reLAKSation 137.
Safety
first, Safety last: According to IntraFish,
Scottish aquaculture minister, Allan Wilson is certain that safeguard measures
will be imposed on Norwegian salmon imports into the EU although how he can
pre-empt the outcome of the investigation is unclear. His confidence on this
matter appears to be based on anticipated support from other EU members. He told
Dagens Naeringsliv that, after all, sufficient member states voted in favour of
an investigation. Presumably, Mr Wilson believes that the investigation will
come out in favour of the application and it this will encourage other member
states to ratify the imposition of safeguards. The rest of us will have to wait
until the investigation is completed before we find out whether the application
is justified or not.
Mr
Wilson supports the application for safeguards because he believes that a
breathing space is needed to facilitate a Scottish transformation. He said that
he needs the time, which safeguards would provide, to transform the salmon
industry to meet the challenges of the future. However, we at Callander McDowell
would argue that the industry has already had plenty of time to introduce change
but has squandered it away. The need for change has been apparent ever since
prices first collapsed in 1989 but the Scottish industry has steadfastly
resisted any attempts at transformation as illustrated by the repeated dumping
complaints, the PO strategy and now, with this application for safeguards. Their
refusal to adapt to changes in the marketplace means that the timetable for
change is no longer theirs to dictate.
However,
it is not just the timetable that is at issue. In the event that Mr Wilson does
manage to persuade the EU for the need for safeguards, will the industry really
use this breathing space to sort out their problems? We, at Callander McDowell
are not convinced that they will. Mr Wilson says that he has prepared a new
strategy for the industry, but the Strategic Framework launched last year
provides little in the way of economic solutions. Farmers depending on this
Strategic Framework to provide the help they need will undoubtedly have a very
long wait. More worryingly, especially for the smaller farmers who have signed
up to the safeguard application, Mr Wilson has said that the Scottish industry
now needs larger farming facilities. This suggestion appears to be at odds with
his own Strategic Framework, which emphasises quality not volume. Of course, Mr
Wilson is correct, if the industry is to participate in the market for raw
flesh, then it must be competitive. We have suggested previously that if the
smaller farms are to survive then they must work together co-operatively to gain
all the benefits of the larger producers. They can do this now and without the
need for safeguards. If they choose not to pursue co-operative ventures, then
they cannot expect to be competitive, nor should they expect the protection of
safeguards. This is their choice, not the European Commissions.
Finally,
Mr Wilson admitted to Dagens Naeringsliv he didn’t believe that the Scottish
industry is much worse off than that in Norway. If this is really the case, then
Mr Wilson should question whether his application for safeguards is truly
justified.
(JD)
Power to the consumer: The latest JD Power
survey of 23,000 car buying consumers has produced a surprise second place for
Czech manufacturer Skoda.
Once the object of the British humour with jokes like: What do you call a
Skoda with twin exhausts – a wheelbarrow or How do you double the value of a
Skoda – Fill the tank with petrol, Skoda have performed an amazing turnaround.
They are now second to Lexus in providing a satisfying customer experience. This
is a major achievement.
We,
at Callander McDowell, have introduced this reference to cars because we feel
that we can draw a real analogy between how consumers buy cars and how they buy
salmon. We can use this analogy to explain what is really happening in the
salmon market and why the British Government have resorted to their application
for safeguards.
The
British market for cars is governed by the demand for company cars. Employers
provide a car as part of the job and this can be a considerable perk for the
employee. The make of car can be very important as it reflects the status of the
employee within the company. For example a salesman might be given a Ford Mondeo,
whilst his manager would get a BMW.
A standard 1.8 litre Ford Mondeo retails at £15,000, whilst a comparable BMW 3 series is priced at £20,000. Both cars have the same sized engine and are similarly equipped. The main difference is the badge. BMW cars have a perceived image in the marketplace for which consumers are willing to pay a premium price. This means that whilst the Ford and the BMW do exactly the same job in getting the driver from A to B, they hold very different positions in the marketplace. Potential purchasers of a BMW do not consider Ford Mondeos an alternative. Instead, they look to the Audi A4 or the Mercedes C Class. By comparison, potential purchasers of Ford Mondeos do not consider a BMW as an alternative as they look to Renault Laguna’s, a Peugeot 406, or a Vauxhall Vectra.
