Potential scale of Scottish seaweed-based industries: research paper

4 Status of the current seaweed-based industry in Scotland

4.1 Approach

4.1.1 This section provides a review of the current (baseline) Scottish seaweed-based industry with regard to the:

• Types of businesses involved and operational structure;
• Seaweed species utilised and the source of the raw material;
• Range of processing undertaken;
• Products produced;
• Industry's locational distribution; and
• Estimated socio-economic value (turnover, GVA and employment) of the sector per product group.

4.1.2 The baseline presented is based on a desk-based review of publicly available data and information provided through consultation. Stakeholders consulted for this study included industry stakeholders (i.e. existing seaweed-based businesses, potential new industry entrants and industry representatives) and wider stakeholders comprising regulators, other aquaculture consenting bodies and other institutions/organisations involved in enterprise, innovation and/or research.

4.1.3 For the purposes of this study, the baseline evaluation of the current seaweed-based industry has considered companies, community groups or other types of organisation whose core business^[9] relates to seaweed with regard to the harvesting, cultivation, processing and/or production of goods containing seaweed^[10] within Scotland. Other actors within the seaweed-related industry, (e.g. upstream supply chain companies providing equipment or institutions/organisations involved in enterprise and R&D), are also described but are not considered quantitatively in the baseline economic analysis.

4.1.4 Seaweed-related businesses identified through searches and liaison with the Project Steering Group (PSG) were contacted via email and invited to engage with the study via a telephone interview^[11]. During the interviews information on the following was sought (see Appendix D for the full questionnaire):

• Type of products and proportion of business that relates to seaweed;
• Location of business;
• Location of markets;
• Type, source and volumes of raw material used;
• Processing of raw material and supply chain requirements;
• Current volume and value of activity (turnover);
• Operational and capital costs;
• Employment (number of FTE, skills shortage, location of the workforce);
• Constraints to current business;
• Future vision for the company, including identification of opportunities/new markets and any potential constraints, and vision for the sector as a whole in Scotland.

4.1.5 Semi-structured telephone interviews were also held with wider stakeholders, to further inform the analysis of the current status of the industry, future products, emerging market opportunities and growth potential

4.1.6 A total of 22 interviews were conducted comprising seaweed-related businesses/organisations (n=12) and wider stakeholders (n=10). For confidentiality reasons these stakeholders are not listed in the report. Further detail regarding the methodological approach to the baseline review is presented in Appendix E.

Limitations

4.1.7 The review identified 20 companies/organisations in Scotland whose core business relates to seaweed, of which 12 engaged in the consultation. Whilst to the best of our knowledge the data presented captures most key seaweed-related businesses in Scotland, obtaining an exhaustive list of seaweed-related businesses in Scotland, for example from a regulatory body or an industry association, was not possible. As such, it is acknowledged that the data presented is likely to underestimate the scale of the sector.

4.1.8 Furthermore, it is important to note that the stakeholder consultation was conducted in early 2020 and hence the baseline presented may underestimate the level and value of the sector activity in 2021.

4.2 Overview of the current seaweed-based industry in Scotland

Businesses and supply chains – wild seaweed harvesting

4.2.1 The vast majority of the current sector in Scotland utilises wild harvested seaweed sourced from Scottish waters, rather than cultivated seaweed. Of the nine seaweed-related businesses involved in harvesting and/or processing of wild seaweeds in Scotland (for which information was sourced), seven are classed as micro-entities and two are classed as small companies as per Companies House (2019) definitions^[12].

4.2.2 The majority of micro-entities operate at a small-scale, harvesting wild seaweed by hand. Most of these businesses can be considered as artisanal operations, harvesting small amounts (up to a tonne of seaweed per annum) where the production process (harvesting, processing, production, and packaging) is done entirely in-house. In general, equipment requirements are low-tech (e.g. air-drying racks, drying ovens, mills, sieves and packaging material). Packaging, labelling and delivery logistics are also requirements. A generic schematic representation of the production and supply chain for these types of businesses is shown is Figure 1.

