Seafood processing survey yields surprising results
showing primary processors are making bigger profits.
A Sea Fish Industry Authority survey carried out in the UK is showing primary processors are making bigger profits.
According to the Seafish survey, seafood companies carrying out both primary and secondary processing operations can achieve better profitability than firms focusing on higher value end products.
The report, Costs and Earnings of the UK Sea Fish Processing Industry 2001, shows that for primary and mixed processors the average operating profit margins were higher than those achieved by companies engaged only in secondary processing.
Findings from the survey prompted further analysis of published accounting figures for companies with over 50 full time staff. This showed that between 1997 and 2000, the average operating profit margin of mixed processors rose from 0.8 per cent to 4.9 per cent, while for secondary processors, the average operating profits as a percentage of sales dropped from 3.7 per cent to 2.0 per cent.
Seafish business economist Hazel Curtis said that the general perception of secondary processing as being the most profitable was not always the case.
She added: "You would expect that companies focusing on only high value adding activities, such as breading, battering, smoking or preparing ready meals, would achieve higher margins than primary or mixed processors.
"While there are some very large, profitable secondary processors, our findings show an increase in profitability for mixed processors from 1997 to 2000.
"Reasons for this trend are not immediately obvious but a number of factors could be contributing to the picture, including downward price pressure by main customers of secondary processors, costs of research and development of new products and more costly promotional activities required by secondary processors. Further research into business economics of vertical integration within processing would give some of the answers."
Seafish drew up the survey in response to requests from processors to evaluate the profitability of various types of processing company, and to find out how well they are performing compared to other companies in the same sector.
Curtis added: "The information arms managers to make important strategic and business choices about what type of seafood is processed, the type of processing, the degree of mechanisation and their customer profile.
"Using this information, processing managers will be able to compare their financial performance to others in the sector and find out how much room there is for improvement in the business that they do."
The survey, carried out by Curtis and Jonathan Bryson, targeted 540 UK processors with information gathered from a questionnaire, interviews and published accounts.
