants are predominantly concerned with the quality
of the fish they serve. While the price is an important part of the decision of which fish
to buy, and from whom, it is not the case the restaurants will add a premium for certified
organic products.
Menus are in place for several months without change, so the ability to source a product
over the medium and long-term is important.
In the restaurant trade, customers only see a cooked product. For this reason, chefs are
not overly concerned that an organic fish such as salmon might have a lighter colour than
a wild or farm fish fed highly pigmented feed.4
The catering firm in Florida, which caters events such as the SuperBowl, air shows, and
high-end corporate banquets, was very cost conscious. Much of the food at a catered
event goes to waste without being touched. For this reason, caterers buy predominantly
less expensive farmed fish. Their customers are more concerned with presentation and
service than with product quality.
The restaurant supply company felt that there would be a market for certified organic fish
in some of their five star restaurants, but it was unlikely any chain restaurants would
purchase it for the foreseeable future.
Producers selling to the restaurant trade, either directly or through wholesalers should
expect premiums of 10-20%. They should also expect that the volume of fish sold to be
significantly less (e.g. 50-100 fillets per week). 10 lbs master cartons are the most
common size.
Chefs prefer to purchase fish from a variety of sources including, wholesalers, direct
from producers, or from the local fish market. If producers opt to sell direct to chefs,
they should expect to spend some time developing a relationship with the chef and the
restaurant staff.
Preferences between fresh and frozen varied among the chefs, but the restaurant supplier
was only interested in frozen product.



4
    Erik Hempel noted in Seafood International (November 2003) that trout, despite a lighter colour
      and higher price, is beginning to take market share from salmon, particularly in Europe.

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The interviews with the executive chefs suggested that when consumers eat in a luxury
restaurant, they are buying not just the food; they are buying the atmosphere, the service
and the overall dining experience. It is a given in the consumer’s mind that the food
quality is beyond reproach (organic, wild or farmed).
Restaurant patrons are not well informed about fish in general, or about organic fish in
particular. Producers that want to sell directly to restaurants or to restaurant supply
companies should expect to assist in the education process. Well-designed tent cards or
menu inserts will help diners understand the product and stimulate trial.
Many of the larger suppliers to restaurants require electronic data interfaces (EDI) of one
kind or another.
Producers
Three producers were interviewed. They varied in size from a relatively small freshwater
aquatic farm to one of the larger aquaculture operations. None of the producers
interviewed are currently certified organic.
All three believed that their customers understood the difference between wild and
farmed fish, but that the term organic is clouded in confusion. The majority of their
customers have no idea what the term means, while some think organic is synonymous
with wild, and others think it means the fish were fed an antibiotic free feed.
Larger producers sell their product predominantly in the U.S. market, although there is a
significant export market to the EU and Japan. Producers sell to wholesalers, grocery
stores and to larger restaurants through buyer’s groups.
Smaller producers target restaurants and smaller wholesalers. Restaurant volumes tend to
be 25-125 lbs of fish per restaurant per week.
The smaller producers interviewed felt that organic certification would allow them to
distinguish their product from larger producers and that it might allow them access to
markets, that would normally require higher volumes than they could consistently
deliver.
One of the producers who currently sells product as “natural” and gets a premium of 25%
believes he can get the same premium for a certified organic product. He is interested in
organic certification in part because he isn’t sure how long his natural-branded product
will continue to get a premium as more and more organic product appears in the market
from other countries.
The larger producer was unsure of the financial viability of organic certification. It is
going to investigate it, but currently doubted whether the price premium would offset the
increased cost of feed.
The 10 lbs tote was the most common size mentioned although one producer noted that
he had some customers that preferred 20 lbs and 30 lbs master cartons.
All those interviewed agreed that in North American, there is a belief that the darker the
colour of a fish, the better the quality; this is particularly true of salmon. One producer
commented that his Japanese customers regularly phone him and ask for more pigment to
be added to the feed.

