reLAKSation 130.
Coming
to the birth?:
Whilst, the European Commission has decided that the UK and Ireland application
for safeguards does not warrant the imposition of interim measures, they have
initiated a nine-month investigation into imports of farmed salmon. According to
IntraFish, the Commission would rather continue discussions to find a solution
which would make border controls unnecessary. This seems to be an acceptable
compromise, although, we at Callander McDowell still believe that the whole
application is nothing more than a deflection away from the need to address the
changing marketplace. This application simply postpones the inevitable
realisation that the industry must adapt to a changing consumer demand. This new
investigation yet again appears to prolong the need to bring about change.
Two
MEP’s have already expressed their disappointment that the Commission have
failed to impose immediate measures. Ian Hudghton said that ‘It’s now that
many of our producers are actually in need of help, not after some lengthy
investigation. Struan Stevenson, Chairman of the Parliamentary Fisheries
Committee added that in reality no
action will be taken for longer than nine months. This is because a new
Commission will take over in October and it will therefore be in limbo for some
time. He went on to say that this will be a bitter blow to many of the EU’s
salmon farmers and that as a result of the Commission’s failure to act now, a
quarter of the UK industry may disappear.
Perhaps,
if Mr Hudghton and Mr Stevenson are so concerned about the future of the salmon
industry, then they should do more than express their disappointment. The
problem with the safeguard application is that it is a reactive response. The
industry may actually be better served it is to take a more proactive approach
to its situation and Mr Hudghton and Mr Stevenson may like to act as the
catalyst to make this happen. We have previously suggested that Scottish
aquaculture minister, Allan Wilson might like to set up a focus group to look at
how the industry might respond to a changing market. Mr Hudghton and Mr
Stevenson could apply pressure on Mr Wilson to do this or equally, they could
take the initiative themselves.
Clearly,
this debate must get underway otherwise the consumer will have to pay the price
for Scottish farmers inability to produce what the market wants at a price that
it is prepared to pay. It is easy to believe that consumers must pay more to
support the local industry but most consumers buy salmon because it is low cost
and represents value for money. If salmon prices rise because imports are
curtailed, then in all likelihood, demand will fall and farmers will be in just
as much crisis as they are now. If salmon farmers cannot produce what consumers
want, at a price consumers are prepared to pay, then there is little point in
producing salmon at all. These are the sort of questions which Mr Hudghton and
Mr Stevenson should encourage the industry to ask. They have a nine month period
to wait until the Commission decides what action, if any, is required.
Meanwhile, Mr Hudghton and Mr Stevenson could try to use this time to
constructively help the industry move on.
Near
neighbours: IntraFish
report that after the events of 2003, Scottish producers find themselves
bloodied but unbowed. Despite the ongoing problem of low prices, the message
from Scottish producers appears to be ‘onwards and upwards’. This is because
the Scottish industry continues to have good access to its markets. Around half
of Scottish production is exported and according to Greame Dear, Managing
Dirctor of Marine Harvest Scotland the country’s greatest advantage is the
proximity to the main markets, of which France remains the most important.
Scottish
Quality Salmon members are reported to have made a strong push in France with
both the Tartan Quality Mark and Label Rouge brands accounting for total exports
of over 20,000 tonnes. Brian Simpson of Scottish Quality Salmon told IntraFish
that there is a strong opportunity to expand retail sales in France. There is
confidence that with properly targeted promotional work, there’s still an
opportunity to extend this quite a bit.
Certainly,
Franz Fischler, the European Commissioner for aquaculture believes that European
consumers are focused on quality and are prepared to pay more for higher quality
Scottish salmon as compared to cheaper imports from Norway. Equally, Brian
Simpson has previously stressed
that in the highly discriminatory French market, consumers express a clear
preference for label Rouge Scottish salmon, and pay a premium price for it.
This year,
we at Callander McDowell, have extended our regular retail surveys to include
the French retail sector. We have therefore closely examined which stores sell
Scottish Label Rouge salmon and which are happy to rely on sales of imported
Norwegian fish. In all, Callander McDowell have visited over 40 different stores
belonging to 12 supermarket groups and their subsidiaries. We have found that
only two groups sell Label Rouge salmon, although neither sell it exclusively.
