reLAKSation 113.

Sophistication: It's been a few years since the Food Standards Agency insisted that the British consumer should no longer eat his fish and chips when wrapped in newspaper. The British consumer is becoming more sophisticated and now has to buy one of his favourite meals from a polystyrene container or wrapped in clean new sheets of white paper bought specifically for the purpose.  The British consumer is growing up.

Certainly, Brian Simpson, Chief Executive of Scottish Quality Salmon believes that this is the case. He told IntraFish that the UK food market is not as sophisticated as some of its Continental neighbours, although he said that there are signs that this is changing.  Mr Simpson judges the level of sophistication by awareness of 'fine foods', which roughly translated means that whilst some Continental consumers are prepared to pay a premium for Scottish salmon, most UK consumers are not.

We, at Callander McDowell believe that this is an indication that UK consumers are actually more sophisticated than their Continental neighbours, rather than less so. This is because of the way in which the supermarket chains have developed within the marketplace.

In a previous issue of reLAKSation, we discussed however the British market has become dominated by 'own label' products. This encourages a relationship between the retailer and it's customers in which a form of trust has developed. This trust is based on the expectation that the retailer will offer its customers products of the highest possible quality at the best value for money. Consumers therefore rarely bother to read the detailed information provided on labels in the same way that perhaps his Continental neighbour does.

We, at Callander McDowell, firmly believe that the UK market is actually one of the most sophisticated in the world and could well provide an indication of how markets elsewhere may develop. UK consumers have moved on from the days when they might question whether one salmon fillet is of better quality than another. For most UK consumer’s salmon is now just salmon. Rather than focus on the raw flesh, UK consumers prefer to look at what form the salmon is in and ask whether it is most appropriate to their needs. This has led to the development of an extremely sophisticated value added industry, which can offer consumers a huge range of products from the simplest presentation to the most complex meal solutions. The latest developments involve a cook at home recipe, which consists of every ingredient including the vegetable oil in which the salmon is first seared. This is an extremely sophisticated product and is a far cry from the times when consumer choice meant that they could buy a whole salmon or have it cut up into fillets and steaks. The salmon market is rapidly evolving and if it is not careful, the salmon industry could well get left behind. This is why it needs to focus on what is important to consumers, and not what they perceive to be important.

Is it worth it? After more than four years of lobbying behind the scenes at Brussels, Scottish salmon is soon to be awarded Protected Geographical Indication status (PGI). According to IntraFish, the application has been published in the Official Journal of the EU, which will lead to a six-month consultation period prior to the award.

IntraFish report that the PGI designation is virtually unknown in the UK, but it has been widely adopted on the Continent, especially in France, where it supplements the better known Label Rouge.

PGI is unknown in the UK, but perhaps this is because it's status is relatively unimportant to consumers, who would probably consider other issues to be well above whether a food has PGI status or not.

Whilst PGI is relatively unknown in the UK, so is the other key designation, PDO or Protected Designation of Origin. At least PDO is more understandable as its aim is to protect well-established product associations so that a Cornish pasty, for example, must be made in Cornwall and Stilton cheese must come from Stilton. Better-known examples from the Continent include Parma ham and champagne.

By comparison, PGI status is used when at least one stage of production, processing, or preparation occurs in a given geographic area. Products awarded PGI must also have a good reputation.

We, at Callander McDowell are struggling to see how PGI will really benefit Scottish salmon producers?  The association between salmon and Scotland is already well established, but it is no different to the association of salmon and other producing countries. Labelling legislation adequately protects the existing relationship between Scotland and salmon and therefore this new status adds little to make Scottish salmon any more attractive to consumers?

The Scottish industry is not the first to seek PGI status for its salmon. The EU has already awarded Clare Island Salmon PGI status.  Although the name is known within the industry, it is not familiar to UK consumers, even though plenty of Irish salmon has been sold in the UK, mostly as generic fish. However, one Irish company has previously managed to establish its own brand in the UK, despite the lack of PGI protection.

Clearly, if all Scottish salmon was produced, processed and prepared in Scotland, the industry could apply for the more useful PDO status. This might better establish Scottish salmon as a unique product than under PDI guidelines.

Scottish Quality Salmon have indicated that they want to introduce high quality salmon to other European countries. They have identified Italy as one country to which market access may be eased once Scottish salmon has attained PGI status. Yet, with the market for Label Rouge in France only standing at 5,000 tonnes, despite a decade of promotion, how much high quality salmon would the Italian market be expected to absorb?

It may have taken the Scottish industry over four years to attain PGI status, but we wonder whether this is four years of effort well spent or could there be better and more fruitful ways to enhance the market for salmon?

Is the penny starting to drop?: An IntraFish editorial posed the question as to whether we have seen the last of higher salmon prices. Regular readers of reLAKSation will already know that we at Callander McDowell are certain that we have.

It has been suggested that prices remain low because the supermarkets are pressurising producers to supply fish at the lowest possible cost so that the supermarkets can maximize their own margins. However, this suggestion can be put in two different ways. Certainly, the supermarkets are looking to their own profits, but at the same time, the supermarkets have become accustomed to such lower salmon prices because of the enormous growth in production. Thus, low prices came first and then the supermarkets started to apply pressure to keep the prices low. Clearly, they recognised that low prices created an increase in demand, which could benefit everyone in the supply chain.  

Despite this growing demand, there is still a reluctance to accept that salmon prices will remain low. Instead of trying to capitalise on such lower prices, the industry continues to look for ways to elevate prices. As a result, producers are caught between the two and are neither effective low cost producers nor are benefiting from higher prices.

The IntraFish editorial considers prices in exactly this way. It focuses on supermarkets in Paris where it highlights the differences between Norwegian and Scottish salmon. It claims that higher quality Scottish salmon can generate a price premium over Norwegian fish, which may not be perceived to be of equal quality. The editor therefore suggests that the market is divided into two; commodity and quality. Yet, it is important to note that whilst this high quality sector does exist, we have already pointed out that it is an extremely small market as illustrated by Label Rouge. Any attempt to boost this market will only undermine the existing premiums.

The future of salmon must lie with low cost production. At last. it now looks like that some sections of the salmon industry have begun to recognise that low prices are now the main feature of salmon production. Producers must therefore adjust their business operation accordingly. The expectation of rising prices is becoming part of salmon farming history not it’s future. However, the change to a low priced salmon industry should also be accompanied by a realisation that the salmon market is not just about commodity or quality; it is in fact a multi-stranded market with many different product sectors, all of which, the salmon industry is well placed to exploit.

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