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One producer gave the examples of Idaho and Denmark where the only trout sold is non-
pigmented. He suggested that while a paler fish might be a more difficult sale in the
short-term, as the consumer becomes educated about organic standards, pale flesh might
serve as the physical indicator of an organically raised fish and may begin to be perceived
as the higher quality fish; however, he emphasized that this is a cultural change that will
take place only over a long period of time.
All producers agreed that national organic standards are a prerequisite for the niche
market to develop. There was also unanimity on the need for an awareness campaign to
educate the public.
One of the producers suggested that industry stakeholders in smaller organic aquatic
farms should consider pooling their resources and advertise in the National Restaurant
Magazine and at the Boston Seafood Show, where Canada has a booth each year. This
might help firm up executive chef commitment to their product.
Processors
Three interviews were conducted with buyers/processors, all within Nova Scotia. Two of
these processors, Clearwater and D.B. Kenney Fisheries dealt primarily with wild catch.
Neither of these processors were interested in organic product and believed that it would
be many years before the consumer would prefer organically farmed fish over wild fish.
Fisherman’s Market International indicated that a market might be developing but that it
is currently below levels that processors servicing international markets would be
interested in.
Wholesalers
Four interviews were conducted with stakeholders in the wholesale distribution channel.
One of these was in Boston; two were in Nova Scotia, while the fourth was a sale agency
located in Ontario.
Wholesalers were open-minded to the idea of certified organic fish. All four believed
that there would be small niche markets for organic fish. The Boston wholesaler, John
Nagle Company, has already been approached for organic product and believes that there
is a market for organic salmon now, but organic white fish could only be sold during the
three-month period when there is no West Coast wild catch. Wholesalers also viewed the
luxury restaurant market as being a potentially good market.
Canadian Gold Seafood sells the majority of its product to EU countries and Japan and
believes buyers in those markets would be interested in organic fish.
All four wholesalers interviewed would be prepared to pay a premium for certified
organic fish; however, there appeared to be consensus that the upper limit for retail
pricing is $10 per pound; above that price and consumers will purchase prime beef.
Premiums of 10-25% were offered, but wholesalers cautioned that premiums would be in
relation to farmed fish and would be subject to usual market fluctuations. It was
generally agreed that currently, organic fish would be unlikely to get a significant
premium over wild fish.



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There were also concerns raised over certification standards. There was very little
awareness of the different certification bodies, but it was generally the case that
wholesalers would expect the producer to have organic certification that was beyond
reproach on an international basis.
Each wholesaler was different in terms of the amount of fresh versus frozen product they
carried. This was also true for their preferences in master carton sizes and for the weekly
volumes of organic fish they would be interested in carrying. Volumes ranged from
hundreds of pounds per week in the case of organic white fish, to thousands of pounds
per week in the case of organic salmon.
Wholesalers expect high quality and consistent supply. In the case of organic product,
they would also expect some degree of support in marketing. Producers should not
expect wholesalers to explain what organic certification means to their customers.
The sales agency in Ontario, which represents the U.S. Catfish Institute, suggested that
there is strength in numbers and that smaller aquatic farms would benefit from selling
under a single brand. This would provide them with greater market access and make
them more difficult to supplant from markets they obtained. He also suggested that a co-
operative approach to promotions, events marketing and taste testings should be
considered when targeting the grocery distribution channel.
Grocery
Five interviews were conducted with grocery stores. There was a mix of U.S. and
Canadian, as well as mainstream and natural stores. One of the interviews was with one
of the largest Canadian suppliers to the natural food industry.
The grocery industry showed the most fluctuation in opinion, particularly between
mainstream grocery chains and the natural food distribution channel. There were
differences between Canada and the U.S. but they were largely in terms of degree not
direction. Canadian grocery distributors have been implementing centralized purchasing
policies and requiring stricter and more integrated financial and food safety protocols of
its suppliers. Most U.S. chains have had these in place for some time.
Atlantic Canadian food distributors were far more inclined to want a frozen product,
primarily because of concerns over spoilage due to lower or unpredictable sales volumes.

Mainstream Grocers
Sobeys, one of the largest grocery store chains in Atlantic Canada, indicated that it
believes there is currently no market for certified organic fish in the region. The
perception is that consumers in Atlantic Canada have a long-standing connection with the
fisheries industry and that it would be difficult to change their belief that no product
could be more organic than wild caught fish. The price premium for organic fish was
also seen as a major hurdle. The chain concurred with the Atlantic Canadian producers’
view that there was a $10/lbs ceiling for fish.
Harris Teeter, a chain representing over 140 stores from North Carolina to Florida, also
believed that consumer demand for certified organic fish has not yet reached the level
necessary to be considered viable within the U.S. Southeast.


