reLAKSation 357. Callander McDowell
Big or bigger?: The Washington DC office of the Chilean Department for Export Promotion (ProChile) reports that there are big opportunities for Chilean salmon in the United States. This news is like a breath of fresh air. After listening for many years to repeated claims of over-production in the world’s salmon industry, it is really refreshing to hear some positive news about the future for farmed salmon.
We have not seen the ProChile report, but an article in IntraFish appears to suggest that it has drawn its conclusions from a number of different sources. For example, data from the Department of Commerce shows that imports of Chilean salmon for 2007 totalled 236,414 tonnes, an increase of 2.7% on the previous year. However, ProChile appear to question whether this growth can be sustained since the report highlights that the salmon industry needs to do more to educate restaurants and chefs about the quality of their products as Chilean salmon has suffered from negative media attention due to the ongoing problems with infectious salmon anaemia. ProChile may be right to be concerned since the latest export figures to the US may be well down on previous years. IntraFish report that Chilean exports have risen by 14% to 245,323 of salmon and trout during the first half of 2008, of which Japan and the US account for 66% of the total export volume. Simple maths calculates this to a total of 161,913 tonnes but 104,713 tonnes of this was exported to Japan, leaving a figure of just 57,200 tonnes, which presumably is the amount that has reached the US market. If these figures are correct and exports stay at the same level, Chilean salmon exports for 2008 would be 92,000 tonnes down on that for 2007.
Reaching any conclusion about the US market is always difficult since data is often quoted in a variety of different guises which then requires much mathematical manipulation to produce data which can be compared.
For the time being we would like to put the possible negative implications of ISA to one side and consider instead the basic premise that the US stills represents a major opportunity for Chilean (or any other) farmed salmon. The National Fisheries Institute (NFI) has recently published US consumption figures for the top ten seafoods in 2007 with salmon remaining firmly in third place at 2.36lbs (1.07/kg) per head. This equates to a total US salmon market of about 325,000 tonnes. Based on this figure, it would seem that Americans consume seven farmed salmon for every three wild fish eaten. Farmed salmon therefore already makes an important contribution to US seafood consumption. However if an average portion size is estimated at 150g, it would seem that Americans typically eat salmon, whether farmed or wild, only once every seven weeks or just about once every two months.
Clearly, if the US public could be persuaded to eat salmon just once a month instead, demand for farmed salmon could be doubled. There is therefore no doubt that ProChile are correct in their assertion that there are big opportunities for farmed salmon in America. With estimated consumption at just once every seven weeks, it seems as if the surface of the market has been hardly scratched at all.
The American public are not great seafood consumers. Their total consumption of the top ten species which includes canned tuna (at number 2) and shrimp (at number 1) is 6.72/kg which means that salmon only represents a small 16% of existing seafood consumption. Surely, this offers huge scope for expansion.
Yet it seems that such potential is not recognised by all. ProChile have included in a study from H M Johnson & Associates in their report which suggest that seafood consumption will actually fall in 2008. They say that this will be due to higher food prices; a weakened US dollar; record fuel prices and a reduction in household spending. We, at Callander McDowell, are not convinced that it is all such doom and gloom.
There have been many reports of spiralling food prices but these have not been across the board. Growing demand for rice and other grains has pushed up prices but at the same time, many retailers have been trying to limit the effect on their customers. Fish and seafood prices are still good value and in the UK for example, some prices have even fallen. In the US, farmed salmon remains available at value for money prices. For example, the following deals are currently available for farm raised Atlantic salmon:
Weis Supermarkets of Abingdon, MD. Salmon fillet $6.49/lb
Big Y Supermarket of North Haven, CT. Salmon steak $6.98/lb
Shop Rite of Tallman NY. Salmon steak $6.99/lb
Felpausch Supermarkets of Battle Creek MI. Salmon fillet $7.99/lb (Canadian)
Balducci’s of New York. Salmon fillet $8.99/lb
D&W Fresh Market, Grand Rapids, MI. Skinless & boneless salmon fillet portion 6oz $4.49
Raleys Supermarkets of California. Salmon fillet $4.99/lb
Shop’n’Save Supermarkets of Beaver, PA. Salmon fillet $6.99/lb
Grand Union Family Market of Hoosick Falls, NY. Salmon steaks $5.99/lb
Pathmark Supermarkets of Fair Lawn, NJ. Salmon fillet $6.99/kg
Heinens Supermarkets of Cleveland, OH. Salmon fillets $8.99/lb (Canadian)
We do not claim to be exchange rate specialists but it does seem that changes in exchange rate mean that American importers of Chilean salmon are actually getting better value now that earlier this year as the dollar buys more Chilean pesos.
