MANAGEMENT’S DISCUSSION & ANALYSIS (CONT’D) 8.12 Industry Consolidation 8.14 Competition Risk 8.13 Increase in Seafood Production from Asia 2  Market share is estimated by Nielsen ®  based from the Tl Grocery Composite. 3 According to “2012 Marketing Handbook”, published by Trade Dimensions International, Inc. 50 HIGH LINER FOODS INCORPORATED In the long-term, further enhancing policies related to  sustainability, environmental and social compliance both within  High Liner Foods and its supply chain may add to High Liner Foods’  costs and reduce margins. Senior management accountability: Keith Decker, President and  COO; Mario Marino, President and COO, Canadian Operations Board oversight accountability: Board of Directors Grocery retailers, wholesalers and food processors in North  America have consolidated and continue to consolidate. In Canada,  five major food retailers control, in aggregate, more than 72.5% 2  of  the retail food sales market. In the U.S. retailers are also  consolidating. Ten retail operators now control approximately 66% 3 of U.S. retail grocery sales. Grocery retailers typically charge  suppliers listing or “slotting” fees for shelf space on a per product  basis for new products, and also require money to support product  advertising and promotions. Arising out of these consolidations we  have experienced demands from customers for increased listing  and promotional incentives and improved payment terms.  However, as a supplier of Canada’s leading frozen seafood brand  and a leading supplier to the U.S. food service channel, we expect  to remain an important supplier to grocery retailers and food  service distributors. We are focusing efforts on brand strength,  new products, procurement activities, and superior customer  service to ensure we outperform competitors. Consolidation makes  it more important to achieve and maintain a brand leadership  position, as consolidators move towards centralized buying and  streamlined procurement. We are in a good position to meet these  demands, since we offer quality, popular products under leading  brands and have the ability to meet the customer service  expectations of the major retailers. Given our brand strategy,  customer consolidation is an opportunity for High Liner Foods to  grow in step with customer growth. Consolidation of customers is expected to result in some  consolidation of suppliers in the U.S. seafood industry. The supply  of seafood, especially in the U.S. food service market, is highly  fragmented. Consolidation is needed to reduce costs and increase  service levels to keep pace with the expectation of customers. We  are always looking for acquisition opportunities to leverage our  current strengths. Senior management accountability: Paul Snow, Executive Vice  President Procurement Board oversight accountability: Board of Directors For more than a decade, many seafood companies, including High  Liner Foods, have diverted production of certain primary produced  products to Asia, and China in particular. Asian processing plants  are able to produce many seafood products at a lower cost than is  possible in North America and in other more developed countries.  In addition, it is possible that some of High Liner Foods’ suppliers  or customers could become competitors of High Liner Foods if they  decide to distribute their own food products. Furthermore, if one or  more of High Liner Foods’ competitors were to merge or partner  with another of its competitors, the change in the competitive  landscape could adversely affect High Liner Foods and its results.  Competitors may also establish or strengthen relationships with  parties with whom High Liner Foods has relationships, thereby  limiting its ability to distribute certain products. Disruptions in  High Liner Foods’ business caused by such events could have a  material adverse effect on its results of operations and  financial condition. High Liner Foods competes with a number of food manufacturers  and distributors and its competition varies by distribution method,  product category and geographic market. Some of High Liner  Foods’ competitors have greater financial and other resources than  it does and/or may have access to labour or other products that are  not available to High Liner Foods. In addition, High Liner Foods’  competitors may be able to better withstand market volatility.  There can be no assurance that High Liner Foods’ principal  competitors will not be successful in capturing, or that new  competitors will not emerge and capture, a share of the Company’s  present or potential customer base and/or market share. Board oversight accountability: Board of Directors Senior management accountability: Mario Marino, President and  COO, Canadian Operations; Keith Decker, (Interim) President and  COO, High Liner Foods (USA) These plants are also able to achieve a better yield on raw material  due to the use of more manual processes and they produce  excellent quality. Land-based seafood primary processing plants  in developed countries, such as Norway, Iceland and Canada, have  found it extremely difficult to compete with Asian processors,  especially when they compete with them for the raw material on  global markets. We anticipated this trend ahead of our many  competitors. It was part of our rationale for exiting the primary  processing and fishing businesses, and the trend allowed us to  develop opportunities that are now contributing to our growth  strategy. We chose to work closely with selected Asian suppliers to  become an important customer, especially for cod and haddock  suppliers. We have made it possible for these suppliers to meet our  exacting quality and manufacturing standards and in turn we  have access to the variety and volume of seafood products,  including a significant amount of wild-caught product from the  Atlantic and Pacific oceans that we need to fulfill our brand  strategy. We have taken advantage of this trend and moved a  significant portion of our processed shrimp production from U.S.  co-packers to Asian suppliers. Although we have not seen this  trend significantly affect products produced in our North American  plants, we continue to look at alternate options for the production of  highly labour intensive product.