reLAKSation 194.
Another
world: According to Intrafish, Lars Liabo of
Kontali Analyse said that he believes a jump in salmon prices being transferred
to shop shelves is inevitable. This was not a difficult prediction to make,
since we at Callander McDowell had already reported that there had been some
upward price movements in the UK supermarkets. Mr Liabo reported that so far,
salmon prices in French and Spanish supermarkets remain unchanged.
The
EUSPG and the European Commission assume that low salmon prices have been due to
the presence of dumped Norwegian imports. The logical argument suggests that if
import prices can be raised by the imposition of tariffs, then higher prices
will filter down the supply chain and this will be reflected in the supermarkets
as a fair price which consumers will be prepared to pay. Unfortunately, both the
EUSPG and the European Commission are mistaken. The EUSPG are simply
uninterested in what the consumer wants and therefore have little idea as to
what happens in the supermarkets. Equally, the Commission focused just on the
question of whether dumping has occurred, that they never considered whether
other factors are responsible for the changes to the marketplace that prompted
the EUSPG to accuse Norway of dumping.
For
example, one of the most important influences on the retail price of salmon in
the UK is the price war taking place between supermarkets. Comparisons between
the price of salmon in the leading supermarkets show how identical prices are.
When one supermarket breaks ranks and cuts the price, the others follow.
Alternatively, as in the case of the recent duties, a small price rise by one
supermarket prompted the others to follow. However, some supermarkets are not
always so keen to follow. Whilst the packs of chilled packs has risen, most
supermarkets have left the fresh fish from the fish counter at the same price.
This is driven by the desire to remain the most competitively priced.
The
aim to be the market leader is the single most influential factor for driving
salmon priced downwards. This week it’s been possible to see this competitive
drive in action.
Although the supermarket chain Sainsbury’s has been suffering from a downturn in sales, it has become a dominant seller of salmon. This is not because Sainsbury’s prices have been the lowest, but rather that they almost permanently have salmon on some form of promotion . Their regular promotion is to offer their 360g pack of salmon fillets priced at £5.99 on Buy One Get One Free.
The leading supermarket chain in Britain is Tesco’s and they have been losing out on salmon sales, despite offering their salmon fillet at £5.97/kg. Tesco’s normally sell their chilled salmon fillet in packs of varying weight. This week, they have a special promotion of salmon fillet in packs of 360g (sounds familiar) on Buy One Get One Free (sounds even more familiar) but these packs are priced at £4.99 undercutting Sainsbury’s by £1/pack or £1.39/kg. This undercutting is despite salmon being at it’s highest price this year.
This
is clear proof that salmon prices are not controlled by what is happening in
Norway as the EUSPG suggest but rather by the supermarkets
providing consumers with what they want – a value for money, everyday
meal.
In
Tesco this week, customers couldn’t get to buy enough salmon. The offer was
just too good to miss. The problem for the EUSPG and the European Commission is
that they just haven’t got a clue to what is really driving the market. Their
combined actions will not result in a sustained higher price; the supermarkets
will see to that. Both the EUSPG and the European Commission need to face up to
the realities of the marketplace. They cannot force the supermarkets nor
consumers to accept their idea of what the salmon market should be. They both
live in another world.
Milking
it… : Whilst the European Commission is
busy putting duties on imported Norwegian salmon, Scottish Quality Salmon is
equally busy offering retailers cash incentives to promote farmed salmon as a
rich source of the omega-3 fatty acids. SQS told Intrafish that most consumers
are unaware of the health benefits of eating oily fish such as salmon. Half of
the monies for this promotion come from the European Commission’s structural
fund through a FIFG grant. The irony of this situation where with one hand, the
EU are restricting supplies of farmed salmon and on the other hand are
encouraging consumers to eat more is not lost on us at Callander McDowell.
This
week, a collaboration of Scottish companies and organisations launched a new
website – richinomega3.com
with the help of the athlete Roger Black to promote the health benefits
of omega-3 fatty acids. At the same time, fishupdate.com reported that Scottish
schools are to be told to serve at least two portions of oil rich fish a week
under a new healthy eating drive. The new campaign was launched by ex Miss UK
Nicola Jolly. However, hardly had the campaign begun that Ian McKay, managing
director of Seafish UK Ltd reported that the company had been supplying omega-3
rich fishcakes to schools for the last eighteen months and that sales had been
much below expectation. He said that children’s taste palates were not ready
for the higher omega-3 content of such products. As about seven out of ten
people do not eat fish, it may take more than a FIFG backed promotional campaign
to persuade people to eat any of the oily varieties, let alone enough to meet
the minimum needs.