4.2.3 Some of the micro-entities harvest or process slightly larger quantities of seaweed (up to 50 tonnes per annum) and also employ the use of external businesses in the manufacture and packaging of their products (Figure 2). One company has more than one seaweed supplier, including one outwith Scotland, to ensure a reliable (constant) supply of seaweed (i.e. to de-risk the supply chain which in general is considered under-developed due to lack of investment in Scotland; see also Table 8, Section 5).

4.2.4 The companies defined as small by Companies House definitions, operate at a relatively large scale compared with the micro-entities, whereby seaweed is harvested mechanically (using a specially modified vessel with cutter) and/or by hand (sometimes with the use of a rake and vessel). These businesses harvest larger volumes of seaweed (over a thousand tonnes per annum) which are processed by drying and milling to individual end-user specifications which can be used directly or are subsequently sold to supply other companies that make seaweed-based products (depending on the application). A generic schematic representation of the production and supply chain for these types of businesses is shown in Figure 3.

Species, products and markets – wild harvested seaweed

4.2.5 The range of seaweed species that are currently wild harvested in Scotland and the product categories that they are used in are shown in Table 4. The table also shows the maximum consented harvest tonnages under CES licence^[13] for each species.

4.2.6 The species harvested in the greatest quantity in Scotland is A. nodosum (egg wrack), which is harvested both by hand and mechanically from the intertidal area. A. nodosum is processed for direct use as animal feed and soil conditioners, as well as being used to produce liquid seaweed fertiliser extracts. It is also processed to customer specifications to supply other companies for the production of human food products, and bioactives within the nutraceuticals and cosmetics industries.

4.2.7 Many of the micro-entities in Scotland tend to hand harvest a diverse range of intertidal seaweed species, including kelps, wracks, red and green seaweeds. Of these species the kelps Laminaria digitata (oarweed), Saccharina latissima (sugar kelp) and the red seaweed Palmaria palmata (dulse) comprise the largest proportion of the total harvest. The uses and products produced in Scotland from these species include human foods and cosmetic products containing seaweed material. Aside from where seaweed is harvested and sold fresh (in one instance), these types of products are considered higher value 'speciality' seaweed products (see Figure 14 in Cefas, 2016).

4.2.8 The majority of seaweed-related businesses identified in this study sell their products mainly to retailers, and direct to consumers (e.g. cafes, restaurants, markets, or via online or shop sales). These are primarily within the locale of the business in Scotland, or otherwise within the UK. A few of the larger businesses also sell products to processors and wholesalers, sometimes via distributors, in the UK as well as internationally such as in Europe, the Middle East, and United States of America (USA).

4.2.9 Whilst Table 4 indicates the maximum consented tonnage of each species that can be harvested under CES licence (approximately 13,000 tonnes in total across all licences), this does not necessarily represent actual harvested volumes and does not account for species harvested on private land not owned by CES^[14], or species harvested at smaller scales (see Table 4 footnote).

4.2.10 It was estimated that in 2020, approximately 8,000 tonnes of wild seaweed were harvested (equating to about 50% of the maximum allowed tonnage under CES licence). This is likely to be an underestimate for several reasons. Information on the actual volume of seaweed harvested per business was sought during the consultation exercise in this study, but this information was not always provided (especially where a large range of species are being harvested but also due to commercial confidentiality), and not all businesses contacted engaged with the consultation. However, the outputs of the consultation suggested that (at that time), businesses were not harvesting wild seaweed at the maximum volumes allowed under the CES licence. In addition, tonnages harvested from private land are not included.

Table 4. Species, method and maximum volumes of seaweed harvest under CES licence per annum in Scotland and seaweed product categories based on the consultation undertaken as part of this study (n=9)

