Deliverable 3.4 - Revision history

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 ===== Norway =====
 ====== Governmental Form ======
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 *Strong seasonal peaks
 *Quality is variable and hard to control, but generally good
-*Efficient auction and high capacity in processing: leads to high
+*Efficient auction and high capacity in processing: leads to high profitability in the fleet, low profitability in processing
-strong competition.
+#Export of whole frozen or fillets. Relational form of governance, but still strong competition.
 *Contract or spot sales
-#Relations are important, necessary for obtaining a sale, but not sufficient
+#Relations are important, necessary for obtaining a sale, but not sufficient to gain a contract. Relations are not unique relations. All buyers will have relations with several exporters, leaving price to determine the contract.
 #Processed products. Relational form of governance.
 *Supermarket chains: Strong buyers in consolidated retail markets
 *Huge diversity of products
 ====== Driving force in the value chain ======

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 *The degree of coordination in the value chain of herring is not as great as the supplies can be stored for a long time as well being global b2b commodities.
 *The vertical integration has maintained a certain power balance in the industry preventing the fishing sector from becoming too powerful.
 ====== Drive force in the value chain ======
-*It is clear that the VICs companies holding majority of the quota are the
+*It is clear that the VICs companies holding majority of the quota are the leading firm in the value chain of herring in Iceland.
 *The driving force is economics of scale in fishing and production
 *Synchronising fishing and production through the VICs.
-*Consolidation brings in the danger of lack of internal competition in the
+*Consolidation brings in the danger of lack of internal competition in the value chain.
 **More or less all companies are focusing on the same strategy of automation in production and focus on frozen fillets and butterflied herring.
 **Only one company focuses on salted herring
 *Market price
 ===== Norway =====

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 ===== Iceland =====
 ====== Governmental form of the value chain ======
-*The herring sector was until 1991 based on many individual boat owners
+*The herring sector was until 1991 based on many individual boat owners that had the licences to catch herring. During that time the governmental form was based on individual contracts and where the herring was caught.
 *The period during 1991 to 2000 a lot of consolidation occurred as other pelagic boats, mainly capelin boats were allowed to buy herring quota.
-that had the licences to catch herring. During that time the governmental form was based on individual contracts and where the herring was caught.
+**In 2016 the real number of companies that hold herring quota is only 11.
 **One of them is not vertically integrated and operates only one pelagic vessel.
-*The period during 1991 to 2000 a lot of consolidation occurred as other
+**Value chain is governed through high power asymmetry as hierarchy.
 *The export part of the value chain has as well changed a lot during the last 30 years.
-pelagic boats, mainly capelin boats were allowed to buy herring quota.
+**The dependency in the value chain varies a lot depending degree of long term contract in their business instead of ad hoc sale.
+**Frequent changes in export from Iceland suggest market relationship based on price. Closing of markets in Russia affect this in the last years.
 *The degree of coordination in the value chain of herring is not as great as the supplies can be stored for a long time as well being global b2b commodities.
-**In 2016 the real number of companies that hold herring quota is
+*The vertical integration has maintained a certain power balance in the industry preventing the fishing sector from becoming too powerful.
 ====== Drive force in the value chain ======