SQS
may have an uphill battle on their hands. Fish may be the best source of omega-3
fatty acids, but consumers are being provided with an increasing number of
alternative options. Besides the usual omega-3 rich capsules which are widely
available in supermarkets, pharmacies and health food shops, this week British
retailer Marks & Spencers launched supermilk, milk containing ten times the
level of omega-3s than in ordinary milk. The milk comes from about 1000 cows
which have been fed a blend of human grade fish oils. The milk tastes identical
to normal milk. It costs 69p for a 750ml carton.
However,
consumers may not even have to drink the enriched milk to improve the health of
the heart. A new study, reported in the Daily Telegraph, found that those who
drank a lot of milk were 12% less likely to have a heart attack and almost half
as likely to suffer a stroke.
Consumers
do not have to rely on just milk for added omega-3’s. Columbus eggs also
contain increased levels of omega-3 and from next year, some Kellogg’s
breakfast cereals will also contain added omega-3s. Consumers clearly have a
choice and whilst oily fish are undoubtedly the best source of such fatty acids,
they are not necessarily the source of choice.
This
is why it is absolute lunacy that the European Commission has placed dumping
duties on farmed salmon from Norway. If there was one single way to deter
consumers from buying farmed salmon, it is to make it more expensive. This is a
sure fire way to encourage consumers to seek alternatives, especially, when oily
fish are not a normal part of the diet anyway. Community salmon producers cannot
supply sufficient salmon to meet current demand, yet whilst the Commission is
helping promote increased consumption, it is also says that it doesn’t want it
to be too popular. Its hardly worth SQS milking the FIFG programme for
promotional funds when consumers now have milk as an alternative.
With
regret: Hoove Salmon, the farm belonging to
EUSPG Chairman, Angus Grains has called in the receiver. The Shetland News (www.shetland-news.co.uk
) suggests that the company has lost the fight against global concentration in
salmon farming. Whilst we are saddened by any farm closure and the ensuing loss
of jobs, we are not convinced that global concentration is to blame. Undoubtedly
the salmon industry has changed in recent years, necessitating a change to the
whole culture of salmon farming to which some companies have been slow to
respond. However, other factors may also be apparent.
The
most obvious is that Hoove Salmon, like nearly all the other salmon farms which
have gone bankrupt since the end of 2003, was located in Shetland. The Shetland
salmon industry has certainly suffered in recent years, partly due to the remote
location which adds to the costs but also because many farms are small family
run businesses. Yet, there are similar farms in Orkney and the Western Isles and
they seem to have survived.
In
common with many others working in a geographically diverse industry, we, at
Callander McDowell, are very reliant on the news services for information. We do
not have specific knowledge of the way some of these companies are set up, but
one pattern that seems to be noticeable is that some, and we stress some but not
all, of the Shetland companies that have gone into receivership are owned or run
by individuals who operate a number of different salmon farming companies. A
second pattern is that these companies appear to be deeply in debt to the local
investment firm Shetland Development Trust. In the case of Hoove Salmon, the
balance of their outstanding loan was £1.87 million. According to Shetland
News, Hoove Salmon was also a major player in SSG Seafoods, another company that
collapsed at the end of 2003 owing around £7 million to local community
investment funds. SSG Seafoods was also managed by Mr Grains.
According
to the Shetland Salmon Farmers Association website (www.fishuk.net
Whilst
Shetland salmon farms are having a hard time due to competition, not only from
Norwegian imports but also from much larger Scottish farms, it is clear that the
way in which some of these salmon farming companies are set up and managed may
have something to do with the number of localised business failures, rather than
the state of the international salmon industry.
How
popular is salmon?: The Observer newspaper
reports that this weekend, a Bank Holiday in the UK is set to be the ‘Night of
the Big Heat’ where hundreds of thousands of men are completing their plans to
reignite their love with their single annual encounter with culinary enterprise:
the barbecue.
Leading
supermarket chain Tesco predicted that over this weekend it would sell a record
450,000 burgers, 475,000 beef steaks, 450,000 salmon steaks, 50,000 tuna steaks,
400 kilos of prawns and 5.5 million packets of sausages. The fact that Tesco
expect to sell the same number of salmon steaks as it does burgers, a barbecue
staple, indicates how popular salmon has become. This is a key statistic that
should not be forgotten.