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Whole Foods, a chain of over 175 natural food stores, is best characterized as a
mainstream grocery distributor. Whole Foods distinguishes itself from the other
mainstream chains by its level of awareness of natural products, but it has vertically
integrated its buying, particularly of its seafood products, in much the same way that
other mainstream distributors have.
Both Whole Foods and Harris Teeter have committed themselves to internal
environmental and quality assurance programs. Whole Foods has also invested time and
corporate energy in promoting the Marine Stewardship Council certification of its
products and doesn’t see the need for organic certification.
In the U.S. it is more common for Canadian producers to sell to grocery store chains
through wholesalers. Despite that fact it is still possible for grocery stores to differ
significantly in their method of purchasing. Harris Teeter has a list of pre-approved
wholesalers from which the managers of their individual Fisherman’s Market can buy
directly. This is in marked contrast to Whole Foods, which has arrangements with a
number of commercial vessels that fish exclusively for Whole Foods. The fish is then
processed at one of three Whole Foods plants in Georgia, Washington or Massachusetts.

Natural Food Market
The smaller natural health food stores across Canada purchase both direct from primary
producers as well as through distributors that specialize in natural and organic products.
These retailers and wholesalers have an advanced knowledge of certification standards
and of the consumer market to which these products appeal. Ontario Natural Food
Cooperative is one of Canada’s larger distributors of organic products to the natural food
retail market. It has only recently added fish to its catalogue (September 2003), but it has
experienced strong demand for both its natural and certified organic fish5. It now carries
twelve SKUs (Stock Keeping Units) for fish and hopes to expand the category offering.
The preferred product is a three-quarter pound frozen steak or fillet. Producers that are
looking at this type of distribution channel should ensure that their product is bar coded,
comes in standardized weights, and has a well-documented certification audit trail.6
Great Ocean Natural Food Store is the leading outlet in Atlantic Canada devoted to
natural and organic products. As is common among consumers of natural food stores,
Great Ocean’s customers read labels thoroughly and have a high capacity for
distinguishing between organic, free-range7, natural, antibiotic free, and sustainable
products.
Great Ocean gets a premium for both organic and free-range fish.8


5
  Premiums for natural were in the 10-25% range, while premiums for certified organic products
     were in the 25-50% range.
6
  An audit trail is what a certification body requires of producers to allow consumers to track a
     purchased product back to the farm where it was raised and to the food it was fed.
7
  Wild fish is sold as “free-range” to be consistent with the store’s non-certified organic free-
     range poultry and beef.
8
  Concerns over PCBs in farmed raised salmon have had a significant impact on its sale. While
     premiums of 20% could still be realized on free-range trout, free-range salmon had to be

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Producers looking at the natural food distribution channel should concentrate on
packaging and branding their product for a particular type of consumer. The consumers
that frequent this distribution channel have higher levels of disposable income. They also
have a higher tendency to make social and political statements with their purchasing
dollars than the average consumer.
There is also an opportunity to supply the natural food market with ready-to-eat fish
products. The brand should tell an honest and simple story and accurately detail the
certification practices. Producers should also have attractive packaging, but avoid over
packaging.
Feed Mills
Interviews were conducted with two feed mills located in Atlantic Canada, Skretting and
Corey Aquafeeds.
Both feed mills indicated that if their customers were willing to pay for the increased cost
of a certified organic feed, they would willingly develop a formulation. The actual cost
of the feed would be dependent upon the rigor of the organic standards. In fact feed
costs would potentially have to factor in the cost of the ingredients, purging of systems,
natural pigment, duplicate storage, cleaning, paper work, and certification fees
One of the concerns is parallel production. There are as many as 25 one-thousand-tonne
containers of ingredients in a feed mill. If concerns over cross contamination of organic
and non-organic ingredients required the virtual duplication of warehousing facilities,
feed costs could end up being prohibitive.
Parallel production is not just a concern in the production of the feed. Organic fish would
have to be raised throughout the year in the same way and at the same time as
conventional fish so that organic feed production wouldn’t start and stop. This would
enable feed mills to contract with local producers of certified organic wheat and soybean
a year in advance; however, it would be a logistical hurdle for aquaculture operations.
Minimum run sizes would also be dependent upon the standards. If the standards
required the complete shut down of the mill and the cleaning of all equipment, this would
only be affordable if larger organic product runs were put through the system, or if the
standards would find a mere purging of the system with organic product acceptable.
Representatives from both mills indicated that customers had asked them if they “could”
develop a formulation; however, to date, neither has received an order.
The time required to develop an organic formulation would also be dependent upon the
standards. If the standards allow the use of fish oils, it would not take long for mills to
develop a formulation; however, if the organic formulation was required to be vegetarian,
it could take several years of research and development.
Skretting believes that both the mills and the producers could expect a premium for their
products. Its efforts to investigate an organic feed formulation extend to sourcing the
necessary materials. Skretting has looked at at least two sources of natural pigmentation

   marked down to sell. Great Ocean also sells a certified organic smoked salmon from Great
   Britain at a price per portion that works out to over $45/lb.

