Spain is the largest producer of frozen seafood in the European Union.

According to Eurostat data, one-sixth of European marine products are originally from Spain, from which around half go through a freezing process: 42.5% in 2012, 51.4% in 2013 (Source: Food report in Spain 2013 and 2014, Mercasa). 

The retail market of frozen seafood products can be valued at EUR 800 million per year (IRI data 2013: 731+ other frozen fish-seafood based products), a figure that increases to more than EUR 1 800 million if products sold thawed out at room temperature are taken into account (Figures from Food and Agriculture Ministry: Magrama).

When analyzing frozen product purchases by Spanish consumers, it can be seen that more than one-third of this expenditure goes on frozen fish products. This is a particular feature of Spanish consumers not seen in other countries of the EU.

One fifth of all seafood products consumed in Spain go through a freezing process. Consumption of frozen seafood items stabilzed more rapidly than fresh products during the economic crisis. 

Frozen seafood sector is in a period of uncertainty

The year 2013 had the worst sales results for the frozen food market since the beginning of the crisis. Figures from early in 2014 do not seem to indicate that this trend is changing. In the case of frozen seafood the situation is made worse by several factors:

• Variable demand in relation to price in an period of international inflation. In the primary sector, which makes direct use of natural resources, the amount (and price) of product that reaches the market is highly dependent on climate and other natural phenomena. These conditions were not optimal in 2013 and an overall decline in catch (5.5% in volume and 9.2% in value for wild caught and 2.7% in volume and 2.8% in value for aquaculture) was seen (Source: Food report in Spain 2014, Mercasa). This situation seems to have continued in early 2014. In addition in recent years, several countries have increased tariffs applied to seafood, among them China, Thailand and Argentina.In the specific case of Spain, the price of cod rose by 17.5% in 2013, which led to a 39.1% decline in terms of volume (Source: Symphony IRI).
  
  
• Product demand weakening as result of the economic crisis. Even though low cost products can still be bought at reasonably low prices, there are indications that demand even for these products, which were in high demand in past years, is declining. According to Nielsen, pangasius consumption shrank 22% during the first quarter of 2014. 
  
  
• Industry in restructuring process. The leading companies in the market have been hit hard by the crisis and several companies, such as Vieira, Pescanova and Freiremar among others have entered into arrangements with creditors. New administrators are trying to ensure their viability through divestitures, management professionalization, staff adjustments and other streamlining measures, but the uncertainty still remains. In spite of everything, the Pescanova Group remains the outstanding leader of the market.

The increasingly relevant role of retailers

• Greater power of negotiation with suppliers. One of the main tools that retail companies can use in negotiations with suppliers is the Private Label (PL). The demand for PL products has grown almost uninterruptedly in recent years reaching approximately 40% of total sales (According to data from Nielsen, 38.8% of retail sales in August 2014). Private labels are particularly relevant in the frozen seafood sector, where they attract about two out of every three euros that are spent in this sector.

As a result of this power, the success of wholesalers is highly dependent on the decisions of the retailer. Mercadona, the leading supermarket chain by turnover in Spain (according to Deloitte) enabled three of its suppliers to be counted among the top ten leading wholesalers of frozen seafood products (Profand, Mascato and Dimarosa). In contrast Freiremar fell mainly because it lost Eurest as client. 

Another case that illustrates the power of the retailer/distributor is that of frozen door-to-door distributors. Distribution companies like Bofrost or Eismann that offer door-to-door services, also have considerable power in negotiating with suppliers. Not only do they have a nationwide presence with its own distribution and brand, but also because of their multinational status. 

Distributors specializing in frozen food prodcuts with commercial premises form another market niche, occupied almost exclusively by La Sirena, a Spanish chain with 237 points of sale specializing in many kinds of frozen food, with a turnover around EUR 170 million.

Despite their prevalence, the growth of Private Labels has slowed as a result of a new regulation (introduced to improve the functioning of the food supply chain), an aggressive marketing campaign carried out by Branded Brands (BB) and the reduction of the price difference between BBs and PLs. At the beginning of 2014 PLs were 2% cheaper than BBs but by August they were only 0.5% cheaper.
 

• Retailers embrace vertical integration 

Integration processes are characteristic of the fishing industry. It could be considered that the freezing process is undertaken because it is in the interest of some operators to achieve more control over the various stages from capture to consumption.

