5. MARKETING FISHERIES PRODUCTS

5.1 Description of fish marketing channels

Sources of fisheries products by marketing agents

Fish farmers and fisherfolks are the primary producers in the fisheries industry, therefore, they are the primary sources of supplies to different marketing agents in the chain.

All major marketing agents such as wholesalers, processors, retailers, and large consumers obtain supplies from the primary producers. However, the main flows of fisheries products go through wholesalers, i.e., wholesalers are the main suppliers for the marketing agents in the subsequent stages. More than half of the processors, retailers, and large consumers depend on the supplies from wholesalers (Table 96).

Table 96 shows that 57.7 percent of wholesalers get supplies from other wholesalers, similarly for the processors and retailers with the figures of 19.4 percent and 10.1 percent supplied by other processors or retailers, respectively. Product transaction in the level of wholesalers was notably with participation of different types of wholesalers. A large proportion (57.7 percent) of the wholesalers are dependent on the supplies of others at the same marketing stage.

Some marketing agents acquire supplies also from other sources like foreign suppliers, or from own sources. Foreign suppliers provide marketing agents in the areas close to neighbouring countries (China or Thailand), however, are not the main sources for them. Fisheries processors tend to expand aquaculture activities so as to produce raw materials for their processing activity. This helps processors to become less dependent on external suppliers.

· Preferences of fisheries suppliers

Supplies directly from the primary producers are widely preferred by different marketing agents. At the early stages of the channel, around half of the wholesalers and processors prefer to get supplies from fish producers, while preferences of the retailers and institutional consumers (the later stages) are lower for supplies from fish producers, but instead from fish wholesalers and retailers (Table 97). The supplies from wholesalers are the most preferred, because: (i) diversified types and forms of fisheries products, (ii) large quantity of products available, (iii) stable supplies over time, (iv) market price flexibility, and (v) product traceability. This again confirms the important role of the wholesale level in fish marketing.

· Market places for purchasing fisheries products

It was not necessary that the product transactions are effected in markets, where the fisheries products are diverse. A large number of marketing agents receive the products at their home through a home delivery service provided by the suppliers. However, the majority of the agents go to the suppliers to purchase fish products to make sure that they get a better choice.

Wholesalers and processors operating in coastal areas may get their supplies at sea by using collector boats to purchase fish from fisherfolks right after the catch. It was reported that getting supplies at sea may result in lower purchasing prices and higher quality of the products purchased in terms of freshness, size and species. However, due to scattered fishing areas and lack of gathering points, less than 5 percent of the wholesalers and processors maintain a fleet of collector boats (Table 98).

TABLE 98
Locations for purchasing fisheries products by marketing agents (%)

Note: Multiple responses.

TABLE 99
Customers of fisheries marketing agents (%)

Note: Multiple responses.

Destinations of Fisheries Products

· Customers of Fish marketing Agents

Table 99 shows that 42.6 percent of the processors export fish products directly to foreign buyers. The majority of fish farmers and fisherfolk (71.4 and 91.1 percent, respectively) sold fish to wholesalers, and 64.9 percent of the wholesalers sold their products to fish retailers.

The flow of fisheries products was further analysed by the sales values transacted with different types of customers. Wholesalers are the main customers of the primary producers (Table 100) and processors are the second largest customers of the fish farmers. Fisheries products from the wholesalers are mainly sold to processors with 39.58 percent of the total sales value. It also reflects a relationship between the processors and the wholesalers where, for many processors, wholesalers perform a supporting role in the flow of raw material to the processors.

The sales value of the processors (89.7 percent) was realized mostly through export to foreign customers. Most frozen, value-added products are exported. Main products sold domestically by processors are fish sauce and pastes, which are often produced by small, artisanal processors. Retailers constitute the last stage in the marketing channel to final consumers. More than three fourths (76.8 percent) of the total sales value of the retailers are conducted to final household consumers (Table 100).

TABLE 100
Proportion of sales value to different customers (%)

* Figures are proportions of physical traded quantity

In comparing figures in Tables 99 and 100, it was shown that wholesalers are the main customers for aquaculturalists and fisherfolks. Although more wholesalers had trading relations with retailers, the conducted sales volume with the retailers was less than that with the fish processors. This may be interpreted as an assumption that high value fish products flow from fish producers to the wholesalers, then processors to export. The rest was for domestic market and finds its way for distribution by retailers.

