reLAKSation 299. Callander McDowell
Like a stone: Intrafish reports that salmon prices continue to drop like a stone. Prices are now around NOK 21/kg. Not so long ago they peaked at NOK 44.53/kg. Maybe this is not the time to remind those who welcomed European Commission intervention claiming that it brought stability to the salmon market. The imposition of trade measures was not a magic wand, although it might have seemed it at the time. It was yet just another excuse to avoid the hard truth that the salmon industry must invest in marketing and market-led strategies if it is to prevent a future roller coaster ride. We, at Callander McDowell, have argued time and time again that, given the state of wild catch fisheries, we can never produce too many fish, but we consistently fail to inform consumers that they are available to eat.
Intrafish outline a number of reasons why prices have fallen. These include uncertainty in the marketplace; too many smaller fish; exchange rate issues and most significantly, too many fish in relation to market demand. Previously, Intrafish have suggested that recent harvest rates have been similar to those expected at Christmas time. This is despite historic evidence which shows that demand is often much lower during the summer months (even though consumers might be expected to eat lighter meals, such as those made from salmon, during the warmer summertime). It seems that production has increased in response to growing demand from new markets such as Russia but, at the same time, the higher prices have suppressed demand in the existing markets. We would suggest that it is now these existing traditional markets which have exerted their influence over prices. Unfortunately, the lower prices have not yet really filtered through to consumers and when they do, it will be when consumer demand is normally lower, due to vacations etc.
Over many years, there has been a view that the salmon industry should seek some form of stability within their market, producing volumes in line with expected demand. If such stability can be achieved, then prices should also remain stable. This is never going to happen as markets can flux due to all sorts of influences, especially those outside the producers’ control. The idea that the markets can be stable suggests that producers need do nothing other than produce their fish. We have heard many times the view that ‘we are just farmers’ as a way of negating responsibility for the price of fish once they are harvest. However, even the smallest farmers have some responsibility to ensure that there is a market for their product. So when Intrafish writes that there are too many fish in relation to market demand, all sections of the industry must accept some responsibility in helping tip the balance towards a stronger market demand.
In the past, the argument has been that this disparity in the market is the fault of over-enthusiastic producers who put too many fish to sea when prices are high in the hope of gaining even richer rewards. Their solution is to impose controls on production in the hope that production levels can be managed well below that of demand. However, this is a very blinkered view of the market which ignores the massive opportunities for product and market development. It is an outdated view which hopefully is being increasingly lost as the past ageing captains of industry leave salmon farming to those with a more open mind to these opportunities.
It is only necessary to go into any bookshop and look for the business section to see that there is shelf after shelf of book written about marketing. Marketing is a key requirement for every business, no matter their sector and the salmon industry is no different. The salmon industry is perfectly entitled to increase production and rightly so since there is a growing gap between availability and demand in the fish and seafood market. The fact that there is such a gap does not mean that investment in marketing can be avoided. It is still necessary to inform consumers that salmon is available and that it is good to eat since salmon still has to compete with other fish and seafood species to gain consumers’ attention.
It could be argued that the industry, or parts of it, already does invest in marketing. Certainly, the Norwegian Seafood Export Council, do engage in some marketing activity for salmon. In addition, there is limited promotion of Norwegian salmon by some supermarkets. Only last week, we picked up such leaflets from the fish counter in one French supermarket.
However, a few leaflets do not constitute a hard hitting message across the whole consumer market. In addition, the NSEC campaign is geared towards the promotion of Norwegian salmon. What is needed instead is a simple message that salmon is here; it’s healthy food; good value and that its good to eat. Most importantly, the salmon industry needs to attract those consumers that never eat salmon so that consumer demand is continually growing.
The way to stop prices from this downward spiral is to ensure that there is a healthy demand for salmon. It is in the industry’s hands to make sure that the balance is tipped back in favour of such healthy demand. Otherwise, it may be necessary to watch out for more falling stones.
