reLAKSation 314. Callander McDowell
Driven away: This week, IntraFish reported from the 2007 Value Added Seafood Conference where Edward Garner from TNS Worldpanel told delegates that rising fish and seafood prices have slowed down the growth of chilled seafood sales. He also believes that this is driving consumers into buying frozen seafood instead. He claims that chilled seafood is still the fastest growing protein in the UK, but growth has slowed in the past year with continuing rises in prices. This means that chilled seafood is showing signs of becoming a bit too expensive.
Mr Garner’s analysis confirms what we, at Callander McDowell, have observed in our retail survey for some time now. High prices are proving to be a deterrent to consumers but unlike Mr Garner, whose analysis is based on consumer purchases, this downturn in consumer demand is also reflected in the reduced range and availability of fish and seafood products offered by the retailers. It seems crazy that at a time when the benefits of fish and seafood are being actively promoted, that price rises are taking fish and seafood beyond the reach of many consumers.
This would be understandable if we relied simply on wild caught fish as our sole source of supply. It is well known that 70% of global fisheries are threatened by over-fishing due a continuing increase in world demand. Natural fisheries simply are unable to provide the amount of fish and seafood that the world needs and thus ever declining supplies would eventually become the province of those who could afford it.
However, we are fortunate that we are not totally reliant on wild catch fisheries to meet this demand because we can also farm our fish and seafood. Unlike wild catch fisheries, farming allows us to produce ever increasing volumes of fish to satisfy consumer demand. It is absolutely ludicrous that demand is being stifled when we can produce more and more fish at a price consumers are prepared to pay. Yet the farming industry is also being stifled because of a constant attack from environmental and other self interest groups who have an outdated vision of what farming means and can be.
However, it is not just such organisations that are at the forefront of attempts to curtail farming. Even European government is playing a role. IntraFish reports that representatives from the EU’s Trade Directorate are getting ready to visit Norway to begin inspections as part of the review of their Draconian trade measures. It doesn’t take yet another round of inspections to confirm that salmon dumping has not taken place. Salmon prices currently are far in excess of the cost of production. It would take real ineptitude for any farm to be selling below production costs.
Farming allows us to produce large quantities of food at prices consumers are prepared to pay. We should be producing as much as we can and then even more. Prices need to be lower if we are to encourage consumers to eat more fish and seafood otherwise, they will simply buy something else instead.
Mr Garner suggested that this something else might be frozen fish instead. We are not so sure. We do not doubt that frozen fish is showing signs of recovery for the first time in five years and that it is now outselling chilled fish but we do not believe that the two are specifically linked in this way.
Jeremy Horton from Young’s Seafood told the conference that the frozen segment is being driven in part by coated fish such as breaded and battered. We, at Callander McDowell, think that sales of these products are growing because of the cost of raw fish, not to the retailers but rather to the fish and chip shops. Rather than being willing to pay a higher price for their fish and chip suppers, consumers are buying frozen battered fish from the supermarkets and cooking their fish and chips at home. The reason that this is more attractive is that whilst prices for cod has been rising with the inevitable consequence that cod and chips are now more expensive, the cod used in frozen portions has been increasingly substituted with cheaper species such as Alaskan Pollock which has meant that supermarkets have been able to keep their prices low. We believe that this is what is really driving the growth of frozen seafood.
Mr Horton also said that natural fish is helping increase the growth of this category. This may be true for some species that are now packed in far distant countries helping keep costs down, but prices of others species are similarly priced to that found in chilled if not even more expensive.
We do not believe that it is possible to distinguish between chilled and frozen fish over price. The simple fact is that higher prices will deter even more consumers, irrespective of whether the fish is fresh, chilled or frozen.
Tell us a story: Chief Executive of Deutsche See, Peter Dill, told delegates at the 2007 Added Value Seafood Conference that price is not everything. He said that in Germany, price, price and price has always been the name of the game but he does not believe that it is. Mr Dill’s view is that by focussing on quality, health, taste and provenance and less on competing with other proteins, it is possible to command a premium. His advice was ‘don’t sell the product. Tell the story.’
This approach to the market was discussed in an IntraFish editorial that argues that the TNS figures seem to support Mr Dill’s advice. However, we are not sure if they are looking at this in the same way. They appear to have changed the advice to ‘tell the story, increase the value’. This is not the same thing at all.
We, at Callander McDowell, have been major advocates of the added value route, especially as it relates to farmed species such as salmon. Most consumers perceive one piece of salmon flesh to be much the same as any other even if it has a story behind it. Whilst they might like the story, it doesn’t mean that they are willing to pay more to buy in to it. After all, it is still just a piece of salmon flesh. However, if the salmon flesh is changed in some way that the consumer can see exactly why they are paying extra, then they are often more willing to dig deeper into their pocket.
This change does not have to be great to increase the price customers are willing to pay. We know of an example where salmon fillet is being sold at nearly £16/kg. When 10g of a flavoured butter is included in with the salmon fillet, this boosts the price of the pack by 10%. Even Mr Dill is proud to admit that his company’s high end smoked salmon is selling at the same price per kilo as a BMW which he says in the land of Lidl and Aldi is pretty remarkable. However even in a market which is used to cheap prices, there are always consumers to whom price is not an issue and who will happily pay whatever price is asked. This does not mean that everyone will buy it. They are still plenty of people who are happy to shop at Lidl and Aldi. In fact, more and more consumers in the UK are turning to these stores. We are endlessly surprised by the number of people who now recommend Aldi as the place to buy smoked salmon. They have found that Aldi smoked salmon is equal to if not better to that found in other stores including Marks & Spencer.
Marks & Spencer are the experts in added value and many customers are happy to buy their products without even looking at the price. Yet, there is a price limit to what these customers are prepared to pay and that is why we know of M&S customers who are just as happy to look for a bargain at Aldi as they were to shop at M&S.
Other supermarkets have tried to follow M&S and add more value to their products but they have not been as successful. This is because the market is segregated and what works in M&S may not work in a store whose customers are looking for value. Asda is one store that is always trying to improve its range of added value fish and seafood products but most do not survive for long. This is because Asda customers are not looking for added value, they just want value. These are not the same thing.
Equally, even if these products can tell a story, it s not enough. Mr Dill suggests that rather than compete with other proteins fish and seafood should focus on quality, health, taste and provenance. This may work for high end customers such as those at M&S but the wider market is a different question. For example, Asda sell added value products made with MSC fish. This means that the focus is on sustainability which after all is a good story. Yet, none of the MSC added value products are sold at a premium because sustainability is not an issue for which value customers are willing to pay more.
It doesn’t really matter how good a story can be told alongside fish and seafood products, the reality is that there is a price barrier beyond which every customer is unwilling to cross. The challenge for the seafood industry is to find the right products for every consumer at a price they are willing to pay. If every product comes with its own story then so much the better but the story on its own is not enough.
First signs: Seafood Week is upon us and we, at Callander McDowell, have been actively out and about in the retail sector looking for evidence of the promotion. Our initial view is that this year, there has been much better preparation than in previous years. Certainly, we have seen confirmation that the promotion is up and running but we are still not convinced that it will do much to increase consumption of fish and seafood. We will report back with our findings once the promotion has come to an end.