State of the Seafood Industry Looking to 2021 John Sackton Seafood - PowerPoint PPT Presentation

State of the Seafood Industry Looking to 2021 John Sackton Seafood Datasearch Fisheries Council of Canada Ottawa October 2020 1

Background • 40+ Years in Seafood Industry • Crab, shrimp, lobster and cod market analyst since 1997 • Price and market outlooks for Atlantic Canada, Alaska, and US West Coast • 2005-2018 Price arbitrator for Alaska crab • Expert on Mussel and Oyster Markets • Co-Founder of NFI’s Global Seafood Market Conference • Annual Market Review for Fisheries Council of Canada • Founder of Seafood.com News and Seafood Datasearch 2

Covid Disruption has replaced Trade War for Seafood Industry • Last year we focused on trade issues, especially the benefits to Canada of the US trade war with China. • This year Canada’s Seafood Industry has been very resilient in face of Covid-19 • Diversification of Markets in lobster has been key driver • However US remains largest market by volume • US is on a knife edge, with potential for lower purchases from Canada • Foodservice and Retail Sales have seen major changes • Our Market Review for Major Species will include – Lobster – Snow Crab – Salmon – Cold Water Shrimp – Others: scallops, cod, mussels and oysters, etc. 3

Review of this spring • Early fears of harvest disruptions did • Canada managed to complete not materialize spring crab and lobster seasons – Vessels able to fish • Seafood has been the food most – No widespread plant shutdowns ‘missed’ with restaurant • Adaptation to foodservice shutdown shutdowns. has been dramatic at both wholesale and consumer level leading to surge in • Seafood Suppliers/Producers retail seafood received nearly $1 billion in PPP • The US PPP program and federal funds. income support through July has been • Seafood demand, helped by critical in maintaining consumer income support, has led to spending and company survival shortages and price spikes for some items 4

Lobster and Crab had real growth in 2019 Major Seafood Export Commodities 2,500,000,000 2019 2,000,000,000 YTD Comparison 2019/20 1,500,000,000 $CA 1,000,000,000 500,000,000 0 lobster crab shrimp salmon (incl wild) 2015 2016 2017 2018 2019 YTD 2019 YTD 2020 Salmon and shrimp were slightly lower Source: Canadian customs data Comparing YTD July 2020 with YTD 2019, lobster and crab had lower value, but not shrimp and salmon 5

Canada is still heavily tied to US Market More so in first half of 2020 Total Canadian Seafood Exports $4,500,000 70% 65% 63% 63% $4,000,000 59% 60% 61% 60% 59% $3,500,000 50% US $3,000,000 China (incl vietnam, HK) EU 40% $2,500,000 Other Asia $CA 000’s Other US percent $2,000,000 30% China percent EU percent $1,500,000 Other Asia percent 20% Other percent $1,000,000 Source: Intracen customs data 10% $500,000 $0 0% 2014 2015 2016 2017 2018 2019 2020 6

US is dominant market for snow crab and fzn lobster; Less so for live lobster Snow crab Fzn Lobster Fresh salmon Live Lobster 7

Coldwater shrimp by Qtr Shell on offshore Q2 similar to 2019 Cooked and peeled Q2 far below 2019 8

China is first major country to recover economically from pandemic China’s September • purchasing manager Index was 51.5, 60%Higher than the Consensus forecast China is the only • major economy expected to post GDP growth this year 9

$1,400,000 80% China has become Canada’s 2 nd most 70% $1,200,000 important seafood partner 60% $1,000,000 Despite 50% $800,000 $USD 000’s improving 40% diversification, $600,000 30% Canada’s $400,000 20% seafood industry still $200,000 10% depends on US $0 0% 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q market, and - - - - - - - - - - - - - - - - - - - - 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 n n n n n n n n n n n n n n n n n n n n i i i i i i i i i i i i i i i i i i i i e e e e e e e e e e e e e e e e e e e e this increased u u u u u u u u u u u u u u u u u u u u l l l l l l l l l l l l l l l l l l l l a a a a a a a a a a a a a a a a a a a a v v v v v v v v v v v v v v v v v v v v d d d d d d d d d d d d d d d d d d d d e e e e e e e e e e e e e e e e e e e e t t t t t t t t t t t t t t t t t t t t in 1 st half 2020. r r r r r r r r r r r r r r r r r r r r o o o o o o o o o o o o o o o o o o o o p p p p p p p p p p p p p p p p p p p p x x x x x x x x x x x x x x x x x x x x E E E E E E E E E E E E E E E E E E E E US China (Incl HK & Vietnam) Europe Japan Other Asia Other US Percent 10