· Preferences on types of customers

As reflected in selling behaviour of the marketing agents, wholesalers are the most preferred customers for the fish farmers and fisherfolks, foreign customers for the processors, and household consumers for the retailers (Table 101).

TABLE 101
Preferences on customers by marketing agents (%)

· Market places for selling fisheries products

Marketing agents may sell their products in various market places. Retailers usually operate in markets for selling products to household consumers. For the producers like fish farmers and fisherfolks, the selling function was mostly conducted right at the landing places or farm, i.e. 84.9 percent fish farmers sell at pond, 88.4 percent fisherfolks sell at landing places. Some of the sales by fisherfolks are conducted offshore. In provinces Quang Ninh and Khanh Hoa, several off-shore fishing ports are in operation, 6.7 percent of the fisherfolks surveyed reported that they sell directly in the off-shore fishing ports. The collector boats at sea run by fisheries processors or wholesalers attract 10.3 percent of the fisherfolks to sell their catch at sea (Table 102).

TABLE 102
Locations for selling fisheries products (%)

Note: Multiple responses.

Wholesalers may sell products either at home or offer delivery service to the customer’s location. Some wholesalers (5 percent) act as brokers operating at landing places. The products are transacted directly from the producers to the wholesalers’ customers. In these cases the wholesalers are responsible for arranging the transactions, records and payments. The charge a commission of 5-10 percent. Market places for the processors are different from that of the other agents since they act as exporters.

5.2 Market structure, conduct and performance

Market concentration

Market concentration was measured vertically and/or horizontally. Vertical concentration expresses relationship of one marketing agent to forward or backward agents. The nature of relationship was determined by the number of agents, which cooperate. Horizontal concentration was expressed by the number of the same type of marketing agent in the chains. The concentration in this regard was measured by GINI coefficient, which expresses the share of a given group of marketing agents in the total value of the chain in the industry.

· Number of suppliers accessed

Marketing agents may receive supplies from various sources. The assumption was that in a competitive market, the larger the number of suppliers accessed, the better the market price the agents can get, and the more choices of products can be obtained. Table 103 shows that the marketing agents received supplies from at least five suppliers. Wholesalers are again in the strongest position confirming their important role.

TABLE 103
Number of suppliers accessed by marketing agents

Wholesalers and processors have a greater choice of suppliers, indicating that they had stronger bargaining power. Retailers and the large consumers have less choice, which would show that they are prices taken from the previous marketing stages.

· Number of customers accessed

Market concentration was also examined in terms of number of customers accessed by each marketing agent. Table 104 shows that the marketing agents have a large number of customers, of which regular customers of the wholesalers and the processors are on average 19.0 and 25.8, respectively. The retailers and the large consumers have a large number of customers, the retailers 40.6, and the large consumers 186. These two categories of marketing agents operate at the later stage of the marketing channel where the number of customers tends to be higher than at the earlier stages; therefore, they can be expected to have strong power in setting selling prices.

Table 104 also shows that a major group of customers of the wholesalers are the retailers with 13 retailers on average. Household consumers are the major customers for the retailers and the individual customers for the large consumers. About seven foreign customers are accessed by each processor on average. The processors also set up a distribution network for the domestic market through wholesalers and retailers with an average of 7.6 and 9.3, respectively (Table 104).

TABLE 104
Groups of customers accessed by marketing agents

* Figures are number of customers per day on average.

· Concentration of sales value

Concentration of sales value was measured by GINI coefficient, which expresses the distribution of fisheries sales value among the marketing agents operating at the same level in the chain. It measures the share of an individual or a group of agents compared to the total sales value of the same level of marketing.

The analysis shows a great difference or distance in sales values across the country (Table 105). The GINI coefficient reaches nearly one for the group of processors (0.822) and wholesalers (0.788). This indicates that a group of the marketing agents has conquered a very large proportion of sales value of the marketing segment horizontally. A similar interpretation can be maintained for the other marketing agents under study.

TABLE 105
Concentration of sales value by marketing agent

The share in total sales value of the 20 percent smallest or biggest marketing agents further illustrates the concentration of the fisheries sales value in a group of marketing agents. For the processors, only 20 enterprises out of 108 processors studied stand for around 84 percent of the total sales value of fisheries products. The 20 smallest enterprises occupying very small percentages (0.01 percent) of the total sales value. However, it has to be kept in mind that the category of processors groups together quite different activities, e.g. shrimp processing for exports and fish sauce production for the local market. Similarly, the smallest and the biggest 20 percent of the wholesalers represent 0.55 and 83.4 percent of the total sales values, respectively.

