Can shrimp follow the avocado example? That is the million-dollar question presented in an article by the Global Aquaculture Alliance published in 2018. Since then, this question has been frequently asked, discussed, and passed around among many stakeholders in the shrimp industry. But what ties avocado to shrimp and why is the avocado model relevant to the shrimp industry? In this piece, ShrimpTails looks into the hurdles and benefits of a unified marketing approach for shrimp.
ShrimpTails estimates that a world total of 8.5 percent growth in shrimp production volumes was recorded between 2017 and 2018, amounting to a total of 3,239,000 metric tons (MT). In the same period, the production volume of the largest shrimp producing countries Ecuador and India grew with approximately 18.4 percent and 11.42 percent, respectively. Two years later, we can still see this trend continuing. While the year-on-year growth between 2018 and 2019 was not as high as the previous year (up by 0.07 percent), Ecuador had still produced 23 percent more shrimp by the end of 2019, while India was at 7.7 percent more.
This year, there’s much uncertainty in the global shrimp market due to recent events such as the COVID-19 pandemic and the oil price crash. These developments have already impacted farm gate prices, which have started to drop. High inventories and the lack of demand from markets hardest hit by the virus are putting further pressure on farm gate prices, as well as on export and market prices. The lockdown in various sourcing countries is also affecting the stocking rate of the farmers as well as the operation of factories.
However, based on expectations of when the markets and demand will recover, suppliers can already adjust their stocking rates. In these uncertain times, the question of using a unified marketing approach to stimulate shrimp demand is even more relevant.
The success of the Hass avocado
Increasing supply and demand lagging behind production was one of the greatest predicaments of the avocado industry, according to Allan Cooper, a food marketing specialist who has worked in both the avocado and shrimp industry. However, through the Hass Avocado Board (HAB) – an initiative set up to equip the industry with consolidated supply and market data, research, and a unified marketing approach to boost the sales of the Hass avocado – the tide has turned.
All U.S. producers and importers of fresh Hass avocados are now required by federal law to contribute USD 0.025 (EUR 0.023) for every pound of avocados sold in the U.S. Producers remit this fee directly to the HAB, while importers are charged by customs. When the program was established in 2002, the organization raised USD 17 million (EUR 15.69 million) that year alone. The volume of Hass avocados sold in the U.S. increased from 308 million kilograms in 2003 to 1.08 billion kilograms in 2018, a growth of around 250 percent.
How to increase shrimp demand?
The story behind the rise of the avocado in the U.S. is quite extraordinary, and ideally, all commodities can follow this model and become as successful.
Cooper, who champions the link between the avocado and shrimp marketing model, explains why this initiative is much needed by the industry today. According to him, demand and supply must grow side-by-side, but that is not the situation for shrimp yet. In order to achieve this, marketing, advertising and R&D programs have to be implemented.
Funding Models
Cooper believes that a unified marketing approach is the key to increasing global shrimp demand, and that the U.S. market would be the best place to start.
The first step is to set up a committee consisting of major importers, producers and exporters, which would be responsible for ensuring that the collective fund is used wisely and efficiently. Logically, the next question is where the funding should come from. If we follow the avocado model, importers and producers/exporters would be responsible for the contributions.
However, rallying their collective support is quite the challenge. One way of funding the unified marketing approach is to keep it voluntary. Stakeholders, e.g. large-scale importers or exporters with the capacity and financial means, could lead the way. This way, the initiative could be implemented faster as there is less bureaucracy (e.g. from third-party regulations or government compliance issues) and there’s no need to first convince everyone – hence like-minded people can get the ball rolling quickly.
But, a voluntary model also has its setbacks. For instance, voluntary means non-binding, so participants could back out as soon as they reap the benefits and the project could collapse. Moreover, there is a risk of attracting freeloaders who benefit from the initiative without actually contributing. While there are also arguments that the cost of not doing anything is higher than the negative impact of such freeloaders, this is a roadblock that has been cited by several European and U.S. importers.
The second funding model is the mandatory model, where 75 percent of all importers must vote in favor of initiating a unified marketing approach. It will be regulated by the government of the importing country and will be governed by transparency measures. It could take some time for this mandatory funding model to be achieved: first, to get a consensus among stakeholders, and second, to arrange all the paperwork for government approval. A mandatory approach could be a long-term process, but it would solidify the commitment from participating importers, producers and exporters.
Not everyone is up for this approach, either, though. For the majority of Indian producers we spoke to, making this initiative mandatory could be a hurdle as not all of them have the financial capacity.
