reLAKSation 272. Callander McDowell
Wrapped in cotton wool: The BBC Scotland Gaelic current affairs programme Eòrpa (which can still be viewed for a limited time at www.bbc.co.uk/scotland/ ), featured the forthcoming take-over of Marine Harvest by Pan Fish. They posed the question whether this was going to be good or bad for Scotland and the Scottish salmon industry? Of course the answer will only become apparent as time passes by but we have no doubt that the fact that Pan Fish are willing to invest in Scotland is because they clearly believe that they have a future there. This must be good for Scotland. Sadly, not everyone seems to think so.
Interviewed on the programme Murdo MacLeod, a Lewis farmer, said that the small fish farmers were there first and it is they who created the jobs, not the multinationals who have just bought their way in. However, what Mr MacLeod seems to have forgotten is that if it hadn’t been for the multinational companies, there wouldn’t be a salmon farming industry in Scotland at all. It was Unilever, not a company that could be described as a small fish farmer, who put the first salmon to sea in Scotland. Other companies like Fitch Lovell, Booker and BP also invested heavily in the early days of the salmon industry. They invested in fish farming because they thought that the public might perceive them as being concerned about the environment offsetting worries about their other industrial activities. How times change!
Whilst some of these larger companies led the way, the view from the Highlands & Islands was that salmon farming was an ideal way of helping crofters and fishermen broaden their activities bringing in extra income. They encouraged the start up of small businesses with grants and loans, which is why the salmon farming industry became so diverse from the outset. Yet, it was both predictable and inevitable that the industry would eventually become polarised with small specialist producers and large multinationals both carving out their own niches. And this is exactly what has happened.
We discussed in the last issue of reLAKSation how Sid Patten of the SSPO has indicated that there has been an unprecedented increase in demand for salmon. Yet, as Atle Eide pointed out in the Eòrpa programme, why is it that Scotland is the only salmon producing nation that has experienced declining production over the last three years? Mr Eide attributes this decline to a tough regulatory framework, which has constrained the industry, rather than encouraging its development. In part, Mr Eide is right. It is only necessary to look at the Strategic Framework for Aquaculture in Scotland to see that its intention was to tighten the noose around salmon farming not support its growth. The economic objectives set out in the framework document have done little to help the Scottish industry. The first one to be proposed was intended to encourage investment industry. This clearly hasn’t worked. However, this is not surprising since the many years of bleating of over-production, dumping and unfair competition will have deterred even those investors prepared to take the highest risks. This is not to say that those with a well defined market-led business plan may be able to persuade the most reluctant banker to invest.
The second objective was the comparative study of production costs, the results of which are still to be published. The Eòrpa reporter suggested that costs are 10% higher in Scotland than in Norway but the study, which has been carried out by KPMG, is rumoured to suggest that there are no significance cost differences at all between the two countries. The fact that the Scottish Executive appears to be sitting on the results may be sufficient confirmation that these rumours are true.
The third objective was to formulate an export strategy increasing scope for exports from Scotland but our own observations from the French market would suggest that exports are actually in decline. It has been some time since the industry published export figures suggesting that they have not lived up to expectation. A report in the latest Scotland on Sunday newspaper puts exports to France at around 10,000 tonnes. This is well below the 30,000 plus tonnes figure given some years ago.
Although there are some other minor objectives in the economic section, the final one to which we will refer is that intended to add value through differentiated products and niche markets. They specifically refer to the Tartan Quality Mark, Label Rouge, Shetland and Orkney. Again our observations would suggest that this objective has failed. In the last reLAKSation, we discussed how production in Shetland and especially Orkney has suffered in recent years. Clearly, if there was a specific demand for products from these areas, then growing demand would have a knock on effect with production. This market differentiation through quality marks and geographic indications has not worked, probably because the consumer doesn’t appear to be interested. If further proof is necessary it is only necessary to look at the EU Protected Geographic Indication. What possible good has this designation done for the Scottish salmon industry?
