reLAKSation 231. Callander McDowell
Surging
ahead:
According to an IntraFish editorial, both salmon producers and analysts are
expecting that the coming years will be very good for the salmon farming
industry. This forecast comes after the record year of 2005 in which markets,
including those thought to have stagnated, continued to show growth. For
example, the market in France grew by over 10,000 tonnes even though the French
market was not considered to be a growth market. The Norwegian Seafood Export
Council's most experienced analyst believes that this is part of a definite
trend towards increased consumption of salmon.
We,
at Callander McDowell disagree. We do not believe that there has been a sudden
resurgence in the salmon market. Instead, we would argue that the salmon market
has always being growing. It is just that evidence has been hidden behind by the
constant talk of over-production, low prices and production control. If the
international industry had been allowed to focus on market growth, consumption
would have grown far beyond current levels. What happened instead was that the
industry had to address dumping complaint after dumping complaint and accusation
after accusation, so much so that the market began to believe that it actually
was in the dire straits that some sections of the industry would have us
believe.
There
is a simple reason why salmon consumption has grown and will continue to grow.
Farmers can supply fish of a predictable quality at a predictable price and most
importantly, with predictable regularity. However, it is not just the end
consumers who benefit from this supply of fresh fish but also the processors.
They have the potential to add value in a way that is almost impossible with
standard white fish. Look in any supermarket and the most adventurous added
value dish made from white fish is a piece of nondescript white fish in a
uninspiring sauce. By comparison, the range of possibilities is endless.
Callander McDowell has a 'library' of examples of salmon added value dishes now
running to over 500 in number and this does not include the many offerings made
from smoked salmon.
NSEC's
unnamed, but most experienced, analyst suggests that the reason that the French
market, which they though was stagnating, was now surging ahead is that it is
consumer driven and that French consumers have a wide range of salmon products
to choose from. This may well be true but it is something that has not just
happened overnight nor just in 2005. This is yet another example of the industry
being out of touch with what is happening in the marketplace. It is all too
easily to rely on statistics for forming an opinion.
At
the end of last year, British TV showed a series in which celebrity fish chef,
Rick Stein travelled across France on a barge examining local food from markets
to restaurants, and from local producers to local shops all interspersed with
recipes and cooking. Any viewer would immediately form the opinion that the
French love their food and buy only the best local food from local suppliers.
Yet, it only takes a visit to any French supermarket to dispel this myth of
French food. French supermarkets are no different to any other supermarket and
it is clear from the products available that the French are equally keen to buy
those foods which are convenient to buy, convenient to cook and convenient to
eat. Our own observations of the French supermarket sector clearly indicate that
there is a gradual move away from buying fish from the fresh fish counter. One
supermarket chain has recently got rid of its fresh fish counters altogether.
Instead, fish now comes ready packed and ready prepared and more significantly,
the number of fish added value dishes has significantly risen.
The
market is different now to what it used to be. It is not only growing, but it is
also evolving but not just evolving, but evolving rapidly. Clearly, the salmon
industry must not only grow with this growing demand but it must also evolve
with this changing market.
Customer,
customer, customer:
If anyone seeks confirmation of our view of the market, they need look no
further than Young's Bluecrest, one of the
largest seafood companies operating. According to IntraFish, Wynn Griffiths told
the audience at the North Atlantic Seafood Conference in Lillestrom, Norway that
he believes that a customer-oriented strategy is the way to operate in a
dramatically changing market and as chief executive of Young's Bluecrest, he
should know for he oversees a company which turns over €730 million by selling
seafood.
Mr
Griffiths said that the seafood industry is undergoing the most radical
transformation that he had seen in his long time in the industry and the only
way that he sees that the industry can meet these changes is to adopt a
customer-oriented strategy. He highlighted several motivating factors for the
market growth, including healthy lifestyles, international travel and an
increasing trend of eating out. However, we at Callander McDowell believe that
he omitted the most important factor and that a customer oriented strategy
allows the greatest opportunity for adding value.
Realities
of the market:
Continuing the same theme, The Glasgow Herald coincidently just published
details of a presentation made by management guru Sean Rickard of the Cranfield
School of Management to Scottish farmers at a conference entitled Exploring Real
Markets. We believe that the points he made to the agricultural sector have
sufficient relevance to salmon farming that we repeat them here:
“Farmers
were told yesterday that they must wake up to the realities of the real market
and prepare themselves for life without subsidies. Sean Rickard’s thoughts
have not changed much over the years but the majority of the audience, which
included many farmers, appeared to accept that his free-market approach might
just be the right one.
He
said: "The realities of reform of the Common Agricultural Policy are that
support is going to decline. The fact is that farming only accounts for 4% of
rural economic activity and that it is often cheaper to import food. Farming is
not the backbone of the rural economy, and I can tell you that the government
doesn't believe it is either.
"The
industry has to get rid of the farming mindset and think like other businesses.
We also have to examine how farmer-controlled business can add value. The CAP
does not add value and you will be wise to assume that the value of agricultural
output is more likely to fall than rise. If you wish to increase value you must
look beyond the farm gate."
The
inevitable trend, according to Rickard, is for larger farms and a more
"industrial approach". The notion that small farmers with their
limited scale are custodians of the countryside is a myth perpetuated by the
"rope-sandal brigade". He added: "It's a load of hogwash and is
not supported by one single reputable report."
Larger
farms look after the environment better because they have the resources to do
so. Rickard also pointed out that 66% of the farms in the UK produce less than
3% of total agricultural output while 85% of added value is down to just 20% of
farm businesses.
This
was strong stuff, but there was more to come from Rickard: "The value of
food sold in the UK over the last 20 years has increased from £60bn to £111bn,
but agricultural output over the same period has been broadly static at £16bn,
and I see little change in the near future."
The
answer is to add value through farmer-controlled businesses. He said 10 of the
25 top food companies in the world started out as businesses controlled by
farmers. Producers had not got a good record at running these type of
businesses, so they should hire the best people available who have the knowledge
and track record.
Rickard
commented: "The great thing about these sort of businesses is that they
have access to capital, but there will be mistakes. That is the way of business
life. If there is no risk what is the justification for profit?"
Organic
production is seen as the saviour of the industry by some, but here again the
Rickard view was devastatingly direct. He said: "It's so much twaddle. The
organic market is only worth £1bn each year, which is less than 1% of all food
sales. We actually spend more on cat food than on organics.
http://www.theherald.co.uk/business/56381.html
We
at Callander McDowell hope that this rings some bells!!!