66. So, what should be done to develop the market?
The answer must be drop the preconceptions of the industry and to return to first principles. Salmon farming can then be re-evaluated as a market led industry using all the tools of the marketing sector. The problem is that many farmers are not really aware of the potential benefits which can be gained by using marketing. Many people, not just in salmon farming think marketing is just an up market way of describing the selling process. This is widely apparent in many companies, who clump sales and marketing activities together.
67. What is marketing?
Marketing is not about selling product, but about getting the right product, to the right market, at the right time and at the right price, and most importantly at a profit.
To do this most effectively, it is essential to have a full understanding of who the potential customers are, where they are, what they buy and so on. Without such knowledge, the farmers just produces and hope he has the right product that the market wants. Whilst some of this may be rather obvious, it is also not surprising that the day to day activities of just running a farm can divert attention away from these basic issues. This is compounded by the fact that most of the salmon industry is geographically placed far away from the markets and therefore the farmer is often divorced from his real customers, the end consumers.
This has been exhibited by two publicised examples. The first is that during the opening of a new feed mill, a leading industry figure commented on the difficulties of the market. He said that with such uncertainty in the market, he did not know whether he should be producing fish of 3 kg or 6 kg size.
However, if he did not know which size of fish he should be producing, how can he know who is customers are?, when they want the fish?, where they want them? and how much they are prepared to pay?
The second example is that of the promotion the Scottish Salmon Festival, which was deemed a failure by many retail fishmongers. This was because they were unable to obtain the sizes of fish required by their customers. This is simply a lack of market awareness.
Part of the problem is due to the preconceptions, which dominate the industry. This is manifested in the marketing activity by the selective way of generating market research using the outside market research companies. This maintains the distance between the consumer and the farmers. Whereas, what is really required is a hands on approach with direct observations of the marketplace, supported by wider information of market trends.
68. Which market trends are relevant?
There are differing opinions, as to which trends should be followed. After all, the European market is made up of a number of countries, each with very different habits to fish consumption. What applies in one country maybe totally irrelevant in another. However, with more international awareness, even those countries with the strongest independent traditions are showing, some change to the global markets. Certainly, in the wider food sector, there are few countries who have not been exposed to MacDonalds, Kentucky Fried Chicken or Pizza Hut.
More usually, it is the younger generations, which have forgone their traditions and adapted to the global market. The same will apply to all food consumption and we will start to see the further development of some of these trends throughout Europe, although some may take longer to develop than others.
69. So, what are some of these trends?
To consider these trends, it is necessary to look at the changes which have occurred in the marketplace. This differs from country to country and therefore the UK market alone, will be examined here.
Since the early 1960's, the number of retail grocery outlets has declined from about 150,000 to about 50,000. Surprisingly, the number of multiple retail stores has also declined. This may suggest that the type of store itself has not influenced this change, however this is not the case. It has been the rise of the giant multiple retailer, which has brought about these changes. The number of large retailers has also diminished, but those that remain, operate much larger stores. Therefore, the trend is towards larger stores, belonging to just a few main retailers. Some commentators see this as undesirable, but consumers simply vote with their feet as they see a much greater choice and quality, than can ever be offered by the small grocer. The result is that the top 20% of key retail outlets now account for about 90% of total UK retail turnover.
70. How has this affected fish purchases?
In terms of fresh fish purchases, the independent fishmonger, the traditional bastion of fish sales, have lost their market share to the multiples. Traditional fishmongers now account for just over 40% of fresh fish sales, but this figure will continue to decline as the number of fishmongers also continues to decline. Approximately 11% of retail fishmongers are closing every year.
However, these figures are misleading on their own, because they represent only fresh fish sales. The market for fish includes frozen primary and secondary processed products as well. The total market for frozen products is now about 65% of the market with the remainder consisting of fresh, chilled and smoked fish products.
The move towards frozen fish sales is not surprising as the younger generations especially, look for convenience and ease of cooking, together with the one stop shopping, which the large retailers offer.
71. Do these younger consumers, buy proportionally more fish?
The answer is no. The highest consumers of fresh fish are those over the age of 45. They account for nearly 35 of fish consumption, whilst those in the age group 16-27 only consume about 6% of total sales. This group, by comparison are the largest consumers of added value products such as fish fingers.
