« January 2007 Table of Contents
International Sourcing: Iceland transformed
Seafood industry shifts focus from frozen to fresh
By Alda Möller, Ph.D.
January 01, 2007
Pure. Natural. Unspoiled. That's how the Icelandic Tourist
Board describes the 40,000-square-mile island. The same can be
said for the picturesque fishing villages, another recurring
marketing theme for Iceland, whose economy is heavily dependent
upon fisheries; seafood products comprise 60 percent of all
commodity exports. And strict fisheries regulations ensure that
the Icelanders will have a sustainable resource for future
"Within the seafood world, Iceland is top of mind for high
quality and has one of the best-managed fisheries in the
world," says Tom Sherman, VP of marketing at Icelandic USA in
Newport News, Va. "It is the 'gold standard' of cod and haddock
U.S. seafood buyers have looked to Iceland ever since
freezing plants were developed there in the 1940s. With
Iceland-owned U.S. sales companies setting quality standards,
the United States quickly became the major market for Icelandic
cod and haddock fillets. Coldwater Seafood Corp., marketing
products under the Icelandic brand, and Iceland Seafood Corp.,
which sold products under the Samband of Iceland brand,
initially were the only two Icelandic companies licensed to
export to the U.S. market.
Coldwater Seafood was founded in 1947 as a subsidiary of the
Icelandic Freezing Plants Corp., which in turn was owned by a
large number of freezing plants. Iceland Seafood, founded in
1951, was also under the ownership of a group of processors in
Iceland. Both companies operated secondary processing plants in
the United States with a network of brokers. Products from
Iceland were their mainstay for a long time, but they gradually
sourced more whitefish from major producers worldwide as
seafood became a truly international business.
Iceland's seafood industry began to change in the 1990s,
when export-license restrictions on seafood were lifted.
Icelandic corporations were listed on the Icelandic Stock
Exchange and processors sold most of their shares. Coldwater
changed its name to Icelandic USA, and Iceland Seafood briefly
became Samband of Iceland. F inally the two arch-competitors
merged in 2005 under the Icelandic USA name, running processing
plants in Newport News, Va., and Cambridge, Md. The company
announced last month that the Maryland plant would close by
"There's been tremendous progress in every area of the
company to consolidate itself and get at the synergies
[originally] identified in the merger," says Sherman.
Those synergies include implementing a consistent
information-technology platform across both companies, SKU
rationalizing (paring down two product lists to a manageable
number) and recently launching a new distribution center in
"In many cases we were competing for raw materials and
customer share; [the merger] eliminated a major competitor.
We're not fighting against each other anymore," notes
Today, a fair number of Iceland's exporters supply the U.S.
market; major players in fishing and processing have become
fully integrated companies with their own sales departments.
With consolidation and other structural changes in Iceland and
abroad, the past decade has been nothing short of a complete
Iceland's fisheries operate under an
individual-transferable-quota system that became law in 1990,
and before that the management system was with quotas based on
total allowable catch (TAC). The ITQ system is well established
but still does not seem to be near its basic goal of rebuilding
Iceland's cod stocks, as evidenced in reports from the Marine
Research Institute (MRI) of Iceland.
However, some in Iceland believe ITQs are working well for
the country's seafood supply.
"The [ITQ] system has proven to be an important tool for
securing sustainability of the fishing grounds around Iceland.
It has also created stability for the seafood companies that
are now operating in a much more stable environment, making
them able to develop their business and become more
profitable," says Ásmundur Gíslason, an international corporate
banking analyst at Glitnir Bank, a leading financial group in
Iceland that specializes in the seafood industry.
Cod, by far the most important species in Icelandic waters,
represents almost 40 percent of seafood exports by value. In
recent years, the annual catch has been close to 200,000 metric
tons, and it is likely to remain at that level, according to
scientists at the MRI, including Dr. Hjorleifsson, who
discussed the state of Atlantic cod stocks at the recent
Groundfish Forum in Lisbon, Portugal.
The positive news is that haddock recruitment has been good
and the resource is quite strong, according to the MRI reports.
Landings have doubled in the past four years and are estimated
to reach 100,000 metric tons in 2006. In 2006, the haddock
catch is therefore likely to reach 50 percent of the of the cod
catch in terms of volume, the first time in 100 years of
Europe has become a magnet for whitefish products from all
over the world, including Alaska pollock, South American hake,
New Zealand hoki and Icelandic products. Europe's whitefish
demand, coupled with the weak U.S. dollar (against a strong
British pound and euro) and price increases on the European
market, led to a decline in Iceland's trade with United States,
especially with respect to cod products. The United States
accounted for 7 percent of Iceland's cod export value in 2005,
down from 16 percent four years earlier. Haddock exports to the
U.S. market were 32 percent of the total in 2005, down from 50
percent in 2001.
"In the last 10 years Europe has for the first time appeared
as a real and competitive alternative to the North American
market [for cod and haddock products from Iceland]," says Helgi
Anton Eiriksson, global seafood director for Glitnir.
"Fresh loins to the UK and continental Europe are now the
best options for many producers, and many plants have changed
from traditional freezing plants to producing a significant
share of the output into fresh products flown to Europe (and
lesser extent to the United States)."