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that might be acceptable in an organic formulation, one from algae and another from
flower petals. Skretting has also looked for and found a source of certified organic wheat
within the Maritimes.

8.       On-line Interviewing
A short (6 question) on-line interview9 was broadcast by email on February 26, 2004 to
250 people in the fisheries industry in North America, Europe and Oceania. The email
addresses were obtained from a list of attendees at the First Joint Trans-Atlantic Fisheries
Technology Conference in Reykjavik, Iceland 11-14 June 2003.
A total of 40 respondents completed the questionnaire by March 1. Respondents were
from Canada (10), Denmark (6), Germany (2), Iceland (4), Ireland (2), New Zealand (2),
Norway (6), Spain (2), Sweden (2), UK (2), and USA (2).
The results showed that:
     •    95% of those that participated indicated that they believed there was a market for
          certified organic fish.
     •    Price premiums for certified organic fish over wild fish ranged from 6.5% -
          17.5%. Relative to farmed fish, participants felt certified organic fish could
          expect premiums ranging from 13.3% - 22.6%.
     •    60% of the participants were unable to name a single organic certification body.
The complete results are available in Appendix “C”.

9.       Market Opportunities
The retail market for certified organic fish is in its infancy in North America. There has
been measured demand both within B.C.10 and Ontario; however, it is at a level that is
only beginning to interest wholesalers, and therefore it has interested larger aquaculture
operations only in terms of gathering information about the process. There is product
appearing in the natural food distribution channel that is being supplied by European
producers.
Within Atlantic Canada, demand exists only at a limited number of restaurants and at
natural food stores that specialize in organic products, but there appears to be niche
markets developing just outside the region, in urban areas where there are higher
concentrations of disposable income.




9 On-line surveys are subject to self-selection bias. They are not random and should not be
    projected onto the general population or even onto the population from which they were
    sampled.
10
   Nathan Pelletier, from the Aquaculture Development Branch of B.C.’s Ministry of Agriculture,
    Food and Fisheries, noted in Trends in Aquaculture that the government’s market research
    found that “similar to other agricultural products, there is growing consumer demand for
    organic aquaculture products” and that “ a number of commercial finfish and shellfish
    farmers are interested providing product to these markets.”

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Restaurants
There is an opportunity to supply higher-end restaurants in both Canada and the United
States. Restaurants in Canada can be approached either directly or through restaurant
supply companies. In the U.S. effort should concentrate on selling product to wholesalers
that supply both restaurants and restaurant buying groups.
Professionally printed information pieces should be produced that help restaurants and
chefs promote the product to their patrons.
Premiums can be expected in the 10-25% area. Producers should anticipate that different
restaurants would have different product preferences for frozen, fresh, filleted and whole
product. There may also be an opportunity to sell the same restaurant a variety of
species. In most cases, producers will find that it is the chef that makes the purchasing
decision.
While restaurants may have wide variation in need, producers can expect average sales of
between 25-125 lbs per week of product. Restaurants are similar to other distribution
channels in terms of their need for consistency of supply.
The restaurant market for organic fish will initially be limited to urban areas where there
are a large, but finite number of restaurants. As additional producers sell into the same
urban area, there will be downward pressure on the price. Additional downward pressure
should be expected as organic fish becomes more mainstream and becomes available in
local markets and grocery stores.
Producers should also anticipate a competitive response from non-certified producers that
defend their market share of the restaurant trade by offering preferential pricing or more
attractive, and possibly all-inclusive delivery agreements.
Wholesale
Wholesalers are beginning to experience demand for organic fish. The demand is
primarily for organically raised salmon, but there will be opportunities to sell wholesalers
farmed fresh water fish or marine species whenever wild stock is unavailable.
Initial demand is expected to come from larger restaurants and restaurant buying groups,
although the natural food chains have become a considerable buying power and may
purchase organic fresh water fish even when wild stock is available.
Wholesale demand will increase substantially as demand shifts to the retail grocery
market; however, large aquaculture operations can be expected to have begun raising
organic fish by that time and the smaller aquatic farms may actually find that their market
access shrinks unless they have developed a promoted strong brand presence.
Wholesalers will require 48-hour delivery, internationally recognized organic
certification, promotional literature, a competitive price and a consistent supply.
There is an exception to the need for consistency of supply. The opportunity to supply
white fish in general, and halibut in particular, between December and February, when
the wild fisheries is closed, will require coordination with wholesalers and feed mills.
It was outside the scope of the current project to determine what strains a strong three-
month market would place on a year round organic production system.

