reLAKSation 196.

Wildly inaccurate: Despite protestations from all sectors of the supply chain, the European Commission appear intent on persevering with the aim of forcing consumers to pay more for farmed salmon. It is clear that they do not comprehend how their actions will affect the marketplace. This lack of understanding is also apparent from their deliberations prior to the implementation of dumping duties.

In regulation 628, imposing dumping duties on farmed salmon from Norway, the Commission states in paragraphs 94/96 that their investigation has concluded that imports of wild salmon do not have a significant impact on the situation, especially those from the US and Canada.. They are totally wrong. Imports of wild salmon have contributed significantly to the current situation. Although the Commission have dismissed imports of wild salmon as irrelevant, they are part of the reason that the EUSPG sought dumping protection. 

The majority of salmon consumers buy salmon on price. They are happy to buy salmon from whatever origin as long as it represents the best value for money for their everyday meal choice. However, there is also a section of the marketplace who are very concerned about the salmon they buy. They are not only interested in the origin, but in the way that it was produced. Price is not a main issue. This is the market that the Scottish industry would like to target. However, such consumers represent only a small section of the market. Prior to 1989, they were the market, but as production has expanded, they have become a niche sector.

In recent years, the various food scares have caused this discerning section of the market to question the how salmon are farmed. This has not been helped by the celebrity TV chefs who have told consumers that farmed salmon should be avoided and that they should buy wild. Unfortunately, supplies of wild Atlantic salmon are extremely difficult to obtain and are very costly. The North American salmon industry have seen this as an opportunity to supply wild Pacific salmon to Europe as an alternative. Much of this salmon is underwritten by the Marine Stewardship Council, providing proof of sustainability. Consumers have been persuaded to buy into this ethos and this has been at the expense of farmed Scottish salmon. Consumers who might have been persuaded to pay a premium for quality Scottish salmon now willingly do so for imported wild pacific salmon. The price differential is significant. For example, UK supermarket chain Sainsbury’s currently sell Scottish salmon fillet at £9.99/kg whilst MSC wild pacific salmon fillet sells at £16.99/kg. Marks & Spencer sells a pack of Scottish for £3.99 and an identical weight pack of pacific salmon for £5.99 

Although the presence of this wild salmon has made little impact on the whole salmon market, it has had a major impact on the quality sector that Scottish salmon has sought to fill. This is one of the reason why Scottish producers have been unable to obtain the premium price they expect to receive and why they have sought the protection of trade measures in the hope of forcing their salmon to be once again considered to be a premium product.

Do it now: It is not just the European Commission that is out of touch with the salmon market, Mr James Hosea of the Norwegian School of Economics and Business Administration seems to be too. The West Highland Free Press reports that he feels that salmon is increasingly being commoditised with consumers thinking that all salmon is same. He is wrong, most consumers already do think that and they have done so for a number of years. This lack of apparent differentiation is the main reason why most consumers are unwilling to dig deeper into their pockets to pay more for Scottish salmon.

Mr Hosea blames Norwegian companies for this commoditisation but the reality is that all salmon farmers, including those in Scotland, have contributed to the change in market image. Prior to the advent of farming, salmon had an inherent rarity value for which consumers were willing to pay a high price. Farming devalued this rarity value and this is why salmon is now considered to be a commodity food.

Mr Hosea sees commoditisation as bad, but the reality is that farming has made salmon into a healthy, value for money everyday meal choice, available to all.  

Mr Hosea says that  if salmon becomes commoditised then there is no benefit to companies in trying to differentiate their salmon by branding the product, producing specialist items like organic salmon or changing their production methods to produce higher-quality salmon. This is because all salmon would be considered the same, regardless of where or who it came from. Mr Hosea is completely incorrect.

As salmon has become increasingly more of a commodity item, now is exactly the time that the industry should be trying to differentiate their products. Mr Hosea doesn’t understand the market and therefore doesn’t see the huge opportunities for market differentiation which do exist.