The companies that mainly entered into the vertical integration processes, both backwards (becoming ship-owners) and forward (transformer, dealing with product elaboration and transformation tasks, wholesale and even retail distribution) were marketing companies. However, for some years now, retail distribution has begun to dictate how the market works.

Mercadona is one of these examples. In addition to playing an essential role in the sustainability of Pescanova by absorbing a good part of their production, the company boosts the business of their suppliers of PLs and manages Caladero, its own marketer. 

This company was acquired by Mercadona in 2010 and was subjected to an extensive restructuring process. As well as extending its commitment of quality assurance to fresh fish, the company was the thirteenth marketer of frozen products in the country in 2013 and what is more noteworthy, it is expanding.

Frozen seafood and fresh fish from aquaculture allow for substantial consumption and the maintainance of a Mediterranean dietary pillar

The Spanish consumer spends an average of EUR 200 a year on seafood products, acquiring approximately 15 kg of fish, 7.5 kg of other seafood and 4 kg of canned fish.

Traditional fishing (fresh caught marine products) has a limited capacity, with significant declines over the past years (in 2013 a 20.2% fall in volume and 23.2% in value; in 2012, 10.8% and 8.2% respectively;  Source: Food report in Spain 2014, Mercasa) and constitutes about one-third of the Spanish production (36.5% in 2013; Source: own elaboration from “Food report in Spain 2014” data, Mercas).

Most seafood products sold as fresh

Approximately 60% of the seafood products are sold at a temperature above freezing. However, this includes both never frozen products as well as products that have been defrosted after being initially frozen, both from capture fisheries and aquaculture.

Prices of fresh wild fish, aquaculture and frozen fish differ considerably

The seafood sector undergoes considerable variation depending on the season, which causes price volatility, especially for fresh-caught seafood, because it is difficult to estimate the offers.

During the Christmas of 2014/2015 these differences in prices were seen in supermarkets in Madrid:

onsumers look for assurance that seafood products have the highest quality
 

The Royal Decree 1380/2002 for the identification of frozen and deep-frozen fishery, aquaculture and seafood products is the standard for labelling of these products in Spain and informing consumers about them. The aim is to label and advertise products with precise information on species, method of processing or extraction and origin. It is noteworthy that there is a special label to indicate clearly whether a product that is being sold as fresh has previously been frozen.

Organizations like APROMAR (the Spanish Marine Producers Business Association) point to massive weaknesses in the application of labeling and demand higher standards to ensure consumers are properly informed, with regard to additives, for example. In this way, they consider that Spanish producers can demonstrate quality parameters that justify the price-premium over products from third countries. However, authorities are cautioned as excessive regulations could also constitute non-tariff barriers to international trade, with the subsequent deterioration of market competition and the breach of international treaties signed by the Spanish government with the WTO.

Another notable legal norm is the Royal Decree 1420/2006 on the prevention of the occurrence of the parasitic worm Anisakis in fish products served to final consumers or communities by establishments. It obliges restaurants to freeze any fish that is going to be offered raw or rare, unless they have proof that it has been frozen prior to its acquisition, and the customer is informed.

This has a disadvantage in that customers have a negative association with frozen fish, perceiving it as having a lower quality, and therefore restaurants are tempted to break the law. 

Spain has a positive trade balance: differential between production and consumption of frozen seafood products

As Spain exports a considerable amount of its own production and in any case, domestic demand exceeds production, Spain has to import a large quantity of seafood products. In 2013 there was a negative trade balance of EUR 428.9 million, with a coverage rate of just 46.8%.

This situation is significantly different with regard to frozen seafood, with a positive balance of EUR 127.9 million and a coverage rate of 120.2% in 2013. Even in this category, though, extremely different situations are observed between frozen fish, with a clearly positive balance, and other frozen seafood, with a deficit in crustaceans and molluscs.

Trade in frozen seafood products is mainly with non-EU countries, both exports (71.6% in volume and 65.2% in value) and imports (74.9% volume and 79.3% in value).

Outlook

Demand, both internal and external, for products in the Spanish frozen seafood sector is considerable and consistent, with consumers being increasingly informed and demanding.

The sector is currently undergoing in a restructuring process that will result, in the medium term, in a situation of greater stability, in which it is predicted that the role of distribution will increase greatly in importance.