reLAKSation 169.
Hot potato!: On a recent trip to Scotland on the GNER east coast mainline, we availed ourselves of the buffet car service and bought a selection of drinks and snacks. This small refreshment provided an unexpected insight into the issues affecting the salmon industry in Scotland. One of the snacks was a packet of potato crisps (chips) made by a company called Pipers. Crisps are a very popular snack food in the UK and whole aisles of the supermarket are often dedicated to crisps and snacks. The market is dominated by Walkers Crisps (owned by Pepsico) and supermarket own label. There is an increasing presence of premium quality crisps, often hand made, and Pipers crisps falls into this category. What makes Pipers crisps different is that blazoned across the front of the pack are the words ‘Made by Farmers’.
Pipers crisps are an
example of a primary producer, in this case a potato grower, who has decided
that the margins on selling potatoes provides insufficient income. To combat the
problem of competition and low prices, this farmer has sought to add value to
his basic raw material and improve his margin and income. Not only has he added
value to his basic product, but he has successfully transformed it into a very
distinct product. In a very competitive marketplace, Pipers have also managed to
maintain some form of exclusivity by ensuring that the crisps are not widely
distributed. Yet at the same time, Pipers have found a niche market selling to a
captive audience.
Pipers are not the only potato grower to see the opportunity for adding value. Another producer, Tyrells has adopted a similar strategy and has produced a range of premium crisps. They have added to the exclusivity by calling them chips but they are the same product. Tyrells are hand cut and fried chips which have managed to obtain a much wider distribution, yet at the same time have retained their exclusivity and premium.
Faced with low prices,
both these farmers have recognised that their future was in their own hands.
Rather than bleat on about poor market conditions, they have gone out and taken
positive action. In looking for opportunities for adding value, both these
potato growers have had little choice but to enter into an already very
competitive market, yet both have managed to not only add value, but make the
raw material into a premium product.
Salmon farmers have much
more choice. There are many more ways in which value can be added to the basic
salmon flesh, but sadly, salmon farmers appear reluctant to even consider this
route of differentiation and boosted margin. Against a background of low prices,
a minority of Scottish farmers appear to prefer trying to manipulate the
marketplace instead with their accusations of dumping and over-production.
Perhaps they might like to take a trip south on the train and rue over the
possibilities with a can of beer and a packet of crisps.
Cheap
as…smoked salmon!: Seafoodintelligence.com report that the French
magazine Lineaires has conducted a comparative price analysis of smoked salmon
in French supermarkets. Much to their surprise, they found that four of the
major chains, Carrefour (the worlds second largest retailer), E Leclerc,
Intermarche and Champion sell their own label product up to 20% cheaper than the
main discount chains. They found that one of the discounters was the most
expensive for own label smoked salmon and that the cheapest only ranked fifth in
what they described as the smoked salmon price war. Actually, the cheapest
smoked salmon sold by a discounter was sold by four different discount chains as
they appear to sell their Norwegian smoked salmon at exactly the same price.
We, at Callander
McDowell, are not surprised by these findings for as we have discussed
previously, the French market for smoked salmon is extremely competitive.
Customers of the main supermarket chains are often faced with an enormous range
of smoked salmon from which to choose. Not only do the supermarkets sell own
label of different qualities but they also sell a variety of branded products.
The customers’ choice is further complicated by the fact that every label
offers a choice of Norwegian, Scottish and Irish varieties. The price
differential between each is such that Norwegian is always the cheapest,
followed by Scottish, with the Irish the most expensive. Customers, especially
those who are not regularly smoked salmon consumers, have a hard choice
differentiating one smoked salmon from another. In the face of such stiff
competition, it is not surprising that the leading supermarkets have cut the
price of their own label product, especially if they areto compete against each
other. By comparison, the discounters usually only stock one variety of smoked
salmon so their customers have no choice except whether they want to buy smoked
salmon or not. They do not have to provide the cheapest smoked salmon, but one
which their customers recognise as being in their particular price bracket.
British supermarkets do not offer such a comprehensive range of smoked salmon as their French counterparts. Typically, they limit their range to two different varieties, a traditional and a premium range. Occasionally, a branded product is available as a special offer but usually for just a limited period. The lack of choice means that smoked salmon is not such a competitive product and prices remain relatively consistent. This means that in the UK, the discount chains still offer the cheapest smoked salmon, even when the main supermarkets put their smoked salmon on promotion. As in France, the main discounters all sell their smoked salmon at the same price, although this week, Lidl have put their smoked salmon on promotion at £7.45/kg (usually £9.95/kg). By comparison, Sainsburys are offering their large packs of traditional smoked salmon at half price, equating to £14.97/kg. Lidl’s smoked salmon, as in their French stores, is Norwegian, but Aldi, who also sell their smoked salmon at £9.95/kg, source their salmon in Scotland, but have it smoked in Germany.
Comparative prices of
standard smoked salmon (200g pack or equivalent) in British supermarkets.
Aldi
£9.95/kg
Asda
£14.55/kg
Budgens
£29.95/kg
Coop
£24.95/kg
Lidl
£9.95/kg
Marks
& Spencer
£24.95/kg
Morrisons
£12.95/kg
Sainsbury’s
£18.56/kg
Somerfield
£24.95/kg
Tesco
£14.50/kg
Waitrose
£27.57/kg
Doesn’t
add up right: Nick Joy, Managing Director of Sutherland based Loch Duart
Salmon has told IntraFish that ‘salmon prices have been very nice this year.
He added that he expects the good prices to continue’. When asked whether this
would change in the run up to Christmas, Mr Joy replied that his company does
not place any extra emphasis on the festive period but that he intends to make a
margin over the entire year. ‘Christmas is only different because the volume
is a little bit larger.’
Next year, Loch Duart
expect production to double following the acquisition of neighbouring Ardvar
Salmon.
Mr Joy must be extremely
pleased with his company’s performance. Salmon prices are good; he returns a
good margin all year and he is expecting production to double. Yet, surely there
must be some mistake. According to the EUSPG, the Scottish industry is suffering
from low prices; Scottish farming companies are facing bankruptcy and the
Scottish industry is in severe decline. It was for this very reason that the
British government submitted an application for safeguards, encouraged by the
EUSPG. Even Mr Joy’s own company signed up to the application. Yet, why would
Mr Joy support safeguard measures or the dumping case when Norwegian imports are
clearly not having an adverse affect on his business? Something doesn’t seem
to add up.