reLAKSation 213.

Far from reality: According to their source at the European Commission, Intrafish report that recent consultations involving all sides of the salmon dispute have confirmed to DG Trade that the MIP should be made permanent. We, at Callander McDowell, are not in the least bit surprised since we had already concluded that DG Trade would see the MIP as the only solution. Certainly, their experience over the last year and a half would suggest that member states would not tolerate any stronger measures but at the same time, they are unwilling to consider the alternative; a return to free trade.

Intrafish report that DG Trade also discounted the idea of a market growth-led solution in which non-EU exporters would be allowed to sell more salmon in relation to market growth. This would be similar to the mechanism implemented as part of the previous EU salmon agreement but in our view it would be doomed to failure because clearly the EU salmon agreement did not work and implementing a similar system now would not achieve a different outcome. This is because due to its size, the salmon industry in Europe does not merit such a controlling apparatus.

Whilst we might not agree with a market-growth led solution, we do firmly believe that what happens in the marketplace is the central focus of any solution. After-all, the whole purpose of salmon production is to supply the market place with what it wants. If any solution does not include consideration of the marketplace then it will not work. This is why the salmon agreement failed and why the current solution, whatever it is, will also fail. Sadly, the European Commission are so totally focused on production issues that they have ignored the market altogether. They have already made their view extremely clear. They believe that the consumer should be willing to pay a fair price for their salmon but they do not have an answer to what the industry should do if consumers are not willing to pay this fair price.

It is already apparent that the retailers have recognised that salmon sales are driven by price. In recent weeks, the number of promotional offers have increased and along with them, the promotional price has fallen. This week, salmon fillet prices, on promotion, have fallen to below the level at which they were before the EU started to interfere in salmon supply. Not surprisingly, packs of these salmon fillets, priced at £5.82/kg have flown off the supermarket shelves.

We, at Callander McDowell, are not sure what the European Commission hopes to achieve by making the MIP permanent. It will not stop prices sliding down below the level at which it is set. It is not a magic barrier to low prices but rather just a mechanism to further disrupt the international salmon industry. Salmon prices have been artificially high, due in combination to the previous salmon measures and reduced harvests but prices cannot be sustained at these higher levels because it is too high to use in further processing and this is where much of the salmon is destined. We appreciate that the European Commissions' initial intention was to regulate all salmon imports through safeguard measures, but member states did not agree. Instead, the European Commission was left with the MIP as their only weapon but all it will do is prevent imports of Norwegian salmon when prices fall below the fixed level. It won't stop prices falling and it won't stop imports from other producing countries. Some retailers are already making preparations for when this happens. This week, one UK retailer introduced a new pack of salmon fillets that states 'Farmed in Scotland, Norway or Chile' and before anyone starts to criticise the store concerned about unclear labelling, the pack also states the specific origin of the fillets inside.

With imports from Chile going some way to help satisfy consumer demand for low cost salmon, we cannot see how the MIP will help the EUSPG. As we discussed previously, the MIP is already set significantly below the cost of production claimed by the EUSPG. Even if the MIP kicks in, EUSPG members will be seemingly losing money so how does this protect them?

We have argued for many years that the salmon industry will evolve into one which is dominated by large multinational players supplying low cost salmon to consumers seeking a value for money everyday meal choice. Small independent producers simply cannot complete against such production might and therefore it has been of paramount importance that the small independent producers should develop small niche markets of their own. Unfortunately, the independent Scottish industry has resisted such change arguing that consumers are willing to pay a higher price for their salmon just because it is Scottish. They were wrong. Country of origin has never been sufficient incentive to persuade consumers to dig deeper into their pockets and this is why the Scottish industry has struggled for so long. However, a minority of these producers are determined that they should benefit from selling their salmon using the Scottish (and Irish) identity. However, to do this they need to exclude all overseas competition from what they see as their marketplace. This is why the EUSPG, as they called themselves, have taken their case to Brussels. In order to persuade DG Trade of the validity of their case, they have had to accuse Norway of dumping.

The EUSPG seem adept at twisting the facts to suit their position. We have previously discussed how in their submission, they claim to represent 90% of European owned production, although they appear to omitted to include about 50 other farms from their calculations. The Salmon Farm Protest Group have identified further manipulation in the latest issue of the Salmon Farm Monitor. Whilst we certainly don't agree with the SFPG as to their own policies, they do seem to make an interesting point about the various farm receiverships that have occurred amongst EUSPG members in Shetland. The EUSPG have cited these receiverships are clear evidence that the Scottish industry is in trouble, yet it seems that a number of the receiverships are of farms owned by the same people and despite suffering multiple business failures, they are no deterrent to obtaining more financial help to buy back the assets and restart farming again. Perhaps, the industry is not in such trouble, it is just how the individual businesses are managed that is the problem. Certainly, other EUSPG members outside Shetland have been only to happy to boast about their ongoing profitability.

