reLAKSation 132.
Just
roll over?:
Acting Chairman of the Finnmark Fish Farming Association, Sigurd Richardson told
IntraFish that he doesn’t want to sound like he is crying wolf, but he warned
that if Norway does not restrict the production of salmon, then in 2005/6 there
could be a repeat of the over-production crisis. Mr Richardson is uneasy that
Norwegian fisheries minister Svein Ludvigsen is to end the feed quotas that have
been the basis of production restraint since the mid 1990’s. He is also
concerned that any voluntary arrangements for self regulation will not work.
This is because there are several companies that believe that they should be
allowed to produce as much as they like. However Mr Richardson believes that
such production would cause an imbalance between supply and demand and as a
result, the Norwegian industry risks an imposition of further punitive measures
by the EU.
Mr
Richardson’s call for the feed quotas to be retained is only one proposal
currently under discussion by the Norwegian salmon industry. Other proposals
that have also been put forward include a two year halt on new concessions; a
scheme to reintroduce generic marketing and plans to reconsider the possibility
of establishing a system of Producer Organisations. Although all are very
different, these proposals have one common aim. Their intention is to appease
the European Commission; showing that the Norwegian industry is seriously
concerned about the implications of the British application for safeguards.
However, we at Callander McDowell believe that such attempts to placate the
European Commission are misguided and could well backfire on the Norwegian
salmon industry. After all, it would not be the first time that this had
happened.
In
1996, the Norwegian industry did not try to defend themselves against the
Scottish dumping action. Instead, they tried to show that they were taking a
responsible approach to production. They did this by culling 4 million smolts
and unilaterally imposing feed quotas. The problem for the Norwegian industry
was that the first question anyone would then ask was if Norway was truly
innocent of dumping, why then adopt such strict controls? If Norway was innocent
of the dumping charges, then the cull and the feed quotas certainly made them
look extremely guilty.
In
1996, Norway did have a potential defence strategy, but failed to use it.
Firstly, the original Scottish complaint was flawed and the claims made against
Norway were based on assumption rather than fact. Norway could have countered
the allegations in the Scottish submission document, but failed to do so. Norway
could have also shown that the EU’s method of investigation of dumping was
unsuited to salmon farming because the many artefacts of the natural lifecycle
of a cold blooded animal meant that the type of spot investigation used by the
EU would always result in a positive dumping margin. A similar comparative study
of Scottish production could have confirmed this as it would have been likely a
dumping margin would also have been identified in Scotland. Unfortunately, the
Norwegian industry failed to pursue such an investigation. Finally, Norway could
have shown that there was an increasing market demand for Norwegian salmon in
Europe, but equally, they failed to do so.
This
current application for safeguards has many parallels with the past dumping
actions. In fact, the application is about exactly the same issues as the
dumping actions but approached via a different route.
Appeasement
did not work in 1996 so there is absolutely no reason why it should work now.
Instead, the Norwegian industry should take a proactive approach to these
safeguards, not a reactive one. The Chilean industry has got it right. Javier
Cox, president of SalmonChile restated a view which we have regularly expressed
in reLAKSation, that the problems that Scottish producers have encountered are
not due to competition from Norway and Chile, but rather that these salmon
producers have failed to adapt to a changing and global market. Rather than
pursue safeguards, Mr Cox said that these farmers should redirect their focus.
As we, at Callander McDowell, have repeated many times before, the farmers
should produce what the market wants, not what they think that the market wants.
The
Scottish industry has tended to focus on the production of high quality fish
backed by a couple of identifiable consumer quality marks. In the UK, the
accepted quality standard is the Tartan Quality Mark (TQM). According to the
1999 Government sponsored PACEC report, most British supermarkets recognise the
value of the TQM and regularly stock fish tagged with the mark. Even then, this
as a very optimistic view but today, even the most determined consumer will find
it extremely difficult to find a tagged TQM salmon or a stickered TQM salmon
portion in the British retail market. The reality is that consumers are not
interested in paying a higher price for a higher quality product. Instead, they
are simply looking for a low cost everyday meal choice and this is what the
salmon industry needs to produce. However, it does not necessarily mean that
Scottish producers should compete directly against low cost producers from
abroad. There are other options.
