reLAKSation 160.

A Gathering Storm: As the European Commission reconsiders its position with regard to the provisional safeguard measures, more and more objections have been raised. It is now not only the Danish industry that has voiced its concerns, but also those in France and Spain.

Anapa,  the Spanish smokers organisation have asked their Government to fight the introduction of a minimum import price because they believe that it will undermine demand.

Jean Louis Lepainteur, President of the Union of French salmon & trout smokehouses and a manger with major smoking company Labeyrie, told IntraFish that they are being held to ransom by a handful of Scottish fish farmers because of their own internal problems. He said that the French industry will now have to pay because a few Scottish companies are having a hard time financially

They have echoed the concerns raised by the Danish industry who believe that the Commission have not taken into account the impact these measures will have on the VAP industry in the EU. Poul Melgaard Jensen, the Chief Consultant with Dansk Fisk that the Commission have not accounted for what  will happen to the processing industry in their analysis. We, at Callander McDowell, would certainly agree.

The Commission have argued that the processing sector has benefited from lower raw material costs but have continued to sell at the same price increasing their margin. However, this is simply not true. We have already discussed in a previous reLAKSation how one major British food processor has seen its profits fall because of increased competition in the retail sector, now another major processor, Northern Foods has reported that they expect that trading conditions will remain extremely competitive reflecting continuing retailer pressure and ongoing cost inflation. The company which employs 22,000 people has announced 1000 job cuts in an attempt to remain competitive as all their main supermarket customers continue to slash prices. Inevitably, this supermarket price war must have an effect on all suppliers including salmon farmers. This is the reason why salmon prices in the UK are under pressure, not because of supposed Norwegian overproduction and dumping. Unfortunately, the Commission have not taken this aspect of the equation into account and thus their calculations have resulted in unrealistic limits for both quotas and the MIP, neither of which will actually help this minority of Scottish farmers.

The Commission could argue that these small farmers are not large enough to supply the major supermarket groups and therefore are outside the limited price pressure, however this is not the case. We have already shown, in a previous issue of reLAKSation, that the small Shetland farmers, who are always cited as the sector most at risk, are supplying at least one UK supermarket store group, as shown by the new labelling. In addition, the supermarket price war has a knock on effect to the independent fishmongers who have to reduce prices to remain competitive. Some British fishmongers have been regularly selling salmon at prices below those found in the supermarket sector.

We, at Callnder McDowell, would not argue that Scottish salmon farms remain under competitive price pressure, however we firmly believe that the solution to this problem is not to be found in Brussels. Instead, the onus on regaining lost profitability must be with each individual farming business. The future of the salmon industry cannot be governed by continual intervention. Farmers must look for alternative strategies, especially those that move away from the competitive raw salmon flesh. We very much appreciate that this is something that the small farming company is not equipped to do on its own which is why we contend that the Scottish Executive should help. The Executive maintain that it is not their role to intervene in the commercial decisions of  individual businesses and perhaps this is rightly so, yet at the same time they were happy to support the application for safeguards, which affects the exact same commercial issues of these businesses.

M. Lepainteur of the French Union of smokehouses said that this is an internal Scottish problem and it is. He is right to feel that other European businesses are being held hostage to these problems. As the storm clouds start to gather, we can only hope that the DG Trade at the Commission now start to see the sense in this view.

Diluting the brand: In reLAKSation no 158, we discussed how whisky manufacture Diageo had suggested that younger UK consumers were being deterred by traditional tartan imagery. The Sunday Herald has continued to discuss these theme and found that whilst several companies have toned down their Scottishness in the UK market, they continue to promote it to their overseas customers. They have found that companies now need to keep their products relevant to the target markets. As a result, companies like Baxters soups have taken out the tartan from their logo and packaging on all but their core Scottish products effecting the biggest change since the company was established in 1868.

Other companies losing their Scottishness include the Royal Bank of Scotland (RBS in England), Aegon changing their Scottish Equitable brand and even the Scottish Executive, which has moved away from using a Scottish emblem in its campaign to promote the nation to the rest of the world.

It is therefore not surprising to find that the Scottish name is starting to disappear from salmon packaging. Supermarkets used to regularly label their packs as Scottish salmon fillets but a number of outlets have now lost the Scottish name from the main label. This maybe because they now must state the origin of the salmon along with how it is produced. They may therefore feel it unnecessary to repeat the Scottish name since they have to label their packs with ‘Farmed in Scotland.’ At least one supermarket has progressed this labelling to state the specific area of Scotland where the salmon was produced. This somewhat reduces the emphasis on the Scottish identity. Now, some of the smaller supermarkets, which once were dedicated to promotion of the Scottish brand have changed their labelling so that the Scottish identity has disappeared altogether. Rather than label their salmon with ‘Farmed in Scotland’, the packs state ‘Farmed in the UK’.

Whilst a limited amount of salmon farming occurs in Northern Island, it is likely that this salmon is of Scottish origin. Some packs of salmon products already use the UK name in their labelling, usually in the form of ‘Farmed in Scotland (UK)’ because the UK is the official country of origin. Could this be, a first step in removing all association with Scotland in order to enhance the products own identity? Perhaps, there is now recognition that country of origin is not ‘the be all and end all’ of choice for those consumers buying salmon.    

Small is …. Small: The announced merger of Marine Harvest and Stolt Sea Farm has provoked a great deal of discussion as to the merits of small and large producers. Rolf Domstein, Chairman of Fjord Seafood has suggested that size does count in the market , especially with regard to negotiating power on the sales side. According to IntraFish, Pan Fish boss, Atle Eide disagrees. He says that there are no really huge customers and even the demand from the biggest current buyers can be already met by existing companies and few of these are ready to commit to just one supplier. He also suggests that any savings made by being very large would be simply clawed back by the buyers looking for lower prices.

Mr Eide says that Pan Fish endeavour to focus on operating on a smaller aquaculture company such as SalMar which he says cannot be beaten in terms of efficient production. This is why he aims to run Pan Fish as a similar  efficient operation but with a small holding company. He considers ‘small is beautiful’.

We, at Callander McDowell, would argue that it is all an issue of perspective. Pan Fish cannot be considered to be a small producer. The independent salmon farms on Shetland are certainly small farms but given their current financial difficulties, small is far from being beautiful. We would suggest that size is not really the issue but instead, it is more important as to what you do with it.

Mr Eide cites the example of the poultry industry as having undergone a process of radical cost cutting (in much the same way as he has applied to Pan Fish) and he suggests that this has enabled the industry to flourish ( and presumably he hopes that Pan Fish will flourish in the same way) however, he should remember that much of the poultry industry does not complete in the market for raw chicken flesh.   

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