reLAKSation 124.
Open
for business? The main theme of the recent Salmon Days conference was
market access. This is a subject,
which is now high on the Norwegian agenda. However, according to IntraFish,
Helge Midttum, chief executive of Fjord Seafood warned that the authorities are
not doing enough to ensure that salmon producers can trade freely with other
countries. As a result, Fjord are
downsizing in Norway and increasing their investment in countries where they are
better able to compete.
However,
whilst we at Callander McDowell welcome any attempts to improve market access,
we also believe that the Norwegian industry has persistently ignored
opportunities to exploit the marketplace, especially through the development of
less competitive products. This
failure to take advantage of existing routes of access stems from the time of
the dumping complaints when anything other than following the traditional trade
routes was perceived as being either illegal or not in the spirit of the
subsequent salmon agreement. As a result, the Norwegian industry has missed out
on many potential opportunities, mostly with regard to further processed added
value products. These are an interesting route to market access because they are
not classified under the usual import codes for salmon and therefore would have
fallen outside the limitations of the salmon agreement. They will also be exempt
from any future controls imposed by the current actions of the British
government.
Unfortunately,
it is not just this reluctance to look for alternative routes of market access,
which has hampered Norwegian development; it is also their attitude to added
value processing. IntraFish reports that in his opening address to the Salmon
Days conference, Odd Steinsbo, Chairman of the Norwegian Seafood Association (NSL)
told delegates that various trade barriers were the main reason why the
Norwegian industry had not developed value added processing. He cited the fact that smoked salmon produced in Norway
attracts a duty of 13% when exported to the EU.
This places the Norwegian industry at a disadvantage. Unfortunately, Mr
Steinsbo is wrong and he is simply perpetuating a myth begun by KPMG some years
ago. Smoked salmon may well attract a duty of 13%, but other added value
products made from salmon actually only incur a rate of duty of 5.5%, which is
considerably less than Mr Steinsbo believes.
Mr
Steinsbo said that without the 13% duty, much more processing would be carried
out in Norway. With a true rate
nearly 60% less than Mr Steinsbo believes, it will be interesting to see whether
NSL will now encourage the industry to progress this route to improved market
access.
There
is a clear tend in the marketplace that consumers are buying more added value
salmon products than ever. This is an opportunity, which the Norwegian industry
can readily exploit now.
Seeking
protection? According to IntraFish, UK trade minister Mike O'Brien is
meeting with a EU committee to discuss imposing safeguards to protect the
Scottish industry from cheap imports.
We,
at Callander McDowell, have previously argued that there should be no need to
protect Scottish producers from imports, even if they are cheaper, since
research has shown that three quarters of British consumers said that they
prefer to buy Scottish salmon over any other and that they are willing to pay
more to buy it. If this actually
happens in the marketplace, then clearly the Scottish industry is well
protected?
In
addition to their monthly surveys of the British retail sector, Callander
McDowell have recently begun to conduct regular surveys of salmon in French
supermarkets. The results of these
surveys have so far been extremely enlightening and bring into question yet
again as to whether the Scottish industry needs safeguarding or whether it
should be encouraged to seek alternative market led strategies.
Whenever
questioned whether Scottish salmon is able to command a premium price, the
industry always cites the example of Label Rouge Scottish salmon sold in France.
Typically, Label Rouge salmon sells at prices about 25% above that of Norwegian
fish. This should be really good news for the Scottish industry except for the
fact that exports of Label Rouge Scottish salmon to France amount to just under
5,000 tonnes a year. This means
that Label Rouge salmon is really only a small niche market and this is
reflected in its presence in the French market. Callander McDowell's latest
survey of French supermarkets, details of which can be obtained direct from
Callander McDowell, shows that Label Rouge Scottish salmon is only present on
the fresh fish counter of just one supermarket chain, although the amount
present on the counter is dwarfed by other imported fish.
A second supermarket group may also sell Label Rouge salmon, but as it is
currently running a major promotion of Norwegian salmon, any Label Rouge salmon
has been displaced. A third supermarket chain does sell Label Rouge Scottish
salmon in prepacks but not on its fresh fish counter.
French
consumers have a clear choice between buying Norwegian or Scottish salmon. The
Scottish fish are sold under a well-established and respected French quality
mark, yet clearly the majority of consumers choose to buy cheaper Norwegian
fish. Mike O'Brien should take heed
of what both British and French consumers appear to want. Instead of demanding
that Scottish producers be safeguarded from imports, he, as trade minister,
should be looking at ways to help the Scottish industry provide consumers with
what they actually want. The problem for the Scottish industry is that they are
trying to force consumers to buy into an image of salmon, which does not
interest them. There may be a few who are happy to comply, but as Label Rouge
salmon sales clearly show, most do not. It is not safeguards that are needed,
but recognition of what the consumer wants that is important!
Is
it chilly out there? Lars Laibo of Kontali Analyse has conducted an
analysis of the Chilean salmon industry's competitive advantages for the
Norwegian Seafood Association (NSL). According
to IntraFish, Mr Liabo concluded that the Norwegian industry would have made a
profit last year, if they had been efficient as producers in Chile. He believes
that Norway now faces a competitive challenge that they have never had before.
He suggests that Norwegian producers must go all out in their efforts, if they
are to beat the Chilean competition.
We,
at Callander McDowell, are rather amazed by the use of this language.
Salmon farming is not be about whether one national industry is better
than another, it is about providing consumers with a value for money, tasty and
good to eat fish, especially at a time when supplies of wild caught fish species
are under threat from over-fishing. When is the industry going to realise that
consumers are not interested in whether fish comes from Norway, Chile or
Scotland, they are simply looking for a good meal choice.
Companies
with farming operations in all major producing areas increasingly dominate the
international salmon industry. These
companies are looking for a success business from everywhere, not a fight
between each production area, each of which has its own strengths and
weaknesses.
The
challenge for Norwegian producers, to whom Mr Liabo addressed his comments, is
not to look on Chilean producers as competitors, but rather how they can best
adapt their own production to produce what the consumer wants. The problem is
that Kontali Analyse is only concerned with production issues and therefore
everything is perceived from a production viewpoint, with no consideration of
the marketplace.
For
example, Mr Liabo has identified that Chile may have more favourable sea
temperatures for salmon production than Norway. Thus, Chilean salmon grow
quicker and presumably at less cost. His
solution is that Norway invests in a breeding programme to produce a salmon more
suited to Norway's climate. This is just nonsense. Rather than try to match
Chile's advantages, Norwegian producers should look to their own strengths and
start to capitalise on what the consumer wants.
Almost
all of the international salmon industry's past problems result from such
production led ideas. Until, producers start to recognise that the market is
king, such unnecessary infighting, whether it comes from Norway, Scotland or
even Chile, is bound to continue. This is a guaranteed way to disrupt all of the
industry.