Farmed shrimp is among the fastest-growing food products in the world. In less than two decades, global production has more than tripled from about 1.2 million tons in 2000 to some 4.2 million tons in 2017. As the global population and consumer affluence grow, farm-raised shrimp is becoming an increasingly important source of protein around the world. In the US alone, the average annual consumption of shrimp has risen to four pounds per capita.
In 2017, the global market for shrimp, including farm-raised and wild-caught shrimp, was valued at around $40 billion. The dominant species of farmed shrimp, Litopenaeus vannamei (L. vannamei), or whiteleg shrimp, accounts for about $14 billion. Shrimp production worldwide is expected to grow by more than 5.6% annually, with China and the US becoming countries where the greatest demand is coming from. If we see the overall industry, its growth rate is still at a record pace but sadly, not all shrimp producers are thriving.
In the early years of this century, China, Thailand, and Vietnam were leaders in the shrimp-farming sector – with Indonesia in fourth place. But the competitive landscape has shifted. Outbreaks of disease and rising labor costs have threatened this once-thriving industry, and India, which has dramatically increased its share in the global shrimp market by producing large volumes at low prices, has become the second-largest shrimp producer worldwide after China – accounting for 14% of global shrimp production with 600,000 tons produced annually. Indonesia was also able to strengthen its already competitive position in the global shrimp market, overtaking Thailand and Vietnam, to claim third place.
In 2018, the global shrimp market experienced a price drop that was the result of high inventory levels in import nations such as the US, further squeezing profit margins and giving low-cost players an advantage. Such a phenomenon encourages shrimp producers to find new ways to stay ahead of fast-moving, low-price competitors while coping with demand dynamics.
The global trend toward environmentally sustainable and socially responsible food production has raised questions about food safety and sustainability within the shrimp industry. Retailers, regulators, and consumers have become much more attuned to the negative environmental and social impact of aspects of unregulated shrimp production, including the use of banned chemicals, environmental degradation, and human and labor rights violations.
In a world with 24-hour access to social media, ongoing consumer awareness campaigns, new regulations in importing countries, and accelerated dissemination of information worldwide, retailers face intense pressure to protect their brands from the damage that results from product recalls, scandals, and supply chains that are disrupted by new import controls.
As more attention is focused on these issues, retailers, regulators, and, in some cases, consumers are demanding sustainably produced, traceable products in nearly all food categories. From 2012 through 2017, the sustainable seafood segment in major European markets grew by about 12% while market demand for other seafood segments declined. Similar trends have been observed in the US, though on a smaller scale, and the growth of sustainable products in China has been driven mainly by food safety scandals and government targets. Overall, there is a growing demand for responsibly produced shrimp, and a niche consumer segment is willing to pay a premium for it.
A 2015 survey of approximately 3,000 consumers worldwide found that 68% wanted to know where their food was coming from and how it was being produced. While statistics show that this consumer-driven pressure is currently less urgent in the US and China, these countries have introduced stricter import regulations and government targets.
Nearly all major retail chains, supermarkets, and convenience stores around the world have pledged to increase their share of sustainably produced food, including shrimp and other seafood categories, and, as a form of legal risk insurance, an increasing number of major retailers are requiring suppliers to sign contracts and carry out in-depth due diligence to ensure traceability and adherence to ecofriendly production methods. Regulators, too, are increasing their monitoring of shrimp imports for drug and chemical residuals and are threatening to ban imports for suppliers that go against the rules. Any company charged with regulatory violations would risk suffering serious economic losses and reputational damage.
As the demand for sustainability grows, there is increasing urgency for a paradigm shift toward truly responsible production and sourcing. Retailers’ pledges of sustainability and niche consumers’ increasing willingness to purchase sustainable products represent forward movement. However, the definition of “sustainability” is not consistently precise. There are many different ways to define sustainability, and retailers and consumers may unknowingly purchase products that fall short in fundamental areas, such as environmental stewardship and social responsibility.
To foster real change, it is important to establish a clear definition of what it means for food to be labeled sustainable. To put it simply, sustainable products should be produced today in ways that do not compromise the ability to produce those same products tomorrow. Products should minimize environmental degradation and the use of natural resources and should be traceable across the supply chain to provide greater transparency and accountability. Sustainability is not a one-man game, all stakeholders need to understand and adhere to these fundamental principles.
To defend their current strong competitive position, shrimp producers need to embrace sustainability. As changes are implemented across the supply chain, it will be imperative to align on the definition of sustainability and establish mechanisms that will hold all actors accountable.