The concentration in total sales value leads to a concentration in market power, especially in shaping the marketing channels and impact on the formation of market prices.

Market competition

Market competition was measured by the number of marketing agents operating in the same category and if one business may affect the performance of the others, regardless of spatial aspect. It was found that each marketing agent has around 10 competitors on average; however, the processors had more with 30.6 competitors. This may reflect fish exporters competing when expanding to foreign markets, especially in Asia, which was capable of consuming various types and grades of fisheries products. Except for the processors, the numbers of other marketing agents doing the same business does not indicate a highly competitive market (Table 106).

TABLE 106
Number of direct competitors and relationship maintained with competitors

Table 106 also illustrates that the majority of fish marketing agents maintain fair relationship with their competitors, relatively few of the agents show that the relationship with their competitors was hostile.

Another indicator of competitiveness was the degree of competition in the market as perceived by the marketing agents (Table 107). The majority of the wholesalers and retailers perceive that the degree of competition in the market was at a medium level. The processors and the large consumers see higher degrees of competition in the market. This perception can be explained by the number of competitors faced by the processors as discussed earlier and by a specific spatial area of operation covered by the large consumers. Since the number of customers was limited, an increase in the number of competitors results in a higher degree of market competition.

TABLE 107
Perceptions of market competition by marketing agents

Market competition was further examined by the tendency of competition-comparing to the current with the previous year, i.e., 2001 compared to 2000). Table 108 shows that more than half of the wholesalers and the retailers see no change in the competitiveness in the fisheries market, the other categories indicate a tendency towards market competition, particularly the processors. This perception runs parallel to the expansion of the number of fisheries processors and exporters over time.

TABLE 108
Comparison of market competition between 2000 and 2001 (%)

Whereas the degree of competitiveness in the export market tends to be higher due to the expansion of operation of fisheries processors and exporters, the domestic market, in which the wholesalers and retailers are the key agents in channelling fisheries products, would appear to be less competitive. This may be interpreted as an opportunity for newcomers to enter the domestic marketing system as being rather favourable.

Fisheries market prices

In this section negotiation power in the formation of purchase and sales prices for fisheries products, changes in prices, and factors affecting the change are examined.

Tables 109 and 110 show a tendency of increasing bargaining power in setting sales prices by marketing agents across the chain from the early stages to the last stage of retailers and large consumers. In Table 109, only 5.5 and 2.9 percent of the suppliers of wholesalers and processors had power to set prices. For retailers and large consumers, a higher proportion (around 18 percent) of their sellers had power in setting prices. This tendency was also reflected in Table 110 where the negotiation power increased from the wholesaler and processing level to retailing, 26.1 percent of the retailers had the power to set prices. This analysis shows that marketing agents at the later stages of the marketing chain had more bargaining power and influence in the formation of prices of fisheries products. It also means that purchasers at the later stages of marketing channels are usually price takers.

TABLE 109
Perceived negotiation power in setting purchase price (%)

TABLE 110
Perceived negotiation power in setting sales price (%)

TABLE 111
Perceptions on changes in fish price

It should be noted that up to 50 percent of the different marketing agents participate actively in the formation of purchase and sales prices, i.e. by negotiation. In both cases processors seem to be more active than wholesalers and retailers. Wholesalers on the other hand, tend to be guided more than the others by current market prices. Considering the relatively low incidence of unilateral determination of prices in comparison to the high proportion of bilateral negotiation or acceptance of current market prices (which are not assumed to be determined by monopolistic parties) it can be concluded that the level of competition in the fish marketing system was sufficient and therefore, not restricting production or consumption levels.

Some prices are not set by seller or buyer, but by the suppliers of the sellers. Table 110 shows that 7 percent of the retailers sold fisheries products at prices determined by their suppliers. Canned, value-added products and fish sauce are the main items for which the suppliers set prices, i.e. wholesalers or processors.

· Frequency of changes of fish prices

Wholesalers and retailers perceive prices as flexible (always, most of the time and sometimes changing), whereas processors and large consumers see them somewhat more stable.

Nearly one-third (28.8 percent) of the processors perceived that the price of fisheries product rarely changed. This was pertinent to processed products in general since the supply to market was often stabilized by better storage or preservation of the products.

· Seasonal changes of fish prices

Price of fisheries products often changed as perceived by various marketing agents. Table 111 shows that price of fisheries products tend to be highest during the period from November to March.

