reLAKSation 158.
Size
isn’t everything!: The news of the
impending merger between Marine Harvest and Stolt Sea Farms is not that
unexpected to Callander McDowell. Back in 1990, after prices first collapsed, we
suggested that the modern salmon farming industry would consist of just a
handful of major multinational players. The supply of a value for money food
product would dictate that salmon farming companies must take advantage of the
economies of scale and inevitably this would mean very large players. However,
we did not exclude the possibility of smaller specialist producers and large
co-operatives of small independent producers. The outcome would be the same, a
small number of key players.
Hans
Den Bieman, the Chief Executive of the new Marine Harvest appears to echo this
view in an interview with IntraFish indicating that he would like to see fewer,
but bigger players in the industry. Mr Den Bieman believes that this will bring
greater stability, although we, at Callander McDowell, wonder whether this idea
of stability that is punted around the industry will ever exist. Certainly, a
move to fewer and larger companies will bring a much more market oriented focus
to the industry and the integration of the smaller players through merger or
acquisition will reduce the likelihood of more complaints, but stability,
whatever it is will come through the development of both supply and demand.
We
do believe that fewer and larger companies will certainly reduce market
disruption, as in an attempt to satisfy their shareholders, the larger players
seek improved margins through market and product development. This will reduce
the buying pressure on raw fish flesh and thus, market uncertainty.
Whilst
we at Callander McDowell welcome such mergers and acquisition, we do believe
that they should centre on the smaller companies because the danger is that if
it is only the large players that merger, the smaller companies will feel
increasingly isolated and resort to the use of further trade measures to secure
their future.
Trashing the tartan: The head of Scotland’s most powerful whisky distiller told the Herald newspaper that the younger generation has turned away from drinking whisky by the widespread use of traditional Scottish icons such as tartan. Paul Walsh of Diageo mocked his groups past attempts to entice younger consumer to sample whisky saying it was not very appealing. He said that consumers are now much more aspirational.
At the same time, the owners of one of Britain’s biggest insurance names, Scottish Equitable are set to ditch the word Scottish amid worries the word has lost its positive meaning.
Interestingly, these comments come at a time when the Scottish salmon industry is heavily trying to promote its very Scottishness.
The recent advertising campaign highlights the Scottish nature of its product and backs this up through the use of the Tartan Quality Mark. The industry has also sought the award of the Protected Geographical Indicator (PGI), which stops salmon from other countries from being passed off as Scottish Farmed Salmon.
Although
whisky producers have started to move away from the traditional perceptions of
Scottish products, the salmon industry seems to be firmly attached to these
outdated images. Yet, surprisingly, whilst the salmon industry continues to
focus on their Scottishness, the message is not being taken through to the end
consumer. This is because the retail sector has realised that there is no extra
benefit to be gained from the Scottish image. The latest advertising undertaken
by the Scottish industry incorporated the Tartan Quality Mark, yet not one piece
if fresh salmon sold through the major UK retailers carries this mark. A small
number of smoked salmon products incorporate the Scottish flag on the pack and
some stores use the word Scottish on the label as in Scottish salmon fillets,
but that is it. There is no use of tartan or other Scottish imagery. We, at
Callander McDowell, believe that this is because most consumers remain
indifferent to the origin of the salmon. Most are just as happy to buy Norwegian
salmon as Scottish and certainly they are not prepared to pay more to buy into
the Scottish image.
In
the past, the Scottish industry have argued that the reason why consumers have
not been willing to differentiate between Scottish and other salmon is because
the labelling may have implied that all the salmon is Scottish. This may have
been true once but it is certainly no longer the case. All salmon sold through
the major retailers is clearly labelled as to its origin. Those retailers
selling salmon from more than one source do clearly differentiate between salmon
farmed in Norway and salmon farmed in Scotland or where-ever. However, as we
suggested in reLAKSation no 155, labelling has now moved on so that consumers
are given much more information than just whether the salmon is farmed in Norway
or Scotland. Tesco now label their fresh salmon as being farmed in South West
Norway, Western mid Norway, Shetland, the Western Isles and the West Coast of
Scotland.
