MARKETING AND PROCESSING OF PRAWNS

3.1 BACKGROUND

Market research addressed four areas affecting placement of Thailand's current and future production of Macrobrachium. As presented in the following sections, these are : A) Domestic Marketing and Sales, B) Export Market Research, C) Processing in Thailand and, D) Recommendations for Updating Studies. Each section utilized different methodologies for study. Procedures incorporated, therefore, are outlined prior to discussion of the findings. A list of interview references in provided in Annex 12.

3.2 DOMESTIC MARKETING AND SLAES

3.2.1 Methodology:

Domestic market survey was conducted by personal interview, based on a profile questionnaire (Annex 13). Hotel and restaurant mangers and chefs from fifty establishments in six provinces were surveyed (Bangkok, Nonthaburi, Pathumtani, Samut Sakron, Samut Prakarn, and Chacheongsao). Selection was made by random sampling from restaurant/hotel guides. These business were classified by the following type:

of the 26 establishments sampled in Bangkok, twenty were Thai food restaurants and six served menus of other ethnic origins. Data was additionally collected from retailers, customers and wholesalers operating within the Bangkok area.

3.2.3 Current Situation:

Freshwater prawn is classified as a luxury seafood item, competing with other crustacea such as lobsters, crabs, and sea prawns, ie. Burma shrimp or jumbo tiger prawn. Most Macrobrachium consumption occurs in and around major cities and ocean resort areas and is targeted at population segments of higher disposable income, and the tourist trade. Freshwater prawn, or “Khung” is primarily a restaurant item with over 80% of all distributions being consumed as menu selections rather than household preparations. By quantity, less than 20% of the available product is consumed by the tourist sector (Annex 14.1).

Prawns are distributed in three forms; live, fresh–chilled, and frozen. The form accepted and preferred is dependent on the class of restaurant, use, and form of presentation. Restaurants specializing in seafoods will often have “live” tanks or ice display cases where the daily selection is exhibited. Off all establishments surveyed, over half (54%) reported daily requirements of under five kilograms; while more than three quarters of the restaurants required less than ten kilograms per day. Only 6% required quantities exceeding 20 kg/ day (Annex 14.2). Preference for form is highly dependent on menu specialization. Restaurants offering mixed–general menus are less likely to have live tanks or ice display cases and hence rely on the frozen form to a greater degree. Most prawns available are supplied fresh. Half of all restaurants reported stocking the fresh product for menu preparation while only 6% relied solely on frozen stocks (Annex 14.3). General preference for form indicates a majority (76%) for fresh–chilled (Annex 14.4). This is probably related to availability of harvested product, and requirements of maintaining live stocks both by the wholesaler and restaurants. This correlates closely with those establishments reporting no product shortage (84%) on a day to day basis (Annex 14.5).

It is interesting to note that larger requirements per given period of time will also affect the form selected. One procurer of prawns, whose requirements range from 3–400 kg/month found sourcing that quantity with assurances of supply and price was next to impossible. While the preference was for fresh–chilled forms, inability to contract for that form in advance for a set price necessitated the stocking of frozen inventories. In frozen form, and depending on clientele served, substitution became more prevalent. Where end consumers were primarily tourist, sea prawns were often used from frozen stocks. In most Thai restaurants however, if live, fresh, or frozen Macrobrachium was not available, most reported cessation of Khung menu items rather than substitution using sea prawns.

Most restaurants purchased and preferred the large size prawns of under 10 per kilogram count (heads–on). These larger sizes were reserved for use as center piece menu items (broiled or barbequed prawns). Preparations where size and form were disguised (curries, soups, mixed dishes, etc.) tended to rely on smaller sized prawns and more on the frozen forms (Annex 14.6). Prices paid for these sizes (under 10/kg) generally range from $10–$12/kg heads–on (฿200–฿240/kg) and are comparable to the price paid for sea prawns of similar size (Annex 14.7). Live prawns commanded the highest price, often ranging up to 50% higher than the value for fresh–chilled forms. Shortage of the large sized prawns has created premuims which are reflected in overall prawn values. One importer revealed that imports of smaller sizes are easy to secure; however, it is the larger prawns that create the demand and establish the price. Overall price for Macrobrachium has exceeded a 20% retail value increase per year since 1977. While this trend may reflect shortage for certain size demands, it also has a limiting effect on the magnitude of that demand in the long run. Seasonal price fluctuation occur with general peaking towards the end of the year (Annex 14.8 and 14.9). This may be due to increased requirements towards the holiday season, coupled with off-season scarcity of the product. As expected, prices are lowest during the normal harvest season in the first quarter of the year.

The distribution channel in Thailand is relatively simple, with three levels between producer or importer and restaurant outlets and household consumers (Chart 1). There is currently little bargaining at each level, unlike most other channels engaged in seafood distribution. This is attributed mainly to the shortage of large size prawns and the overall demand growth of consumers. As home production augments supplies, bargaining will prevail at the wholesale level, which in turn, will affect the price secured by the producer or importer. Nearly 75% of all restaurants secured supplies from either a wholesaler or from a retailer. Direct sales between producer and restaurant accounted for only 2% of responses (Annex 14.10).

