Indian Shrimp Industry - Analysis

Shrimp Industry - Outlook

The global shrimp market is experiencing robust growth, driven by increasing demand for seafood and shifting dietary preferences towards healthier protein sources. In 2021, the global shrimp market reached a value of US$62.8 billion and is projected to expand to US$84.2 billion by 2027, representing a compound annual growth rate (CAGR) of 4.8% during the forecast period.  This positive trend is fueled by steady growth in traditional markets like the US, Europe, and Japan, along with a significant increase in consumption in emerging markets such as China and India.

India plays a pivotal role in the global shrimp landscape, being one of the world's largest producers, processors, and exporters of shrimp. In 2022, the Indian shrimp market achieved a volume of 0.85 million tons and is forecasted to grow at a CAGR of 9.60% to reach 1.47 million tons by 2028. The Indian shrimp sector benefits from a long coastline, favourable climatic conditions, and a large farming community, making it ideally suited for shrimp culture.

Overview of Various Shrimp Products

A variety of shrimp products available in the market. These products can be broadly categorised based on their processing level:

1. Raw Shrimp: This category represents the most basic form of shrimp product, typically frozen without further processing. Various raw shrimp products as based on their physical characteristics:

1. Head-on: Shrimps are sold whole with their heads intact.

2. Headless, Easy Peel: Shrimps are sold without their heads but with the shell partially removed for easy peeling.

3. Raw Peeled & Deveined, Tail-on: Shrimps are peeled, deveined and sold with their tails intact.

4. Raw Peeled & Deveined, Tail-off: Shrimps are fully peeled, deveined and sold without tails.

5. Butterfly Cut, Peeled & Deveined, Tail-on: Shrimps are butterflied, peeled, deveined, and sold with their tails on.

6. Pin Deveined: Shrimps are deveined but otherwise intact.

2. Cooked Shrimp: Cooked shrimp products offer convenience and are ready to eat. There are various types of cooked shrimp products, mirroring the variations found in raw shrimp:

1. Cooked Head-on

2. Cooked Headless, Easy peel

3. Cooked Raw Peeled & Deveined, Tail-on

4. Cooked Raw Peeled & Deveined, Tail-off

5. Cooked Butterfly Cut, Peeled & Deveined, Tail-on

6. Cooked Pin Deveined

   
   

3. Value-Added Shrimp: Value-added shrimp products undergo additional processing to enhance their flavour, presentation, or convenience. Several examples of value-added shrimp products are:

1. Marinated Products: Shrimps are marinated in various flavours.

2. Breaded Products: Shrimps are coated in breadcrumbs.

3. Skewers: Shrimps are placed on skewers for easy grilling or frying.

4. Shrimp Rings: Shrimps are arranged in a ring shape.

Indian shrimp industry has a trend of moving up the value chain, with a focus on speciality and ready-to-eat (RTE) shrimp products. These products cater to consumers seeking convenience and higher-quality seafood options. There is a the growing demand for frozen shrimp snacks, ready meals, and value-added shrimp products in various countries, driven by changing lifestyles and increasing consumer preference for convenience.

Industry Value Chain

The value chain begins with shrimp farming, where farmers cultivate shrimps in shrimp ponds / farms. This stage is witnessing a growing emphasis on sustainable farming practices to minimise environmental impact and ensure long-term viability. Technological advancements, such as the use of probiotics and improved water management systems, are enhancing productivity and disease resistance in shrimp farms.

Next comes shrimp feed manufacturing, a critical link in the value chain. Companies like Avanti Feeds dominate this sector with about 50% market share, supplying high-quality feed to shrimp farmers. Trends in feed manufacturing include the development of specialised feeds tailored to specific shrimp species and growth stages. There is also an increasing focus on incorporating sustainable ingredients and reducing the reliance on fishmeal.

Then comes the shrimp processing stage which involves transforming raw shrimp into various marketable products. The trend is towards moving up the value chain by producing more value-added products, including cooked, breaded, and ready-to-eat shrimp. This shift is driven by consumer demand for convenience and higher-quality seafood options.

Distribution and retail play a crucial role in connecting processed shrimp to consumers. Large wholesalers, distributors, and retail chains are the key players in this stage. E-commerce platforms are emerging as a significant distribution channel, providing consumers with greater accessibility to a wider range of shrimp products. Trends in this segment include a growing demand for sustainable and ethically sourced shrimp, with consumers increasingly concerned about the environmental and social impact of their food choices.

