Aquaculture is the name given to the ‘agriculture of aquatic species’. The fundamental factor fueling the industry as a whole is human consumption. We need to ingest animal protein for our bodies to work correctly, and fish plays a huge role in this. Over the past 6 decades, per capita meat consumption has almost doubled.
Meat has been historically scarce and, therefore, expensive. However, a growing global economy has helped increase average household incomes, at the same time as increasing meat supply, making it more affordable and accessible from both ends. Moving forward, the human population is expected to continue increasing, in line with meat consumption. Curiously, because of the scarcity of land-based protein production, how environmentally unfriendly is and its higher inefficiency compared to fish’ production, fish supply and demand are expected to fairly outpace overall meat.
As observed in the chart above, the average person eats almost 2x seafood as it did half a century ago. Global production of fish has quadrupled while human population doubled, explaining this gap. And, out of the total 492M tones of the global protein consumption (estimated by the Food and Agriculture Organization), fish equated to 161M, and salmon to 2.6M.
Within seafood, the two major methods for production are aquaculture and wild catch. The past six decades have been accompanied by a huge development of aquaculture, outpacing wild catch, and as of 2022, had a 56% share of seafood consumption. Specifically in salmon, about 80% of the worlds’ salmon harvest is farmed. This trend is to continue given the scalability each method supposes.
Moving forward, Mowi’s handbook states multiple trends that are expected to keep fueling salmon’s demand. Leaving aside population growth, which is the ultimate secular tailwind, there’s:
Health and aging population. Healthcare’s focus is expected to switch to prevention, leading to nutrition becoming essential. Fish, and particularly salmon, are considered to be a vital source of protein.
Growing middle class. As the average person gets richer, meat demand and kg per capita should continue to increase.
Climate change. The world has become increasingly more aware of environmental issues. As a consequence, aquaculture in general has outpaced other agricultural processes due to the high efficiency at which fish can be farmed. The latter’s carbon footprint is much lower and it consumes less liters of water per kg of meat than other animals.
Note: the table includes salmon, not fish in general
Resource efficiency. Protein retention measures ‘how much animal food protein is produced per unit of feed protein fed to the animal’. Feed conversion ratio measures how many kg of feed are needed to increase the animal’s weight by 1kg. Salmon is far superior to other animal protein sources.
Ultimately, aquaculture has fairly outgrown agriculture and, within aquaculture, salmon is one of the species that have benefited the most. Over the past 10 years, the value of salmon sold has increased at an 11% CAGR, while volume has increased at a 4% CAGR in the same period. The strong underlying and unattended demand for salmon allow for a fundamental pricing power.
“The total protein market in the world is 400M tons, out of which 2M tons is salmon. The average growth of this market could be something like 2-3%, while salmon maybe grows of 6-8%” Regin Jacobson, Bakkafrost CEO; 2018
The barriers to entry this industry are interestingly high and its natural characteristics have led to continuous consolidation. We’ll now get into the barriers…
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