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 |}
 ==== Consolidation ====
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 *An H below 0.01 (or 100) indicates a highly competitive industry.
 *An H below 0.15 (or 1,500) indicates a concentrated industry.
-*An H above an H between 0.15 to 0.25 (or 1,500 to 2,500) indicates
+*An H above an H between 0.15 to 0.25 (or 1,500 to 2,500) indicates moderate concentration.
 *0.25 (above 2,500) indicates high concentration.
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 ''Table 5. Concentration calculation for Iceland the years 2000 and 2017''
-{| class="wikitable" style="width: 100%;"
+{| class="wikitable" style="width: 100%"
 |-
 ! &nbsp;
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 Data for the calculation is from the Directorate of Fisheries in Iceland. Calculations based on catches by all vessels reporting pelagic catches in 2000 and 2017. Concentration calculated by vessel operators; if an operator has many vessels catches of them all are combined.
-*It is clear that consolidation has been taking place in Iceland looking at the
+*It is clear that consolidation has been taking place in Iceland looking at the CR index and biggest company CR1 is close to the quota celling of 20%
 *The CR10 points toward great consolidation where the 10 biggest have well over 95&nbsp;% share of most pelagic species.
-CR index and biggest company CR1 is close to the quota celling of 20%
+*The HHI index express that the industry has moved from being a competitive industry to being an almost totally concentrated industry in 2017.
 ===== Norway =====
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 ''Table 1 Atlanto-Scandic herring – Danish ITQ quotas. No vessels, no of vessels with different owners/owner company* and HHI index.''
-{| class="wikitable" style="width: 100%;"
+{| class="wikitable" style="width: 100%"
 |-
 ! &nbsp;
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 ''Table 2. North Sea herring– Danish ITQ quotas. No vessels, no of vessels with different owners/owner company* and HHI index.''
-{| class="wikitable" style="width: 100%;"
+{| class="wikitable" style="width: 100%"
 |-
 ! &nbsp;
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 ''*The specific ownership is not clear. The quotas are allocated to vessels, which can have different owner structure. Reduction only if same company owns two vessels.''
-*The concentration of the Danish fisheries of North Sea herring has
+*The concentration of the Danish fisheries of North Sea herring has increased. It had the top level to be characterised as an un- concentrated market in 2008, but will be regarded as moderately concentrated by 2017.
 *A strong consolidation has taken place in the primary processing of herring over the last 10-15 years. Unfortunately, there is no data available on volumes of purchasing of herring by the Danish fish processors to document this process in HHI-terms. At present (2017) we have assessments from industry informants and managers that the documented structure of high concentration of primary processor in the herring with two large processors and a few minor processors probably would give a score at the HHI-index around 0,40, which document a high concentration of production in the Danish processing. As will be argued later, this is not problematic from a competition point of view, as the regional (Norway, Germany) competition is high.
 ===== Newfoundland =====
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 ===== Summary of main influencing factors regarding concentration =====
-*According to CR4 it is clear that Norway had more concentration sector
+*According to CR4 it is clear that Norway had more concentration sector than Iceland in the year 2000 where the Norwegian pelagic sector had CR4 49,1% while the Icelandic herring sector 28,9%.
 *In 2017 the CR4 is up to 62,3% in herring for Iceland while it is 67,6% in the pelagic sector in Norway. The difference is getting smaller and it is clear that concentration within the sector in Iceland has been increasing fast
-than Iceland in the year 2000 where the Norwegian pelagic sector had CR4 49,1% while the Icelandic herring sector 28,9%.
+*Although concentration has been increasing a lot in all the countries it is argued that this is not problematic from a competition point of view, as the pelagic products are mainly B2B commodity and the global/Nordic competition is high as well as regional.
-{| class="wikitable" style="width: 100%;"
+{| class="wikitable" style="width: 100%"
 |-
 ! Factor

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 ==== Fishing ====
 ===== Fishing gear =====
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 Norwegian catch all the herring in purse seine that is believed to deliver better quality of raw material than the pelagic trawl.
-*Icelandic pelagic vessel are increasingly using pelagic trawl in catching the
+*Icelandic pelagic vessel are increasingly using pelagic trawl in catching the herring as can be seen from below figure where the trawl used for 90% of the catch during the last 3 years.
 *The NL/Canadian herring fishery are using a combination of fixed and mobile gear (purse seine) to capture herring; regulations governing the use of each gear type and the region where they can be used.
 [[File:D34 fig 32.png|center|Figure 32]] ''Figure 32. Use of purse seine and pelagic trawl in Fishing herring in Iceland 2005 to 2016''
-*The biggest change in the fishing of herring is the improved cooling system
+*The biggest change in the fishing of herring is the improved cooling system in the vessel by the introduction of fresh chilled (RSW) on board the vessel.
+**In Iceland this changed the industry in the sense that more of the herring is processed on land instead of frozen at sea as can been seen in Figure 33.
 [[File:D34 fig 33.png|center|Figure 33]] ''Figure 33. Herring landings 1982 to 2016 – frozen at sea or domestic processing''