Species	Harvest method	Max. harvest tonnages under CES licence (tonnes) *	Product category
Ascophyllum nodosum (egg wrack)	Hand (incl. rake and nets from vessel) Mechanical using modified vessel	11,520	Horticulture; Animal feed; Human food; Bio-actives (cosmetics, nutraceuticals)
Fucus vesiculosus (bladder wrack)	Hand	249	Human food; Bio-actives (cosmetics, nutraceuticals)
Fucus serratus (serrated wrack)	Hand	201	Human food; Bio-actives (cosmetics)
Himanthalia elongata (thong weed)	Hand	101	Human food
Laminaria digitata (oarweed)	Hand	413	Human food; Bio-actives (cosmetics)
Laminaria hyperborea (tangle / cuvie)	Hand	51	Human food
Saccharina latissima (Sugar kelp)	Hand	10	Human food
Alaria esculenta (dabberlocks)	Hand	62	Human food
Porphyra sp. (laver species)	Hand	10	Human food
Palmaria palmata (Dulse)	Hand	56	Human food; Bio-actives (cosmetics)
Osmundea pinnatifida (Pepper dulse)	Hand	2	Human food
Chondrus crispus / Mastocarpus stellatus (Carrageen)	Hand	8	Human food; Bio-actives (cosmetics)
Ulva sp.	Hand	8	Human food; Bio-actives (cosmetics)

* Maximum consented harvest volume per species under Crown Estate Scotland licence was provided by CES. It does not account for species harvested on private land not owned by CES, for which the volumes harvested are not known.

Note: The CES licensed harvest tonnages only represent the consented maximum volumes of seaweed to be taken from CES-owned foreshore (i.e. approximately 50% of foreshore in Scotland). Such licences are only required for licensees who intend to harvest tens or hundreds of tonnes of seaweed per annum and the maximum licensed tonnages are based on stock and sustainable harvest assessments supplied by the licensee (Appendix A). The tonnages presented therefore do not necessarily represent actual harvested volumes and do not account for species harvested on private land not owned by CES, or species harvested at smaller scales. Whilst information on the volume of seaweed harvested per business was sought during consultation for this study, volumes per species were not always provided and thus are not presented here. Furthermore, not all seaweed-related businesses that operate in Scotland were able to input into the study.

Source: Data provided by Crown Estate Scotland (May, 2020) and stakeholder consultation

Current seaweed cultivation activity in Scotland

4.2.11 At the time of the consultation (Feb to May 2020)^[15], there was only one company commercially cultivating seaweed in Scotland. No information regarding the species cultivated or the tonnage harvested was available. The farm is owned by a vertically integrated company that acts as the producer organisation, intermediary and end-user selling products for human consumption (Stanley et al., 2019).

4.2.12 There were also two experimental seaweed farms off the west coast of Scotland (the Cutter's Rock farm in the Sound of Kerrera and the Port A'Bhuiltin in the Forth of Lorne between the mainland and the island of Lismore) managed by the Scottish Association of Marine Science (SAMS). The main species cultivated currently are Alaria esculenta, S. latissima and L. digitata. Biomass harvested from the Port A'Bhuiltin farm in excess of that utilised for R&D may be available to feed into the current supply chain, although information on the tonnages currently harvested were not divulged for confidentiality reasons.

4.2.13 Hence, the baseline review indicated that some seaweed cultivated in Scotland is currently being used within the supply chain in Scotland, albeit in low volumes.

4.2.14 Information from the consultation indicated that there are companies in the seaweed value chain in Scotland who are keen to utilise seaweed cultivated in Scotland in their products, although currently the high cost of farmed seaweed (compared to wild harvested seaweed) does not make this economically feasible. However, these supply chain businesses are currently able to source seaweed from the global market (i.e. outwith Scotland) and hence are neither impacted by the lack of Scottish cultivated seaweed nor currently directly driving the demand for cultivated seaweed in Scotland (Stanley et al. 2019).

4.2.15 The primary species of interest to cultivate in the immediate future are S. latissima, A. esculenta (both of interest for the food market) and L. digitata. Other species that stakeholders expressed an interest in cultivating included green seaweed species (e.g. Ulva lactuca, Ulva linza and Undaria pinnatifida) and higher value red seaweeds such as P. palmata, Osmundea pinnatifida, Chondrus crispus, Gracilaria spp. (G. gracilis), Gelidium and Gracilariopsis longissimi, although many of these species may be better suited to cultivation in tanks on land. Whilst such red seaweed species are considered high value species and would only be required to be cultivated in small volumes (e.g. for use within the cosmetics industry) tank-based cultivation has high energy demands (for example to maintain specific temperatures or constant bubbling (tumble culture), requiring these costs to be offset.