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Premiums can be expected in the 10-25% range over farmed fish. These premiums
should be on the upper end of the range while demand exceeds supply. This may mean
that the white fish opportunity on the West Coast is a lucrative market on an annual basis.
This particular market needs further investigation.

10. Organic Certification Versus Natural Label
The difference in demand for organic product at mainstream and natural food markets
cannot be attributed to higher levels of disposable income; both Whole Foods and Harris
Teeter in the U.S. are frequented by customers with higher family incomes.
It is also difficult to explain it in terms of a higher social and environmental concern
among customers of natural food stores; Whole Foods carries a wide variety of organic
products and its customers traditionally would be considered natural food customers, and
yet there has been virtually no demand for a certified organic alternatives at either Whole
Foods or Harris Teeter.
It is possible that both the mainstream and natural food markets may be open to an eco-
label such as MSC certified. While organic standards for livestock list a number of
additional principles, the motivation for consumers to purchase certified organic is
primarily four fold:
      •   It assures consumers that the producer gets a reasonable return;
      •   It ensures the meat is raised in an environmentally sustainable way;
      •   It ensures consumers that the meat they purchase is free of synthetic material,
          antibiotics, and genetically modified organisms; and,
      •   It assures consumers that the animal was raised humanely.
It was outside the scope of this study to determine which of these motivators are
necessary and sufficient to provide consumers with a level of comfort when making their
decision to purchase fish. If consumers’ main concerns with aquaculture revolve around
environmental issues, the MSC certification program may be sufficient to obtain a
premium.
A more detailed investigation of consumer awareness of the MSC logo and standards is
advisable. Such a study should also determine whether the animal cruelty motivator
toward organic livestock transfers to fish. There is evidence that it does.11
It is likely that in the short-term future, MSC and organic certified fish products will co-
exist on store shelves. Future studies should determine the degree to which organic
products take share from MSC certified products and vice versa. The MSC certification
is likely to be easier to comply with than the final organic standard from the point of view

11
     The dolphin friendly logo has had an impact on consumer buying habits. In 1990, a U.S.
      consumer boycott of Heinz, in protest against the 100,000 dolphins killed and injured each
      year in 'purse-sein' fishing nets used to catch tuna, forced Heinz to take action. Later that
      year, the company announced they would no longer accept tuna caught in nets that kill
      dolphins and adopted a dolphin friendly logo campaign, prompting other companies to follow
      suit. Dolphin deaths have decreased by 97% since 1990.

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of producers and processors. Furthermore, recognition of the MSC logo doesn’t suffer
from the confusion that organic certification logos suffer from.
Organic certification has a distinct advantage over MSC certification. Organic
certification bodies are not reliant upon corporate sustenance. Integrity is the basis of
consumer confidence in any regulatory or monitoring system. If consumers doubt the
integrity, the premium will disappear.
Wholesalers should be cautious of carrying “natural” products, particularly if they also
sell wild catch. Premiums associated with the natural product are being realized,
sometimes in the same range as organic products; however, product may be slow to move
next to wild product. As demand from organically minded consumers increases so will
the clarity of the distinctions between the terms natural, wild, and organic. Premiums for
natural product may diminish or disappear altogether.
There is currently no international accepted organic standard for aquaculture or aquatic
farming; however, a standard can be expected in the coming years if not months. Despite
the lack of an international standard for aquaculture, the international community has
organic standards for other agri-food products as well as an international infrastructure
for verification and monitoring.
Producers may decide in the absence of an organic standard to comply with an ecological
standard such as MSC and subsequently, after an internationally recognized organic
standard has been accepted, seek certification for it, either in addition to or instead of the
MSC certification.

11. Implications
1. There are a number of niche markets that small-scale aquatic farmers could access.
   These include higher-end restaurants, natural food markets, and seasonal wholesalers
   that service regional markets lacking wild catch.
2. Organic certification will distinguish aquatic farms from both large and small
   conventional aquaculture operations and potentially provide market access.
3. Aquatic farms will require some form of cooperation in order to service the
   increasing demand for certified organic fish products in the wholesale distribution
   channel.
4. As demand begins to shift toward mainstream grocery stores, aquatic farmers should
   anticipate larger aquaculture operations entering the market and competing for the
   wholesale market. If aquatic farms haven’t collectively branded and promoted their
   products, they will find maintaining wholesale market access difficult.
5. Aquatic farms that set up within the same urban marketing region should expect to
   co-operate or see a reduction in price.
6. Organic certification is not fundamentally necessary to the aquatic farm; however,
   without it, those farms may be supplanted in their market by those who choose to
   seek organic certification or by larger suppliers that can provide better pricing or
   delivery terms.


