reLAKSation 148.
Doesn’t add up!: Harald Wiedenhofer, General Secretary of the European Federation of Food, Agriculture and Tourism Trade Unions has warned the European Commission that the imposition of safeguard measures will threaten many jobs in the processing sector. In a letter to DG Trade, which IntraFish has published, Mr Wiedenhofer states that 84% of the salmon processed in the EU during 2003 was imported.
Mr
Wiedenhofer maintains that there are no grounds for the imposition of such
safeguard measures based on the World Trade Organisation’s regulations. His
letter highlights the fact that salmon imports have grown by about 12% during
the period investigated by the Commission whilst normal annual growth is around
8 to 15%. By comparison, Mr Wiedenhofer argues that the only time that the
Commission has imposed safeguards was when imports had grown by 120% in one
year. He said that this is no way the ‘sudden, sharp and significant’
increase as claimed in the British application.
We,
at Callander McDowell, would go further and suggest that the figure of 12%
growth may even be too high. What this figure does not take into account is the
fact that Scottish salmon exports to the US grew by a staggering 217% during
2003 to 23,000 tonnes. This means that about 23,000 tonnes of salmon previously
available to the European market was removed during 2003. In order to satisfy
the existing European demand for salmon, the market would have to import an
additional 23,000 tonnes. This means that this extra volume did not contribute
to any market growth at all. If the import volumes are then adjusted
accordingly, import growth for 2003 was actually only about 6%, which is
certainly neither sudden, sharp or significant. What is clear is that the
figures in support of safeguards just don’t add up!
Oblivious
or oblivion?:
According to the Sunday Herald, salmon industry expert Lars Liabo of Kontali has
warned that the Scottish industry must focus on premium priced segments or risk
oblivion. He said that Scottish producers must specialise in organic salmon or
else develop a premium brand, such as the Tartan mark. He believes that they
should steer clear of the commodity part of the market.
We,
at Callander McDowell, accept that Mr Liabo is extremely knowledgeable about how
much salmon is currently in production, but we wonder whether he knows anything
at all about what is happening in the marketplace. Clearly, Mr Liabo views
Scotland as being just a small niche producer as compared with Norway and Chile.
However, Scotland is still a significant producer of salmon despite a handful of
bankruptcies. It is only necessary to look at the UK retail sector to see that
Scottish salmon still has a dominant presence on the supermarket shelves despite
strong competition from Norway and elsewhere.
Salmon
were originally selected as a candidate species for farming because they were
perceived as being in the premium sector of the marketplace. Consumers were
expected to pay a high market price for the salmon they bought. However, the
rapid expansion of global production brought salmon to many more consumers and
at a much lower price, reflecting its widespread availability. The whole market
image of salmon changed so that salmon became perceived as being a value for
money meal choice. This is now the main market for salmon irrespective of its
country of origin for this is what consumers want to buy.
Clearly,
if consumer demand is for a value for money fish, it is pointless suggesting
that the Scottish industry should focus on the premium market because this no
longer exists, certainly on the scale of current Scottish salmon production.
This can be seen from the market for Label Rouge, which currently stands at just
over 5,000 tonnes a year. Mr Liabo suggests that the Scottish industry should
develop a premium brand like the Tartan mark, yet this is exactly what the
Tartan Mark is. Unfortunately, consumers have been unable to differentiate
between Tartan brand and other salmon, which is why the mark has now disappeared
from British supermarkets. Its main purpose now is to satisfy suppliers that the
salmon is produced to a set quality standard.
Mr
Liabo also recommends that the Scottish industry should focus on organic
production. However, it is clear that organic is still a relatively small niche
market except at the high end of the retail market. The bulk of organic salmon
sales are made through just two store groups.
Managing
Director of Marine Harvest Scotland Cameron Davidson also disagrees with Mr
Liabo He told the Sunday Herald that Scotland’s cost structure could easily be
as good as Norway’s and that there is no niche market big enough to take over
130,000 tonnes of fish. He said that instead, the industry must become cleverer
in the way salmon are marketed so that it becomes market-led rather than
production driven.
Of
course, we at Callander McDowell, applaud this message. For many years we have
been a lone voice promoting the need for a more market-led strategy within the
salmon industry. At times, it has been like banging your head against a brick
wall, but at last we believe that some salmon companies are beginning to realise
that there is no other way.
The
real significance of a market-led approach is that the industry should be able
to differentiate the product away from the dependence on raw salmon flesh and
into sectors where extra value can be added. This would directly benefit the
producer as well as reducing the competitive pressure.
Sadly,
there are still large sections of the industry remaining oblivious to the
benefits of a market-led strategy. The danger is that the longer that they
remain this way, the more likely that they will sink into oblivion.
Well
and truly burgered!:
One of the themes of the recent AquaVision conference was how to make
aquaculture a thriving and sustainable source of aquatic protein. The keynote
address was given by a visionary food business expert, Ray Cesca, formerly
managing director of world trade at MacDonalds. He said that it is clear that
too often farming companies are occupied solely with producing; then the company
does what it can to sell those products. This is an old business model and does
not suit today’s markets. Instead he suggests that the aquaculture industry
must first learn to understand its markets. He offered a number of examples such
as finding out what changes are taking place in the food industry?, What is
happening in the retail stores? Are consumers looking for more value added
processing? What factors are influencing food choices? etc, etc.
According
to IntraFish, Mr Cesca highlighted the healthy eating trend at fast food chains
such as McDonalds to illustrate these points. However, we at Callander McDowell,
do not share his view. The recent promotion of healthy eating at MacDonalds is
certainly not an example of a market-led strategy, but instead a clear case of
sticking with the type of production-led strategies that remain a firm feature
within the aquaculture industry.
Mr
Cesca told the AquaVision conference that it is estimated that there are 300
million overweight people worldwide and he should know because many food
agencies blame fast food outlets like MacDonalds for this widespread obesity. Mr
Cesca said that this huge number of overweight people present clear marketing
opportunities. He said that MacDonalds are now seeing better returns due to its
focus on healthier items. However, the shift to healthy items was not the result
of market research identifying that such products were what their customers
wanted. Instead, the change was forced on them by 14 months of negative sales.
MacDonalds customers were starting to get the message that a diet of burgers and
fries may be doing long term damage. Faced with declining sales, MacDonalds had
to take urgent measures to reverse the trend, hence the introduction of a
healthy eating menu.
In
many ways this reflects what is happening in the salmon farming industry,
although the realisation that the market-led option offers the best chance of a
sustained future has yet to hit home.