reLAKSation 12.
Easter sales: Reports in Intrafish suggest that there is concern that Easter sales 'will not happen this year'. This is because demand from the catering sector is expected to be down because of the outbreak of Foot and Mouth. Tourists are staying at home and major events have been cancelled. Yet, whilst the caterers might be buying less salmon, retail outlets might expect to see a surge of sales as the public reduces their meat consumption.
Easter is the peak time for salmon consumption, however as production has increased, the higher prices associated with this holiday have declined. A similar trend used to be observed at Christmas time when demand also peaked with an accompanying price rise. Unfortunately, the added margins at Christmas have tended to disappear as retailers increasingly use salmon as a promotional tool. This is also becoming more apparent at Easter with the stores giving extra incentives to buy salmon. It is more than likely that in future years, the Easter price rise will disappear altogether.
This year, the problem of Foot and Mouth has increased uncertainty, but without a crystal ball, it is only possible to speculate as to what will happen, but with Easter only a few days away, it looks unlikely if any significant price rise will be forthcoming. Already some of the major British supermarkets are discounting salmon. For example, Sainsburys are offering prepacks of 720g of salmon fillet for the price of 480g, equivalent to 50% extra free. Tesco have prepacks of steaks and fillets at 50p off, equivalent to a discount of 16%, whilst Asda have prepacks of 390g of salmon fillet for the price of 260g. This is equivalent to 50% extra free.
Inevitably, prices are going to even out throughout the year as increasing production means that salmon becomes equally available at all times through the year. This is indicative of both the changes within the salmon industry itself and the market place. Clearly, the salmon industry will have to respond to these changes if it is to remain viable, especially regarding the identification of those markets which may enable individual farming companies the opportunity to regain extra margin.
Such an approach may be essential, since Frank Johnson of Framgord has identified that there are increasing volumes of frozen Chilean salmon being imported into the EU markets and these may have an impact on the markets both before and after Easter.
The prospect of imported Chilean salmon in the UK and EU markets has been readily discounted by many European producers, who believe that the distances involved are simply too large. However, why it should be viable to export salmon from Norway and Scotland to Japan, but not from Santiago to Europe is unclear.
Fresh Chilean salmon first appeared in the UK market back in 1991 and although it is was possible to buy Chilean fish, the Scottish industry dismissed the fish as a gimmick, even though it came in on several different deliveries and in considerable quantities. However, whilst the European market was of interest to Chilean producers, their attention was quickly diverted to the US market instead because of the problems experienced by Norwegian exporters.
Despite the then long absence from the EU market, Chilean producers had clearly stated that their intention was to divide their production equally between three key markets, the US, Japan and the EU and as such they have retained an active interest with a regular presence at the European Seafood Exhibition in Brussels.
It is therefore of little surprise that Chilean salmon should start to reappear in the European market. However, this time, it clearly makes more sense to export frozen fish as the market demand for frozen has increased. Frozen salmon is used in many of the recipe dishes, which have become increasingly common in the major retail outlet and if the price is right, there is no reason why Chilean salmon cannot be used. Equally, retail consumers are familiar with fish on the fresh fish counter sporting signs stating 'previously frozen' and this has not deterred sales. If the price is right, then demand for previously frozen Chilean salmon could soar.
Whilst the EU market for salmon continues to grow, there may be a market niche for salmon from Chile, however as margins weaken, European producers will have to face up to this competitive threat. This is the reality of our modern global industry.
Market Saturation : The European Commission has recently published a Green Paper on the future of the Common Fisheries Policy. This suggests that the market should be the driving force for aquaculture, and rightly so. It may well be a significant technical achievement to produce certain types of fish, but unless there is a clear market demand for such species, then such developments are pointless.
However the Green Paper also warns that production and demand are finely balanced and any increases in production in excess of likely evolution of demand should not be encouraged. The EU therefore questions whether the Community should continue to subsidise investments in production capacity for species where the market is close to saturation. This clearly refers to the production of salmon.
This begs the question, 'Is the market for salmon nearing saturation?'
There are certainly many who think that the salmon market is close to its maximum. They believe that the decline in margin on fresh salmon is a clear indication of that there will soon be a surplus in market supply and to prevent any further market disruption, production should be subjected to control.
Yet, the marketplace is very diverse and salmon is not limited to the traditional markets. If it was, then the salmon industry would have suffered from over-supply along time ago.
In fact, the first suggestions that the market had reached saturation were made as long ago as 1989, when Scotland had produced the grand total of 28,500 tonnes of salmon. The claims of over-supply were made as the price of salmon collapsed, not through over-production, but rather because of under-marketing.
This does not necessarily mean that the industry should have invested more in promotion and publicity, but rather that they should have been more aware of their target customer. Back in 1989, the main customer base consisted of those who saw salmon as a luxury product for consumption at special occasions. The lower price, brought about by the increased production, meant that salmon became attractive to those who could see that salmon was starting to represent excellent value for money and would make an ideal everyday meal option. Unfortunately, the industry wanted to retain salmon as a luxury product and the divergence between production and the markets led to the then recurring market disruption.
Over the following years, continued claims of over-production re-emphasised the possibility of market saturation, so much so, that this became the overriding message. It was only a couple of years ago when the then head of the Norwegian Seafood Export Council made a similar assertion, suggesting that the EU market was close to saturation and that marketing effort should be redirected to other markets. His view was not shared by many exporters whose objections subsequently brought about a withdrawal of his remarks.
The view that the salmon market is close to saturation has been longstanding, yet salmon is only bought by a fraction of the European Community population. The challenge for the future is to encourage consumption amongst those who have never eaten salmon before. This does not mean that the industry should further invest in heavy promotion as this is unlikely to produce the desired effect Instead, the industry should start to look at putting salmon into the type of products that these consumers already buy.
Fortunately, some sections of the industry have sufficient foresight to recognise this and are starting to significantly diversify their product ranges. This is the type of innovative development required to diversify production and ensure that the market never reaches saturation. There is enormous scope to develop the market salmon, especially as supplies of wild caught marine fish are in decline. The suggestion that the market is nearing saturation demonstrates a failure to comprehend the changing marketplace for salmon. Rather than withdraw funding to the salmon industry because of this perception of market saturation, the EU might better serve the industry by diverting investment away from production and instead encourage investment in market development.
The Great Salmon Scandal: It now seems fashionable to knock the salmon industry. In the latest attack, the Daily Mail has just serialised extracts from a new book, The Great Food Gamble, by Radio 4 broadcaster, John Humphries.
In a two page spread, Mr Humphries expounds his views on salmon farming, but clearly, like many other detractors before him, many of his facts are clearly wrong.
Many of his views appear to have been derived from his one experinece of diving on a site where a salmon farm had once been located. He asserts that the loch bottom was coated in thick black mud, which then pollutes the local environment.
However, it is not just public figures such as Mr Humphries who seem bent on underming the salmon industry. Fellow Scottish aquaculturists in Scotland producing shellfish are now demanding a moratorium on further expansion claiming that salmon farming is damaging their livelihood.
Shellfish producers have also voted not to join a new federation of Scottish aquaculture producers because they do not want to cooperate with those they blame for allegedly polluting the sea bed around their farms. It does seem rather a shame that rather than join together to seek solutions acceptable to all, they prefer to further divide an industry already under siege from outside.