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7. Organic aquatic farms will need assistance in developing farming methods. Water
   management, species-specific husbandry and marketing advice will be particularly
   important in the initial start up phase. The managers of non-certified organic farms
   will need to familiarize themselves with existing organic standards for agriculture and
   develop a conversion plan.
8. Organic aquatic farmers and feed mills will need research to identify appropriate feed
   formulations, crop densities, and species diversity for organic production.
9. Foreign producers have begun to target Canadian retailers for organic fish products.
10. Diversified family farms may see financial benefits if they include aquatic farming in
    their mixed operations.

12. Recommended Next Steps
The following recommendations are aimed at assisting with the development of organic
aquatic farming.

1. Aquatic Farm Inventory:
   Develop an inventory of existing aquatic farm operations in Canada. The inventory
   should include a GIS mapping component to allow efficient regional interpretation of
   the data.
   The inventory should list data specific to the farm (Location, structures, water
   resources), the livestock (fish, poultry, swine, beef), the marketing channels
   employed, and the end market serviced. As well, this data source could enhance
   understanding of wastewater considerations on the farm.
   The marketing data should be general to maximize compliance (e.g., wholesaler,
   restaurant, grocery). It should also be related to the GIS system. This will enable
   aquatic farmers, investors and government support workers to anticipate sales volume
   by geographic market and help prevent oversupply and downward price pressure.
   The inventory should be maintained over time so that profiles of successful operators
   can be developed. This will enable the inclusion of aquatic farming into the
   “Benchmark for Success” program under the Renewal pillar of the APF.

2. Research & Training Facility
   There will be a significant need for scientific research that pertains specifically to
   organic aquatic farming. One example would be research into feeds and probiotics
   and their efficacy on livestock health relative to antibiotics. Internationally there are
   many publicly and privately funded aquaculture associations and institutes that have
   developed and published a large body of quality literature; however, these have
   focussed on the needs of the conventional marine operations.
   There is no clear agreement among international organic certifying bodies about what
   final standards will look like. In fact, some organic standards may prohibit some
   marine based aquaculture from organic certification altogether. Whether or not large
   marine based aquaculture operations are certifiable, small organic aquatic farms will

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       have unique research and training needs including feed rations, new species
       development, densities, and water management in an organic system.
       These needs are best met by locally based facilities that can offer both wet lab and on-
       farm trials where training can take place. Because of its unique proximity to the
       research resources at the Nova Scotia Agricultural College and the number of food
       and water scientists it has as tenants, AgriTECH Park could help facilitate public and
       private partnerships. The Park is also home to AgraPoint International, which has an
       organic and rural infrastructure specialist; their involvement could help keep the
       research focussed on its applicability to family farms.
       In keeping with the Science and Innovation pillar of the APF, these facilities should
       be located where a climate of innovation can be created. The market for organic fish
       by all wholesaler accounts, both within Canada and abroad, is a premium market.
       The goals for these research centres should be to facilitate the success of the aquatic
       farming industry and to mentor those within the industry that show innovation in
       species development, production practices and in marketing initiative.12
       The facilities could also conduct valuable research into best management practices for
       organic production and measure the impact of organic aquatic farms on their
       surrounding environment. This research would help organic certification bodies in
       grounding the standards in science. This is in keeping with the Environment pillar of
       the APF.

3. National Market Study
       The current study was an initial survey of the market within Atlantic Canada. Both
       its scope and depth were limited to a number of key stakeholders in some key
       industry roles. The results suggest that there may be stronger markets further west
       both within Canada and the United States. This should be confirmed.
       In addition, it would be valuable to know consumers’ fish preferences within each of
       the markets across Canada. This will be particularly true of the restaurant market.
       This information should be currently available from industry sources, but it should be
       compiled and added to the geographic inventory.
       The study should conduct interviews with producers, wholesalers, natural food stores,
       grocery store chains and restaurants in both larger and smaller urban areas in each of
       the provinces.
       The producer interviews should identify any human resource issues that could be a
       barrier to entry. They should also determine producers’ willingness to cooperate in
       both branding and marketing initiatives as well as their understanding of organic
       standards.



12
     Science and innovation are the cornerstone of efforts to make the Canadian agriculture and agri-food
       sector the world leader in food safety, innovation and environmentally responsible production and to
       support its future success and prosperity. (Federal-Provincial-Territorial Framework Agreement on
       Agricultural and Agri-Food Policy for the Twenty-First Century – May 2003)

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      Consideration should be given to increasing the revenue of aquatic farms by
      exploring the revenue opportunities of aquatic plants. This could be explored in the
      interviews with retailers and restaurant chefs.