With increased haddock landings, the value and volume of
this species have actually risen significantly on the U.S.
market. Haddock became the No. 1 export from Iceland to the
United States in 2005 in terms of value and volume. Cod, the
undisputed king in the 60-year history of U.S. seafood trade
with Iceland, took second place.
The appearance of Chinese frozen-fillet imports in Europe
also contributed to Icelandic processors' focus on producing
fresh product for that market. Icelanders pride themselves on
fresh and once-frozen products; whole fish are not frozen and
reprocessed in China. Fresh processing is now common at many
large freezing plants in Iceland. Exports of fresh cod and
haddock fillets and portions have tripled in the past 10 years,
and it is estimated that 44 million pounds, valued at about
$200 million, were exported in 2006, according to Statistics
Iceland, the official bureau for Icelandic statistics.
Iceland's cod catch is divided among its processing
industries: 44 percent goes to the freezing industry; 42
percent is processed into saltfish; and 14 percent is processed
into fresh fillets and portions. Frozen fillets account for 51
percent of haddock raw materials, while fresh fillets and
whole, gutted fish represent 24 percent of the market
The largest primary processors of frozen cod and haddock, in
terms of quota allocation, are Brim, with a plant in Akureyri;
Samherji, with a plant in Dalvik, and also frozen-at-sea (FAS)
processing capabilities; Visir, with three plants, the largest
in Husavik; Thorbjorn, with a plant in Grindavik, and FAS
processing; HB Grandi with two cod and haddock plants, the
larger in Akranes, and FAS processing; Fisk Seafood, with three
plants, the largest in Saudarkrokur, and FAS processing. All
six companies produce fresh and frozen fillets for the global
market, and some are also large saltfish producers.
The frozen market
Frozen Iceland seafood products on the U.S. market are
skinless and boneless FAS fillets and fillets from land-based
producers. The FAS fillets are size-graded and interleaved,
while the land-based processing is dedicated to IQF fillets and
portions, with a significant production of cello-wrapped
5-pound packs - a form that's survived many generations of
new-product development. There is also significant production
of haddock-fillet blocks; for cod, fillet blocks are strictly a
Approximately 11.5 million pounds of frozen cod was exported
to the United States in 2005, down 60 percent from 2001.
Land-produced fillets and IQF portions were still the main
Frozen haddock exports show a much more positive trend. The
total for haddock in 2005 was 17 million pounds, up about 90
percent from 8.9 million pounds in 2001. The chief products
were land-produced fillets, but the supply of FAS fillets to
the market doubled
Icelandic USA is the chief supplier of frozen cod and
haddock products to the U.S. market, with an estimated 60
percent volume share in 2006.
The company's largest product categories are land-produced
IQF fillets and 5-pound packs, followed by FAS fillets. Almost
all of the products are sold to broadline foodservice
distributors, historically the main market for both the
company and the country's products in general, says
Icelandic's Sherman. But in the past two years, the
casual-dining and QSR categories have claimed an increasing
part of Icelandic's business.
"We've done a better job adding value to the fillets out of
Iceland," says Sherman.
Other suppliers of frozen products are the Icelandic Sales
Agency, with about 7 percent volume share; Kambanes, with 5
percent volume share; Iceland Seafood, with 4 percent volume
share; and a number of other smaller companies. These exporting
companies sell to U.S. importers and brokers or have their own
agents in the United States, including Legacy Seafood of
Cranston, R.I., and F.W. Bryce of Gloucester, Mass.
Fresh haddock and cod
Fresh products are primarily skinless and boneless fillets,
but also skin-on haddock fillets. Iceland's exports of fresh
cod fillets to the United States are still small, at 2.5
million pounds, and declining. On the other hand, haddock
are increasing rapidly, with the U.S. market expected
6 million pounds in 2006, which is more than a third
of Iceland's production of fresh haddock fillets.
The largest suppliers of fresh fillets to the United States
are Saemark, with more than 50 percent of the volume, followed
by Danica, the Iceland Freshfish Co. and Tros. All work
directly with U.S. processors and distributors, such as
Boston's North Coast Seafood, Aquanor Marketing and Slade
Gorton & Co., which supply a wide range of fresh products
for foodservice and retail. Daily product shipments arrive at
airports in New York, Baltimore and Boston.
A "new" Icelandic
fish to consider
Atlantic pollock is a resource that may be almost forgotten
in the U.S. market, although it was well known when supply was
abundant 15 years ago.
The pollock stock in Icelandic waters has rebounded,
according to MRI reports. Landings have doubled in four years
and are likely to reach 80,000 metric tons in 2006. About 80
percent of the resource is FAS in the 8- to 16-ounce and 16- to
32-ounce fillet sizes.
Atlantic pollock has a firm texture and light-brown flesh
color and is eminently suitable as a lower-price alternative to
cod and haddock. Iceland exported more than 12,000 metric tons
of FAS pollock fillets last year, mostly to Europe.
Fresh-fish marketing depends upon efficient supply-chain
management, including reliable supply, a quick communication
system and transportation to market. Icelandic processors have
had all this in place for several years. Given this solid
infrastructure and sound fisheries management, Iceland's
transformation as a global supplier of fresh whitefish appears
Alda Möller is a s eafood industry