reLAKSation 18.
Welcome to Criticise: A regular correspondent has questioned whether production-led or market-led strategies (reLAKSation 17) are relevant to the salmon industry. He says that these are for people who produce plastic bags or nuts and bolts and not to salmon. He argues that what he does is FARM, which is much more important as it concerns the ethics of food production(!) He goes on to say that the problem with analysts is that they view salmon farming as a manufacturing and not a biological process. However, his major criticism is aimed at the comparison of salmon farming with the manufacture of motor cars.
We, at Callander McDowell, make no apologies for using this comparison, as it is one we have used several times over the last ten years. In this instance we were prompted by an article, which appeared on the Intrafish website on 1st June. This posed the question as to who will be the winners of tomorrow's industry, those who follow a production-led or a market-led strategy? The article referred to Henry Ford and his comment that 'you can paint it any colour as long as its black'. This is given as an example of the production-led approach.
Callander McDowell has also used the motor industry to illustrate the difference between production and market led strategies, albeit in a very different way.
Salmon was initially selected as a candidate species for farming because it was perceived as being of high enough value, to generate significant profits. This was because wild salmon had only a limited availability and this rarity meant that consumers were willing to pay a high market price. Salmon was firmly positioned in the luxury marketplace.
If a comparison were to be made with the motor industry, then salmon would be positioned in the same sort of market as a Rolls Royce or a BMW 7 series, a Merc 1000 or possibly a Range Rover. These cars are top of their ranges, are manufactured in small numbers and sold at a high market price. Buyers choose these cars because they want the perceived rarity value to reflect their life style.
Unfortunately, the very act of farming has undermined the luxury image of salmon. The early success of farmed salmon in the market place encouraged a rapid expansion of production. The resultant increased volume of salmon meant that salmon has become almost ubiquitous. It was therefore inevitable that the widespread availability has meant that the luxury image has disappeared so that consumers now view salmon as being an everyday meal option.
Translated back to the car industry, salmon has become a mass market product like the Ford Focus or Toyota Corolla. Yet, despite the huge volume production, salmon farmers continue to believe that they are producing a Rolls Royce product. They need to ask whether potential customers for a Rolls Royce would be prepared to pay a Rolls Royce price, but yet be willing to see a Rolls Royce on every corner? The answer is obvious.
The reality is that the very act of farming has brought salmon to a much wider range of consumers. However, many of these consumers became attracted to buying salmon because of its ever decreasing price. These new consumers have found that salmon is no longer a luxury dish for the special occasion but instead, is an ideal low cost, every day meal option.
This change in the perception of salmon has created a quandary for the farming industry. Should they focus on the production of Rolls Royce products or concentrate on the Toyota Corolla market?
Our correspondent has no doubt. He writes that rather than argue for the introduction of more market-led strategies, Callander McDowell would be better served with a discussion of how to farm better food to bring back true Scottish differentiation.
The question that we would pose is do consumers really care whether the salmon they buy comes from Scotland, Norway Chile or where-ever or more importantly, does the salmon they buy represent real value for money?
EU salmon agreement: Several reports from Intrafish suggest that there is still a great deal of uncertainty about what is to happen when the EU salmon agreement runs out. It would seem that everyone is keeping their cards close to their chest. EU Commissioner Franz Fischler dismissed any enquiries by saying that the agreement is not an issue at the moment.
Although Callander McDowell strongly feel that the agreement should be discarded forever and consigned to the waste bin, we find it odd that those advocates of the agreement are also those who argue for stability in both the industry and the marketplace. Surely, any uncertainty about the future of the agreement can only bring uncertainty for both producers and consumers. The agreement must be raised up the agenda and given full consideration and open discussion. The alternative is that some sections of the industry will be aggrieved because an unnecessary decision will be forced on them at the last minute.
UK Halibut: According to Eivind Farstad of the Norwegian Business School, the British consumer is extremely positive towards halibut. This suggests to Mr Farstad that there is a significant market potential for farmed halibut in the UK.
Mr Farstad's conclusions are based on a market assessment he carried out amongst British consumers. However, the Intrafish report of this work provides few details as to how the research was actually conducted. This is unfortunate as these findings appear to conflict with more generalised observations of the market place.
Whilst Mr Farstad suggests that British consumers are extremely positive towards halibut, the reality is that halibut is not consumed widely by the British public. The key question is whether this is due to its scant availability or because it is not a significant fish of choice?
Halibut has recently been the subject of a number of market surveys. These all indicate that the market has not really been exploited, primarily because the fish is not widely available. However, in the UK, the supply of wild fish appears to meet consumer demand. This is reflected in the price, which is not that high when compared to fish species in high demand.
A recent report from Taylor Nelson Sofres suggests that wild halibut sells for £6.50-£77.50/kg, whilst farmed halibut can only command a price about £1.00/kg lower. Presumably, these are wholesale prices, since the few retail outlets for halibut, price it at around £14.00/kg.
This report also gives an indication of halibut's availability, In 1999, only 1270 tonnes of halibut were sold in the UK. Sixty three percent of this was used in the food service sector and the remaining 37% were sold through the retail market. This is only a tiny proportion of the total amount of fish consumed in the UK. The bulk of this was cod, haddock and salmon.
Cod is the species of choice for many British consumers, who are notoriously conservative with regard to their fish consumption. Many attempts have been made to convince British consumers to try alternative species to cod, but with only limited success.
Of course, halibut farmers never intended that their fish would compete in the wider marketplace, but would be aimed at the specialist restaurant and retail trade instead. Some farming companies have already suggested that production volume will increase and the price will thus fall. This is expected to make it more attractive to more consumers, however a positive response may not be sufficient to change this positive attitude into hard sales.