Finally, consumers represent the end of the value chain, driving demand and shaping industry trends. Their preferences for convenience, quality, and sustainability influence the types of products offered and the practices adopted throughout the value chain. As consumer awareness grows, traceability and transparency are becoming increasingly important considerations in their purchasing decisions.

Porter's Five Forces Analysis

Porter's Five Forces framework can provide insights into the competitive dynamics of the Indian shrimp industry:

Threat of New Entrants: Moderate. Setting up large-scale, integrated shrimp operations requires significant capital investment, making it relatively difficult for new entrants to compete with established players. However, smaller-scale entrants focused on niche markets or specific segments of the value chain may emerge.

Bargaining Power of Buyers: High. Large importers and retail chains in major export markets have significant bargaining power due to their volume purchases and ability to switch suppliers. This puts pressure on Indian exporters to maintain competitive pricing and product quality.

Bargaining Power of Suppliers: Moderate to High: Suppliers of key inputs, such as feed ingredients and shrimp seed, can exert bargaining power, especially if their products are specialized or in high demand.

Threat of Substitute Products: Moderate: Consumers have a wide range of protein sources to choose from, including other seafood, poultry, and meat. However, the health benefits and unique flavour profile of shrimp limit the threat from substitutes to some extent.

Competitive Rivalry: High: The Indian shrimp industry is characterized by intense competition among established players, particularly in the export market. Companies compete on factors such as price, quality, product innovation, and supply chain efficiency.

Industry Headwinds and Tailwinds

Past Headwinds of the Shrimp Industry included: Disease outbreaks: White Spot Syndrome (WSS) and Early Mortality Syndrome (EMS) have caused significant losses in the past; Price volatility: Fluctuations in global shrimp prices impacted farmer profitability and export earnings; Anti-dumping duties: Imposition of duties by the US affected India's competitiveness in a key market.

A significant headwind currently is the volatility of the global shrimp market, 8.74% contraction in India's marine product exports during 2023-24. This was driven by recessionary trends in key economies like the US, impacting demand and pricing. Another headwind has been the rising competition from other shrimp-producing countries such as Ecuador, Vietnam, and Indonesia, which often have lower production costs. Ecuador's growing market share in the US has been a concern due to its proximity and competitive pricing.

The fluctuating cost of key feed ingredients like soybean meal, fish meal, and wheat flour, impacting the profitability of feed manufacturers and posing a challenge for farmers who depend on affordable feed. Natural disasters and disease outbreaks, often worsened by environmental stressors, can cause substantial production losses and financial setbacks, forcing companies to adopt sustainable farming practices and robust biosecurity measures

Role of Equador

Ecuador has emerged as a major force in the global shrimp market, even surpassing India in total shrimp production. Ecuador has consistently increased its shrimp production and reached an estimated 6 million metric tons by 2017. Ecuadorian vannamei supply has grown exponentially from roughly 40,000 tonnes exported in 2000 to an estimated 1.2 million tonnes in 2023. The country became the world’s largest producer and exporter of farmed shrimp in 2022, respectively supplanting China and India in the process. A small domestic market size contributed to the development of an export-oriented sector. Indeed, approximately 90% of Ecuadorian shrimp is sold overseas, primarily to China, which accounted for 59% of exports in 2023, followed by Europe (18%) and US (17%). 

However, Ecuador's production has largely focused on commodity-based shrimp products, with a significant portion of its exports being head-on, shell-on shrimp destined for markets like China. Ecuador has faced limitations in producing higher-value, ready-to-cook (RTC) shrimp products due to constraints in manpower resources and a reliance on machines for processing. This has presented challenges in penetrating markets like the US, where demand for value-added products is strong.

In recent years, Ecuador has experienced challenges that have impacted its production, including: Civil unrest and political instability, Energy crisis and power failures and Removal of Diesel Subsidy. Despite limitations in value-added production, Ecuador has managed to gain market share in the US, primarily due to its geographical proximity, allowing for shorter shipping times and lower transportation costs compared to Asian producers.

Government Policies and Incentives

The Indian government's efforts to promote the aquaculture sector, including the reduction of import duties on certain shrimp aquaculture inputs, played a role in supporting shrimp production and exports.

The production-linked incentive (PLI) schemes for the food processing sector, which included value-added shrimp products, also aimed to boost India's export share.