Small seafood players get creative to survive

Published on
August 15, 2016

Smaller players in the Japanese seafood industry are getting squeezed. Supermarkets have been consolidating and increasing direct buying, cutting out layers of middlemen, such as the intermediary wholesalers in the Japanese public auction system.

Aeon, for example, is one of the largest supermarket chains outside of the USA and in the top 15 worldwide, with 11.5 percent market share of supermarket sales in Japan, followed by Ito-Yokado (7 percent). The Nikkei newspaper estimated that the total sales of supermarkets in 2013 were 19 trillion yen (USD 188 billion; EUR 169 billion), up 2.3 percent from the previous year. Meanwhile, independent fish shops are disappearing in line with the general abandonment of shopping streets in favor of malls and big box outlets.

Coastal fishermen, who in Japan are locally regulated by fishery cooperatives and are tied to a specific port and fishing ground, are also feeling the pain. They sell to traders through their portside auctions or undertake further processing through their cooperative. However, supermarkets have even more bargaining power as they consolidate, so that co-ops and local traders have become price-takers with shrinking margins.

How are they surviving? Some aren’t, and are are watching their businesses dwindle to but a few long-time customers, advising their sons to go into another field, and waiting for retirement. But others have gotten creative.

If you can’t beat ‘em, join ‘em

One way for small fishery co-ops strapped for cash to upgrade equipment and become more competitive is to partner with a corporation.

Japanese law gives priority access to fishing and aquaculture grounds to local fishery co-ops. But in Miyagi Prefecture, the prefectural governor issued an emergency decree allowing corporate investment in joint ventures under liberalized rules. The measure was aimed at infusing new capital into tsunami-hit oyster farming areas. The liberalization was in line with recommendations of a business think-tank policy paper urging widespread opening of access. It was also included as a recommendation in the Fisheries Agency most recent white paper. While it is a precursor to further erosion of local access rights it has the upside of bringing in the capital and business acumen of big business.

Large companies are eager to partner for aquaculture, with many trading companies now involved in bluefin tuna farming.

Strength in numbers

Co-ops that are financially sound can be very innovative on their own. By pooling resources of their many members, the costs of innovation can be spread out. For example, the Kagoshima-based Azuma-cho Fishery Cooperative, with its Buri-Oh brand of farmed yellowtail, is a major producer and exporter, and has developed its original feed formulations.

In Aomori Prefecture, the Hiranai City Fishery Cooperative has developed innovative products. As a scallop byproduct, the “string” is dried into a beer snack similar to the dried squid that is a standard Japanese snack with beer. They can be flavored with chili pepper, seaweed or cheese. Dried scallops are featured at the tourist shop by the highway. There is even scallop curry rice and scallop flavored ice cream.

Find a new channel

Bypassing the supermarkets is another option. New channels available in Japan include online, through the Rakuten Ichiba marketplace for example. The gift/souvenir market is huge in Japan, as all travelers are obliged by custom to bring back some local snacks for friends, family and co-workers.

Also, ekiben, or “train station boxed lunch”, featuring local products and usually including seafood, are a good sales and promotion opportunity. Gourmet tourism is also huge in Japan, and is very successful for areas within easy train access to Tokyo and Osaka. Regionally branded snow crab on the Japan Sea, such as “Matsuba-gani,” is the prime example.

Department stores in Japan sell gourmet foods on the basement floor from independent shops, and these are an opportunity for high-grade processed foods.

Home delivery services, usually featuring bagged frozen semi-prepared seafood, can educate consumers through their literature about special product features. Some examples are boneless mackerel fillets with miso or tomato sauce—ready to cook and suitable for busy housewives.

Niche products

Finally, there are innovations that can add value and set a product apart, creating a niche.

Kunihiro Inc., a Hiroshima-based oyster farming and processing company, has introduced a high-pressure processing (HPP) system for shucking. They toured processors in U.S. Gulf of Mexico region, where HPP is used as an alternative to cooking to destroy the Vibrio bacteria. In Japan, the main advantage is the reduction in labor cost, both in man-hours and reduction of necessary skill. The shucked oyster meats, frozen raw and bagged, have found a good market in supermarkets like Coop.

Farm Suzuki, also of Hiroshima, displayed Farm Suzuki. The color is caused by certain algae growing in the brackish “claire” pond (a former salt evaporation pond) where the oysters are finished. The farming method imitates techniques used for centuries in the Marennes-Oléron region of France.

Japanese university research, while a source of new ideas, is often picked up by trading companies or other large investors, and so is often not the source of small business ideas.

Contributing Editor reporting from Osaka, Japan

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