reLAKSation 351. Callander McDowell
Credit crunched: Premium food store Marks & Spencers are currently offering 100g packs of their top of the range ‘Kiln smoked Orkney salmon’ at half price. It has been quite some time since M&S has discounted such a product by so much. Perhaps, this is an indication of the way that stores are reacting to the growing effects of the credit crunch in an attempt to attract shoppers. The Glasgow Herald has reported that shoppers are now switching away from the higher value end of the market to the value supermarkets. The newspaper reviews the latest figures from TNS Worldpanel who found that Aldi and Lidl have increased sales over the last twelve weeks by 21% and 13% respectively. The larger supermarkets offering most value to their customers are also reporting increased sales with Morrisons and Asda both up 8%. By comparison growth at Tesco and Sainsburys was only 5% and 4% respectively. TNS have suggested that with food price inflation rising to 4.6%, shoppers are now in pursuit of value for money and this is affecting the supermarkets share of the market.
The BBC TV programme ‘Countryfile’ looked at these changes from a different perspective that of the way shoppers buy into ethically produced foods such as Fairtrade and organics. They believe that many shoppers might consider ethical downsizing as the pressure of increased costs for power, mortgages and fuel starts to bite into the amount shoppers can afford to pay for food. Fifty percent of typical consumers have indicated that they will buy less ethical food whilst thirty percent of the wealthy consumers also said that they would buy less.
Countryfile say that food prices are now rising faster than at any time in the last sixteen years and that their figures indicate price inflation has already reached 6.6%. They think that some shoppers who have been prepared to pay more for organics may have to ‘park’ their principles to save money. They wonder whether this may be the end of the organic movement as the organic boom loses pace. Tesco report that sales of organic foods are down 10% as consumers adjust their shopping to balance value with ethics.
The programme looked at the cost of shopping in various outlets using a small bag of just 10 organic items. They found the cost of these from a mainstream supermarket was about £25 whereas the non-organic products cost just £17, a saving of £8. By comparison, they visited a local farm shop where they found the items cost £20, although none were organic. They then went to Aldi where the same 10 items cost just £13. Again, none were organic, but the programme was surprised by how much was produced in the UK.
The programme makers concluded that shoppers might develop a scale of principles from local to Fairtrade to organic and if they found that they couldn’t afford organics then they would look for local food or even Fairtrade. The Soil Association responded that they thought that many organic consumers eat organic because of the principles and these would not be compromised by cost. More likely, they would keep buying organic but reduce the amount of higher cost items in their shop so buy less meat and chicken and more vegetables. However, for most shoppers, who were attracted to organic for other reasons, the change to value might be easier to make.
Countryfile did not mention organic fish in their report but we suspect that there may be a greater willingness to change to non-organic than there would be for say, chicken. This is because the organic message is much more linked into welfare issues for chicken than for salmon, probably because the way chicken is reared has been regularly highlighted on several different TV programmes. Also a number of stores have now started to offer locally produced ‘Freedom Food’ reared salmon and this may help persuade consumers to reduce their shopping costs, especially as locally produced ‘Freedom Food’ salmon is also available in a value pack for just £6.98/kg. This is almost half the price of organic salmon from the same store.
For organic salmon farmers, this credit crunch cannot have come at a worse time. Many have converted from traditional production in the hope of higher margins and reduced competition from the mainstream salmon industry. In addition, the imminent removal of the MIP would be a deterrent to a return to traditional salmon farming. This does not mean an end to the small independent salmon farmer as there are other options available. The real question is whether the current credit crunch is just a short term blip or whether, fuelled by permanently high oil prices, this is the start of wholesale changes to our lifestyles.
Out of love: The latest issue of the Fishupdate newspaper included a review of the current state of the French retail salmon market. They say that volumes are up about 20% on 2007 whilst prices have declined by 8%. They say that the price drop has encouraged sales with salmon accounting for 17% of fresh seafood purchases by French households.
We have just returned from France where we conducted our regular survey of thirteen supermarket chains and whilst our perception is based on observation rather than hard sales figures, our impression is that salmon appears to be falling out of favour with the French consumer.
When we first began surveying the retail sector in France five years ago, we were struck by how dominant salmon was on the supermarket shelves. Every supermarket fish counter was a sea of pink to the extent that some stores had separate counters just to display the various salmon presentations. In addition to the fish counter, every store offered a range of prepacked fresh salmon from the chiller cabinet.
Salmon was widely available in added value products ranging from simple fishcakes to various recipe dishes. Finally, the supermarkets stocked a huge range of smoked salmon including every conceivable pack size and from every different origin. The choice was immense so much so that we wondered how any consumer could make a truly-informed decision.
By comparison, our last visit was extremely disappointing, almost depressing. In every single area, the availability of salmon can said to be poor from fish counter to prepacks and from recipe dishes to smoked salmon. The range of products has shrunk beyond belief. Fish counters that once offered piles of whole fish, fillets, steaks and portions now seems to offer just a few portions and possibly some fillets too. Prepacks are numbered in handfuls and recipe dishes consist of a few staples. Even the range of smoked salmon has shrunk to own label and maybe one or two smaller brands. This is typical of the whole retail sector with the exception of possibly one supermarket chain but even this one if not the image of its former self.
Our observations are restricted to the products on the shelf so we have no idea of the amount of each product or presentation being sold. We cannot say whether volumes have increased as Fishupdate’s market report indicates. However, we do record prices and whilst the market report suggests an 8% fall since Easter, we have found that prices have generally risen.
Of course, our latest observations do not show a sudden change. We have noticed a steady decline in the salmon presence over the past couple of years, which has coincided with a period of high salmon prices. It would not be surprising if consumers have fallen out of love with salmon since they were previously offered salmon as a value for money meal choice. Once, prices became too expensive, French consumers simply looked for cheaper alternatives and it seems that they have found them.
Well-informed?: IntraFish have drawn attention to a letter they received from Patrick Franklin of the British consulting company Homarus Ltd. Mr Franklin writes that Atle Eide has hit the spot when he suggested that the price of salmon will plummet once the MIP is removed. He says that it is remarkable that it has taken this long for any informed comment to come out of Norway and that far from being winners, the Norwegian salmon industry will also lose out if prices collapse. Against this background, Mr Franklin says it is difficult to understand why the Norwegian industry has been so consistently against a guaranteed minimum price.
We, at Callander McDowell, don’t think it is difficult to understand Norwegian opposition to the MIP. In fact, it is really simple. The MIP was imposed by the European Commission after the EU’s DG Trade found Norway guilty of dumping salmon into Europe even though Norway had clearly not been dumping salmon at all. Since Norway is innocent of the charges, then they rightly object to being punished with any sort of punitive measure irrespective of whatever it achieves.
We have discussed many of the issues of this case previously but suffice to say that Norway was well and truly stitched up by the combined efforts of the EUSPG, the Scottish Executive and the European Commission. With the Commission acting as prosecutor, judge and jury, they have been extremely reluctant to admit that the whole procedure was significantly flawed and had they not been blinkered by their own perception of salmon, then they would have not only found Norway not guilty, but also thrown out the original charges before the investigation was even initiated.
We have always argued that the dumping complaint was nothing more than an excuse for poor marketing. Salmon is a tasty, healthy, value for money meal choice. It has enough strong selling points that it doesn’t need to be propped up by any artificial price guarantee and certainly not one directed at only one group of producers.