Market Demand Assessment for Haa Aaní Oysters

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Market Demand Assessment for Haa Aaní Oysters Market Demand Assessment For Haa Aaní Oysters Confidential Prepared for: Sealaska Haa Aaní Prepared by: Juneau • Anchorage May 2011 Table of Contents Key Findings ............................................................................................................................ 1 Summary ............................................................................................................................... 6 Introduction and Methodology .............................................................................................. 8 Methodology ......................................................................................................................... 8 Measures of Oyster Production and Conversion Factors .......................................................... 9 Overview of International and Domestic Oyster Production and Markets .......................... 10 Oyster Markets ..................................................................................................................... 10 Potential Markets for Haa Aaní Oysters ............................................................................... 22 Alaska Markets ..................................................................................................................... 22 Lower 48 Wholesale Market .................................................................................................. 26 Lower 48 Retail Market ......................................................................................................... 29 International Markets ........................................................................................................... 31 Transportation, Logistics, and Quality ................................................................................. 32 Shipping .............................................................................................................................. 32 Logistical Considerations ...................................................................................................... 33 Oyster Quality ...................................................................................................................... 34 Organizational Considerations ............................................................................................. 36 Appendices ........................................................................................................................... 37 Appendix A List of Contacts ................................................................................................. 38 Wholesalers/Distributors ....................................................................................................... 38 Seafood Restaurants and Oyster Bars .................................................................................... 42 Retailers ............................................................................................................................... 47 Anchorage Wholesalers ........................................................................................................ 48 Icy Strait Point ...................................................................................................................... 48 Small Ships ........................................................................................................................... 48 Shipping and Logistics .......................................................................................................... 49 General Information ............................................................................................................. 49 Appendix B: Selected Menus ................................................................................................ 50 Key Findings Haa Aaní LLC, a subsidiary of Sealaska Corporation, and Yak-tat Kwaan Inc. are supporting the development of three oyster farms in Yakutat as part of a rural regional economic development initiative. Haa Aaní’s three farms are on track to produce 250,000 marketable oysters by year-end 2011 and an additional 500,000 oysters by the end of next year. Within three to five years, Haa Aaní production volume could reach 2 million oysters per year. Haa Aaní oysters will be a high- quality floating tray cultured oyster intended for the high-value half-shell market. Maximizing the market value of this very substantial volume of oysters will require a well- defined plan with expertly executed marketing strategies. The purpose of this study is to provide the market information necessary to develop a sound marketing plan. McDowell Group’s research for this project, which included interviews with oyster distributors, restaurateurs, and retailers from across the country, has confirmed that the prevailing image of pristine Alaska water, coupled with our state’s unique “wild” mystique, sets the stage for a potentially large market for high-quality Alaska oysters. However, efficient distribution and competitive pricing will be significant challenges for Haa Aaní efforts to distribute large volumes of oysters profitably. Following are key findings from the study. International and Domestic Oyster Production and Markets • U.S. domestic oyster production has averaged 217.5 million pounds, live weight, per year since 2000. The top export markets for U.S. oyster exports in 2010 were Canada, Hong Kong, Taiwan, Singapore, France, and Italy. • Pacific Coast landings totaled 73 million pounds, live weight, in 2009. Production is centered in Washington. Sales in the Pacific region totaled $72.8 million in 2009. British Columbia production Market Demand Assessment for Haa Aaní Oysters McDowell Group, Inc. • Page 1 totaled another 11.9 million pounds, with a landed value of $6.2 million. Alaska production accounted for .03 percent of Pacific Coast landings. • Oyster exports through U.S. Customs in Seattle in 2010 totaled 5.5 million pounds and were valued at $14.8 million. Oyster exports through Seattle were destined for Hong Kong (35 percent), Canada (34 percent), and Taiwan (23 percent). • Imports of British Columbia oysters to U.S. Pacific Coast states totaled $5.4 million in 2010. Along the Pacific Coast, California imports the largest value of B.C. oysters, followed by Washington. • Other top international destinations for British Columbia oysters were Hong Kong ($4.8 million in exports in 2010) and Singapore ($1.3 million in exports in 2010). These countries were also the top export destinations for oysters from other Canadian provinces. Alaska Oyster Production • A total of 27 farms in Alaska (15 in Southcentral and 12 in Southeast) harvested 764,422 oysters in 2010 with a total farm gate value of $384,500, based on data self-reported to ADF&G. Alaska harvest is down from the 2005 peak of 1.3 million oysters with a total farm gate value of $566,000. • The average price (farm gate value) for Alaska oysters has risen from $3.98 per dozen in 1990 to $6.04 in 2010. The price per oyster in 1990 averaged $0.33, while the average oyster price in 2010 was $0.50 per oyster. This price increase is generally on par with inflation over the 20-year period. • Roughly half of the statewide harvest occurs in Southeast. In 2010 423,288 oysters were harvested in the region with a farm gate value of $166,000. This equates to $4.71 per dozen. Over the past 20 years Southeast’s oyster harvest peaked in 1996, at 624,000 oysters. • Southcentral growers have increased the average value of the region’s oyster harvest over the last five years to $7.69 per dozen. This may be the result of lower shipping costs and increased direct-to-the- public sales via the Internet. Prices listed on the Kachemak Shellfish Growers Cooperative website range from about $16 to $19 per dozen (plus shipping). It is unknown what volume of oysters are sold at these prices. • Most oyster farms in Southeast Alaska are small in scale. The larger oyster producers in Southeast include Pearl of Alaska (estimated production of 13,000 to 16,000 dozen in 2010 with plans to increase production to about 40,000 to 60,000 dozen by 2012 or 2013), Canoe Lagoon (about 10,000 dozen per year), and Blue Starr Alaska Oyster Company (about 3,000 to 5,000 dozen per year). • Alaska oyster production will increase dramatically in the next few years. Haa Aaní production alone will nearly double total statewide oyster production within the next year or two. Pearl of Alaska and several oyster farms on Prince of Wales Island will also be ramping up production. Market Demand Assessment for Haa Aaní Oysters McDowell Group, Inc. • Page 2 Market Structure and Characteristics Oysters can change hands several times before ending up on the plate of the consumer. Some growers sell directly to restaurants or retailers, while others may rely almost exclusively on wholesalers/distributors. Many growers do both; carefully developing relationships with select high-end buyers while also selling larger volumes of oysters to a wholesaler (who may then sell the oysters to yet another smaller local distributor). In any case, each approach has its advantages and disadvantages, as summarized below. WHOLESALE MARKETS • Wholesale markets are appealing because of the potential to sell very large volumes of oysters, which can reduce the unit cost of marketing, harvesting, testing, packaging, handling, and shipping. However, growers must be willing to settle for lower prices, perhaps substantially less than direct sales to oyster bars or other restaurants. • Oysters often go through two wholesale
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