reLAKSation 287. Callander McDowell
On the way out: An IntraFish editorial posed the question as to whether seafood counters face extinction. They say that research shows that it pays for most retailers to move to self service seafood counters yet, for every chain that converts to this format another enhances its counter with extra trained staff. The original question was prompted by a recent presentation at the Boston Seafood Show. Retail seafood specialist Tom DeMott said that 80% of 34,353 retail food stores in the US had seafood counters but most have low to moderate sales and negative profits that cannot justify sourcing consistently high quality seafood for their customers. According to Mr DeMott stores with service counters have to sell $6,667 worth of seafood a week to break even while self service counters only need to sell $1,775. He added that it only makes sense for high end chains such as Whole Foods or Wegman’s to devote manpower and money to the higher level of service. IntraFish concludes that this does not mean the end of the seafood counter as we know it. Instead they see that it offers the consumer more choices; more ways for retailers to carve out a niche for themselves and more was for suppliers to create products that appeal to both philosophies. We, at Callander McDowell, are not so sure.
Our view is that the market for fish and seafood is changing, a reality to which the retail sector must eventually respond. Their response is unlikely to happen overnight and may take some years but it is inevitable that the retail sector will have to change. The alternative is that supermarkets retain their fish counters simply as a museum piece invoking ideas of what shopping used to be. This is already not so far from the truth. Not so long ago one leading supermarket informed its customers that it was upgrading its local store and solicited views as to what services should be included. Top of the list was a fresh fish counter and when the new store was unveiled, pride of place was given to a fresh fish counter of the latest design. It was soon apparent from our own regular visits to the store that whilst most customers wanted to see a fish counter in store, few actually bothered to shop there.
The same applies to other supermarket groups too. The fish counter is retained simply because customers expect to see one in their store. The fact that they do not use it appears irrelevant. However, sometimes the lack of customer interest does prompt the supermarket to act. A couple of years ago, one of the smaller chains decided to upgrade some of its stores and introduce a fresh fish counter. Although initially, this was well stocked, the lack of sales soon resulted in a contracted range of choices as can be clearly seen.
The eventual fate of the fish counter.....
Yet, there are some stores where the fish counter is extremely popular. Typically, this can be attributed to the make up of the local population with different ethnic, age or economic profiles. It is this sort of store that we use in our retail surveys because they provide a good cross section of the various seafood products available. Whether these supermarket fish counters can sustain their popularity as the demographics change only time will tell.
Tom DeMott had suggested that it will only make sense for the higher end supermarkets to retain their fish counter. Yet in the UK, when Marks & Spencers trialled fresh fish counters in some of their stores, they failed to attract customers. M&S soon reverted to self service yet continue to offer a range of high quality fresh fish products that their customers willingly buy.
With an increasing range of store formats such as the smaller Express and Metro stores, our view is that supermarkets will actively select which stores retain fresh fish counters leaving other stores to offer chilled fish prepacks.
The picture is different in Europe. Most fish sold through Spanish supermarkets comes from the fresh fish counter whilst French consumers appear to be increasingly selecting chilled fish. Many French stores retain a fish counter but our visits suggest that only a few are popular with customers. Over the years, we have noticed that the choice at many fish counters has visibly shrunk and customers are much thinner on the ground.
We think that many supermarkets will hang on to their fish counters for as long as possible but eventually, simple economics will force a change.
Size does matter: Back in January, Marine Harvest CEO Atle Eide told delegates at the Laksedagene conference that in two years 10 companies will control over 90 percent of the worlds salmon production. We, at Callander McDowell, are in no doubt that Mr Eide’s view is correct although the time scale is not so clear. In fact we first made a similar prediction as long ago as 1990 in response to the then price collapse. Whilst much of the Scottish industry were busy accusing Norway of over-production and dumping and seeking the imposition of trade measures from Brussels, we argued that unless farmers sought more market-led strategies, the days of many were numbered as others opted to capitalise on lower margins through the acquisition of more production. In the absence of such market-led strategies, the trail of acquisition continued throughout the following 17 years and will continue to do so. Consolidation is the only strategy that makes sense in a global marketplace.
Norwegian salmon farmers Gerhard Alsaker disagreed saying that many Norwegian mid sized players would stand in their way. However, like the Scottish industry before it, Norwegian producers will find that the lack of any specific market-led strategy will reduced their competitiveness as the larger companies grow bigger. We firmly believe that small to medium sized companies can withstand the onslaught provided that they have identified specific target markets but time is running out.
Speaking at the recent Glitnir Securities seafood conference, Mr Eide said that there is nothing that the small fish farmer can do that larger companies cannot manage to do. However, he added that where the large companies win is with their market power enabling companies like Marine Harvest to play the global market more effectively that their smaller competitors.
Our view is that it is not so much having the power but what is done with it. We believe that the salmon industry has yet to really take hold of the opportunities that such power provides.
Mother nature?: An editorial in the Boston Globe responded to the new legislation promoted by US Commerce Secretary Carlos Gutierrez to authorise fish farming in US federal waters. They say that fish are such a nutritious source of protein that an expansion of aquaculture should be a motherhood issue but is the law does not include enough protections against the downside of fish farming then Mother Nature will be the loser.(!!) The editorial goes on to say that the overarching problem of farming high value fish like salmon is that they are not an alternative to wild caught fish - they depend on them. Fish farming can be sustainable when fish such as carp and catfish eat mostly vegetable matter and not feed made from sardines, anchovies, herring and mackerel. These smaller fish are the standard diet for many farmed species such as salmon. Intensive harvesting of smaller species to support cultivation of carnivorous fish could leave the smaller species as depleted as North Atlantic groundfish stocks. This would be in turn disastrous for wild salmon, tuna and halibut that depend on these species for food. The Boston Globe suggests this is sufficient reason to reject this new legislation at least until researchers come up with vegetarian alternatives.
Perhaps, the Boston Globe missed the opportunity of reading the latest newsletter from the American Soybean Association. According to seafodintelligence.com researchers in Spain have found that sea bream fingerlings can be fed up to 50% soybean meal in their diets with no negative effects on growth although the increased soybean level did affect taste slightly.
However as Cliff Goudley of MIT pointed out in a letter to the Globe, the question of fishmeal is a real red herring. Fishmeal is widely used in terrestrial farming and is much better converted by fish than their terrestrial counterparts. He adds that much of the fishmeal is made from well managed stocks of species unsuitable for human consumption.
The fact is that it makes no sense at all to argue that farmed fish should be fed on feeds of vegetable origin whilst huge amounts of fishmeal are used in terrestrial farming. If we need to reduce the impact of fishmeal production, the first call of port must be animal diets where soya and other vegetable proteins would be more suitable substitute. Once fishmeal is excluded from animal diets then the fish farming industry could examine whether it would be right to follow suit. Yet whilst fishmeal is used in so much abundance in terrestrial farming, it cannot be used as a reason to limit the development of aquaculture, especially aquaculture offshore.
Fish farming is the only really effective management tool for the protection of wild fish stocks. If the Boston Globe is so concerned about protecting Mother Nature then it should be promoting aquaculture not damming it.