Chart 1

DISTRIBUTION CHANNEL FOR FRESHWATER PRAWNS IN THAILAND

Imported stocks are procured by about a dozen firms, the largest of which is government controlled (Cold Storage Organization). Most imported supplies come from Burma and are a wild caught product. It is estimated that yearly imports exceed 150 metric tons. Most imported prawns are of the large size, filling a demand that local farms, in general have not opted to meet. Most imports are in the frozen form, with heads–off. In many respects, importers have been able to judge the market and react to the demand much more quickly than the home producing industry. For one thing, there is no capital requirement decision needed to supply the size or form demanded by the market. Secondly, as long as farm reared prawns and wild caught stocks remain largely undifferentiated in the consumer's eyes, there is more incentive to import the cheaper product and force substitution to fulfill the demand. The most common way to protect developing home industries in these situations is to legislate import restrictions or impose quotas on competing products. However, such actions will not address market requirements if producers opt not to grow out their crop to the desired sizes.

3.2.3 Market Potential:

Emphasis on the export market, and the limited time available, precluded detailed study of domestic market potential. However, from the retail level, the outlook for prawn demand is bright. Nearly 70% of all restaurants reported anticipated annual growth requirements of up to 10%. Fourteen percent reported growth requirements exceeding 15% annually. Surprisingly however, 16% anticipated decreased requirements and these were associated with cost increase and turnover rate experienced with prawns as menu items in the last few years (Annex 14.11). It is anticipated that live demand will increase as production and pricing becomes more competitive. Greatest growth at the retail level can be expected in the fresh–chilled form, demand again being dictated by price. Competition in the frozen form will be fierce, since imports of wild caught stocks will always be a lower cost substitution.

3.3 EXPORT MARKETING

3.3.1 Methodology:

Market modeling was initially established to guide export research. The model was predicated on a) markets of greatest consumption potential within the closest proximity to Thailand and, b) consideration that would derive the highest profit margins, providing incentive for export. Preshipment requirements were also investigated to determine general procedures for exportation of perishables as they pertain to Banking, Customs, Mode Selection and Shipping Agents, see Section 3.3.2. No assumptions were made about new product entry factors, pricing, channels of distribution, packaging, or product characteristics for these became the premise of research. The model established three market scenarios potential: Singapore for its proximity to Thailand and known consumption patterns of seafood products; Hong Kong for its dependence on seafood related commodities for local consumption and trade; and Japan for its dietary preference of seafood proteins and consumption potential for premuim priced products. A summary Matrix of current conditions for these markets follows the individual country discussions (Table 1) on page

While research focused on potential for consumption of Macrobrachium in these three markets, it was not limited to exclusive use as an imported item. Trade for re–export, further processing, and business structure were also investigated to establish and distinguish distribution characteristics from consumption patterns.

In each of the markets studied, lists of seafood and related product traders were secured from government agencies, telephone directories, trade associations, and trade sections of selected embassies. Referenced contacts and, in some cases, random selection of traders from the lists were made for interview purposes. These firms were initially contacted by telephone to establish interview appointments. The ease of contact was somewhat indicative of social and business structure within each market; the simplest being Singapore and the most difficult being Japan where introductions are most commonly required. Spot checks were made in local fish markets as well as at selected restaurants specializing in seafood.

Lists of traders in each country were complied along with addresses and telephone numbers. These lists (Annex 15) must be futher qualified on a business contact level once export potential is achieved. Within the time and scope of this project, the lists should serve as an identified source for ground level contacts.

3.3.2 Fundamentals for Prawn Export Marketing:

This section summarizes the techniques applicable to the prawn export market and is intended to assist the industry in its approach to this new topic.

There are five fundamental considerations which must be addressed in the export process. These considerations are: a) Location of the customer, b) Negotiation of the terms for export, c) Financing, d) Requirements of shipment, and e) Communications and follow through.

Location of the Customer

Finding an export customer is often an art as much as it is a science. In most cases the two parties are unknown to each other in past business dealing, and either the exporter has located the buyer for his product or the importer has sourced out the needed suppliers. Irrespective of who seeks out the other to establish a trading relationship, there are numerous ways in which either exporter or importer can facilitate their search for prospective partners. Among these are:

1. References from personal friends
2. Industry Association membership lists
3. Telephone books - Yellow page advertisements
4. Reference from Economic Trade Section of Embassies
5. Chambers of Commerce directories
6. Reference from local market/retail outlets/restaurants
7. Reference from Fisheries Departments and Universities
8. Export or Import Trade Directories
9. Industry Wholesaling Groups.

Once a prospective customer or contact list is secured, communicational follow up is required to establish “interes” for engaging in business. Integrity and reputation of a prospective partner is often times tested only by the experience of conducting business with that partner. However, background checks on a potential customer, especially where the volumes of trade is expected to be large or where the exporter may feel that peace of mind warrants such a search, can easily be obtained by securing banking references. Most of the risks involved in trade are financial in nature, and a bank's willingness to vouch for its customer's past standing and credit worthiness is usually sufficient background for establishing a business relationship.

