1. BC Seafood Sector SWOT Analysis Industry Perspective Stuart Nelson Nelson Bros Fisheries Ltd

2. Perspective on SWOT Analysis 2 SWOT Analysis Large scale project A qualified team of consultants commissioned by Province to report on the state of the BC seafood industry in 2003 Insights to form the basis for subsequent strategic planning… how to renew the BC seafood sector?

3. Perspective on SWOT Analysis 3 Industry Perspective Stu asked to provide industry perspective on the SWOT Analysis Not knowing what industry perspective means, Stu retreated to the Nelbro archives Maybe it would be interesting to review what industry has expressed to government over the years re: the state of the BC seafood industry? This approach could lead to insights…if not… this presentation is in serious trouble.

4. Perspective on SWOT Analysis 4 Presentation Outline The more things change, the more they stay the same… Profound BC seafood industry change Current state of industry Monty Python analogy Summary

5. Perspective on SWOT Analysis 5 The More Things Change… Need to be Market Driven Managing to the market is required if industry is to be globally competitive and economically viable Presentation to Ottawa, FCBC, March 1998 Focus must be on customers needs first… BCP Strategic Plan, 1995 Industry must retain the ability to be reactive to changing conditions from the retail market level right back… A Status Report on the Commercial Fishing Industry of BC FABC, 1983 It all begins with a housewife asking her local grocer, a can of BC salmon, please! Nelson Bros educational materials, 1959

6. Perspective on SWOT Analysis 6 The More Things Change… Recognition that Volume is not The Answer The problem is exacerbated by reduced salmon abundance, however reduced abundance is not the cause… Presentation to Ottawa, FCBC, March 1998 Fluctuations in wild salmon supply are overshadowed by increases in total salmon supply squeezing prices and margins BCP Strategic Plan, 1995

7. Perspective on SWOT Analysis 7 The More Things Change… Industry Financial Performance Financial performance of the the BC fish processing sector has been inadequate for close to a decade… Gislason et al, 2003 Industry is in financial crisis Fisheries Management: The Bottom Line The Business of Fishing in BC, FCBC, 1993 The commercial fishery is experiencing severe economic difficulties A Status Report on the Commercial Fishing Industry of BC FABC, 1983 In 1969 the industry was insolvent… A Status Report on the Commercial Fishing Industry of BC FABC, 1983

8. Perspective on SWOT Analysis 8 The More Things Change… Need Secure Access to Raw Material Industry requirements: One fishery, one manager Secure access to raw material with clear allocation rules Presentation to Ottawa, FCBC, March 1998 Business Requires: Access to high quality raw material at reasonable prices Fisheries Management: The Bottom Line The Business of Fishing in BC, FCBC, 1993

9. Perspective on SWOT Analysis 9 The More Things Change… Supplement BC-caught Fish with Outside Resources To ensure adequate volumes, BC processors are increasingly sourcing raw material from outside the province Gislason et al 2003 We get our fair share of fish from the Fraser River, but we also pack in fish from the outside… we even carry cohos from Ketchikan, Alaska… the price is cheaper there than in BC Ritchie Nelson, Nelson Bros, 1930

10. Perspective on SWOT Analysis 10 The More Things Change… Need for Industry-Government Cooperation What is needed is coordination between government and industry alike to follow through with present initiatives (fleet rationalization, SEP) Unknown is whether or not govt and industry alike will have the perseverance to resolve our problems and design our future… A Status Report on the Commercial Fishing Industry of BC FABC, 1983

11. Perspective on SWOT Analysis 11 The More Things Change… The World is Changing… Historically, the performance of the industry fluctuated as a reflection of year-to-year variances in catch levels and levels of market demand… in more recent times, performance has been affected by numerous other factors… A Status Report on the Commercial Fishing Industry of BC FABC, 1983

12. Perspective on SWOT Analysis 12 Longstanding/Recurring Messages Industry has expressed over and over: Need to be market driven, abandoning mere volume orientation Need to access high quality raw material on reasonable terms Need for government support/cooperation That the world is changing… more variables and complexity Difficulty earning satisfactory financial returns

13. Perspective on SWOT Analysis 13 So Whats the Point? With so many consistent themes, its tempting to think: Industry is crying wolf… Industry is not changing & adapting – same problems, different decade Industry lacks imagination

14. Perspective on SWOT Analysis 14 Industry Change Has Been Profound The BC seafood industry in 2003 scarcely resembles that of only a decade ago Dont be fooled because many of the faces are same… Industry strategy, philosophy, and structures have been substantially transformed

15. Perspective on SWOT Analysis 15 Signs of a Transformation Harvester group hosting Seafood Summit… not processor group (there isnt one) Largest salmon brand in Canada doesnt produce a scale (Cloverleaf) Fishermens Union is involved in allocating quota to vessels (Groundfish Development Authority) Groundfish processors share their business plans with Union, Communities, and each other! (Groundfish Development Authority) Salmon processing – the only thing worse than not enough salmon is… enough salmon! too many boats chasing too few fish is not on the list of industry challenges in a SWOT study

16. Perspective on SWOT Analysis 16 More Signs of a Transformation Women in top posts! Albion Fisheries. The Seafood Alliance. The BCSFA. SOKOA. mid-40s, thinning hair, thickening waist = young whipper- snapper! Dogfish and pilchards are back… whats next? whales and seals? Halibut fisherman cuts-short the fishing trip… to effect repairs… to the satellite dish Zero-martini lunches Fisherman writes a letter to the Minister… and knows what font he used Rob Morley not a suit, but a sweater…