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 |}
 ==== Price settling mechanism ====
 *Price of herring in Iceland is decided by the Official Bureau of Ex-Vessel Fish Prices (Verðlagstofu Skiptaverðs).
-**The price is decided monthly, where the set-price is changed
+**The price is decided monthly, where the set-price is changed according to changes in the market price, sometimes with a considerable delay.
 **This price is not used in any transactions other than calculating the vessel crews ́ wages (based on a share system).
-according to changes in the market price, sometimes with a considerable delay.
+**Historically the price was determined by the market price for fish oil and meal.
 **As the importance of herring to human consumptions has grown, this has changed and the Bureau of Ex Vessel Fish Price now also decides the price for whole herring for freezing.
+**The quantity behind the price is however very limited so the price for fish meal and oil is still the price that is used by the industry
-**This price is not used in any transactions other than calculating the
+*Norwegian herring is sold through the Norwegian pelagic auction, Europe’s largest pelagic fish auction, with an annual turnover of approximately 1.5 million tonnes at a value of almost NOK 9 billion (€ 966 million).
 **The auction is an electronic auction without physical inspections of products and is based on the first-price sealed-bid method
-vessel crews ́ wages (based on a share system).
+**There is a minimum price in the auction, set at 80&nbsp;% of the average for all sales of the species for the last two weeks
 **The first-hand sale of fish in Norway is legally protected through the raw fish act and organized through sales organizations with exclusive rights for co-ordinating the first-hand sale of fish
 **The Norwegian pelagic auction was established in the 1970s and is owned and operated by Norges Sildesalgslag (NSS), the current sales organization for pelagic fishermen in Norway.
-**Historically the price was determined by the market price for fish oil
+**There are some firms owning both fleet and processing capacity in the herring sector, but the auction limits any real vertical integration
+**There are two main prices in Norway for consumption, and for meal and oil as shown in Figure 30. The quantity in meal and oil is very limited so the consumption price will be used in the comparison.
 [[File:D34 fig 30.png|center|Figure 30]] ''Figure 30. Herring price and volume in Norway 2001 to 2017''
-*Danish herring is also offered at the auction of “Norges Sildesalgslag.” The
+*Danish herring is also offered at the auction of “Norges Sildesalgslag.” The Norwegian processors as well as Danish processors buy directly via this auction.
 **Around 90% of the herring goes through the auction of “Norges Sildesalgslag.”
-Norwegian processors as well as Danish processors buy directly via this auction.
+**The rest or 10% is sold through the Danish fish auctions (Ministry of Environment and Food.
 **In many cases there are some agreement or coordination between the vessel and a processer about deliverance of a certain amount at a certain time.
 **Even when coordination takes place, the current price at the auction of Norges Sildesalgslag is the basis for negotiations about possible bonus for deliverance.
-**Around 90% of the herring goes through the auction of “Norges
+**The market is not fully reflecting the highest quality of herring. In general, the quality of purse seine caught herring is higher than trawl caught herring, as the quality of herring caught by trawl depends of trawl time, and there are pressure risks.
 *In Newfoundland first hand price is negotiated annually between the harvesters and the processors with an average price per kilogram determined in advance of the season; the negotiated price is subjected to change throughout the season. Unlike other fisheries, the FFAW (the union representing the harvesters and processors) are not actively engaged in the price negotiations for herring.
 Price development in the comparisons countries is expressed in Fig 12. Price was just available from Canada from 2006 to 2008 and from 2014 to 2017.
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 [[File:D34 fig 31.png|center|Figure 31]] ''Figure 31. Price development in Norway, Iceland and Denmark 2001 to 2017; Canada 2006-2008 and 2014-2017.''
-*There is a huge difference between the price paid in Iceland and the
+*There is a huge difference between the price paid in Iceland and the consumption price in Norway and Denmark.
 *The price in Canada is always the lowest (for the comparison years).
-**Price varies between region in Canada and the herring receive the
+**Price varies between region in Canada and the herring receive the lowest price of the region in Newfoundland.
 *There is not much evidence of the role of the auction markets to pay for quality, or according to the fishing gear as all herring in Norway is caught in purse seine
-lowest price of the region in Newfoundland.
+**According to unconfirmed personal communication the auction market is not fully reflecting the highest quality of herring.
 ===== Summary of main influencing factors regarding the price settling mechanism =====
-{| class="wikitable" style="width: 100%;"
+{| class="wikitable" style="width: 100%"
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 ! Factor

