Production of frozen prawns is an example that shows that investments in new technology are not enough to increase profitability and value added.
Despite many years with efficiency improvements and cost reductions, the competition from prawn industries in other countries is tougher than ever.
Prices are forced down
The majority of Norwegian prawn production consists of peeled prawns that are frozen and exported. In the last 20 years, the number of companies with this type of production has dropped from 26 to 8, and the number of employees from 1500 to 350.
The prawn industry has continuously improved the production process, e.g. the machines increase the meat yield in the peeling process. Investments in new technology and automation have resulted in lower costs and increased productivity.
But the competition from prawn producers in other countries has never been tougher, and the prices of the end products are continually being forced down. The cost reductions have not improved profitability.
The prawn industry has succeeded in improving efficiency and reducing costs. The problem is that these technological developments have not resulted in permanent advantages. The Norwegian products do not have added attributes that make them stand out as special, and they must therefore compete against the same type of products from other countries, says Senior Scientist Bent Dreyer, who has followed the profitability development in the Norwegian seafood industry for many years.
Local advantages important
The fillet industry has also experienced that innovation does not necessarily result in permanent competitive advantages. Norways most modern and efficient plant for production of fillet products of cod started in 2001 and went bankrupt barely a year later. When the company opened, it was portrayed as an example of future-oriented competitive fish processing.
With cold storage and modern technology for thawing of frozen fish, the plant would be ensured of continuous access to raw materials regardless of seasonal fluctuations in the fisheries. Computer technology and transport systems made sure that the finished products were frozen and put in storage with the least possible amount of manual labour. Increased automation would reduce labour costs. Nevertheless, other producers of the same products make them for less money in other countries.
We live in a time where innovations are given great emphasis to strengthen the companies competitiveness and create new jobs. Innovation is important, but is often costly and risky. For every successful innovation, there are many failures. It is therefore important for the Norwegian seafood industry that future innovation protects and develops local advantages says Dreyer.