One specific market that has had some success is that for organic salmon, although it is still very much a niche market. It is unclear whether this market will undergo significant further expansion or whether it will remain just a small niche. Speaking on the Eòrpa programme, Councillor Michael Foxley of the Highland Council said that he would like to see Pan Fish relinquish one or two loch systems so that organic farming can take place on the mainland. Surely, if there was a demand for organic salmon to be grown on the mainland then one of the smaller farming companies would have taken advantage of this opportunity and undergone conversion to organic. However much he would like to see organic salmon production take place on the mainland, Mr Foxley cannot force companies to grow organic salmon nor can he force consumers to buy it! What he can do is help create the right conditions to encourage farmers to consider this and other options.
The main reason why the Strategic Framework does little to help Scottish farmers is because it was drafted by a committee of people who were more interested in controlling the industry rather than helping it develop. This is why Mr Eide can say, as reported by Seafoodintelligence.com, that the Scottish authorities have failed to put more emphasis on giving the industry the means to develop. Even Murdo MacLeod said that there is very little Government support for small salmon farming companies like his.
The Scottish Executive has already stated its intentions with regard to the help it gives the industry. In its submission to the Competition Commission, the Executive say that they aim to support a sustainable and competitive salmon industry, which can be achieved through the activities set out in the Strategic Framework. However, we already know that this will never provide the real help that the industry needs. The Executive also state that other initiatives out with the Strategic Framework include continued support of trade defence to ensure that the EU market avoids ‘boom and bust’.
Herein lies the real problem. Whilst the tough regulation with which the industry must contend may have some effect, the main difference between other salmon producing nations and Scotland is that they have grasped the opportunities of the marketplace, whilst a minority of Scottish producers, supported by the Scottish Executive, have tried to protect their own vision of what the market should be. The Executive even compare the two saying that business will either need to restructure to retain their competitiveness or will need to produce a premium product which can offset higher production costs.
Unfortunately, the experience of the marketplace over the last fifteen years has shown that most consumers are unable to perceive any difference between bog standard salmon and this high quality premium product and as such are unwilling to pay any more to buy it. Rather than accept this reality, those producers of premium product simply accuse overseas producers of unfair competition and seek out redress through trade measures. Whilst the Scottish Executive supports this approach to production, other than as a small niche market, the ensuing market disruption will always be an obstacle to the further development of the industry in Scotland.
Both the Executive and producers need to recognise that most, but we accept not all, consumers are more interested in whether the salmon they buy tastes good and whether it represents the best value for money rather than looking for where it was farmed. Speaking on Eòrpa, Michael Foxley implied that the dominance of the Scottish industry by overseas companies like Pan Fish means that Scottish salmon is rarely marketed as such but as Atlantic salmon instead. The reality is that Scottish salmon is hardly marketed at all since the Scottish industry has invested very little in marketing so it would not be too surprising if Scottish salmon was not marketed as Scottish. Yet, despite this lack of marketing, quite a lot of salmon is sold in the UK as Scottish salmon. The remainder is sold as salmon, but if it is Scottish, labels do clearly state that it is ‘Farmed in Scotland’.
The problem for retailers is that there is no such fish as Scottish salmon. It is actually Atlantic salmon, as distinct from the Pacific species that are increasingly taking over shelf space. No retailers sell it as Atlantic salmon but just salmon. If retailers don’t bother to highlight the fish as Scottish then it is because they realise that it is largely immaterial to their customers that it comes from Scotland.
Michael Foxley might like to see salmon produced in Scotland sold as Scottish salmon but he cannot force customers to buy it as Scottish nor can he make them pay more for it. The policies adopted by Scottish producers and Government seems to ignore what the market wants and instead appears to want to protect an outdated vision of what the market should be. They cannot wrap up the industry in cotton wool and protect it from the realities of a commercial world. Sadly, it is this misguided view which has really sent the Scottish industry into decline. Instead of bleating on, they should welcome the fact that there are companies still willing to invest in the Scottish industry and fully embrace them.