reLAKSation 243. Callander McDowell
Muddled thinking 1: According to IntraFish, Scottish National Party aquaculture spokesman Rob Gibson has called for a public enquiry into PanFish’s takeover of Marine Harvest. Mr Gibson appears to suggest that the deal should not be given the go ahead because Pan Fish is not necessarily competing at the highest quality level. He argues that the Scottish salmon industry should aim for quality not quantity. Instead of producing fish for the bulk end of the market, Mr Gibson said that the industry should employ sustainability and traceability methods, such as those used by smaller salmon farmers to target upscale retailers such as Waitrose.
We, at Callander McDowell, can only wonder that Mr Gibson has not thought out this proposal thoroughly. It appears that Mr Gibson has proposed that the large multinational companies; the same companies that small producers blame for destroying an independent Scottish industry, should now target the exact same market as the remaining independent sector. This is certainly a sure-fire way to undermine the small independently owned Scottish industry that the SNP are keen to protect as it removes what seems to be their unique selling point. The problem, it seems, is that Mr Gibson would like all ‘Scottish salmon’, whether produced by the largest multinational company or the smallest independent producer to be viewed as being of the highest possible quality. The Scottish name would therefore be the carrier of the quality label. Unfortunately for Mr Gibson, the salmon industry tried this approach for many years and failed. The largely defunct Tartan Quality Mark was supposed to be the visual representation of the quality status of Scottish salmon but Mr Gibson would be very hard pressed to find the TQM in the British retail sector and even if he did find an example, most consumers would not know what it meant.
The Scottish salmon industry have blamed the presence of Norwegian salmon in the European market for undermining the quality image of their salmon, but this is not the case. The reality is that the very act of farming in Scotland is responsible for devaluing the image and this happened long before the take up of ownership by Norwegian companies. Before the onset of farming, salmon was viewed as a high quality, luxury product due to its inherent rarity in the market place. Farming has meant that Scottish salmon has become ubiquitous and the reality is that consumers are no longer willing to pay a premium for something which is widely available. We have used this analogy previously but would the price of a Rolls Royce car be as high if it were produced in the same volumes as a Ford Mondeo?
Mr Gibson’s proposal is also flawed because he appears to suggest that all Scottish producers should target the high end retailers instead of supplying the mainstream market. This means that they should aim to sell fish to Waitrose and Marks and Spencer’s rather than to Asda and Tesco. This is OK in theory, but in practice is a non-starter. Waitrose have a share of the retail market of about 3.6% whilst Marks & Spencer can claim about 3%. By comparison Tesco have 30.8%, Asda 16.3%, Sainsbury’s around 16% and Morrison, just under 12%. It doesn’t take much thought to see that the maths simply do not add up.
Waitrose and Marks & Spencer are high end retailers but this high end sector is only the tip of the salmon market. Mr Gibson’s proposal would mean that all 130,000 tonnes plus of Scottish production would be targeted at this small market sector, presumably leaving Norwegian and Chilean producers to target the bulk market. Inevitably, when Scottish producers then fail to sell their fish in this sector, and also fail to obtain the premium reflecting this high end market, then they would blame Norway and Chile for undermining their market position. It sounds all a bit familiar.
Mr Gibson needs to look harder at the salmon market if he is to understand why his proposal is just the result of muddled thinking.
Muddled thinking 2: Mr Gibson is not the only one to suffer from such muddled thinking. According to Fishupdate.com, independent salmon farmers have branded the Scottish Executive’s offer to help those behind the merger of the world’s largest salmon farming companies as a ‘disgrace’. Angus Macmillan of West Minch Salmon argues that previous mergers have resulted in job losses, not job creation and that public money used to help build new facilities has been wasted as these facilities have been closed down in subsequent restructuring. Mr Macmillan finds this particularly galling because he has been trying to seek financial assistance from Highlands & Islands Enterprise without success. However, we, at Callander McDowell do not think that aquaculture minister Ms Brankin’s offer of help is about money. Pan Fish appear to have an adequate source of that.
It is not Mr Macmillan’s irritation about the help offered that strikes us at Callander McDowell but rather his view that the independent sector could still compete if it was given an even break by the Scottish Executive which demonstrates the muddled thinking affecting some sectors of the industry. Mr Macmillan cannot really complain that the Scottish Executive has not shown favour to the independent sector when they initiated the application for safeguards on behalf of the EUSPG totally disregarding the views and concerns of the majority of salmon farming companies in Scotland. If the type of safeguards that the EUSPG had wanted had been imposed, Mr Macmillan would be now singing a totally different tune but as the hoped for measures were not imposed, it seems that Mr Macmillan still considers that the Scottish Executive owes him, and his colleagues in the EUSPG, something.
However, it is the view that the Scottish industry needs to compete that is most muddled in the thinking. Mr Macmillan said that ‘we can compete; because the smaller companies are supplying different markets to those served by the larger companies’ (Mr Gibson, please note). Surely, if Mr Macmillan is supplying different markets to the multinationals, then he is not in direct competition. In fact, they are not in competition at all. They are serving totally different markets in exactly the same way that Rolls Royce are supplying cars to a totally different customer to those that Ford would be expected to target. Even the EU now accepts that niche market salmon such as organic is not operating in the same market as traditional salmon.
This idea of competition is one of the underlying problems with the independent Scottish industry. In the past, they have pursued a different strategy and market to that targeted by imported salmon. Yet, when the strategy fails, rather than look at the strategy itself, these independent farmers have looked for someone else to blame and this invariably has been Norway.
We, at Callander McDowell, have always argued that every salmon farming company needs to examine its strategy, preferably looking at what their customers actually want, rather than what they think that they want. Unfortunately, what we seem to get instead is rather muddled thinking.
Do the deal: Fisupdate.com report that Norway is now willing to transfer up to 3500 tonnes of haddock to ease the UK’s haddock shortage. Mike Park of the White Fish Producer’s Association said that Norway wanted to be as accommodating as possible if an acceptable currency formula could be agreed. He added that Norway is looking for some kind of reward for the transfer so it is up to us to find the right way forward.
We, at Callander McDowell, have previously proposed one such currency in the form of the MIP. It is total nonsense that the European salmon industry is being subjected to the MIP when salmon producers cannot produce enough fish to meet current demand. Unfortunately, because farmed fish has not been included in previous fisheries deals between the EU and Norway, the view is that such deals as the one which we propose are not possible. This is a view from the past. Consumers buy farmed and wild caught fish from the same fish counters. They are indistinguishable from one another and without labelling most consumers wouldn’t know that one was farmed and one not. Fish are fish and should be treated the same. With a little thought, there is no reason why farmed salmon market access cannot be traded against wild caught haddock. It just requires a willingness to do so.
One reason the Scottish Executive may not be willing to consider such a deal is that the MIP has resulted from their past support for the independent salmon sector. EUSPG member, Mr Macmillan now seems to think that the Scottish Executive is not supportive of their position. Perhaps, the Executive thinks it is. Yet, whilst they hesitate, it is the Scottish white fish industry that is really losing out.