reLAKSation 284. Callander McDowell
Premium price: For as long as salmon has been farmed in Scotland, there have been claims that consumers are willing to pay a premium price for Scottish salmon. Despite such claims, the latest coming in the recent Ernst & Young report there is absolutely no evidence from the marketplace to support this view. As more smaller farmers desert the Scottish label to convert to organic, there will be no doubt some delight that consumers do appear more ready to pay a premium price for organic fish.
According to IntraFish, Seafish have commissioned TNS to compile separate data for organic fish sales, the findings of which indicate that consumers are prepared to pay nearly double the typical £8/kg price for the organic fish, a finding that was of some surprise to researchers at Seafish.
We, at Callander McDowell, are not that surprised as we have monitored the cost of organic fish from when it first appeared in the UK retail sector. However, we do not believe that the premium is as large as SeaFish would suggest since the data is misleading.
We suspect that the average price of fish is calculated from across the whole retail sector ranging from Asda to Waitrose. This means the calculation includes both the cheapest and most expensive fish in the marketplace. By comparison, the price of organic fish is heavily weighted towards the prices charged by the top end stores such as Marks & Spencers and Waitrose. These stores have a declared ethical fish policy and offer their customers a greater choice of organic product. Their price base is also much higher than other stores. For example, prepacks of organic salmon from Marks & Spencers sell at nearly £19/kg whilst Morrison’s sell their organic salmon for just under £13/kg. The higher volumes of organic fish sold by M&S at this higher price pushes up the average price of organic well above the average for ordinary fish.
The big question is whether this price premium can be sustained in the long-term? We very much doubt it. If the market for organic fish expands, then more must be sold through the mainstream retailers such as Asda, Morrisons, Tesco and Sainsburys. All these stores sell organic fish at a significantly lower price than M&S and Waitrose so if sales increase, the average price must fall.
In the case of salmon, the retail market is extremely complex. Store groups have developed product ranges that mean organic salmon is not even the variety that generates the largest premium. Instead, this tends to be the stores’ own premium range, although by its very nature, this tends to be sold in much lower volumes than the standard ranges. It can prove extremely difficult to identify exactly which salmon product is now the standard against which to compare the exact premium attainable.
How cool?: IntraFish report that mandatory country of origin labelling (COOL) for seafood is failing to deliver the promised benefits. It had been expected that sales of seafood from the US would be boosted once consumers could clearly see its origin. This has not happened.
We, at Callander McDowell, do not find this particularly surprising. This is because most consumers are not that interested in the origin of the produce they buy. Of much more importance is whether it tastes good and whether it represents value for money. In addition, retailers rarely, if ever, provide consumers with a choice of identical product from different origins allowing consumers to choose between them unless the product is also identically priced. This is because it makes no sense to stock different products based solely on origin. In our trawl around supermarkets in different countries, we have never seen a choice of products being on offer where the difference is only down to its origin.
Certainly, the experience of the Scottish salmon industry in its home market has shown that accurate and clear labelling does not induce consumers to actively select home grown product. Because the Scottish industry cannot satisfy local demand, retailers do sell identical prepacks of salmon from Scotland and Norway where the only difference is the wording ‘Farmed in Scotland’ and ‘Farmed in Norway’. Observations of consumer selection would indicate that any attempts to discern between packs is based on the appearance of the fish i.e. fillet size, rather than what is written on the label.
Even in France, where Scottish salmon is supposed to be more highly regarded than fish of Norwegian origin, consumers are not really given a direct choice. What tends to happen is that whole fish and steaks may be of Scottish origin whilst fillets are labelled as being from Norway. However, it should be noted that in France the main reason why supermarkets stock salmon from both Scotland and Norway cannot be attributed to the origin but rather due to Label Rouge accreditation.
The US Food Market Institute now wants to relax the COOL legislation because the high cost does not produce any benefit. Instead, they want to use a more flexible scheme using terminology like wild Alaskan salmon, but we think that this would be a mistake. The system used in the UK seems to work providing simple guidance as to whether the fish is wild caught or farmed and the geographic area from where it originates. This enables the consumer to make an informed choice if that is what they want.
However, the approach taken in the UK is not without fault. The legislation is not tight enough to help consumers fully distinguish in some cases exactly what fish is on offer. Wild Alaksan salmon is a case in point where there is a tendency to use this generic term instead of the specific species. This is because not all supermarkets sell exactly the same species. ‘Ray wings’ is another example of this confusing terminology as this could include a number of species which are thought to be under threat from over-fishing. However, these are minor contraventions of the labelling law and by and large, the supermarkets have a high level of compliance.
By comparison, many independent fishmongers seem to ignore the legislation altogether, including some who are viewed as being the leading lights of this sector. It seems that both the Food Standards Agency and Trading Standards have largely ignored the independent fishmongers, enabling them to use only the most basic labelling.
We do not believe that many consumers read the labelling used on fish and seafood but this does not mean that the legislation should be relaxed. It is the consumers’ choice not to read or use the information provided, not the industry’s choice to leave it out. Just because US consumers are not actively selecting US seafood now that information about its origin is provided is no reason for cooling the legislation.
Misled: According to the Daily Mirror, Tesco is being investigated over claims that it has cheated customers with its half price fruit and vegetable promotion. At the beginning of the year, Tesco launched its ‘five a day’ campaign (to encourage consumers to eat five portions of fruit and vegetables a day) by offering half price deals on some fruit and vegetables.
It is claimed that the supermarket giant raised prices in the days before the promotion and then slashed the price meaning that the reduction from a week or so earlier was far less or nothing at all. For example a 500g of plums were priced at £1.48 on December 11th but just two weeks later on December 28th, they were priced at £2.99. At the launch of the promotion on January 1st, the priced was reduced to £1.48 with Tesco claiming a 50% reduction, yet compared against the price on the 11th December the actual reduction was 0%. Whilst Tesco insisted that any price variation was due to seasonal fluctuations, the Trading Standards Institute said that the store group had grossly exploited a loophole that allows price cuts on perishable goods without them being sold at a higher price for a continuous 28 days.
We wondered whether the same loophole is being used by a number of supermarket chains to promote salmon in a similar way. However, we can better understand the dilemma that faces supermarkets if they are actually using this loophole.
The rapid expansion of salmon farming has meant that consumers have become used to salmon as an everyday value for money meal choice. However, in recent months, salmon prices have risen significantly due to increased demand from Russia and elsewhere whilst the industry has ignored changing market demand and has been busy fighting an insane trade dispute. The combined effect is that retail prices rose reducing the scope for increased promotion. The only way that this depressed demand in the local marketplace could be overcome was with visible price discounts. Yet, margins allowed little flexibility in the amount available.
The store groups seem to have used the perishable foods loophole to boost salmon prices and then offer them at significantly discounted prices back to around the current price level. Consumers appear to think that they are getting a good deal and buy the salmon, which is what we all want, but the reality is that the deal they are getting is not really a deal at all. All the information needed is available if they actually stopped to compare prices but to many, the heavy discounting is just to good a deal to miss (lead).