reLAKSation 245. Callander McDowell
How convenient?: An IntraFish editorial suggests that convenience foods are ‘in’ with consumers. So what’s new? Convenience foods have been the driving force within the retail sector for a long time, although we do concede that there is some variation from country to country as to how dominant convenience has become. The message from the marketplace is that the development is only in one direction.
The editorial says that it was only necessary to look round the recent Brussels exhibition to see how many new products were on display especially those designed to be all in one meal solutions. Yet, this was not the impression that we, from Callander McDowell, gleaned from our visit to the show. The European Seafood Exposition has changed very little over the years that we have been visiting. We are not even convinced that it is really representative of the seafood market. Certainly, it is only a glimpse into each national seafood industry, as most countries are represented by a handful of companies. In addition the emphasis is still very much focused on the supply of whole fish as could be seen from many stands whose offerings looked like a fishmongers’ shop (and we know what is happening to the presence of retail fishmongers on the High Street; they are fast disappearing).
We acknowledge that added value products were present at the show but the offerings do not seem either that innovative or sophisticated. Even the winner of the ‘Seafood Prix d’Elite’, Bond’s Seafood Wok-Dish of salmon with thai green (curry). According to the European Seafood Exposition’s website, the judges particularly noted that the product capitalized on the current European trend in wok cooking and offered a superior eating experience to consumers.
Whilst we at Callander McDowell are pleased to see the development of any added value product containing salmon, such developments do need to be put into context of the wider market. For example, to an observer from Norway, such as the editor of IntraFish, a product like Seafood Wok-Dish might look innovative because the Norwegian retail market offers little in the way of such products, but to an observer from the UK, which is the real powerhouse of consumer oriented development, this type of dish is not really that innovative at all. It is only necessary to visit any of the major retailers in the UK to see how sophisticated and innovative seafood product development has progressed both in the product and its presentation. The companies that manufacture these products do not exhibit at the European Seafood Exposition and therefore visitors to the show can come away from the show with an impression of the European seafood market, which is not a true reflection of how it really is. It is true that more exhibitors at the show are moving in to added value development but they are not innovating, but rather following.
Branded!: The same editorial also suggests that the increasing trend towards added value development presents new opportunities for farming companies. The move away from whole round fish to fillets is the first step towards the creation of their own value added processing as already undertaken by Fjord Seafood with their Pieters processing operation. The suggestion is that this next phase will be characterised by branding. We, however, are not convinced.
The move towards added value processing was both predictable and inevitable. The development of the salmon farming industry continues to mirror that of the broiler industry. Chicken producers found that as production grew in response to increasing demand, prices fell and so did margins. They found that the best way to improve these margins was to add value by turning their whole chicken into more convenient and user friendly products.
The problem for farmers is that most consumers are unable to tell one salmon from another. It does not matter whether it is produced in Norway, Scotland or Chile, or by Pan Fish or Loch Duart, the resulting product is still a whole fish that is a salmon. Scottish producers have tried to give their fish an identity with Tartan ‘brand’ but they have failed because the fish is still just a salmon.
The only way to successfully give the fish (and the company) an identity of its own is to process it into something unique. The finished product can then be labelled and given its own distinctiveness. This does not mean that the companies should automatically need to develop a brand. It just needs a distinct identity.
Companies can spend huge amounts of money developing their brand but they cannot guarantee that they will be rewarded. This week, the trade journal ‘Marketing’ published their annual review of the brands that we love and hate. They say that consumers tend to choose brands based on their emotional appeal, so if consumers can be made to care about a brand, half the battle is won. The survey of brands in the UK does not have any real significance for the global salmon industry except that one of the important conclusions is that any positive sentiments or loyalty to any particular brand does not translate into sales. Consumer’s feelings of warmth toward, nostalgia for and even patriotism about some brands will not stop them buying rivals offerings if they think that they offer better value or greater convenience. This is clearly apparent from our own industry.
Scottish salmon producers have regularly produced consumer surveys illustrating not only consumer preference for Scottish salmon but also a willingness to pay more to buy it. Unfortunately, when faced with a buying decision in the supermarket, consumers have neither been so willing to pay more for Scottish salmon but have not been bothered whether the salmon they buy is even Scottish. What is important to them is whether the salmon represents value for money. The Scottish brand is largely irrelevant but this does not stop the Scottish industry continuing to focus on this issue.
The Scots are not alone is equating country of origin with a brand. According to Seafoodintelligence.com, the Norwegian Seafood Export Council claims that the Norwegian seafood brand is equal to the brand image of Coca Cola. This is based on consumer preference studies which show that in some countries 6 out of 10 consumers prefer Norwegian salmon to any other which is about the same level as their preference for Coca Cola. However, whilst NSEC is clearly proud of this study, it is clearly flawed. Firstly, in many of the European markets studies, Norwegian salmon is the only salmon available. This means that consumers do not have a choice. Secondly, as a salmon is just a salmon, if it wasn’t for NSEC telling them that it was Norwegian, these consumers wouldn’t know any different. By comparison, Coca Cola is a distinct product because of the shape of its bottle or the design of its can. Coca Cola also has a distinct taste. It is these differences which make Coca Cola worth promoting as a brand and why it features in the top ten of brands that British consumers love.
We, at Callander McDowell are not convinced that brand development is the next logical step for salmon farming companies to take once they move further into added value processing. Instead, we firmly believe that the greatest opportunities lie in market development. If the industry produces what consumers want to buy, then the huge investment needed in support of brand development can be truly avoided.
Crossing the threshold: In our final reference to the IntraFish editorial, we recognise that more salmon farming companies are investing in the ability to sell salmon fillet rather than fish in the round. We are not so sure that we agree that this explains why there is so little anxiety about current high salmon prices. The editorial suggests that the market is more likely to accept a higher price as it is paying for a processed product and not for whole fish. In our view, high prices, whether they are for whole fish or fillet are unsustainable and do nothing to help secure the long term future of the salmon farming industry. Our regular market surveys would suggest that the reason salmon consumption continues to grow is because salmon is being used in more and more processed products, whether it is the simplest smoked salmon or the most complex meal options. The reason why salmon is so widely used is simple. It is widely available, of predictable quality and is (or was) good value. As prices rise, this value disappears and it pushes the price of the resulting processed product out of the price ranges dictated by the supermarkets. If processors cannot justify the economics of using salmon, demand will surely fall.
At the moment, most British supermarkets appear to be withholding any significant price rise from the consumer. Retail salmon prices have risen little since the price took off. Supermarkets continue to promote salmon on a regular basis. Over Easter, salmon prices were cut to the lowest level recorded for some years with salmon fillet available at £3.13/kg in one supermarket. Clearly, the price rise is being absorbed somewhere down the supply chain but it is inevitable that prices cannot be held back forever. When the price rises do reach the consumer, there is a major risk that consumers will turn away from salmon. IntraFish report that Antony Hovanessian. Business Development Director for Alfresca said that we must not forget that people have a wide choice when it comes to food shopping whether it is fish, red meat or chicken. If prices rise too much, then consumers may well exert this choice even if salmon is viewed as a desirable product for taste or health reasons. We agree, if the current salmon prices were passed onto the end consumer, we believe that there would be a sudden and large drop in demand. In these good times, it is easy to forget that demand for salmon has grown for one simple reason and one simple reason alone – it represented value for money.