Yet
soon, even this information may not be enough. Tesco have now changed the labels
on the packs of their smoked salmon. Their salmon range of Tesco smoked salmon
is labelled as either:
Farmed in Highland, Scotland,
Farmed
in Argyll, Scotland,
Farmed
in the Hebrides, Scotland,
Farmed
in Orkney, Scotland,
Farmed
in Shetland, Scotland.
Whilst
salmon from each of these localities is not available all the time in every
store, consumers now have to make a choice. Is one salmon better than another
and how will consumers know?
Whilst
consumers may now have to pause for thought when buying Tesco smoked salmon,
this is not where detail about origin has stopped.
Tesco
also sell smoked salmon and gravadlax, as well as fresh salmon fillet, under
their own premium label the Finest range. All the salmon is produced in Shetland
and packs have clearly stated this as in ‘Smoked Shetland Isles Salmon’.
Tesco have now decided to provide further information as Callander McDowell
shows in their regular retail surveys. Packs are labelled as either:
Farmed
in Hoganess, Shetland.
Farmed
in Skelda, Shetland,
Farmed
in Burwick, Shetland,
Farmed
in Flotta, Shetland,
Farmed in Spoose Holm, Shetland,
Farmed
in North Sandwick, Shetland,
Farmed
in Punds Voe, Shetland,
Farmed
in Wadbister, Shetland.
There
may yet be more locations as various sites are harvested, but as Tesco stores do
not stock salmon from each of these locations at the same time, it is impossible
to believe that customers should develop a loyalty to specific salmon. In much
the same way, consumers have not developed any loyalty to any other salmon
irrespective of whether it is the loch, the island, the region or the country.
Consumers choose the salmon they buy on whether they believe that it represents
the best value for money. The whisky producers are beginning to realise that the
Scottish imagery does not provide any extra benefit and sooner or later the
salmon industry will realise the same. French consumers do pay a premium for
Label Rouge Scottish salmon but it is the Label Rouge, not the Scottish image
that generates the premium. If the Norwegian industry were to bother applying
for Label Rouge accreditation, then they could generate the same premium.
However, as the Scottish industry have found, the market for such premium
product is very small and as such, the costs of the scheme can well outweigh the
extra revenue.
Abide
with me?: Nick Joy, Managing Director of Loch
Duart Salmon has warned Norwegian producers that they should accept the
safeguard measures in order that the industry can return to profitability and
stability. He told IntraFish that he cannot understand why anyone would want to
resist this goal.
Yet,
it seems that it is Mr Joy and his colleagues at the European Salmon Producers
Group who appear intent on sabotaging the very safeguard measures that they have
sought to have implemented.
There
hasn’t been any indication at all that the Norwegian industry will not abide
by the provisional safeguard measures that have been imposed by the EU. These
measures have only just been set in place and before giving them a chance to
work, the European Salmon Producers Group have already upped the stakes with
their plan to submit both anti-dumping and anti-subsidy suits to Brussels.
Surprisingly,
these submissions have not been prompted by any attempt by the Norwegian
industry to circumvent the measures, but rather by the Danes, who believe that
the safeguards will damage their processing industry. The Danes argue that they
need regular supplies of value for money salmon to sustain their industry and
they believe that the European Salmon Producers are trying to penalise them in
order to achieve their own aspirations for a small volume of Scottish salmon.
According
to IntraFish, the Danish industry has now started to make enquiries in Chile as
to sourcing alternative supplies and why shouldn’t they. If the EU chooses to
restrict their source of raw material, why shouldn’t they look elsewhere?
This
is yet further illustration that low prices are not the result of Norwegian or
any other producer dumping cheap salmon in the European market but rather that
the European market has a demand for low priced salmon. Unfortunately, Mr Joy
and his colleagues are unable to see this preferring instead to believe that
most consumers are willing to pay more for high quality premium product. This is
just not the case.
Loch
Duart Salmon are always promoted as being the best example of a farm that is
able to buck the trend and develop a niche market for its specialist salmon.
Yet, if Loch Duart are able to command a higher price for their fish and see it
as being distinct from the value for money product, why are they so concerned
about low priced imports that they have signed up to a proposal to restrict the
competition?