Canada is dominant Snapshot of Canada's Exports to China in 2019 exporter to china for 1200000 120% lobster and fzn coldwater shrimp 1000000 100% Market share for major exports: Lobster 72% 800000 80% Fzn Lobster 100% Coldwater shrimp 45% $CA 000's 600000 60% Frozen Crabs 39% Live Crab (Dungeness) 15% Hake 55% 400000 40% 200000 20% 0 0% e n p ) n t e r u e v s e k z m s i F b a h z L e i o i H t r r n l O r h r a e e F e S H t g t s s b b r n & b e a o u o t r t D L a C o L w ( b e r d v u l o i T l C b a r C CA Exp China Imp Canada Market Share 11

Questions for today • Is impact of covid-19 different than other seafood supply impacts in the last 10 years • If so, what is the difference • Are some markets for specific species reacting differently than others • What dynamic will drive sales in 2021 12

Pandemic has hit different sectors unevenly • 70% of US Seafood dollar sales are at Foodservice • Shut down of foodservice sector has had huge impact • But impact was initially mitigated • Next few months critical in determining extent of long-term damage 13

US restaurant performance lags Germany and Canada Seated Diners Since August 1st 40 Percent Change in Seated Diners Year over Year 20 0 g g g g g g g g g g g g g g g g p p p p u u u u u u u u u u u u u u u u e e e e A A A A A A A A A A A A A A A A S S S S - - - - - - - - - - - - - - - - - - - - 2 4 6 8 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 1 1 1 1 1 2 2 2 2 2 3 -20 -40 -60 -80 Canada Germany United States Linear (Canada) Linear (Germany) Linear (United States) 14

Seafood Distribution is not out of the woods $2.2 Billion in uncollected debt Recent Congressional testimony from Slade Gorton: • Lost 70% of their business • Huge problem with bad debt; restaurants can’t pay for what they ordered last spring • Nationally $2.2 billion in bad debt is overhanging seafood distributors • Bank Lending secured by inventory is freezing up as inventories get smaller 15

Industry got reprieve from retail seafood IRI Weekly Retail Data: Seafood, Meat, Deli Meat 100=no change YOY 180 Seafood 170 160 150 140 Meat 130 120 Deli Meat 110 100 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 / / / / / / / / / / / / 4 1 8 5 2 9 6 2 9 6 3 0 1 2 2 / 1 1 2 / / 1 2 3 / / / 7 / / / 8 8 / / / 6 6 6 7 7 7 8 8 8 deli Meat Meat Seafood 16

Frozen category very strong at retail IRI Weekly Retail Data: Frozen, General Food, Refrigerated 100=no change YOY 135 130 125 120 115 110 105 100 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 / / / / / / / / / / / / 4 1 8 5 2 9 6 2 9 6 3 0 1 2 2 / 1 1 2 / / 1 2 3 / / / 7 / / / 8 8 / / / 6 6 6 7 7 7 8 8 8 Frozen General Food Refrigerated 17

Three trends helping seafood consumption • Big Increase in home cooking • Big increase in use of frozen food • Continued emphasis on health during pandemic Data from informal survey of changes in seafood consumption by SeafoodNews 18

Survey shows increased retail buying, buying from home delivery service 19

US small business revenue makes up 45% of GDP: it has not recovered 20

Restaurant traffic recovery is stalling as summer ends Open Table Restaurant visits 20 0 1-Jun 8-Jun 15-Jun 22-Jun 29-Jun 6-Jul 13-Jul 20-Jul 27-Jul 3-Aug 10-Aug 17-Aug 24-Aug 31-Aug 7-Sep 14-Sep 21-Sep -20 -40 -60 -80 -100 US Caanda 5 per. Mov. Avg. (US) 5 per. Mov. Avg. (Caanda) 21

Spending growth stalled as stimulus programs ended Consumer spending stalls Personal income falls Change in real disposable income 20.00 15.00 Monthly Change in Personal Income 10.00 5.00 0.00 Jan. Feb. March April r May r June r July r Aug. p -5.00 -10.00 22