Opinion Page
WHO WANTS THIS MARKET
TO GO DOWN ? NOBODY ?
When last week Heinz announced it would not meet it projected profits: one of the analysts suggested that it would be good for Heinz to consider “spinning off its tuna business”. StarKist being America’s market leader, and also focused on conquering this position in Europe, is feeling its share of the 2000 tuna depression. The analysts argument: It is good to be a category leader, but it must be a profitable category !
It is obvious that the major players are all in urgent need of profits. Recently also Thai Union (Chicken-of-the-Sea) announced disappointing financial results. Bolton group which acquired Peche et Froid last year by outbidding StarKist is obviously also eager to see some results, just as ConAgra’s who obtained recently Bumble Bee. All companies not only heavily involved in marketing tuna, but also in processing. With StarKist and Bolton also (still ?) owning a tuna fleet.
But not only the major global players are suffering, the major Philippine tuna group First Dominion went recently into receivership status and also importers and traders have taken a beating over the past year. Canned tuna importers saw their turnover in units perhaps stable, but with tuna prices ever-sliding and price p/unit at 60% of normal levels, most of them failed to meet their targeted earnings on tuna. Some incurred heavy losses on this product category. The recent move by US tuna importer Mitsubishi to start an alliance with Thai Union shows the need of rationalization in this sector, and I believe we will see more of this within 2001.
Also for frozen tuna traders 2000 has been hell. Whatever market position they took it seems they were hardly able to turn it into profit. Some still seem to be holding considerable inventories positions right now, in a final bet, and confidant that they will finally be able to turn them into a profit.
So what could their strategies be for the next 2 months?
- Supermarkets: Keep margins on tuna as last year, do not lower in-store prices, and resist price increases, if needed raise prices, maximize profits on this category.
- Brand-leaders: push up retail tuna prices fast, maximize profits on inventories, and recover losses. Stay out of the market, stick to hand-to-mouth buying and production.
- Canned Tuna Importers: ensure that all canned tuna contracted, will be fulfilled and delivered. Build off inventories, maximize earnings, turn to hand-to-mouth buying. Cautious approach throughout summer period, avoid speculation, back-to-back business only.
- Canned Tuna Processors: Wait for demand to return to normal. Clear all inventories, create liquidity. Buy raw tuna only on a back-to-back basis. Offer and sell only based on raw tuna prices which can be secured, refrain from any speculation. Play it Safe !
- Frozen Tuna traders: Be firm on higher skipjack prices. Continue to be firm at skipjack prices around $800 p.M/T or higher , steadily but slowly release remaining inventory position into the market at this level. Avoid any further major speculation. Build-off inventory positions by mid of April 2000.
- Fisherman: continue catching skipjack, push for higher prices, balance costing versus volume, reduce fishing efforts when needed in case of increased catches, and lower prices. Do not risk another downfall in skipjack prices.
It looks in the interest of all parties, perhaps except for the supermarkets; to have prices for raw skipjack prices go to USD 850 CF BKK and higher. At lower prices there are likely very few winners, except some of those retailers who kept their prices almost unchanged from the higher price-level of beginning1999. So who would want this skipjack market to go down, hardly anybody! (Except the some retailers maybe?)
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