More stones?: In a cry harking back to the dark days of the Scottish salmon industry, Basil Sudborough, Product Director of Selonda Aquaculture, warned that a strong increase in sea bass and bream production could implode prices. He told IntraFish that it is better to sell a smaller quantity at a higher price than to produce in a large quantity at a low kilo price. Yet, although the relationship between price and volume would suggest that the choice is one or another, the relationship between price and volume is not sacrosanct. It is possible to produce larger quantities and still receive a higher price. This is the whole point of developing market-led strategies, producing what the market wants, rather than simply producing fish and hoping for the highest price possible. Even Mr Sudborough seems to recognise this saying that the sea bass and bream industry is production-driven, but now they should think about what the market wants to get better prices.
Mr Sudborough says that experience has shown that the best returns on marketing are from consumers that already eat bass and bream. He says that they are more open-minded towards eating more fish. By comparison, he argues that it would take a great deal more investment to attract new consumers. This stance was exactly the same taken some years ago by the Scottish salmon industry. They too said it was easier to persuade an existing consumer to eat more salmon than persuade a non-eater to even try it. It is perhaps worth considering the subsequent pain that the Scottish industry underwent by trying to convince the market to conform to their expectations rather than adapt their expectations to what the market actually wants.
Mr Sudborough outlined some observations of the marketplace that appear confused but whether this is how they were related to IntraFish or how they have been reported is unclear. For example, having said that the best returns come from marketing fish towards those who already eat bass and bream, he says that the Italian market appears to be saturated, presumably with those who already eat bass and bream! Mr Sudborough suggests that the market for bass and bream is divided between Northern and Southern Europe. Southern Europeans, except Italians, prefer bream and as whole fish, whilst the implication is the Northern Europeans prefer bass, sold as fillets. He said that bream’s round shape deters sales in Northern Europe as it is considered too exotic. Does this mean that snapper, barramundi, marlin, pangasius and tilapia are not exotic since all can be found for sale in Northern Europe? The reality is that bass and bream can be found on every supermarket fish counter in the UK so perhaps they are not that exotic!
Mr Sudborough told IntraFish that the UK market is one that is growing fast with sales increasing by 100% last year, although from a small baseline. He said that the fish sell well in prepacked form, often sold with flavoured butter. He said that the challenge is to produce fish that exactly fit the pack but clearly, this is a challenge which bass and bream producers must meet if they want to grow the UK and other markets, in which we have recorded the presence of portion sized packs. It is no use producing larger fish, even if they are more economically viable, if the market actually wants portion sizes. This is exactly the point about producing what the market wants, rather than what farmers want to produce. Mr Sudborough does seem to acknowledge that there is a growing demand for processed products. Could this be the marketing message he really needs to consider if he wants to avoid an implosion of the bass and bream market?
Ethical policing!: IntraFish report that the UK consumer watchdog, the Food Commission, surveyed many popular cookery and women’s magazines and found that many appear to be doing nothing to prevent the destruction of endangered fish stocks. They surveyed two consecutive issues of 16 popular magazines with a combined circulation of around three million per month and found that most gave no guidance on purchasing non-endangered fish or information on the importance of buying fish from sustainable stocks. They said magazine editors need to take responsibility for the advice they give their readers so they can choose the right fish to buy rather than publish recipes that encourage the destruction of endangered stocks.
This is certainly a new idea. According to the Food Commission, magazine editors should become arbitrators of what we can and cannot eat, providing recipes only of fish with sustainable credentials. Perhaps, the idea can be taken further. Car magazines could only feature cars which are ethical using greener engines and fuels. They shouldn’t be allowed to mention Ferraris or other supercars because they are prone to damaging the environment with high fuel usage. At the same time, holiday magazines should no longer be allowed to feature exotic destinations or anywhere that requires that the holidaymaker flies. Only holidays by train or boat should be covered. Maybe magazines about golfing should be banned as well since golf course developments are often built over the ‘natural’ landscape destroying wild habitat.
Where will this all end? The fact is that shoppers can obtain information from all sorts of sources and then they are free to make their own considered choice on what they buy.