4.2.16 The industry's and wider stakeholders' opinions on the key drivers and constraints to developing the seaweed farming sub-sector in Scotland is presented in Section 5.

Location of seaweed-based businesses in Scotland

4.2.17 The majority of seaweed-based businesses, which harvest seaweed in Scotland, or currently utilise wild harvested seaweed from Scotland, are located on the west coast of Scotland (primarily within the Local Authority areas of Comhairle nan Eilean Siar and Argyll and Bute, but also the west coast of the Highlands) (Table 5). A lesser number of businesses are based on the east coast (within the Highlands and Fife), whilst one is based outwith Scotland (in England).

4.2.18 The majority of businesses that harvest seaweed do so within the same locale in which seaweed is processed and/or their business is located. However, a few harvest or source seaweed outwith the immediate locale in which they are based; this includes harvesting taking place in the Western Isles and Orkney. A few businesses that rely on specialist supply chain companies to manufacture or package finished seaweed products also use other businesses located outside of Scotland (see Figure 2).

4.2.19 The one established commercial seaweed farm in Scotland at the time of consultation (2020) is based within the Local Authority area of Argyll and Bute. Most of the seaweed cultivation activity in the pipeline (i.e. currently seeking consents) would predominately be located off the west coast of Scotland (given the more sheltered nature of the coastline) although there is also interest off the east coast (based on wider stakeholder input).

Table 5. Location of businesses using wild harvested seaweed from Scotland

Local Authority Area	Number of businesses
Argyll and Bute	4
Comhairle nan Eilean Siar	5
The Highlands	2
Fife	1
England	1

Other actors in Scotland

4.2.20 A wide range of other organisations are also involved in supporting and developing the seaweed-industry in Scotland, although their core business does not relate to seaweed. Such actors are involved in R&D (e.g. SAMS, The James Hutton Institute, North Atlantic Fisheries College), Innovation (e.g. SAMS, IBiolC, Scottish Aquaculture Innovation Centre (SAIC)) and Enterprise (e.g. Highlands and Island Enterprise, Scottish Enterprise) (see Stanley et al. 2019). Whilst a monetary value of such actors has not been incorporated into the economic evaluation of the current seaweed-based sector in Scotland (presented in Section 4.3 below), where information was obtained from such stakeholders during the consultation it has been incorporated into the baseline review of the Scottish seaweed-based industry (above) and in the development of plausible scenarios for the seaweed-based sector in Scotland (Section 6).

4.3 Current industry baseline economic analysis

Approach

4.3.1 The following economic analysis is based on the information obtained through interviews with seaweed-based companies, supplemented by additional information sources included the activity mapping exercise undertaken for the Seaweed Review Steering Group and a review of company accounts via Companies House^[16].

4.3.2 The economic analysis is divided into the following aspects:

• Scale and viability of existing companies, including turnover, profit and projected growth;
• GVA based on difference between turnover and operational costs; and
• Employment based on full-time equivalents currently employed;

4.3.3 The economic analysis is presented by the following product 'groupings' where possible^[17]:

• Food for human consumption;
• Animal feed;
• Horticultural products;
• Bioactive products for the cosmeceutical and pharmaceutical industries; and
• Innovative applications or biotechnology.

4.3.4 Businesses which are not yet trading commercially were not included in the current economic analysis other than for enabling the number of businesses per product group to be estimated, although their potential value and growth potential were considered in the projected future scenarios (Section 6).

Limitations

4.3.5 A small number of additional companies involved in seaweed harvesting and/or cultivation were identified but were not interviewed. Information on these companies (e.g. from Companies House) was very limited. Hence it is known that some companies who generate turnover from seaweed have not been captured within this analysis and not included under the baseline (for example, if they did not engage, did not provide quantitative information and/or no information was available from Companies House), and as such the estimated turnover and GVA are likely to be an under-estimate and should be regarded as indicative. Should this be the case, the impacts under the BAU and the High Growth Scenario are also likely to be an underestimate. Yet, these are the best possible at the time of writing with the range of information available (see Table 6, below).