The perks of a unified marketing approach
If you’re an importer or exporter, you’d probably want to know what you will get out of this unified marketing approach. In the case of the HAB, the funding is spent on the following efforts: data collection, consumer research, health and nutrition research, retail data collection, and marketing. Clearly, most of these aspects are focused on research.
In any industry, data collection is key to analyzing the market. By studying consumption and trade patterns, companies are able to understand consumer behavior and preferences. This way, they can tailor their products to market requirements.
For example, if research shows that sustainability and traceability are the trends in a particular market, it should be the producers’ priority to develop products with traceable codes or to apply for sustainability certifications. This was the strategy of major Ecuadorian exporters when they tapped into the Chinese market through the Sustainable Shrimp Partner-ship (SSP).
Furthermore, through analyzing consumer attitudes and preferences, importers, as well as retailers, can make certain features of their shrimp product stand out. If research suggests that millennials appreciate ready-to-cook and convenient products the most, you can focus your advertising on easy recipes and highlight the convenience of your product on the packaging.
As evidenced by the avocado model, a unified marketing approach can boost the appeal of a product. The U.S. has embraced the avocado as a healthy food. From avocado smoothies to avocado toast, it’s become a trendy and hip fruit among millennials. Marketing and consumer education about the avocado’s health benefits are at the forefront of this success.
Fragmented industry
To make the unified marketing approach work, commitment, cooperation, and consensus are needed. Currently, U.S. importers are already assessing whether the Avocado Model could be applied to the shrimp sector. Travis Larkin, president of the U.S. shrimp importer Seafood Exchange, explained that the best way to execute this is by establishing an organizing body made up of the major importers and producers that would establish the objectives and “rules” of the marketing initiative.
However, this mandatory approach, commonly known as a “check-off program,” would need government approval and would be subject to regulation by the United States Department of Agriculture (USDA). This is precisely one of the concerns for some importers who worry that the USDA would become involved in regulating the shrimp industry as a whole.
“But these are two completely different things," Larkin said. "Such a marketing approach would be handled through the USDA’s Agricultural Marketing Service, which is separate from its regulatory function. So conceptually we would be dealing with the USDA’s marketing arm, not its regulatory arm. Would the influence of one bleed over into the other? Supposedly not, but for many it’s fear of the unknown, which is sadly one of the most powerful emotions driving our community.”
Unlike the industry behind other commodities, where there are large companies that are well-funded and organized within the sector, the shrimp industry is currently too fragmented to march forward with such a wide-scale initiative. Many small-scale players do not have the financial capacity to support a huge movement, such as in the case of Indian exporters, the dominant suppliers of the U.S. The same goes for the European market, which is composed of several diverse and small-scale importers. The types of products offered are varied, and the supply comes from multiple sources.
While the HAB model allows a percentage of the funds to be allocated in the marketing efforts from the country of origin, some producers are still concerned about losing the “uniqueness” of their own origin-based product if a unified marketing campaign is implemented. Larkin explains that it’s difficult for many importers to make a change when that change does not align with their own interests or motivations. There’s a prevailing mentality of everyone worrying only about their own business.
“But the old adage that ‘a rising tide raises all boats’ is arguably very relevant,” he added. “This program would require relatively little from the participants, yet all would benefit across the board.”
“Everybody needs everybody”
Finding a consensus for a project that may take years to develop, and many more before observing its impact, is a risk many are not willing to take. However, Larkin argues that “everybody needs everybody in this industry.” He cites the recent impact of the COVID-19 pandemic on some major suppliers such as Ecuador in relation to the drop in demand from their main market in Ecuador’s case, China. If a producing country were less dependent on one single market, the impact of a market fallout would not be so detrimental. Hence, increasing shrimp demand globally is key.
While a unified marketing approach is an intriguing and a promising initiative that, if tackled properly, could really propel the shrimp industry forward, it is still far from being realized. It is easy to be drawn in by the successful marketing efforts for products like the Hass avocado, but the fact remains that avocado and shrimp are two very different products, with a very different industry behind them. Reaching a consensus is already a difficult task, not to mention the hurdles of agreeing to a funding model, regulating this fund, and going through all the government processes.
However, as in any challenge, difficult does not mean impossible. The power of collaboration should not be underestimated, and if importers and exporters would work towards the same goal, it wouldn’t matter what kind of shrimp you are promoting, or where it is sourced, the message will be simple: Eat more shrimp!