What is clear is that the older age groups, who were brought up when the only fish products available, were fresh fish, are more used to buying such products now. By comparison, the younger age groups prefer to buying secondary processed, added value products. As these groups age, they will undoubtedly continue to make similar purchases.
This trend can be seen from the increase in servings, for all age groups, of frozen and processed products from 55% to nearly 70% in just the short period from 1987 to 1994. During the same time, fresh fish consumption has declined from 45%, to just under 30% of total fish servings.
72. Does such consumption represent the total market for fish?
Whilst retail sales and home consumption dominate the market for fish with 53% of total sales, they do not represent all fish sales. The catering market accounts for the other 47%, which is divided between the catering sector at 32% and fish friers at 15%
The catering sector is important, especially as this is perceived to be for whole fresh fish, yet this is not the case. The catering market is increasingly supplied by food service companies, who provide pubs and restaurants with ready processed heat and serve dishes. A declining number of restaurants, still purchase fish as a basic raw material
73. So, what conclusions can salmon farmers draw from this change in consumer preference?
The main target market must be for secondary processed, added value products, which are most probably frozen. The bulk of this market is currently shaped blocks of fish, either breaded or battered, produced ready for the oven. Many farmers would suggest that salmon is not comparable with the commodity fish species used is such products. But this is simply because farmers have a preconceived idea of what salmon is or, is not.
There are many other potential products, which could be manufactured. The list is unlimited and simply restricted by the limitations of the imagination.
The key point about all such product development is that for each fish, which is turned in to a totally different product, it represents one less fish competing in the open market. Processing fish into different products reduces the competitive pressure on the traditional markets, reducing the likelihood of further collapses in price.
The best example of how this would benefit the industry, comes from the UK retail market. Whilst the Scottish industry readily complain that Norwegian imports are undermining the price of salmon in the European market, they do not raise even an eyebrow at the 28,000 tonnes of canned Pacific salmon, which is imported into the UK every year.
The Scottish industry fail to see this salmon, as a threat as they do from Norwegian salmon. This is because the product is canned and secondly, because it is produced from Pacific salmon.
The Scottish industry do not perceive canned salmon as a threat, because it does not compete against their fresh produce. However, equally, if some of the European salmon production was processed into other products, it would also lessen the competitive pressure on the fresh produce. In fact, if a large percentage of the salmon could be processed in this way, then the Scottish aspiration to keep fresh whole Scottish salmon, could be easily attained.
Equally, the Scottish industry do not see Pacific salmon as a threat to their own salmon production. This is because, they believe that Atlantic salmon from Scotland to be superior to anything else, especially to Pacific species. They therefore, do not perceive it to be a competitive product, especially when sold in cans.
However, Scottish salmon farmers should not be complacent. This is for two reasons. The first is that Norwegian salmon is starting to appear in British supermarkets, in canned forms, although the presentation is different to North American cans. Secondly, raw fillets of Pacific salmon are also available from the same stores. These, previously frozen, fillets are available in a variety of marinades.
Scottish salmon farmers should therefore, be concerned, since many consumers simply cannot differentiate between salmon from various sources. To them, salmon is just salmon. This is the image, on which farmers must now capitalise.
74. But, is some salmon not already available in such forms?
Experience from the wider agricultural sector has shown that once an industry moves towards volume production, farmers do not have to restrict themselves to the low margins available from selling the raw material. Instead, the farmer can increase the margin by adding value to the salmon before it is sold. This is now common practice within the intensive broiler industry for example, where whole new market opportunities have been created through added value processing.
It was therefore, not unexpected that some farmers would also consider added value processing as a way of increasing profitability. This has taken various forms but the two most common have been steaking and filleting and smoking.
Smoking is a logical route for adding value to salmon. Smoked salmon is considered an expensive delicacy. However, as more and more companies have turned to smoking, the increased availability of smoked salmon has devalued the price of this product.
With 20% of Scottish production destined for smoking, smoked salmon can now be bought extremely cheaply. There is a danger that this market could also collapse, unless the volume of smoked fish produced is reduced. This could be easily achieved, if more and more salmon is diverted into other markets.