The changes of fish price over time are explained by seasonality of aquaculture and marine capture and consumption behaviour of consumers. For the consumption behaviour, Vietnamese often consume more food (including fisheries products) and other goods or services during the traditional New Year celebrations. Therefore, the demand for fisheries products was higher by the end or early of the year. In addition, substitutes for fisheries products like chicken or pork are limited due to their own seasonality. The nature of the animal protein market by the end or early of the year results in an increase of fish prices as indicated in Table 112.

TABLE 112
Perceived months in which fish prices goes highest by respondents (%)

· Factors affecting the price of fish

There are many factors affecting the price of fisheries products on demand and supply. On the supply side, fish prices are affected by the seasonality of production, weather conditions which cause the seasonality of the market supply, i.e., the quantity of the product available on the market. It was found that seasonality of fisheries products was the main factor affecting the price. The majority of wholesalers and fisherfolks (79.8 and 67.6 percent, respectively) mentioned this factor (Table 113). It was also indicated by approximately half of the fish farmers, the processors, retailers, and large consumers. After seasonality, weather conditions and market supply were also the major factors. The market supply refers to the supply of fisheries product in a specific area that can come from either internal or external sources, i.e. from neighbouring provinces or regions.

TABLE 113
Perceived factors affecting price of fisheries products by respondents (%)

* Figures as percentages of multiple response analysis.

TABLE 114
Average price (x 1 000 VND/kg) of important fish species

In 2001, prices of freshwater fish in regions around Hanoi city were lower due to the penetration of marine captured products brought either from coastal provinces in the north such as Hai Phong or Quang Ninh or from the central or south of the country. Around one fifth of the fish farmers and fisherfolks (18.4 and 18.9 percent, respectively) indicated that quality of the products was also a major factor affecting price of fishery products. Therefore, it was necessary that producers take care of handling fisheries products after harvesting.

On the demand side, consumer preferences are perceived as the major factors affecting price by producers and wholesalers. Marketing agents do not consider consumers’ income as important or that income level may affect consumption behaviour of the consumers. Moreover, the price of substitutes also affects the price of fisheries products as perceived by a significant group of wholesalers. Processors and the producers mention the international price of fisheries products as a factor since export was the key market for processors and exporters.

Market performance by marketing agents

Market performance of marketing agents can be measured either by actual prices of specific products at different stages of marketing or value-added gained by each marketing agent.

· Prices of major fisheries products sold by marketing agents

During the survey, average prices of major fisheries products in 2001 and at the time of the survey were gathered at each level of marketing channel. The changes in fisheries prices on the domestic market along the chain from the primary producers to the consumers are presented in Table 114.

Table 114 shows a big difference in prices realized by different marketing agents. The prices obtained by producers like the fish farmers or fisherfolks were much lower than those charged by retailers to the final consumers. For popular freshwater species, the difference in price at farm level and retail level were from 27 percent up to more than 81percent. The survey did not produce a coherent body of markets, which would be suitable for a detailed analysis of marketing margins and performance of operators, but it indicates a definite need for collecting comprehensive marketing information and its distribution.

· Fisheries gross output, gross income

Gross income and output ratios were calculated with a view to examining the performance of groups of marketing agents to analyse their productivity.

Table 115 shows that the processors produce the biggest gross output of more than VND 87 billion per year (mean), which was much higher than the figures for the other marketing agents.

TABLE 115
Fisheries gross output, gross income (VND x 1 000) by marketing agents

¹ Values as figures per trip
² Values as monthly figures on average
³ Values as monthly figures on average
⁴ Values as monthly figures on average

The gross income of the processors was the biggest with nearly VND 7 billion on average for the year 2001. However, the gross income to gross output ratio was the lowest with only 8 percent, while the wholesalers, retailers and large consumers generate higher productivity with the ratio of 9.3, 20.0 and 20.0 percent, respectively.

Marketing deficiency: fisheries product detention

Fishery products are perishable, difficult to preserve in fresh form for a long time. It requires good handling practices in order to ensure that product’s quality affects the price. Marketing deficiency refers to inability of handling the fisheries products properly and to meet customers’ demand. Marketing deficiency often leads to large rate of discard at harvesting, low value products, or other losses during the marketing process.

The majority of the fish farmers and fisherfolks answered that they had not experienced any product detention. This indicates good handling capability at the producer level and production to demand, especially by the fish farmers. The processors for the export market often suffer due to detention because of quality problems, which requires sophisticated standards in terms of quality, packaging and hygienic practices.

TABLE 116
Percent of detention/rejection of products delivered