Negotiation of Terms

Once “interest” has been established, negotiations on specific trade terms must be conducted. Usually, this process occurs by letter, telephone, or in person; the choice being often volume and value related. Terms become the basic trade instructions and typically will include the following conditions:

1. Specification of the Issuer and Receiver and address (exporter and importer)

2. Statement of the Commodity being traded

3. Weight, value, and quality of the commodity

4. Shipment terms - Documents required, mode of shipment, packaging or packing, and other shipping requirements

5. Terms of payment - F.O.B. or C.I.F., credit limitations, and form of payment.

These terms are usually recorded in an agreement (Contract) or on a contracting document for each transation (Letter of Credit). It represents the basic understanding of trade between exporter and importer and becomes the source document for arbitration in the event of default by one or both parties.

Financing

Shipment requests are usually made by Letter of Credit (LC) or on Credit. Both of these methods require some involvement of financial institutions in the collection for exported goods on behalf of the exporter. In most countries, the majority of transactions will occur with LC's; Thailand is no exception with over 80% of all trade utilizing Letter of Credit. (Bangkok Bank Limited).

Letters of Credit are individual financial contracts for a particular shipment or series of shipments. They contain the terms negotiated between exporter and importer and are issued in lieu of payment by the importer's bank as instructions for the shipment of goods. There are several different forms of LC's, however, the most commonly used is “At Sight”. This form allows payment to the exporter as soon as all terms are fulfilled as specified on the LC. Generally, collection can be made when the goods are tendered to the importer's transportation agent (surface carrier, shipping line, or airline), even though the importer may not see the goods until delivery is made by the agent. From the importer's side, LC's are instructed to the importer's bank naming the exporter as beneficiary of the transaction. The importer's bank may either require payment by the importer to the bank for the full value of transaction when the LC is requested, or if the importer has established credit at the bank, the transaction amount may be requested for payment to the issuing bank after the goods have been dispatched to the importer's shipping agent. In the latter case the importer's bank has extended services and credit on behalf of the importer's reputation and past history with the issuing bank. The procedure makes no distinction between type and form of goods involved (i.e. hardware or perishables). Letters of Credit can usually be secured in one day.

The important factor with regard to the banks, is that all instructions on the LC are rigidly adhered to. Any variances to the instructions may be grounds for rejection of the shipment or payment if amendments to the LC are not initially secured. There is little latitude for interpretation of the instructions of a LC. For example, if the intent of the agreement specifies “Freshwater prawns with heads–on”, and by inadvertant typographical error the LC instructs “Freshwater prawns with two heads–on”, the exporter must either ship prawns with two heads or secure an amendment to the LC from the importer to correct the obvious error!

Shipments on credit are made where the exporter and importer have negotiated more flexible credit terms, allowing for extended reimbursement. This form of transaction is used less frequently since the exporter is financing the cost of production for his product over the additional time extended to the importer. Shipments on credit also demand a high degree of trust and proven integrity that both parties will uphold the agreement through time.

In certain cases, financial institutions may extend other forms of services and credit to facilitate in the export process. For example, short term credit to the exporter may be granted to facilitate his procuring or producing the required export quantities. In such cases, the banks will often grant credit against an LC. Longer term assistance for production capital in the development of export product is secureable through commercial institutions like the Bangkok Bank, Thai Farmers Bank, or through government agencies like the Bank of Agriculture and Agricultural Cooperatives.

Requirements of Shipment

Export Custom Clearance Procedures

Prior to shipment, there are four customs clearance requirements which must be fulfilled in order to export any fisheries product from Thailand. First, the exporter must prepare an Export Entry Form. This form contains information requirements about the description of the export commodity, the value in foreign and local currency, weight, quantity, destination and assessments of export duty. For prawns, an export business tax of 1.5% of the F.O.B. value will be assessed. In addition, 10% of the assessed business tax amount will be added for municipal taxes.

Secondly, the export entry form must be submitted with an Application for Certificate of Exportation. Specifically, this form (Exchange Control Form - E.C. 61) must be approved by a commercial bank and is the primary bank control document for money exchange for the goods being exported.

Third, a Commercial Invoice must accompany the shipment. This is a statement, usually on the exporter's letterhead and containing his signature, giving the value, quantity, and description of goods being exported. In most receiving countries, shipments arriving without a commercial invoice will result in a delay of the custom clearance process for the importer. This delay can result in product spoilage if the shipment is not released to the importer pending arrival of a copy of the commercial invoice.

Finally, some countries require Certificate of Health, Sanitaion, or Mercury content to accompany fisheries products. These certificates are obtained from the Fisheries Department and from the Ministry of Public Health after analysis is performed on the product to be exported. Depending on the country of destination, not all of these Certificates may be required.

Once all documentation has been secured, it must be submitted to the Custom's Officer at the Thai Customs Officer during normal working hours. After documents have been approved and the business and municipal taxes have been collected, goods may be taken to the ports for export inspection. Once inspection clearances are obtained, the product may be released to the transportation agent. It is estimated that the document approval process will require 1–2 hours at the Customs Office. Customs inspection can be arranged anytime during the day or nigh providing notification is given to the Customs Office prior to the close of business hours. This process will apply to all forms of fisheries products, irrespective of form (live, fresh or frozen).