Back in August, an unnamed leading figure of the independent Scottish industry told the Glasgow Herald that unless they received significant financial help, the independent sector would collapse within two months. It is now two months on and so far there has been no news of any major collapse. Perhaps, this is because a number of the independent farms have finally recognised that the real opportunities for them lie, not with promotion of a Scottish product, but rather by focussing on other niche markets such as organic and environmentally sustainable production.

Making the MIP permanent is not a solution to the problems of the independent Scottish industry. The only solution is for these farmers to adapt their production to produce what consumers actually want. The MIP will only increase disruption within the salmon industry, destabilising the market for years to come. Sadly, DG Trade cannot see this because their blinkered vision is so far from reality.

Weak week: National Seafood Week, now in its fifth year, is the biggest celebration of seafood and according to Andy Gray of Seafish, it grows bigger and bigger. Seafoodintelligence.com reported that six major British supermarkets pledged their support of Seafood Week 2005, which ran from October 7th to the 14th. According to fishupdate.com, the week included events and tastings in fishmongers, supermarkets, hotels , restaurants and fish and chip shops encouraging people to be more adventurous and try some of the many different varieties of seafood available in the UK.

We, at Callander McDowell, must have missed out on these celebrations because, as in previous years, we saw little evidence of this major promotion anywhere we looked, and we did look. The National Seafood Week website states that 'supermarkets throughout the UK will be celebrating Seafood Week with a variety of events and promotions. Visit your local supermarket to find out if they're taking part.' We did and what we saw, suggests that most weren't taking part although the level of actual participation did vary. The six supermarket chains that had pledged support for the promotion included:

Asda actually provided the highest profile for National Seafood Week of any supermarket chain. The fish counter and in some cases, the chilled fish cabinet were decked out with National Seafood Week pennants and balloons.

At the beginning of the week, one or two stores also added National Seafood Week stickers to packs of chilled fish and seafood, but once they were sold, they were not replaced. Asda did not offer any tastings or promotional discounts to encourage sales.

Iceland stores had no evidence of any form of participation in the promotion.

Morrisons used National Seafood Week to launch their fish information booklet but this did not mention National Seafood Week, nor was there any evidence of the promotion in most stores. The exception was a handful of stores in the Humber area that offered tastings between 11am and 3pm on one day only. Last year, we visited one of these stores in Leeds and found the booth hidden away at the back of the store with indications that there had been few visitors. A similar tasting was programmed to take place this year.

Sainsbury's stores had no evidence of any form of participation in the promotion.

Tesco stores lacked any evidence of involvement in the promotion with the exception that prepacks of cod fillets, cod loins and haddock fillets carried a small sticker from Seafish advertising the promotion and offering to try the fish for free (up to a value of £3.72). Consumers buying the pack and sending the label and the proof of purchase to Seafish would have their money refunded. This promotion was the most surprising of those observed since cod is supposed to be a threatened species and one of the stated aims of National Seafood Week was to persuade consumers to try different species.

Waitrose fish counters offered discounts on several fish species, mainly monkfish, swordfish and tuna. The fish counter stabbers advising of the price discount also included the National Seafood Week logo although it was very small and hardly visible. There was no other indication that it was National Seafood Week.

Callander McDowell also visited a small number of independent fishmongers and saw little evidence of the promotion.

As in previous years, we believe that the promotional hype greatly exceeded the actual promotional activity. We believe that the idea of promoting fish and seafood would  be to attract consumers who never buy fish or would consider eating it. This promotion fails in this account since only those consumers who visit the fish counter or the chilled fish cabinet would see the promotional material. Non-consumers would never see it at all. Those consumers that were made aware of the promotion did not receive any incentive to buy more fish or try other species except in Waitrose or Tesco and in Tesco, the promotion focused on the traditional species, rather than encourage consumers to try something different. We just cannot see how this promotion can either boost sales or increase fish consumption. Despite this, we are sure that in two or three weeks time, Seafish will issue a press release claiming that the fifth National Seafood Week was the best ever promotion and a great success. We can only conclude that it must have been a different National Seafood Week to the one we saw!      

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