reLAKSation 32.
Something to do with it: Vigfus Johannson, President of the International Salmon Farmers Association has suggested that whilst he is optimistic about the industry's future, he admits that the next few years will not be plain sailing.
Interviewed by IntraFish, Mr Johannson said he believes that the salmon farming will enter a slower phase with growth of 6% over the next 5-7 years.
The key question is whether this predicted slow down in growth can be perceived in an optimistic light, or is it just an attempt at industry hype?
Mr Johannson was asked about the causes that have led to its present difficulties. He replied that it is difficult to identify the main reasons, but he admitted that over-production has something to do with it.
Whilst, Mr Johannson might have difficulty in identifying the main reasons for the current problems, we at Callander McDowell are in no doubt. There is only one single reason for the current low prices and this is under-marketing.
Yet, be clear. Under-marketing is not about the joint promotional campaigns advocated by Mr Johannson. Such promotional campaigns without investment in proper marketing activity will achieve little, as the industry has already seen.
These campaigns are simply an extension of the current production-led strategies and will never work since they tell consumers about what the industry wants them to buy.
By comparison, investment in marketing will help the industry identify which products consumers actually want to buy and so allow producers to respond accordingly.
This is the only way forward. The alternative will be claims and counter-claims of over-production and dumping. This can only lead to more unwanted and unwarranted trade disputes and increased market disruption.
Jools for Jul: A new TV advert begins with musician Jools Holland playing individual notes on a piano. He then starts playing cords, moving on to a musical piece with other instruments in accompaniment. The message is that like a musical piece, a good whisky is a blend of different flavours. The advert was for Bells whisky.
The advert was aimed at the modern lifestyle. It was clearly intended to attract younger consumers to whisky drinking especially as they are faced with a plethora of new and exciting drinks.
Why is this of interest? A recent conference about Scottish salmon farming, reported by IntraFish, asked whether Scotland is selling itself short?
Nick Joy of Loch Duart told the conference that he went to Europe to look at smoked salmon packs. He found no conformity with packs or labelling of Scottish product. His view is that with the exception of the UK market, Scottish producers avoid tartan as they seem to think it is tacky. However, he thinks that it is important to create a Scottish image and cites the case of Walkers shortbread, who have created a positive image with their Scottish identity.
Mr Joy's views raise two issues.
Firstly, the Bells whisky advert demonstrates that whilst tartan is not tacky, it is just not relevant to many consumers. Whilst the first ISFA market survey had many faults, it did show that country of origin was of only minor interest to consumers. This applies just as equally to Scottish salmon as it does to salmon from Chile or Norway. Instead, consumers are much more interested in whether the salmon they buy represents value for money. Of course there are always exceptions and some consumers are quite willing to pay above market price for Scottish fish and if some producers can obtain a premium, then all credit to them.
Some producers might think that tartan is tacky, but its presence or absence is not really going to have a major effect on fish sales. Instead, consumers are much more interested in whether the salmon is available in the form that they want to buy.
Secondly, there is a big difference between one biscuit manufacturer and the salmon industry. Walkers are one of the few producers of shortbread and they have established their own brand. They have used the tartan to support their own brand image but it is the Walkers name and not the tartan, which has established their reputation.
Market identity is a complex issue, which can be illustrated by an example from the British market. The supermarket group Safeway sell Scottish salmon labelled with the SQS Tartan Quality Mark. The label contains three different messages. One from Safeway, one saying Scottish and one saying Tartan Quality. Which is most important to the consumers? The answer is Safeway since the fact that any consumer buying Safeway salmon has actually made a decision to enter a Safeway store. The pack can be labelled Scottish or TQM, but if they are inaccessible to the consumer, because the consumer is not in the store where they are displayed, then these messages will make no difference at all.
In a tunnel?: An IntraFish editorial discusses whether there may be light at the end of the tunnel in terms of the current market situation. IntraFish believe that production growth is showing signs of saturation at a time when demand is rising and this will eventually force salmon prices back up.
Whilst such a price rise will be welcome to many farmers, we at Callander McDowell have yet to be convinced.
IntraFish suggest that the majority of analysts expect a balance to return during the next six to twelve months. By comparison, they have said that pessimists think it will take longer.
However, why would anyone in the industry want a balance between demand and supply. Surely, it is preferable to have a situation where demand is much greater than supply.
However, suggestions that demand is rising should be tempered by the fact that it is the continuing low price which is actually driving demand forward. Should supply be restricted by limitations on production, much of this new market demand will disappear with rising prices.
IntraFish have expressed a similar view saying that this is the norm since the salmon market is traditionally a highly cyclical industry with large price fluctuations. However, there is no evidence to confirm this.
The idea that the salmon industry was cyclical was first proposed by Professor Chris Ritson back in 1991. yet, the evidence on which he based his assumption was extremely flawed. The view expressed by IntraFish is based on similar assumptions and is equally mistaken.
It is possible that salmon farming will eventually exhibit cyclical behaviour, but as yet, it is still following a typical growth curve. Prices have shown some fluctuations, which may be thought to be cyclical, but these are only due to either market interference or seasonal variation.
The reality is that prices are falling because production has increased without due consideration of the marketplace. It is inevitable that any product will reach saturation within its own market area, but the only realistic response is to develop new market areas to supersede those already saturated. This is why the development of market-led strategies is so important.
IntraFish believe that there is light at the end of the tunnel. We take the view that the light needs to be switched on first to see if the industry is in a 'tunnel' at all.