Mode Selection

There is no rule as to how carrier selection is made. It may be specified by the importer, i.e. Thai International or Odessa Ocean Line, or if unspecified, the exporter will usually select a carrier for the importer. Generally, if a specific carrier is not named, at least the mode (air, surface or ocean) will be. Mode selection is closely aligned with the form of product being exported and the country of destination. For example, if prawns in the live or fresh-chilled state are being exported to Japan, the mode will have to be by air freight, whereas if the destination is Singapore, surface becomes an option (at least for chilled form). A frozen product buys the importer flexibility in mode options. In most instances, a frozen product will not move by air unless the freight rates or alternative services outweigh surface selection factors. Frequency and capacity in any point to point sector may influence freight rates; surface or air. For example, looking at air frequencies and capacities for Singapore, Hong Kong and Japan (Annex 16), most capacity exists in the Hong Kong sector. Air freight rates are in fact the lowest on the sector on a distance basis. The exporter may choose to interface directly with a carrier for his shipment or a shipping agent may be assigned to amke the choice for him. Fianlly, if shipping volumes are expected to be large or constant over time, many carriers will implement developmental or promotional commodity rates upon request. These specific commodity rates (SCR) are normally reductions from the otherwise applicable rates for general shipments. SCR's can save the exporter and importer substantial transportation costs once the carrier implements such rates.

Shipping Agents

Shipping agents, consolidators, brokers, and freight forwarders are generally utilized in most international shipments. Their main function is to coordinate for the exporter all aspects for preparation of the shipment. This includes securing all required documentation for custom clearance (Entry form, Certificate of Exportation, and Health Certificate), selection of carrier and booking of space for the shipment, and all follow up communications. The services of an agent allows the exporter to concentrate on production and provides exportation expertise for a set fee per shipment irrespective of size. These charges are usually computed in the negotiations between exporter and importer as part of the total fees for the transaction.

Follow–Through Communications

The last step and often the most neglected in most export transactions is the communications regarding the outcome of the shipment. Most financial responsibilities are completed when the exporter has fulfilled his terms of contract. However, customer satisfaction is only determined with adequate feedback. Quality of perishables cannot be defined to the satisfaction of both parties unless their perceptions of quality are similar. Since quality standards are highly dependent on sujective judgements, follow up communication is often the only corrective device to assure continued customer satisfaction.

3.3.3 SINGAPORE

Current Situation

Macrobrachium is familiar to the consuming public but not readily preferred, when compared with sea prawns, due to perceived taste, texture, and quality aspects associated with product supplied from surrounding areas. These stocks are primarily wild caught and are imported from Malaysia, Indonesia, Bangladesh, Sri Lanka, Pakistan and India. Reports of perceptual differences, however, may be predicated on the general unavailability of the product as a restaurant or retail item since most supplies are secured frozen, processed and re–export to Europe, Japan, the United States and Thailand. Singapore has no shortage of competing products and is a net exporter of sea prawns.

Conflicting reports were secured on “perceptual” differences when inquiry was made with brokers as opposed to restaurants. Brokers tend to attribute public preference on “cultural” familiarily with salt water varieties and to the fact that past experiences with Macrobrachium have generated little acceptance. Specifically, Macrobrachium was perceived to have a more fibrous texture, being less sweet than the sea variety, and having a “muddy or paddy–field” odor. When restaurants were queried, there seemed to be some potential for fresh and live forms for display and live tank offerings. The public was assessed by some restaurants as being able to detect differences in body shape of the freshwater prawn tails used in dish preparation since similar preparation using sea varieties exhibited longer and thinner characteristics. From a retail level, larger size prawn are preferred. Generally, no substitution of species is intended and depending on availability, Macrobrachium would be presented as a freshwater prawn. Most specialized sea food restaurants in Singapore proper cater to the tourist trade. In these situations, availability and variety of selection become important factors for attraction. Restaurants farther from the city, along the East Coast Road, tended to prefer local varieties of sea prawns due to availability and predominance of local clientele.

From the broker's level, Macrobrachium is a good trading item which is requested and exported as “freshwater prawns”, at least to Europe an the United States. Most shipments to these areas however, are intended for consumption within Indo–Chinese communities. Recent demand has increased, and is attributed to the expanded consumption through ethnic food restaurants established through Indo–Chinese migration. Primary supplies for these markets come from Sarawak and Indonesia. It was reported that one processing plant in Sarawak ships one ISO 20 foot container holding ten tons each week. These shipments contain all sizes, usually under 50 tails per pound, heads-off/shells–on. Seasonal shipments of 5–10 tons per month (November through January) are made to Japan, heads-off/shells-on, but no distinction is made on the shipment lable as to the species. Shipments to Thailand are less frequent with few brokers willing to share specifics about such shipments. It was revealed however, that the product that is re–exported to Thailand is often consolidated from Sri Lanka, Pakistan, and India in frozen form and is processed in Singapore. Finally, trading for re–exportation from Singapore seems to be big business for several reasons. First, the country has a developed shrimp industry availing itself to processing equipment, established quality standards, and export expertise. Secondly, Singapore has a well developed infrastructure in terms of communications and port/ airport facilities to deal with container shipments and frequencies. Finally, geographically, it is situated at the cross roads of Macrobrachium supplies, with the ability to leverage numerous sources for the best price.