4. Communication and Marketing Strategy
      There will be a need for on-going communication between producers, government,
      research facilities, feed mills, wholesalers, the restaurant trade and consumers.
      Existing aquatic farms will have limited awareness of organic standards. Existing
      livestock farms that are determined to be good candidates for aquatic farming will
      have limited awareness of both organic standards and aquatic farming protocols.
      Both these groups must have the risks and opportunities clearly explained to them.
      Specialized production and marketing reports such as those issued by Statistics
      Canada (VISTA – Organic Fruit and Vegetable Production: Is it for you?) will also
      help producers determine for themselves if they are suitable candidates for organic
      aquatic farming.
      Research facilities must be made aware of producers’ research, human resources and
      informational needs. These needs will change over time. In addition, as research
      results become available, there needs to be an organized process for getting them in
      the hands of producers and investors so that commercial advantage can be realized.
      Marketing strategies need to be developed for both individual aquatic farms and for
      those that form regionally based buying and selling groups.13 Each of these will have
      different needs, markets and resources. Initiatives should focus on the primary target
      markets: executive chefs and wholesalers.
      Chefs can be best targeted through the Canadian Culinary Federation, which is having
      its 41st annual conference in Charlottetown, June 8-13, 2004. The federation has a
      Certified Chef de Cuisine program, which is administered by the Canadian Culinary
      Institute. The industry should maintain contact with executive chefs and sponsor
      events with the federation to promote its products. The federation has chapters across
      the country so individual aquatic farms can maintain contact in close proximity to its
      market.
      Advertising to chefs through trade publications will not be effective until such time as
      branded products are available for national distribution.
      Wholesalers are best reached through the Boston Seafood Show. The federal
      government has a booth at the show each year and could facilitate the presence of
      aquatic farmers and their products.
      If value added or ready-to-eat products are developed, natural food trade shows are
      best suited to showcasing product launches. Government programs that assist
13
     According to Statistics Canada’s VISTA report in September 2002 (Catalogue # 21-004-XPB)
      because the market for organic products in Canada is not well defined, it is essential that
      producers develop marketing plans for their products. Choice of product, geographic location
      and the quality of the marketing plan are all factors in the premium consumers will pay for an
      organic product over a conventional one.

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   processors attend these events and possibly enter the export market should be
   communicated to producers.




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13. Appendix A – Bibliography
A&L Goodbody. August 1, 2003: Legal News and Publications. Irish Seafood Cracks US
  Market in Largest Organic Seafood Deal in Irish History.

Bell, Ian. December 29, 2003: The Western Producer Magazine.

DFAIT. May 2003: Canada’s International Market Priorities.

DFAIT. October 2003: Fish and Seafood Sector Profile in Germany.

DFAIT. May, 2003: Market Study – Japan.

DFAIT. May, 2003: Market Study – Republic of Korea. .

DFAIT. October, 2003: The Fish and Seafood Market in France.

Falklands-Malvinas. December 28, 2003: Chile Prepares For Halibut Farming.

FAO. 2002: Review of Organic Aquaculture. Current Status and Future Prospects.

Hanson, Gregory D. September 27, 1996: Consumer Profiles in Fish Marketing. U.S.
   Trout Farmers Association 43rd Annual Meeting. Tannersville, PA.

Hempel, Erik. November 2003: Seafood International. Trout – A Serious Challenge to
  Salmon.

IFOAM. August, 2002: Basic Standards for Organic Production and Processing.

Infoexpert Canada: The Mid Atlantic US Market. Document ID 28706.

Khan, Stephen. January 18, 2004: Scotland editor, The Observer. Sunday Edition.

Parson, William. September 2002. VISTA: On the Agri-Food Industry and the Farm
   Community. Organic Fruit and Vegetable Production: Is it for You?

Pelletier, Nathan. June, 2003: Market Trends in Aquaculture.
    http://www.certifiedorganic.bc.ca/rcbtoa/services/aquaculture-standards.html

Pulsifer Associates. 1999: Marketing Opportunities: Export of Atlantic Canadian Organic
   Produce to New England.

The Independent (UK) December 7, 2003: Tighter Rules for Organic Fish Farms.




