The seafood industry is ripe for platform disruption
Persistent challenges in the seafood industry have created an ideal recipe for platforms that can facilitate data sharing, efficiency and transparent trade.
The $150 billion global seafood industry is rapidly expanding. Per capita seafood consumption has risen by 90% worldwide in the past fifty years and today more than one in ten people on the planet derive their livelihoods from fisheries and aquaculture. This rapid growth has fueled significant challenges both for the seafood industry and the overall sustainability of our oceans. Currently, 89% of global fish stocks are overfished or fully exploited, yet the problem isn’t simply consumption but waste, as up to 50% of fish are discarded or wasted within supply chains. In addition, more than 800 kilograms of seafood are stolen every second through IUU (Illegal, Unreported and Unregulated) fishing. The above data are from The State of World Fisheries and Aquaculture 2016
In the book, The Platform Revolution: How Networked Markets Are Transforming The Economy, authors Geoffrey G. Parker, Marshall Van Alstyne, and Sangeet Paul Choudary identify four characteristics that describe industries that will be most prone to platform disruption in the coming years: 1) information intensive, 2) filled with unscalable gatekeepers, 3) highly fragmented and 4) characterized by extreme information asymmetries. These four characteristics are perfect descriptions of the challenges, and ultimately the opportunity, that exists in the seafood industry today. Below I will go into each into more detail.
- Information Intensive: At first glance many would conclude that the seafood industry is anything but information intensive. This is due in large part to the way the industry has been managed until recent years. However, in order to truly determine the quality of seafood and the responsibility of its harvest, buyers need to know important details such as location of harvest, time/date of harvest, the identity of the fishers, and the way in which the seafood was handled. These details are of course in addition to the product specifications (species, size, weight, etc.), and that doesn’t even begin to address quality determiners like time/temperature readings from the point of harvest to the point of consumption, bacteria count, and much more. These data points don’t simply need to be captured, but transferred through each member of, what in many cases are, highly fragmented supply chains. At present only some of these data are being captured in more linear supply chains, but starting now and in the decades to come, seafood buyers are demanding more data and in fact governments are requiring these data in order to verify the safety, legality and responsibility of the seafood we consume.
- Filled With Unscalable Gatekeepers: Part of the transparency problem throughout the seafood industry is due to the careful design of non-scalable information gatekeepers in the form of “middlemen” that add little to no value, but simply maintain their position by carefully guarding information and creating financial mechanisms that limit fishers into having only a single option when it comes time to sell their catch. In the past these information cartels were tolerated because the industry was highly fragmented, fishers on the whole had very little connection to other fishers outside of their immediate area, and downstream players in the supply chain did not require key data elements for import and purchase. This is all changing however, as buyers and governments are requiring these key data elements as mandatory in order to ensure legality, safety and quality.
- Highly Fragmented: Unlike many agricultural industries, seafood supply chains are highly fragmented with very little connection from the point of harvest to the point of consumption. This is because 85% of the world’s seafood by volume is sourced from developing nations, and much of that is harvested by independent smallholders, who sell their catch to independent intermediaries, who in turn consolidate batches of seafood to be sold to independent processors, and so on. This is a massive challenge leading to the fact that in many cases global HORECA (Hotels, Restaurants and Caterers) brands buying seafood are completely unaware of key data elements (who, what, when, where) from the point of harvest onward. In addition to economic risks from health concerns and the possibility of safety recalls, this data ignorance is a massive brand risk as many of these same global brands are touting their sustainability commitments while the seafood they are serving cannot be proven to be LRR (Legal, Reported and Regulated) without data tracing all the way back to the first link in the supply chain. The technology to overcome this fragmentation is available, but in most cases the incentive structure doesn’t yet exist to reward each player in the supply chain for capturing and passing along the required data.
- Extreme Information Asymmetries: The combination of the above elements has led to extreme information asymmetries within seafood supply chains where ultimate buyers are unaware of, and disconnected with, those responsible at the point of harvest. As mentioned, this is in many cases by design from intermediaries that may operate like information cartels releasing information only as needed, and maintaining the information asymmetries to protect their monopolies. In the past this situation was accepted as a feature and not a bug within the industry. However, in today’s interconnected world where more and more brands are being held responsible by governments and consumers to ensure products are legal, reported and regulated, and not tied to global problems such as human slavery and high carbon output, this information asymmetry inevitably must change.
To address these and many other problems, regulators in the European Union and the United States are now demanding traceability back to the source. On January 1st, 2018, fifteen seafood species and species groups became subject to the US Seafood Import Monitoring Program prior to import. However, global seafood supply chains do not yet have a trusted mechanism that meets the needs of the various stakeholders in the industry and that includes appropriate incentives for taking the extra effort to capture and transfer data along the supply chain.
At Eachmile we believe the seafood industry is ripe for platform disruption — not a platform that will solve all of the above problems, but a series of overlapping platforms each addressing particular aspects of the industry by connecting parties more efficiently. In order for this to happen however the industry needs a mechanism to allow data to flow more freely through supply chains and across borders that will allow stakeholders to make more confident and informed decisions about buying, selling, shipping, storing, processing and even consuming seafood.
The challenge is that this mechanism for data transfer must be open and trusted by all parties in a highly decentralized and fragmented industry. New technologies such as blockchain make trust possible without central intermediaries — but only if used appropriately to maintain decentralization. Whatever the solution looks like, and we firmly believe it is coming, it will unlock huge potential for one of the world’s most precious resources.