Angus Macmillian of West Minch Salmon has already moved into the production of organic salmon; a distinct market from the standard salmon product. Not only is it different, but, more importantly,  it can be seen to be different. This is all that consumers need to reassure them that this salmon is worth the extra cost. What consumers have not been prepared to do is pay more for salmon just because its Scottish.

The article poses the question whether going organic is the way forward for the independent farmers? The answer is that there are a number of options available of which organic production is just one. It’s just a shame that this question is having to be asked now. If farmers like Mr Macmillan had spent more of their time looking at what the market really wants, rather than continually seeking trade protection from Brussels, then they might have realised this long ago.

Good news week: Despite the latest reports, there is some good news this week. Scottish Sea Farms have bought the Saga Seafoods processing factory, which closed last year with the loss of 77 jobs. Although all these jobs are unlikely to be replaced, Shetland-news.co.uk report that hopes are high that some jobs will be created.

Scottish Sea Farms are one of the companies which the EUSPG claim are not part of the community industry, yet it seems clear that the company is doing more to help the industry in Shetland than the EUSPG has ever done. At least they are willing to put their money where it counts, whereas the same cannot be said of some of the EUSPG’s members. 

David Sandison, General Manager of the Shetland Salmon Growers Association, told the Shetland News that he welcomed the news that the factory was to start processing fish again. This happy news must have reversed the mood of the previous week when Mr Sandison had been called on to comment on the failure of Hoove Salmon. He had said then that he had expected a further decline in production and jobs before seeing any improvement. Scottish Sea Farms seem to have a different view.

Mr Sandison said that Scottish Sea Farms, along with other Norwegian owned firms, Hjatland Sea Farms, Lakeland and Mainstream, appear to be the main survivors of the ‘salmon price slump’ accounting for more than 80 percent of the salmon now in Shetland. He also said that be believed that there was still a future for the small producers.

We, at Callander McDowell, have always believed that the small independent producer has a future in an industry dominated by large multi-national companies. Unfortunately, rather than focus on how to make their produce different, many have tried to compete in the market for raw salmon flesh. This is why many are now experiencing significant difficulties. How can a producer of 100 tonnes effectively compete with companies producing 40,000 tonnes. It makes no difference as to who owns these companies, how they are financed or how they are run. Small producers cannot compete, not unless they have some Unique Selling Point. Its only necessary to see how a ‘small’ car maker like Rover couldn’t succeed in the volume car business to see that unless there is something special on offer, the numbers simply don’t add up.

Its now over a year since the Shetland industry announced its vision for the future. At the time David Sandison outlined what was needed when he said that ‘ A co-ordinated, market-led approach is required which involves high calibre sales and marketing people, who will be our future industry leaders. These key people will be responsible for improving the perception of the quality of our product in the global marketplace’. Whilst we would certainly endorse the view that a market-led approach is required, we have heard nothing further about this vision and how it will help the Shetland industry. We have certainly not seen any signs as to how it will help the remaining small producers survive.

Whilst we are passionate advocate of market-led strategies, we are not convinced that such strategies alone will protect the small producer from the same fate as Hoove Salmon and others. Nor do we believe that trade protection is the solution either.

Instead, we believe that the only solution is through co-operation, not the loose form of co-operation between friends, but co-operation under strict proven guidelines. The small Shetland farming companies must group together in a well defined farming co-operative. We believe that this is the only way that they can compete in a changing marketplace especially if they seek more challenging ways to add value. We certainly appreciate that this is not an easy solution, but we are convinced that it is the only solution.

It is clear that the market for salmon continues to change and the salmon industry must evolve with it otherwise it will be unable to supply what the market wants, in the way that the market wants it. It is impossible to stop progress although the EUSPG are certainly giving it a try. Whilst they criticise Norway and Norwegian owned companies, the fact it that these companies are the ones that have recognised that it is impossible to turn the clock back. At least these companies are the ones now providing the good news in Shetland.        

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