Singapore is a free port nation with no restrictions on the importation of freshwater prawns. Channels of distribution are relatively simple with three levels to access retail sales (Chart 2). Most import brokers will determine the form of the product, usually predicated on price. If Macrobrachium were successfuly introduced, it is perceived to command the same price, or slightly less than is received for King or Tiger Prawn (Penaeus monodon) at the retail level. King prawn, head–on and fresh will fetch US$18–20.00 per kilogram (฿360–400/kg).

Chart 2

SINGAPORE/HONG KONG DISTRIBUTION CHANNEL FOR PRAWNS

Market Potential

Market entry to Singapore will difficult for Thai-produced Macrobrachium in any form unless priced competitively with other sources. The major disadvantages for the Thai product is the distance to market. The abundance of wild caught supplies from Malaysia and Indonesia will diminish Thailand's potential for volume shipments in the frozen form, even if re–export were considered from Singapore. The fresh product, in small quantities, is currently being shipped in by boat (1–2 days transit) from Indonesia. Finally, culture of Macrobrachium in Malacca, Malavsia will probably fill live requirements that may develop if introduction to the retail/restaurant level is successful.

3.3.4 HONG KONG

Current Situation

Freshwater prawns are vitually unknown to the consuming public in Hong Kong, due to availability. Mass distribution or introduction has not been widely tested by local suppliers of marine related products due to the perceived additional costs of handling a non-indigenous, non-differentiated species when a local substitute product is available. As such, Macrobrachium must compete mainly on price and form with domestically caught varieties of sea prawns. Macrobrachium, however, was imported in large quantities from Southeast Asia until recently, for purposes of re–export; mainly to the United States. Hong Kong is a net exporter of sea prawns, shipping half of its domestic catch to overseas markets.

Perceptually, Macrobrachium is not distinguished from salt water prawns in taste or texture. This reflection is based on the traders and broker's view point since they are in control of most quantities of both freshwater and saltwater prawn varieties. With little exposure to the public, consumer preference based on experience with the species was difficult to ascertain. While little distiction is made between fresh and salt water varieties, most quantities of Macrobrachium were re–exported to countries where the percapita consumption of seafood, in general, was lower. Therefore, a claim of “no distinction” may in fact be indicative of business practices rather than true consumer perceptions (re–exported Macrobrachium often classified as shrimp). Since most Macrobrachium supplies to Hong Kong are shipped frozen/ heads-off there are few characteristics that would allow perceptual differences to be determined at the retail level other than by size, color, freshness and price. Most fresh sea varieties for sale are presented with heads–on at the retail outlet and this would tend to accentuate a difference in perceived “freshness” when compared to product without the carapace. For color judgements, again, locally supplied sea prawns are of the pink or brown variety whereas Macrobrachium is highlighted in darker bluish hues. With size and price remaining as the primary determinants for purchase, traders have found new product introduction an up hill battle in light of the higher transportation costs, unfamiliar characteristics and competitive substitutes available. All these factors reflect traders' resistance rather than consumer choice.

Experimentation with Macrobrachium culture was reported on one farm on Lantao Island. This pilot project was privately conducted, securing post–larvae from Taiwan. Stocking, unfortunately, was made the beginning of last season's winter months, producing discouraging growth and yield results. Indications are that the experiments will be repeated and expanded this season since there is increased interest from farmers located in the New Territories (Hong Kong Fisheries Department). The primary market for any home grown stocks would be the highly lucrative “live” demand for restaurants engaged in live tank promotion. The phenomenon of live tank presentation has caught on throughout Hong Kong and Kowloon within the last five years, creating new requirements for non–indigenous species. This is evidenced by increasing presence of Anguilla, certain varieties of scallops, and goeduck (King Clam), which were relatively absent from menus in the past and which are currently flown-in or supplied from China. Prawns, presented live, will fetch 2–3 times the frozen value as well as overcoming the “new product” introductory problems anticipated with frozen forms. Fresh forms were classified similarly to the frozen product, especially if with heads–off, and are not anticipated to generate much of a price edge. Premiums are paid for larger sizes of prawns. Live animals of Penaeus species, ten and under per pound, commanded up to US$16.00/kg (฿320/kg). Fresh forms with heads-on, and frozen product, heads–off were fetching US$5 to US$8/kg (฿100 to 160/kg). Macrobrachium introduction, pending availability of all three forms, is expected to adopt a similar pricing structure to the end consumer. Restaurant distribution generated the highest per kilogram price to cover maintenance of live tanks. Most of the live consumption was targeted at local consumers, with a smaller share directed towards the tourist sector.

Access to the Hong Kong market is fairly simple with few governmental entry restrictions and more than adequate business opportunities. Hong Kong is a free port and has no quota restrictions on freshwater prawns. No written regulations could be found on specific health requirements regarding the importantion of prawns. Governmental intervention (Urban Service Department) occurs only when the product is suspected of presenting a health problem. Distribution channels in Hong Kong are efficient with about three levels from the importer to the retail outlet (Chart 2). The capability and potential for handling different forms of imported prawns may differ from broker to broker depending on the related facilities currently available to that broker. It was generally found that procurers of frozen stock were also in the cold storage business while wholesalers of live products maintained separate facilities and target audiences for their product.