Whilst
consumers will have to struggle to find the TQM in the UK, French consumers can
still find Scottish Label Rouge salmon in their shops. However, as only 5,000
tonnes of Label Rouge salmon is exported from Scotland annually, some of which
goes for smoking, the French market is not exactly awash with Label Rouge fish.
Only two French supermarket chains sell Label Rouge salmon, although not in
every store and not exclusively. These stores also sell Norwegian salmon,
especially in the forms which are most popular. Thus, a store may sell both
whole or steaks of Label Rouge salmon, but the popular pavé portion is more
likely to be of Norwegian origin. The French market is dominated by cheaper low
cost salmon, which even the more discerning French consumer appears happy to
buy. Whilst Scottish producers should be congratulated for achieving a Label
Rouge accreditation, they also need to take more note of what is happening to
consumer trends because they have changed significantly since salmon farming
began and continue to do so.
Yet,
it is not just the Scottish industry which needs to take note of the consumer
marketplace. Norwegian farmers also need to look at what is happening to
consumer demand, especially outside Norway. The Norwegian supermarket sector is
very different to that in France or the UK and any farmers helping with the
weekly shop would be seriously misled if they thought that European shoppers had
a similar shopping experience.
The
market for salmon is changing. Sigurd Richardson says that if the industry is
not careful, supply will outstrip demand leading to a potentially damaging
imbalance. However, demand is complex. In the UK, demand for fresh fish is
starting to slow down whilst demand for salmon in convenience products is
soaring. Consumers want meal choices that are value for money and quick and easy
to prepare. Yet, it is unlikely that such changes are part of Mr Richardson’s
equation.
Another
of other suggestions to appease the EU is to reintroduce a generic marketing
campaign. At first sight, this may seem a positive proposal since its aim must
be to expand demand. A similar campaign was undertaken as part of the EU salmon
agreement and hence a new campaign might be viewed favourably by the EU. The
last campaign was funded by a tax on exports to the EU but despite the huge
spend, the impact on consumer demand was hardly noticeable. A subsequent
evaluation indicated that the campaign had had a positive effect of 1-2%. What
has never been mentioned is the fact that the campaign was never brought to a
complete end and part continues on even today. A web site was developed for each
of the three target markets and these were used to establish a database of
interested consumers to whom recipes were sent out on a weekly basis. These
recipes are still being sent out to consumers in the hope of increasing
consumption. How much effect they have can be seen from the fact that the
Scottish industry have now been motivated to apply for safeguards. Generic
marketing campaigns appear a sensible approach in principle, however, they have
no specific target but rather fire a broadside message across the whole
population. Any effect can therefore be rather diluted. Generic campaigns can be
very expensive for very little return. The Norwegian industry is already
suggesting that European farmers might like to contribute towards the cost if
such a campaign were to go ahead. Given that the Scottish farmers have claimed
that they are already in dire
financial straits, this rather seems unlikely. Generic campaigns are expensive
and the reality is that such a campaign would be a very costly exercise,
especially as its main aim is simply to placate the EU.
Producer
Organisations have also been suggested as a way of helping Norwegian farmers
gain support from the EU since PO’s are originally an EU concept; part of the
Common Fisheries Policy. However, whilst the principle might sound ideal, the
concept of PO’s has never been tried as part of a farming system. It would in
fact turn into a bureaucratic nightmare for all farmers and would be almost
impossible to manage. The central operation of a PO depends on an accurate
estimate of both supply and market demand. What is already clear is that even
the most experienced industry expert still has little idea as to what the
current market demand for salmon actually is. Without accurate data, PO’s
would simply fail to function.
It
is such knowledge of market demand, which is in fact the crux of the current
application for safeguards as well as the subsequent necessity for Norway to
appear to appease the EU. Appeasement is not the answer, instead Norway must
show that it has a strong and developing market for its salmon. The alternative
is that the Norwegian industry could just roll over and let these few Scottish
farms force their perception of the salmon market onto every single consumer
throughout Europe. We all know that the consumers will not accept this, but by
then the damage will have been done.