17. Perspective on SWOT Analysis 17 BC Seafood Industry Adaptation Although well-aware of challenges, industry has been unable to reverse a marked decline in revenues Given lower revenues, there is no choice but to adapt

18. Perspective on SWOT Analysis 18 Revenue-Earnings Pattern Preferred – Real Businesses

19. Perspective on SWOT Analysis 19 Revenue-Earnings Pattern Typical Seafood

20. Perspective on SWOT Analysis 20 Revenue-Earnings Pattern BC Seafood in Recent Years

21. Perspective on SWOT Analysis 21 How Has Industry Responded? Strategically 1. Cut costs – same activities, lower budget 2. Rationalize – fewer activities 3. Specialize – get rid of unprofitable endeavors 4. Consolidate – more of profitable activities 5. Diversify/Shift – get into new/different activities 6. Exit - if 1.-5. fail… get the hell out! Emphasis on defensive strategies… growth & investment on the sidelines.

22. Perspective on SWOT Analysis 22 How Has Industry Responded? Philosophically From: Well do it ourselves To : Well do what we can and outsource the rest… From : Margin orientation (speculate) To : Cash flow orientation (low risk, low return) From : Processing as key competitive function To : Processing as service to be purchased/sold From : Well achieve growing revenues and earnings, just like real businesses To : Well exploit opportunities as they arise, and not make any big mistakes…

23. Perspective on SWOT Analysis 23 How Has Industry Responded? Structurally Historically, big companies had all the stuff People Fixed assets Access to Capital As companies have rationalized, they have: Reduced staffing & fishermen levels Closed facilities, sold assets Lessened ability/willingness to risk capital People, facilities, and assets dont disappear, they become: Fish brokerage firms, consultants, independent fishermen Custom unloading, custom processing service providers As big companies shed structure and reduce risk tolerance, opportunities open-up for others… The stuff in the industry is now much more spread around…

24. Perspective on SWOT Analysis 24 What Does the Industry Look Like Now? Given strategic and philosophic responses by industry to a changing business environment, and resulting structural changes, what does the industry look like today? How is it equipped to deal with the challenges and opportunities as identified in the SWOT? Are we in better shape now than we were in the good old days?

25. Perspective on SWOT Analysis 25 The World has changed, and the BC seafood sector needs to change with it… Successful businesses and industries are those that can adapt and reposition themselves when circumstances change… By this measure, weve done a great job… lots of repositioning in light of changed circumstances…

26. Perspective on SWOT Analysis 26 Industry-in-General Challenges in Adapting to Changing Business Conditions A lack of leadership, cohesion, and the will to respond to change Focus on the short term to the detriment of long term strategic planning Production inefficiencies Neglect of research and development, product development, and investing in human resources Lack of attention to changing consumer needs Inefficient and/or inflexible government regulation Guilty on all counts…

27. Perspective on SWOT Analysis 27 Compared to Past BC Seafood Industry Today Is: Nimble… able to respond to changing circumstances Opportunistic… able to exploit emerging opportunities A network of industrialists and service-providers Collectively, serving customer needs Small… more players, and the big ones arent as big Positive cash flow vs. strong margins Fractured Fragile – prosperity can be easily undermined Undercapitalized – capital on the sidelines…

28. Perspective on SWOT Analysis 28 An Obvious Analogy: Brave Knight as BC Seafood Industry Brave Knight confronts & prevails over traditional seafood industry business environment…

29. Perspective on SWOT Analysis 29 Brave Knight as BC Seafood Industry Brave Knight confidently prepares to deal with a new, complex business and regulatory environment…

30. Perspective on SWOT Analysis 30 Brave Knight as BC Seafood Industry Brave Knight suffers a pretty nasty wound… but remains optimistic… tis but a scratch!

31. Perspective on SWOT Analysis 31 Brave Knight as BC Seafood Industry Brave Knight is down to one digit… only one leg to stand on… but keeps fighting.

32. Perspective on SWOT Analysis 32 Brave Knight as BC Seafood Industry Brave Knight is but a trunk… defenseless… but his mouth still works! Just a flesh wound…

33. Perspective on SWOT Analysis 33 Making Sense of the Brave Knight Analogy Different sectors of the BC seafood industry are at varying stages of health The competitive environment grows increasingly complex A supportive government/regulatory framework would be helpful… but an ambivalent or hostile one may prove fatal Industry will invest to place itself on a firmer competitive footing… once the dismemberment has stopped…

34. Perspective on SWOT Analysis 34 British Columbia Packers Limited Annual Report Highlights 1977-1983 Year / $millions 1979198019811982 Investment in Fixed Assets 12.628.59.416.8

35. Perspective on SWOT Analysis 35 Government as Industry Supporter From Western Grocer magazine - 1961

36. Perspective on SWOT Analysis 36 Summary Many themes or challenges facing the BC seafood industry have been around for a long time, though the list grows ever-longer The industry knows what it must do… Industry not crying-wolf when describing challenges… SWOT Analysis has very effectively captured them After years of adaptation and rationalization the industry remains vulnerable to a hostile operating and regulatory environment Industry needs the support of government to successfully confront its challenges Do not underestimate the amount of change the BC seafood industry has undertaken… or the scope of the challenge to heal certain sectors

37. Perspective on SWOT Analysis 37 No Flesh Wound…