Market Potential

While current market conditions do not favor high volume exports of fresh or frozen Macrobrachium to Hong Kong, there is a growing potential for live shipments. In this form, competition will be most severe from Taiwan where transportation and overall experience in live shipment may lead to a slight edge. Live shipments however, hold greatest short-term promise for the highest profit margins. Risks and cost of transportation will be greater from Thailand, however, the ability to supply high quality product year round may overcome some of these factors. At least one Thai freshwater prawn farm, in Chiang Mai has received a direct approach from Hong Kong for potential live shipment.

In the longer term, Hong Kong presents an excellent market for over productions, especially in the frozen form. Again, competition will be offered by wild caught supplies in Malaysia and Indonesia, and from other brokers in Singapore, who enjoy price advantages from stocks secured in Bangladesh, Sri Lanka and India. It is not anticipated that Macrobrachium, in the frozen form, will command any price premiums over varieties of sea prawns. Product so traded may in fact end up as re–exports after being deveined and shelled.

Table 1

SUMMARY OF CURRENT PRAWN CONSUMPTION IN MARKETS INVESTIGATED

3.3.5 JAPAN

Current Situation

“Onitenaga”, or giant long-armed prawn, is known to Japanese importers but not widely distributed. Macrobrachium is still considered a specialty item which is making slow market entry either as a substitute or specifically as Onitenaga. Current supplies are imported frozen, heads–off from Indonesia and Singapore and are also supplied live and fresh–chilled in limited quantities from home production. Japan is a net importer of Macrobrachium as well as sea prawns.

In recent years, the excess of rice production in Japan has stimulated experimentation with several species of fish and crustacea which could possible replace rice as a source of income. Macrobrachium culture, while capable of producing one crop per year due to temperature, proved to be economically unfeasible as the only income generator. Home production is minimal and has not contributed greatly to consumer exposure to the animal. Available supplies of Macrobrachium are mostly from Indonesia and Singapore in the frozen form and are sometimes sold without distinction of species. This practice, however, is being corrected through fair trade regulations. Fresh-chilled prawns (300kg/week) are being shipped in regularly from Hawaii to supply specialty restaurants and are promoted as freshwater prawns.

Primary demand for freshwater prawns is to supplement supplies of sea prawns. This demand is seasonal, towards the end of each year when holiday feasting depletes most supplies of larger sized prawns. Taste tests have been conducted by some trading companies to determine consumer preference. Results reveal that when Macrobrachium was presented alone in non-comparative tests, reception was more favorable than under conditions of comparative tests with the “Kurumaebi” prawn, Penaeus japonicus. In comparative situations, the most common response related to the texture being harder than the sea prawn.

In most markets, availability and hence demand is often controlled by the wholesaler or supplying entity. In Japan, the outlets/restaurants probably influence supply and demand of “exotic” or new species to a greater extent than will retail sales. The decision making process of the restauranteer determines the demand for form and type of product. For example, live or fresh introduction potential is affected by how the product will be prepared. If the product is cooked and presented from menu selection, the consumer does not see the quality of freshness (appearance, color, ordor, etc.,), therefore much of the premium paid for live or fresh forms is wasted unless the reputation of the establishment maintains priority over the form and quality standards of its supplies. On the other hand, if the establishment displays its products to its clientele prior to preparation, form and quality take precedence over price considerations. Where the form is frozen and the restaurant has no choice, price will dictate the demand decision. Quality consideration in Japan are often a matter of reputation of the supplier. Therefore, when the restaurant has no choice as to form, quality considerations have been assumed to be a large responsibility of the middleman supplier.

Recently, there have been reportes of Onitenaga being served in some restaurants as freshwater prawns for use as tempura. One restaurant in the Yamagata Perfecture had generated yearly requirements of ten metric tons, seven animals per kilogram size with heads on. This requirement was being imported from Indonesia through a trading company. The restaurant served freshwater as its specialty item, drawing specific attention to the species.

Macrobrachium is an exempt item and carries no quota restriction. Nominal duties of 3.9% of the value are assessed on all imported prawn shipments. Health and sanitary regulations for market entry are regidly controlled. Standards which must be met are outlined in the following section under Standards for Export Quality Prawns (Section 3.3.5). Channels of distribution within Japan are probably the most complex found in any developed country. The evolution of its structure is tied to geographical, infrastructural, and social/financial developments of Japanese society over the past few centuries. Specialized distribution channels exist for live and fresh marine products and different channels for frozen products. With large product groups, like shrimp and prawns, a separate distribution structure will be followed from that of most other marine products. As indicated in Chart 3, there are up to five levels of middlemen/wholesalers involved for prawn distribution. Unlike most other structure found elsewhere, the multiple levels where bargaining or auctioning occurs produce higher retail prices, but in the process, segregates the highest quality for certain purchasing sectors (restaurants, fish market retailers, etc.,). In general, supermarket distribution targets the masses with average quality, lower priced products. More frozen product will be distributed through supermarkets than through any other form of outlet. Brokers revealed that successful supermarket entry for frozen forms could be made only if the product were priced at half that of Penaeus species. It is doubtful whether differences perceivable in frozen forms would sustain this level of price difference for very long.