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 ===== Processing =====
 ====== Profitability and performance ======
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 [[File:D34 fig 29.png|center|Figure 29]] ''Figure 29. EBIT as share of revenue in Iceland and Norway 1997 to 2015''
-*The profitability in processing is higher in Iceland than Norway in most
+*The profitability in processing is higher in Iceland than Norway in most cases.
 *The profitability as EBIT in Norwegian processing is very low or below 5% in most years while the EBIT in Iceland has been over 15% from about 2008.
-cases.
+*Profitability for meal and oil production yield an EBIT of around 10&nbsp;% in Norway. This industry bases its production on capelin, blue whiting and rest raw material from herring. The amount of whole herring used for meal and oil is negligible.
 ===== Summary of main influencing factors regarding markets- and production development =====

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 *USA purchases almost 80% of the products. Easy access routes favour products from Canada
 *Most of the remainder of the products are exported to East Europe.
 ====== Value creation ======
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 [[File:D34 fig 28.png|center|Figure 28]] ''Figure 28. Value creation in euro/kg of export value of herring products from Iceland, Norway, Denmark and Newfoundland''
-*Value creation has increased with time mainly due to price increases of
+*Value creation has increased with time mainly due to price increases of herring products as herring quotas have been in steep decline from 2009 until 2017.
 *Similar value creation is observed in all the countries
-*The value creation within Newfoundland seems to be increasing in the last
+*The value creation within Newfoundland seems to be increasing in the last few years, possibly because of their focus on final consumer goods
 ===== Processing =====

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 *Due to tariffs there is virtually no production of consumer herring goods for export in Iceland and Norway. There is some bulk production in Norway of herring products (in brine or vinegar cured) which form the main ingredient in the consumer goods (mainly jars) which are produced in EU (mostly Sweden) to avoid import taxes
 *Newfoundland export a large part of their herring products (>40%) to the US as preserved and prepared goods. No import tariffs are on the products.
 ====== Customers ======
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 ''Table 1. Main buyers of Icelandic herring products (as share of herring export volume and value, excluding meal and oil)''
-{| class="wikitable" style="width: 100%;"
+{| class="wikitable" style="width: 100%"
 |-
 ! colspan="4" | Volume
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 *Main markets for the products are in Eastern Europe
-*The focus is on commodities or raw material (fillets or whole fish) that can
+*The focus is on commodities or raw material (fillets or whole fish) that can be used to produce the final consumer goods. Virtually nothing is produced of the prepared or preserved ready to eat products.
 *There is considerable variability of main buyers (as countries) between years; it depends on market conditions and prices to whom the products are sold. Often uncertain market conditions e.g. closure of the Russian market recently, but also lack of loyalty between buyers and supplier
 *EU purchases between 30-65% of the products (mainly Poland)
 ''Table 2. Main buyers of Norwegian herring products (as share of herring export volume, excluding meal and oil)''
-{| class="wikitable" style="width: 100%;"
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 ! Country
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 *Main markets are in Eastern Europe
-*The focus is on commodities or raw material (fillets or whole fish) that can
+*The focus is on commodities or raw material (fillets or whole fish) that can be used to produce the final consumer goods. Virtually nothing is produced of the prepared or preserved ready to eat products.
 *EU purchases between 43-61% of the products (mainly Denmark, Germany and Lithuania)
-be used to produce the final consumer goods. Virtually nothing is produced of the prepared or preserved ready to eat products.
+*More stability in customer base than seen for Iceland – possibly due to more loyalty between buyers and supplier. Easier logistic routes to markets also help
 ''Table 3. Main buyers of Danish herring products (as share of herring export volume and value, excluding meal and oil)''
 *Main markets are in Eastern Europe
-*The focus is on commodities or raw material (fillets or whole fish) that can
+*The focus is on commodities or raw material (fillets or whole fish) that can be used to produce the final consumer goods. Virtually nothing is produced of the prepared or preserved ready to eat products.
 *EU purchases between 43-61% of the products (mainly Denmark, Germany and Lithuania)
-{| class="wikitable" style="width: 100%;"
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 ! Country
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 The access to the common market is a key (no tariffs) as well as short logistic routes.
-*High stability in customer base indicating loyalty between supplier and
+*High stability in customer base indicating loyalty between supplier and buyer. Germany is by far the biggest market not only for the commodities but also taking the largest share of the value-added products
 ''Table 4. Top buyers (based on value) each year for Newfoundland herring products (as share of herring export value, excluding meal and oil)''
-{| class="wikitable" style="width: 100%;"
+{| class="wikitable" style="width: 100%"
 |-
 ! Country
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 |}
-*USA purchases almost 80% of the products. Easy access routes favour
+*USA purchases almost 80% of the products. Easy access routes favour products from Canada
 *Most of the remainder of the products are exported to East Europe.
 ====== Value creation ======

