reLAKSation 348. Callander McDowell
Four thousand?: In the last issue of reLAKSation (no 347) we considered the claims made by Angus Macmillan of the EUSPG that up to half the industry could disappear with the loss of thousands of jobs. At the time of writing, we had not seen the ‘Times’ article in which Mr Macmillan argued that ‘up to half of the 8000 people employed in the Scottish aquaculture industry could be laid off if the decision to remove the MIP is rubber stamped.’
Given that the EUSPG told the European Commission that the Scottish industry, as represented by their organisation, comprises of less than 20% of those producing salmon in Scotland, employing less than one thousand people, it is extremely difficult to understand how another three thousand people can risk losing their jobs since they are not considered to be part of the Scottish salmon industry (although having excluded them for the last three years, the Scottish Minister for Aquaculture has now admitted that these other farms may be part of the Scottish industry after all.
What this shows is that the EUSPG are more than happy to manipulate figures to suit their immediate purpose. We, at Callander McDowell, have been criticised on more than one occasion for questioning the rationale behind the dumping case, but actually what we have questioned is some of the very dubious data submitted in support of the claim and the total refusal by anyone from either the European Commission, the Scottish Executive or the EUSPG to explain why the data supplied by the EUSPG does not match the official industry data as compiled by the Government agencies.
Mr Macmillan does not explain how he has come to the conclusion that four thousand jobs are at risk from cheap imports. It seems that he has just plucked a figure out of the air. However, whilst Mr Macmillan spreads his tales of gloom and doom, we, at Callander McDowell are more than happy to explain why these jobs are not at risk.
For many years, the Scottish industry has repeatedly claimed that consumers prefer to buy Scottish salmon and when they do so, they are willing to pay more for it. Unfortunately, whilst consumers are happy to say this, when they actually make a purchase, it seems that they are not so loyal to Scottish salmon, preferring the salmon which represents the best value for money, irrespective of its origin. This is why even though the UK is a salmon producing nation it is possible for consumers to buy fresh salmon from not only Norway but also Chile.
However, this free market is undergoing change not because of changing consumer choice but because the retailers have changed their priorities. The supermarkets now want to be seen as taking a greater responsibility in relation to the salmon they source. They are concerned about sustainability, traceability and welfare issues and these can be only addressed if they have a much closer relationship with specific salmon farms. Thus, a number of the supermarkets are forging links with individual farms that produce salmon to a jointly agreed standard. Naturally, these farms are in Scotland because it makes more sense to work locally. Thus these supermarkets are committing themselves to buy Scottish salmon only.
For example, Marks & Spencer sources all their salmon under their Lochmuir brand, whether fresh, frozen, smoked or as part of a ready meals. Lochmuir salmon is now also labelled as RSPCA Freedom Food. Sainsbury’s have recently launched their packs of Scottish responsibly sourced salmon which is also Freedom Food approved. All their smoked salmon is of Scottish origin. Morrison’s source all their salmon from Scotland and have done so for many years. Their smoked salmon is also Scottish. The Coop also labels their fish as responsibly sourced from Scotland.
The majority of salmon sourced by Waitrose comes from specific farms in Scotland although they also have an arrangement with a couple of farms in Norway. Whilst Asda sources salmon from both Scotland and Norway, both smoked salmon and many of their added value products are sourced only from Scotland. Tesco, the supermarket with the largest share of the market sources their salmon from different sources but some products such as their Finest salmon fillets are sourced from Scotland only, as is most of their smoked salmon range.
In virtually all these examples, the salmon is supplied in preprinted packaging which commits the store to supply Scottish salmon. There are many fewer examples of packs where the origin is over-printed on the label allowing the retailer to chop and change the source of its fish as market conditions change. This means that even if Norway should flood the market with low cost salmon, most retailers will not seek the financial benefit of changing supplies since they now believe that consumers are ready to forgo rock bottom prices in favour of the reassurance of responsibly farmed salmon.
Those retailers committing themselves to sourcing salmon only from Scotland account for just over half of the UK market. This figure will be pushed higher by the Scottish sourcing undertaken by the other stores for their specialist ranges. In addition, the market for smoked salmon in France focuses heavily on origin and every supermarket stocks a range of smoked salmon products made from Scottish salmon. This demand for Scottish fish by French salmon smokers also makes a significant contribution to the need for Scottish production.
Even if spot market prices should fall to levels below that which would have triggered the MIP, it is difficult to see how, having made a commitment to Scottish salmon, these retailers would suddenly change their sourcing policies. The Scottish industry has always argued that the consumer is prepared to pay more for Scottish salmon. It now looks as if this may be finally true. Against such a background, it is extremely difficult to see how half of the salmon industry might collapse with the loss of so many jobs. This is just an example of yet more scaremongering without any real foundation. We have always argued that one of the problems of the salmon industry is that they know little of what is actually happening in the marketplace. Perhaps if they did, then spokesmen, such as Angus Macmillan would not make such wild and misleading claims.
