reLAKSation 222.
It's
your duty!: Knut Haagensen, chairman of the
Norwegian Seafood Federation, told IntraFish that he wants a debate on the
possibility of introducing a duty of NOK 0.5/kg on the sale of Norwegian salmon.
The idea of a duty of about 2% on the typical price of NOK 25/kg was put forward
by Pan Fish's commercial director, Therese Log Bergford, who estimates that it
would raise about NOK 325 million to spend on marketing salmon. Mr Haagensen
said that the industry needs to market salmon in new markets so that Norway is
less dependent on the EU.
Long
time readers of reLAKSation will know that we, at Callander McDowell, are
passionate advocates of those strategies that are market-led and therefore we
might be expected to fully support this proposal. Yet, whilst we do recognise
the need for increased marketing, we have some concerns that this may not be the
best way to proceed. If Mr Haagensen wants a debate on the issue, then we are
willing to respond.
Mr
Haagensen has said that this proposal comes at a time when the industry is
earning money and he is right. One of the recurring problems in the salmon
industry is that recognition of the need for increased promotion is usually when
the times are bad and cash is in short supply. When times are good and the cash
is readily flowing in, there is often little incentive to spend it on market
development. However, that the industry is now earning money does not really
correlate with this proposal for as Mr Haagensen readily admits, the
introduction of this duty will lead to the consumers paying more for salmon. The
simple fact is that it is the consumer, not the industry that will end up paying
for any increased marketing. Seemingly, the industry will not have to put their
hands in their own pockets to finance the marketing, although it is they that
will be hoping to reap the rewards. Yet, any rewards may be rather thin on the
ground. Whilst, the resulting marketing campaign might encourage consumers to
buy more salmon, the higher price that they have to pay may, be sufficient
deterrent to discourage them from doing so. Certainly, it is clear that salmon
consumption declines when the price goes up.
Is
there an alternative? We at Callander McDowell believe that there is. Rather
than tax salmon sales, the industry could place a levy on the price of salmon
feed. This should generate the same amount of cash but rather than raising the
market price of salmon, it places all the emphasis on the cost of production. It
would also focus the industry on the need for an effective campaign since it is
their money, not the consumers, that is being used to pay for it. Erosion of
profit without any benefit is more than sufficient incentive to get the
marketing right.
Mr
Haagensen does not mention what sort of marketing strategy is envisaged but he
does indicate that it would be the Norwegian Seafood Export Council (NSEC) which
would oversee the project. The NSEC had been previously involved in the joint
European marketing campaign that was required by the EU-Norwegian Salmon
Agreements. It was only a couple of months ago that IntraFish discussed whether
the time had come to resurrect this campaign but the conclusion was that such a
campaign might be too costly. The reality is that parts of that campaign are
still operating. Four different websites, in English, French, German and Spanish
continue to promote salmon recipes to consumers. How successful these sites are
is unclear but presumably they continue to run because the costs are minimal.
Whether Scottish and Irish producers, who are listed as partners on the site
also contribute is also uncertain.
What
is known is that the EU-Norway joint marketing campaign was estimated to grow
the market by just under 2%. In our view, this was actually much lower than the
growth stimulated by the widespread availability of value for money salmon.
Thus, if the money generated by the extra duty incurred on salmon prices during
the run of the EU Salmon Agreement had actually been used to selectively reduce
the price of salmon, we believe that the market might have grown even more. The
problem with the type of marketing campaign run during the agreement, is that it
was spread widely and not focused on any particular group of consumers. In terms
of increased market awareness as so readily used by the advertising industry,
many consumers might have been aware of the campaign, but only a minority were
stimulated to actually buy salmon. At a recent seminar in Oslo. PanFish CEO,
Atle Eide declared that 'If you shoot at everything, you will hit nothing'.
Whilst he was not referring to advertising and promotion, this statement also
holds true. The huge sums spent by the well known household names to maintain
their brands illustrates the high cost of persuading consumers to part with
their money. Instead of a high profile campaign, the industry would be better
served selectively targeting those consumers who are actually going to buy their
salmon.
Two
lost years: During their annual conference on
the 2nd December, the Irish salmon industry demanded that the Irish Marine
Minister, Pat 'the Cope' Gallagher, begin an immediate restructuring of the
industry to make it 'more efficient and productive to withstand future market
assaults from giant third-country producers'. According to
seafoodintelligence.com, Jan Feenstra, Chairman of the Irish Salmon Growers
Association said that the five year MIP should be viewed as an interim measure
and that producing member states need to restructure so as to be able to compete
without the MIP. He said that the clock is ticking on this one.
We,
at Callander McDowell, also believe that not only is the clock ticking but that
it has been ticking for a long time. Much of this ticking has been characterised
by talk and not action. It was clear that producers in the member states needed
to restructure when the safeguard application was first submitted but whilst
this time was used to fight for the imposition of inadequate measures, little
has been progressed to make the industry more competitive. It did not need the
EU to impose an MIP to begin the process.
Late
Christmas present?: In a change to our usual
comment on the news, we, at Callander McDowell, have come across a potential
Christmas gift for the fish farmer in your life. We were recently sent a copy of
'Salmon Fever' a new book by Aslak Berge, which charts the rise and fall and
subsequent rise again of fish farming company Pan Fish. We are not sure of the
title and believe that it may be better called 'Money Fever' because the salmon
appear to be nothing more than a way for making money. The premise was simple.
High salmon prices resulted in large earnings which in turn pushed up share
prices. High share prices brought potentially huge wealth for investors and the
ability to expand the company further. The problem for the management at Pan
Fish was that salmon prices did not remain high and for a company that was over
extended, the result was inevitable. It is a moral tale for a salmon industry
still focused on the stock market. The financial commentators continue to talk
up salmon prices and hence share prices but we all know that high salmon prices
will not be sustained. The clear message is that the salmon industry needs a
much more defined strategy than one based on price.
The
book's unfolding story rattles along at a rapid pace and would make for good
reading for a quiet moment during the Christmas festivities.