Equally, neither supermarket group appears to sell identical products from
different origins so minimising consumer choice. For example, A store selling
whole Label Rouge salmon does not sell whole Norwegian salmon on the same fresh
fish counter. However, the store which does sell whole Label Rouge salmon may
also sell salmon portions from Norway and salmon steaks from Scotland..
The overriding impression gained from our observations is that neither of the store groups, which sell Label Rouge salmon, appears to offer any consistency in which salmon they sell. For example, one of the leading supermarket groups which does sell Label Rouge salmon through its fresh fish counter, appears to sell prepacks of Label Rouge salmon only in those stores with a fish counter
By
comparison, the stores which just sell chilled prepacks, do not offer their
customers Label Rouge salmon but only Norwegian salmon instead. What this means
is that whilst only two out of 12 supermarket groups sell Label Rouge salmon,
not even every store within that group does so. Clearly, Label Rouge salmon is
only available to a limited group of customers in France and perhaps this
reflects on why Label Rouge salmon accounts for only 5,000 tonnes of Scottish
sales to France. Label Rouge would appear to be a niche market leaving most
French consumers to be just as willing to buy Norwegian salmon either in fresh
or chilled form. This is despite the fact that the European Commissioner Franz
Fischler believes this salmon to be of inferior quality.
Whilst the
availability of Label Rouge salmon appears to be extremely limited, its price is
significantly higher than that charged for Norwegian salmon. Previous surveys
commissioned by the Scottish industry suggest that Label Rouge salmon can
generate a premium of about 25%, however, we at Callander McDowell have found
that this is rather a low estimate
and that the premium charged in French supermarkets can be as high as 60%, but
equally this is reflected in the amount of Label Rouge salmon available as
compared to the cheaper Norwegian product.
Other than
Label Rouge salmon, French supermarkets appear to sell little Scottish product.
Only one of the smaller supermarket chain appears to sell Scottish salmon in
prepacks but most interestingly, the name of the farm, not just the country of
origin is stated on the pack. This is a much more open form of labelling than
undertaken by all the other French supermarket and also of those in the UK.
Our
observations would confirm Mr Simpson’s belief that there are a number of
opportunities to expand the market for Label Rouge and Tartan Quality Mark
salmon in France, but clearly, many French consumers appear equally happy to pay
a lower price for Norwegian salmon. It may be more difficult to persuade these
consumers to dig deeper in their pockets to pay more for what they might see as
being a similar product.
NOK
30?: Last
year a number of commentators predicted that salmon prices would rise to over
NOK 30/kg during 2004. Although, we are only in the third month of the year and
there are still nine months to go, at least one of these commentators said that
the NOK 30 barrier would be breeched by Easter. Whilst it is possible, although
unlikely, that prices may reach NOK 30 by the end of the year, it would be a
small miracle if they did so by next month. In fact, we at Callander McDowell
still believe that these predictions have more to do with wishful thinking than
real fact.
We
firmly believe in the relationship between price and volume and therefore the
expected down turn in production may be expected to bring an upturn in prices.
Certainly, Lars Liabo of Kontali Analyses believes so as IntraFish report that
he told the Annual General Meeting of Nordland Fish Farmers Association that the
1% expected fall in salmon production growth should bring about an estimated 6%
growth in prices paid by the consumer. We are not so sure.
With
Norway being the dominant producer in Europe, it is easy to believe that changes
in Norwegian production volume will influence the price paid for salmon in the
EU. However, salmon is now a global
commodity and we are not convinced that Norwegian production can exert its
effect on EU salmon prices. Past experience has shown that if Norwegian salmon
becomes too expensive, buyers look elsewhere for cheaper alternatives. Imports
of Chilean fish may be relatively small now, but if prices rise in Europe,
buyers have already been shown to be willing to bring in frozen salmon from
Chile to compete against fresh European salmon. The Chilean industry may not be
seeking to exploit the European market, but it is the buyers who are the
ultimate decision makers not the producers. We believe that a 1% drop in
Norwegian growth is insignificant in terms of world production and therefore
will have little influence on prices.
We,
at Callander McDowell continue to believe that any dramatic rise in price will
have an adverse effect on the industry as consumers stop buying salmon in favour
of cheaper alternatives. This is the reality of the marketplace that the salmon
industry must face. Even Mr Liabo now asks how great a rise in prices can the
market now stand?