reLAKSation 29.
Quality not quantity: If you asked any salmon farmer, irrespective of his nationality, if he produced quality salmon, the answer would be yes. 'Quality' is almost impossible to define since everybody has their own perception of what quality means. JJ Connell in his book 'Control of fish quality' (Fishing News Books) suggests that a possible definition of quality is 'that which meets the customers' requirements'. This means that if the customer is happy enough to pay the price for the salmon, then the salmon is of sufficient quality.
However, at a time when salmon prices are at their lowest ever levels, can any salmon can be of a quality capable of persuading customers to pay a premium price? Unfortunately, there is no straightforward answer, but experience would suggest that any price premium would be very hard to come by.
It is the very success of salmon farming, which has undermined the market image of salmon turning it from a high value, luxury food to a low cost, everyday meal choice. This change was both inevitable and predictable as increasing volume production forced down prices. Throughout this evolution, there has always been those, who believed that their production was of sufficiently superior quality to merit a premium price. For example, research undertaken by AGB/GFK (independent research) for the now defunct Scottish Salmon Board suggested that 76% of consumers prefer Scottish salmon to any other origin and 72% are willing to pay more for it (The Grocer. 9th March, 1996.)
Yet, whilst it was once quite possible to generate such premiums, the erosion of the overall price has also eroded the level of premium, which such salmon could generate. This is despite the apparent consumer willingness to pay a premium for the salmon they buy.
Unfortunately, whilst many consumers say they are prepared to pay more for 'quality' salmon, the reality is that low prices seduce most consumers and as a result any good intentions to buy premium salmon quickly disappear.
These comments have been prompted by an editorial in the October issue of Shetland Seafood News. This goes on to suggest that the Shetland locality could produce salmon, which warrants a premium price.
Shetland farmers might consider looking towards near neighbours in Orkney for inspiration since salmon from Orkney has increasingly obtained a dominant place in some UK supermarkets. Orkney salmon is promoted as a high quality food, yet interestingly the price of salmon in one leading supermarket has not risen despite the introduction of Orkney salmon to its fish counters.
Quality and the expectation of a premium price are not enough to safeguard the future of either the Shetland or Scottish industry. Undoubtedly, there will be some individual farmers who will say that they have managed to raise their margins and all credit to them for doing so, but this cannot be an industry wide strategy.
'Quality not quantity' may be a message to inspire farmers, but the future of salmon farming may be better assured by a different strategy. In the words of the editorial, this might be better described as both quality AND quantity. However, a better interpretation would be the development of a twin or multi-stream marketing strategy. Such a strategy has been advocated many times previously, but readily dismissed. Perhaps, the current low prices may be the catalyst to instigate further investigation to this approach.
Consumer response: If the Shetland industry decides to pursue a strategy based on quality, they may want to take note of a recent survey carried out by the UK's 'Food Standards Agency'. When asked to mention the most important factors, which affect their food purchases, 46% cite price as being the main influence. This one single factor accounts for nearly half the respondents of the survey, whilst 17 others make up the remaining 54%. This clearly demonstrates the effect of price on the market.
The next most influential factors were taste (18%) and quality (17%) followed a long way behind by country of origin (3%).
The full results were:
Sample size 1003. Taylor Nelson Sofres for the Food Standards Agency.
Whilst the results of this survey simply confirm many observations of the market place, what is most interesting is that all the responses to this question were spontaneous and unprompted. Many such market surveys rely on the respondent to select one of a number of predetermined answers. This can mean that the results are flawed since they remove any opportunities for free expression of answers. In fact, it is even possible to sway the responses to meet a foregone expectation, although what such manipulation of a survey would hope to achieve must be questioned. Perhaps, a positive response is expected to encourage more consumers to follow suit.
Low prices: There has been a deafening silence from the various industry commentators as to their views on what will happen to salmon prices. Perhaps, they simply do not want to be the purveyors of more bad news.
Intrafish have had to turn to the leading companies to look for some form of prediction. Yet, they can only find disagreement amongst the heads of three key players. Perhaps, this is just an added indication of the uncertainty.
Both Marine Harvest and Panfish believe that there will be some relief in the future, although it is unclear when this might occur. By comparison, the head of Cermaq thinks that prices might continue to fall until they reach near the cost of production. This is a view which we at Callander McDowell have previously expressed and which we continue to hold. There may be some recovery towards Christmas although the chances of this happening are minimal. However, any price rise will probably be short lived as the downward pressure continues.
The crucial question is how can the industry respond to these low prices? The overriding view is that unchecked growth must be brought under control, although it seems that each individual country believes that it is uncontrolled growth by other producing countries, and not themselves, which is to blame.
The current situation has even prompted a resurgence of the idea of Producer Organisations, although it is clear that they will never work. The concept of PO's was taken from the fisheries sector, where a specific quota of fish needed to be shared out amongst local members. This is a very different approach to that required by the farming industry. In this case, it is the market and not the production, which would dictate control. As we have recently seen with the hastily conducted market research by the Norwegian industry, there is still very little knowledge of what is actually happening in the market place.
It is now over ten years since we at Callander McDowell suggested that it was under-marketing not over-production, which was the underlying problem affecting the industry. This still holds true today. The only viable solution is for the industry to market it's way out of the low prices, not to try to manipulate production.
The salmon market is still a long way from saturation, but it is a very different market which the industry needs to approach. This is why there is such urgency for the introduction of a strong market led strategy at company, national and international level.