Scale and viability of existing companies

4.3.6 The scale of the current market is based on the number of companies operating in a product category, turnover, profit and growth over the past three years (2017-2020). Growth potential is also considered, as reported by companies during the interviews or taken from information submitted to Companies House. The results are provided in Table 6.

4.3.7 Nine companies were identified that are producing human food, all of which were identified as being micro-entities or small companies under the Companies House (2019) definitions. Five companies produce only human food, while four others also produce other product types.

4.3.8 There are seven companies producing bio-actives. Of these, three produce cosmetics, three produce nutraceuticals and one produces both. Four of these companies also produce human food. As with human food, all of these companies are micro-entities or small companies.

4.3.9 For horticulture and animal feed, there were two companies that reported producing these, both of which are relatively large-scale harvesters and processors. As there are only two companies identified for these products, no quantitative data is presented for this category to protect commercial confidentiality.

4.3.10 Turnover varies by type of product (Table 6) but is also highly variable within any one product category. Average (mean) turnover for companies involved in production of human food is around £210,000 per year (median £191,000)^[18]. Average (mean) profits reported are around £34,000 per year (median £21,000)^[19]. Some companies reported losses (which have been excluded from the mean profits) for example due to investment in equipment.

Table 6 Scale of markets by product type

Product category	No. of companies1	Turnover		Profit		Forecast growth2
		Mean	Median	Mean	Median
Human food	9	£210,000	£190,000	£34,000	£21,000	↑
				(but some companies report losses)
Animal feed	2	Confidential		Confidential		→
Horticulture	2	Confidential		Confidential		↗
Bio-actives (cosmetics, pharmaceuticals, and nutraceuticals)	7	£87,000	£125,000	£15,000	£13,000	↑
Hydrocolloids	None in Scotland	-		-		-
Biofuels	None identified	-		-		-
Innovative/ biotechnology	2	Not applicable		Not applicable		↑
Key:	Growth expected to at least double in next few years
	Growth expected but to be less than double in next few years
	Little or no growth expected, expected to remain more or less at the same level
	Potential reduction in production expected

¹ Companies producing more than one product category are counted for each category. Thus the total number of companies recorded in the table exceeds the total number of producers identified: 13. Turnover has been allocated to the different product categories to avoid double counting. Number of companies includes both those interviewed and those identified as producing seaweed-based products based on publicly available information. Note information on turnover and/or GVA was not available for all of these companies, hence, total turnover is likely to be an under-estimate

² Forecast growth based on information provided by the businesses consulted and presented as a general trend to protect confidentiality

4.3.11 For bio-actives, average (mean) turnover is estimated at £87,000 per year (median £125,000)^[20] with profits estimated at £15,000 per year (median £13,000)^[21]. None of the companies reported losses.

4.3.12 For innovative products and biotechnology, there is some development that is on-going through start-ups. These businesses are at an early stage so no turnover or profit information is available.

Gross Value Added

4.3.13 Overall turnover across all companies where data are available (or can be estimated) is around £4 million with an average (mean) turnover of £500,000 and a median of £270,000 per company^[22]. Gross Value Added can be extrapolated across the remaining companies, based on average GVA for small-scale, medium-scale and large-scale companies^[23] but ignoring start-ups as these are not currently generating any GVA.

4.3.14 Total GVA from the seaweed industry in Scotland can then be estimated at £510,000 per year, with this based on weighted average GVA of 13% of turnover. This is expected to be an under-estimate as some companies producing seaweed-based products may not be captured and turnover data was not available for all due to gaps in both the information provided via interviews and from publicly available data such as from Companies House. This compares with GVA in Scotland (for 2018) of £485 million for fishing and aquaculture, £1,609 million for manufacture of food products and £1,036 million for manufacture of pharmaceutical products (ONS, 2019).

Employment

4.3.15 Ten of the companies responding to the survey reported the number of employees. This gives a total of 59 employees across all companies that provided data, with an average (mean) of 7 per company and median of 4 employees. There is a significant range with some companies having no staff other than the owners, up to a maximum of 20.