Higher and higher?: Also in the last issue of reLAKSation, we continued the debate on low prices. We have been prompted to revisit the subject yet again after reading in IntraFish that Henning Lund, an analyst with Glitnir Securities has said that salmon prices are on their way up and that a conservative estimate is that by autumn they will reach NOK 26/kg. Unfortunately, Mr Lund has been a bit slow off the mark as prices have already rebounded reaching an average of between NOK 27.50-28/kg this week.
Mr Lund bases his prediction on lower volumes from Chile and limited growth in Norwegian biomass. However, it is very difficult to base any price forecast on these sort of trends. The reality is that volumes can be down on previous years yet prices can be depressed simply by releasing too many fish on the market at any given time. Equally the reverse is true, higher biomass can be mitigated by limiting the release of fish to market. In addition, prices are not dictated by just supply but also by demand.
Mr Lund suggests that demand is currently softer than predicted for this time of year and this is why prices are lower now (or not). The summer has always been a time of low demand despite the potential for summer parties, BBQ’s, lighter meals etc. Traditional, demand peaked at Easter and then again at Christmas, but with increased availability, demand can be maintained throughout the year. Demand may be softer than predicted but this is probably due to previously higher prices which always suppress demand.
Market analysts always appear willing to forecast prices but keep quiet when the predictions fail to materialise by which time everyone has long forgotten the original price estimate. As we previously suggested, the analysts are too focused on prices as a tool to gauge industry performance. Prices are so unpredictable that profitability would be a much better measure. Yet, prices can not be totally disregarded since they can provide an indication of demand. As we mentioned, rising prices are a sure fire way of suppressing demand.
One factor which has been expected to push up salmon prices is the rising cost of fuel and grain which have brought about significant food price increases in recent weeks. Yet, as we discussed in reLAKSation 347, we don’t think that salmon prices will be affected by the rising price of other foods. According to the Glasgow Herald, the Chief Executive of Morrison’s supermarket, Marc Bolland has said that whilst the price of milk, bread and eggs has been rising, the price of fish has actually been falling. He added that the latest Australian grain harvest was better than expected so it is possible that grain prices may even start to come down too.
One unexpected supporter of lower salmon prices appears to be Nick Joy of Loch Duart Salmon who told IntraFish that low salmon prices may not be such a bad thing. He said that whilst the price of other proteins has been going up, lower salmon prices may be an opportunity for the industry to reach new consumers. This echoes our own view that high prices are a deterrent to widening the market for salmon. If salmon appears cheap compared to other proteins, then this may attract consumers who are looking for cheaper, but wholesome alternatives.
The challenge is to make salmon attractive to a much wider range of consumers but if prices are high, the chances of doing so will be much reduced.
Overcome with excitement: For the past few years, SeaFish has regularly reported the success of their Seafood Week promotion. It has been so much of a success that this year, the week long promotion is to be extended to a fortnight. This suggests to us, at Callander McDowell, that perhaps the promotion is not working as well as has been suggested. We say this because our own observations have indicated that the promotion has had little impact on consumers.
We find it hard to get very excited about this promotional campaign. The first announcement this year was that Seafood Fortnight has landed a bumper catch of celebrity chefs to help support this year’s celebration of the seafood industry. Chefs such as Mitch Tonks, Phil Vickery, Brian Turner and Jo Pratt have all signed up to get involved in the two week long promotion. Can we expect these chefs to appear in retail stores during the promotion, perhaps demonstrating their skills of cooking fish? Unfortunately not. Instead, these chefs will contribute new and delicious seafood recipes to help show how easy it is to eat the recommended two a week.
However, it is unlikely that any new recipes will help promote increased consumption of fish and seafood, especially those who rarely or never eat seafood now. Consumers are not short of new recipes, especially those compiled by celebrity chefs for in this internet age, many hundreds of recipes are freely available on the web. It is only necessary to search the BBC Food or UK TV Food websites to find many recipes from these chefs. Yet, the ready availability of these recipes has done little to help boost consumption, especially amongst those we would like to encourage most.
The latest news from Seafood Fortnight is that to help promote the ‘2 a week’ message to consumers, SeaFish has created new labels for use on seafood products. The labels have been created in consultation with the Seafood Fortnight steering committee which includes key industry ‘contacts’ who have been working together to maximise the ‘2 a week’ message. The main difference between the new label and the old is that they now included a message alongside the ‘2 a week’ symbol. The message says ‘The contents of the pack will help you achieve your recommended ‘2 a week’. That’s bound to persuade more consumers to buy fish and seafood!!
Old New
SeaFish say that these labels are available in 30mm x 38mm and 38mm x 53.7mm sizes and are in full colour and will have excellent stand out in the seafood aisles….. …and there lies the rub about everything that is wrong with this Seafood Fortnight promotion. Most potential consumers don’t even visit the seafood aisles.
We will continue to watch with interest.