The
importance of the badge to car buyers was clearly illustrated at the launch of
the Skoda Octavia. Potential consumers were shown the car but with all the
badges covered up. Everyone questioned said that they were extremely impressed
by the car and would consider buying one. However, once the Skoda badge was
revealed, many of those questioned quickly back tracked saying that they were
actually unsure if they would consider buying one. Skoda hope that they have now
persuaded consumers that their image has changed and that the badge is something
to be proud of, not ridiculed.
How
does this all relate to the market for salmon?
Scottish producers would have the market believe that their product is comparable to the BMW, whilst imported salmon is more akin to the Ford Mondeo. They perceive that their product has a certain caché for which consumers are willing to pay a premium price. They have even given their salmon a distinctive badge, the Tartan Quality Mark, to help consumers identify Scottish salmon in the marketplace.
By
comparison, Norwegian and other imported salmon are considered to hold a totally
different position in the marketplace. Like the Ford Mondeo, Norwegian salmon is
OK, but it lacks that extra something that makes the BMW as distinctive as it
is.
In
exactly the same way that BMW and Ford fulfil different and separate areas of
the marketplace, the Scottish industry believe that Scottish and Norwegian
salmon are completely unconnected and satisfy different consumer needs.
In
the marketplace for cars, these separate needs do not impede on each other.
Thus, if the Ford adopts a different strategy to sell their cars, it does not
affect sales of BMW’s. The competition in the marketplace means that Ford have
had to discount the price of a Ford Mondeo so that it is now priced at about £12,500,
far below the cost of a BMW. Yet, the cache of the BMW badge means that
potential consumers are not rushing from the BMW dealer to those selling Ford
cars because these are two totally different markets. Ford can flood the market
place with low priced Mondeos, yet BMW sales will continue to remain healthy.
Unfortunately,
this is where any comparison between the market for cars and that for salmon
parts company. The increased availability of the low priced imported salmon has
had a dramatic effect on sales of Scottish fish, despite the perceived market
cache. This is because consumers now question whether the perceived image of
Scottish salmon is worth the extra cost. After all, Ford Mondeos are just as
effective as a BMW for getting from A to B. If the perceived cache is
unimportant to the consumer, then is there any point in paying any more for it?
Clearly, for salmon consumers, the answer is no as they have happily moved from
one market area to the other and now readily buy lower cost imported salmon
because they find that it meets all their specific requirements.
The
increasing trend of consumers moving from one distinct market area has occurred
despite the presence of the Scottish badge. This shows that the TQM badge has
not sufficient cache to persuade consumers that Scottish salmon is not only
better than other salmon, but that it is worth paying more for. The lack of
market cache has meant that the TQM has slowly disappeared from the UK so that
now it is almost impossible to find. As a result, consumers cannot distinguish
Scottish salmon from other fish and have come to accept that all salmon is of
equal standing. What has become apparent that unlike the car market, the badge
is unimportant, it is the purpose for which they are produced, which is now key.
Consumers buy salmon because it represents a value for money meal choice. They
are not concerned with its origin or whether it has a market image. The separate
and distinct markets have now merged together and become as one.
However,
the fundamental question that now must be posed is whether the imposition of
safeguards will help the Scottish industry. If imports of lower cost Norwegian
salmon are curtailed through either import restrictions or the imposition of
extra taxes, will the two market areas become separate again? We, at Callander
McDowell, do not think so. Consumers now associate salmon with value for money.
If supplies become restricted and the price rises in response, consumers’ will
not only stop buying salmon, they will look for other low cost alternatives,
which may not even be fish. Once consumers move away from salmon, farmers have
to risk the possibility that they may not return. Safeguards could well do more
damage than good. They certainly won’t help the Scottish industry because what
Scottish producers need is to recognise that consumers want something very
different to what they want to supply. Salmon consumers are now more than happy
with their Ford Mondeo.