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 ===== Differences in exports/productions =====
 ====== Products ======
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 [[File:D34 fig 23.png|center|Figure 23]] ''Figure 23. Export of whole herring (frozen and fresh) from Denmark, Iceland, Norway and Newfoundland as share of total export volume (fish meal and oil excluded).''
-*Whole herring is a large part of the herring export for all the countries
+*Whole herring is a large part of the herring export for all the countries except for Canada. The whole herring is exported mainly as frozen but both Norway and Denmark export as well fresh herring.
 *NL market decreasing from 42% in 2000 to 0% in 2016
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 Denmark, Iceland, Norway and Newfoundland as share of total export volume (fish meal and oil excluded).
-*Herring fillets, both single and butterfly fillets frozen at sea or on land, are
+*Herring fillets, both single and butterfly fillets frozen at sea or on land, are the most important export category in Iceland indicating the growing importance placed on processing
 *Fillets are also of growing importance in Norway, reflecting on the investment made in both Iceland and Norway on investment in processing and automatization of the process. Both countries focus on processing the fish into fillets and using the rest raw materials (offal, bones and heads) for fish meal and oil.
-the most important export category in Iceland indicating the growing importance placed on processing
+*All the large pelagic processers in Iceland have included in their integrated operation a fish meal plant(s). Figure 25 shows the value of herring fish meal and oil during the last few years for Iceland as share of total herring products export value.
 *Fillets are not a large item of the exports from Denmark
 *NL market decreasing from 33% in 2008 to 0% in 2016
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 [[File:D34 fig 26.png|center|Figure 26]] ''Figure 26. Export of salted, dried and smoked herring products from Denmark, Iceland, Norway and Newfoundland as share of total export volume (fish meal and oil excluded). The figures for Norway include both salted and preserved products.''
-*Salted and vinegar cured products are important as raw materials for the
+*Salted and vinegar cured products are important as raw materials for the Scandinavian herring market as well as for the German market.
 *Denmark and Norway produce for this market and approximately 3-4% of the herring products are export as salted
 *Iceland has virtually stopped salted – 1% or less of the herring is exported as salted
 *This is a growing market for NL,- increased from 6% in 2000 to 50% in 2016
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 [[File:D34 fig 27.png|center|Figure 27]] ''Figure 27. Export of prepared and preserved herring products from Denmark, Iceland and Newfoundland as share of total export volume (fish meal and oil excluded).''
-*Denmark and NL both focus on this market. Denmark exports between 15-
+*Denmark and NL both focus on this market. Denmark exports between 15-25% of the herring as value added products to EU28 countries. Denmark does not have to pay tariffs for the products being a member of EU whereas both Iceland and Norway must pay 10% tariff on prepared and preserved herring products to EU as EEA countries.
 *Due to tariffs there is virtually no production of consumer herring goods for export in Iceland and Norway. There is some bulk production in Norway of herring products (in brine or vinegar cured) which form the main ingredient in the consumer goods (mainly jars) which are produced in EU (mostly Sweden) to avoid import taxes
-% of the herring as value added products to EU28 countries. Denmark does not have to pay tariffs for the products being a member of EU whereas both Iceland and Norway must pay 10% tariff on prepared and preserved herring products to EU as EEA countries.
+*Newfoundland export a large part of their herring products (>40%) to the US as preserved and prepared goods. No import tariffs are on the products.
 ====== Customers ======