Trading company representatives normally contract for supplies in the country of production. In most instance, they will also handle all aspects of exporting the product to Japan. Trading company intervention often leads to expedited development of new resources since the exportation. marketing, distribution and financial expertise is made available to the producer.

Finally, complex distribution channels result in higher product prices, not necessarily at the production level but at the wholesale and retail levels. Prawns shipped in frozen, heads off, 35–45/kg size were yielding nearly US$14.50 per kilogram (Baht 290) at the wholesale level. Retail price for the same prawns were double at $29.00 per kilogram (Baht580/kg). The live product and fresh-chilled product will normally have some price factor built in for waste (head) but premiums are attached for the added transportation by air and for overall quality of the product. Depending on the supply and size factors, auctioning may add as much as 50% more to the retail levels.

Chart 3

JAPANESE DISTRIBUTION CHANNEL FOR PRAWNS

Marketing Potential

Japan offers excellent market potential for Macrobrachium in all three forms. Effective market entry, however, is still developmental, since public exposure and access to the product has been limited. Higher export margins are to be derived by pursuing premium market sectors for live and fresh-chilled forms, even though risks may greater. Competition can be expected on a seasonal basis from Taiwan for the live and fresh forms; however, Thailand's capability to supply Macrobrachium on a year round basis will partially diffuse seasonal pricing tactics.

Thailand will face greater competition for frozen exports due to the availability of wild caught stocks in Malaysia and Indonesia. Developmental efforts should stress guidelines for quality standards equal to those required by Japan. Once established and implemented, export flexibility can be extended to almost any market. Finally, most trading companies have regional offices in Thailand. Their resources should be utilized until home expertise can be developed.

3.3.6 STANDARDS FOR EXPORT QUALITY PRAWNS

Review of standards for fresh and frozen prawn export reveals that wide latitude exists from market to market, withmany aspects dependent on sensory judgements of consignee or government health and sanitary agents. Some markets have established controls for specific bio-chemical factors such as bacterial count, E.coli, or volatile basic nitrogen content; however, others tend to leave general standards acceptability to the judgement of the importer and exporter.

Recent instances pertaining to United States and certain European country rejections of marine products from Thailand highlight the need for established guidelines in the area of quality control and basic sanitary standards. This need becomes extremely important for Macrobrachium as a new product entry since freshwater scavanger species are more often associated with certain diseases endemic to feeding habits of the animal and to isolated customary consumption patterns of humans. While Thailand currently adopts International Standards (Codex), enforcement and implementation tends to be voluntary.

It is generally found that countries of the Western world, and countries highly dependent on marine related proteins, tend to have more rigid quality standards for imports than do developing countries or those engaged in heavy export of their marine products. Many countries with established standards adopted procedures from countries with more exacting sets of standards, as with the case of Japan and the United States for frozen products (FDA). If Thailand achieves export quantities from its prawn industry, it behoves the development of quality control guidelines based on the most rigid standards to access all markets. It is recommended that the standards imposed by the Japan Marine Products Importer's Association (JMPIA) on its members, for the importation of shrimp and prawns, be adopted as Thailand's export standards objective for Macrobrachium exports.

Briefly, the Japan standard for Shrimp and Prawns is a ten point plan which is applied to deep-frozen or quick frozen products. Of the ten requirements, two involve elements of subjective rating.

Objective Ratings are:

Subjective Ratings (see Annex 17 for marking specifications) are:

In the assessment of live and fresh–chilled product, no written standards could be located. The Association (JMPIA) indicated however, that such forms of product often follow different channels of distribution, and in most cases are assessed by subjective ratings of the wholesale importer. This application tends to be the mode of operation for most wholesale fish market where the majority of product is on ice or live. In summary, while quality control standards can be stated as an objective, mush of the practical application for achieving desired quality standards rests in the experience and integrity of the exporter.

3.4 PROCESSING OF MACROBRACHIUM ROSENBERGII IN THAILAND

The expansion of Macrobrachium rosenbergii production in Thailand establishes the need for determining best processing methods to meet market requirements. Processing research in our study was limited to preservation techniques in the fresh-chilled form. This form is expected to derive greatest short-term market potential domestically and for export. Additionally, packaging requirements were also addressed.

3.4.1 Materials and Methods

Whole freshwater prawns from a private farm were used for experimental purposes. Average weight was 35 or 30–35 prawns per kilogram. The live animals were chill–killed in ice water and then packed with ice in an insulated box during transportation to the Fishery Technological Development Division. Packing was done at the Division with different packing materials and various packing methods.

Two experiments wer performed to determine suitable packaging materials and methods (see Annex 18 for type of box and packing materials and methods), to transport chilled freshwater prawns for a period of 19–20 hrs which is the usual distribution time. The first experiemtn was designed to determine suitable boxes and the proper amount of cooling media to preserve prawns in good condition for a period of 19–20 hrs. Samples of prawn were taken to evaluate the quality after 7,14 and 21 hrs. The second experiment was to use the selected containers for packing prawn with suitable proportion of cooling media. Thermometers were inserted into each box to measure the temperature approximately in the center of the box. Temperatures in each box were recorded every hour until the termination of the experiment (which was 19 hrs after packing). The samples of prawn were collected for evaluation of freshness. Proportions and types of cooling media to prawn are shown in Annex 19 and 20.