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14. Appendix B – Certification Bodies For Organic Aquaculture

         Asia                   ACT (Thailand)
         Europe                 Biokreis, Bioland, Demeter, Naturland (Germany)
                                BIOSUISSE (Switzerland)
                                DEBIO (Norway)
                                ERNTE (Austria)
                                KRAV (Sweden)
                                QCI (Italy)
                                SOIL (UK)
                                TÚN (Iceland)
         North America          FOG (USA)
                                FVO (USA)
                                NOFA Massachusetts (USA)
         Oceania                BFA (Australia)
                                BIOGRO (New Zealand)
                                NASAA (Australia)

In addition, France, the United Kingdom and Australia have national standards for
organic aquaculture. In the US, Indiana and Iowa have their own state standards.
IFOAM adopted a set of draft standards in August, 2002; however, these standards have
not yet been ratified.




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    15. Appendix C – On-Line Survey Results

                        Total           NA             EU          Producer      Government       University
Respondents              40             12              26             8              18             20


1. Do you believe there is a market for certified organic fish?
                        Total           NA             EU          Producer      Government       University
Yes                     95%            100%            93%           100%            89%            94%


2. What degree of price premium would you expect to pay for certified organic fish over a
   similar species of wild or farmed fish.
Premium over …          Total           NA             EU          Producer      Government       University
Wild Fish              11.4%          17.5%           8.6%           13.8%           6.5%          11.2%
Farmed Fish            17.9%          20.8%           16.6%          17.5%          13.3%          22.6%


3. Which of the following categories describe your involvement in the aquaculture industry?
   Check as many as apply.
                         Producer                               20%
                         Government                             45%
                         Education                              50%
4. Are your annual sales greater than 25 tons? (8 Producers Only)
                         Greater than 25 tons                   4
                         25 tons or less                        2
                         Did not answer                         2
5. Which of the following species do you farm? (8 Producers Only)
                 Charr (0)                          Perch (0)
                 Cod (0)                            Salmon (4)
                 Flounder (0)                       Tilapia (2)
                 Haddock (2)                        Trout (2)
                 Halibut (2)                        Other (4)
6. Can you name an organic certification body that has developed standards for aquatic farms?
   (All respondents)

Certifying Bodies       Total           NA             EU          Producer      Government       University
Don’t know              60%            67%             57%            50%            67%            60%
NOSB *                   5%            17%             0%             0%             11%             0%
EU Body **              35%            17%             43%            50%            22%            40%

* National Organic Standards Board (USA)
** (AENOR, DEBIO, GAA, KRAV, Naturland, Scottish Fish Farmers Association, UK Soil Association)



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16. Appendix D – List of Companies Interviewed


The following is a list of those companies that were interviewed during the course of the study.


Canadian Gold Seafood Company                       Indian Point Marine Farm
Enfield, Nova Scotia                                Mahone Bay, Nova Scotia

Clearwater Fine Foods                               John Nagle Company
Bedford, Nova Scotia                                Boston, Massachusetts

Cooke Aquaculture                                   Joy Wallace Catering
St. George, New Brunswick                           Miami, Florida

Corey Aquafeeds                                     Ken Berger Sales Company
Fredericton, New Brunswick                          Thornhill, Ontario

D. B. Kenney Fisheries                              Ontario Natural Food Cooperative
Briar Island, Nova Scotia                           Etobicoke, Ontario

Delta Barrington Hotel                              Scotian Halibut
Halifax, Nova Scotia                                Halifax, Nova Scotia

Fisherman’s Market International                    Skretting
Halifax, Nova Scotia                                St. Andrews, New Brunswick

Great Ocean Natural Food Market                     Sobeys
Halifax, Nova Scotia                                Stellarton, Nova Scotia

Grill 23                                            Sysco Food Services
Boston, Massachusetts                               Lakeside, Nova Scotia

Harris Teeter                                       Whole Foods Market
Raleigh, North Carolina                             Gloucester, Massachusetts




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17. Appendix E – Terms and Acronyms
The following terms and acronyms were used in this report:


Terms
Aquaculture operation (production of 50 tonnes or more)
Aquatic farm (production of 25-50 tonnes)
Small-scale aquatic farm (production of 15-25 tonnes)


Acronyms
APF (Agricultural Policy Framework)
DFAIT (Department of foreign affairs and international trade)
EDI (Electronic Data Interface)
EIGT (Emerald Isle Global Trading) EU (European Union)
FDA (Food and Drug Administration)
FLO (Fairtrade Labelling Organizations)
GIS (Geographic Information System)
HACCP (Hazard Analysis and Critical Control Points)
HMR (Home Meal Replacement)
JAS (Japanese Agricultural Standards)
MSC (Marine Stewardship Council)
mt (Metric Tonne)
NSAC (Nova Scotia Agricultural College)
SKU (Shop Keeping Unit)




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