All samples were analyzed to determine freshness of prawns using Total Volatile Bases (TVB), Total Viable Count (TVC), Indole Test and Organoleptic Evaluation as an index of quality. TVB was determined by Conway's microdiffusion method. TVC was determined by the Standard Plate Count method using nutrient agar as a medium. The plates were incubated aerobically at 37°C for 48 hrs. Indole Test was determined by the Colorimetric Method (AOAC method). Organoleptic evaluation was done by GDA's method.

3.4.2 Results and Discussion

The results of experiment I (Annex 19) showed that the amount of dry ice used was more than required for a period of 20 hrs transportation. Temperatures of final products were -27°C, -3°C and -2°C for Box No.1, No.2 and No.3 respectively. Prawns were entirely frozen; therefore organoleptic evaluation indicated that freshness of prawn was in class I with the exception of toughness of texture. The value of Total Volatile Bases on the products ranged from 7.63 to 20.58 mg N/100 g which considered to be within the standard limit. Levels of Indole Value varied considerably; however, they were still considered far lower than standard limit. The number of Total Viable Counts of final products in each box were quite low which indicated good quality and good hygeinic practices.

It should be noted here that the cost of styrofoam boxes (No.1) is very high in Thailand and there was no problem in using dry ice in corrugated fiberboard boxes (No. 2) or corrugated fiberboard boxes lined with styrofoam (No.3). Therefore only boxes No.2 and No.3 were used for experiment No.2. The results from this experiment showed that, in general, the amount of dry ice added directly influenced the quality and temperature of prawns (Annex 20). Organoleptic Evaluation of the final product from each sample did not indicate much difference, except that prawns packed with dry ice had rather tougher texture than prawns packed with dry ice and sawdust. In order to analyze the results, sample box No.3–2, which was the only sample kept in a chill room, should be disregarded. However, there is a possibility to pack prawns with moistened and chilled sawdust for short tranportation in a cool container. The quality of prawns in Box No.3–2 after 19 hrs (Annex 20) judged by TVB, Indole, TCV and Organoleptic Evaluation was satisfactory. The temperature of prawns rose from 6°C to 11°C within 19 hrs (Annex 21).

Comparing the quality of prawns in 3 boxes (Box No. 2–1, Box No. 2–2, Box No. 2–3) the results (Annex 20) indicated that the final product of Box No. 2–1 had a higher quality judged by lower value of TBV, Indole and number of TVC. Temperature of prawns in this box started from 0°C and rose up to 4.8°C after 19 hrs of packing. Considering that the ideal temperature of chilled prawns should be 0–2^oC, only samples in Box No. 2–1 and Box No. 3–1 comparable. Annex 21 showed that the temperature of prawns in Box No. 2–1 can be kept to 2^oC for 14 hrs while Box No.3–1 can be kept only 7 hrs. In the beginning of the experiment the temperature of prawn in Box No. 2–1 declined to -1°C; however, at this temperature, prawns were still not frozen (freezing temperature of prawn is around -2°C). If we compare the amount of dry ice used in the two boxes, Box No. 2–1 required ½ kg more dry ice than Box No. 2–3, lined with styrofoam sheet, consumed more space which should be reserved for prawn.

It was concluded that corrugated fiberboard boxes are suitable for distribution of freshwater prawns in a chilled condition for a period of 14 hrs with a dry ice to prawn ratio of 1:2.5.

3.5 RECOMMENDATIONS FOR UPDATING MARKETING STUDIES

Domestic and Export Marketing studies initiated for this report have isolated key elements that must be updated and re–evaluated in order to assure proper development of Thailand's freshwater prawn industry. Domestically, price elasticity for all three forms (live, fresh–chilled and frozen) should be assessed as more supplies are made available. A more definitive way to isolate imported volumes of prawns should be designed and researched to improve the accuarcy of home production forecasts. Finally, research should be initiated to determine what is happening to home production, i.e. assessments of how much product is in inventory and in what form, whether the amount of prawns purchased by household consumers increases when supplies and price become competitive with substitutes, and whether consumer perceptions about prawn characteristics and economics are aligning themselves with what is actually taking place in the market place?

Internationally, research of market in Europe and the United States to determine distribution control factors for exports to Indo-Chinese communities should be conducted. Thorough understanding of direct exportation, even of frozen forms, will lead to higher margins for Thai producers than if the product were brokered through third countries like Singapore or Hong Kong. Studies to determine whether high density live shipments can be feasibly made will also expand the potential for accessing high margin markets like Japan and Hong Kong. Finally, in-house promotion on a Fisheries of governmental agency level to representatives of trade consuls and trading companies will often win allies for export market potential in the home country.

Future research on processing should concentrate on quality control retention of other forms, including experimentation with live shipments. Specifically, experiments in form variation such as: fresh- chilled (headless), fresh–chilled (blanched - whole and headless), and frozen variations should also be addressed. Experiments with other packing materials should be carried out and the cost-benefit of packing versus the use of refrigerants should be assessed. Finally, proportioning experiments to determine the most effective selections of refrigerants, packing materials, and packaging alternatives will lead to a better understanding of transportation cost options.