Fuel prices may have reached record levels but the price of oil does appear to have peaked. One reason is that the world’s economies have now come off the boil and demand for oil is now falling. At the same time, oil producers have upped production to try to take advantage of rising prices, which has increased supply. Finally, changes in exchange rates means that oil revenues give a better return for producers so they do not have to sell greater volumes to maintain their income.
Lastly, the credit crunch will mean that there could be more people seeking to reduce household spending which is all the more reason that they will seek foods that offer the best value for money. This does not necessarily mean that they will reduce their seafood purchase, especially as those products at the top of the most popular species are not the most expensive.
H M Johnson & Associates finish their report by suggesting that the future trends likely to affect the seafood industry are food safety, sustainability, traceability and organic certification. Such trends are not difficult to predict since they are already important in the supply of seafood with the exception of organic certification which remains a niche sector. If H M Johnson’s predictions are correct and consumption will fall, then this will certainly impact on any move towards organic certification. This is because organic producers expect a much greater return and this is unlikely to be realised if cash is tight. Equally, consumers will not expect to pay more for food safety, traceability or sustainability. These are all issues which will be expected to be provided as a matter of right.
So the key question is how do ProChile believe that the salmon industry can exploit the big opportunities in the US market? IntraFish provides a list of nine recommendations taken from the report, four of which focus on streamlining the export supply chain. We do not intend to consider these in this issue of reLAKSation but the other five merit further discussion. These fall into three categories:
ProChile suggests that producers should seek a selective niche for their products such as restaurants, gourmet stores or supermarkets, particularly if a company is looking for differentiation. We find this suggestion rather confusing since farmed salmon is far from being a niche market product. With third place in the US top ten consumption table, farmed salmon is definitely mass market. At the same time, salmon does have the potential to be a niche market product. The key is certainly differentiation.
One of the main factors that brought about the trade war between Norway and Scotland was the focus on whole fish and the lack of any differentiation. The market for salmon is very diverse, yet there has been a tendency for producers to argue that they are simply farmers producing a whole fish which they sell. There has been a resistance to recognise that even the most complex products are made from their fish. This is the old argument about whether the salmon industry should continue with their production-led strategies or pursue those that are more market-led. We believe that ProChile are trying to promote the market-led approach and rightly so, even if their message is slightly confused.
One of the selective niches that ProChile specifically recommends is the kosher market. This suggestion reflects a greater issue in the seafood market; that of average consumption rates and target markets.
We have already discussed how the average US citizen consumes 2.36lbs of salmon a year. The reality is very different with consumption ranging from none to a lot. Many consumers will never eat salmon at all whilst some will eat it extremely regularly. When it comes to trying to boost consumption, is it easier to persuade those who eat salmon to eat more or to persuade those who never eat salmon to start eating it. The answer is usually the first group since they have already crossed the line of deciding whether to eat salmon or not. Those who don’t eat salmon pose a much greater obstacle since it is necessary to work harder to overcome the barriers to consumption. Existing consumers are much the easier option. In the US market, the kosher market must fall into this category.
Currently, the Jewish community in the United States represents about one and three quarter percent of the total population so it can be considered a niche market. As large consumers of salmon, this market must be already well supplied with both fresh and smoked fish but like any market if it is provided with too much product, there is the likelihood that the market can be undermined. With less than 2% of the population, clearly there is still a lot of scope outside this specific niche for market development.
ProChile already recognise that there are other market hotspots where fish buying behaviour is much higher than elsewhere. For example, they say that the Northeast region consumes 32% more seafood than anywhere else, whilst the largest consuming ethnic group is of South East Asian origin with 43%. High earners also tend to eat more fish and seafood (36%). These observations are not unique to the US but also to other developed markets, exception perhaps where the region is concerned. The high consumption of fish in the Northeast region may reflect it’s rich fishing heritage. Again, should the industry target these consumers or should they aim to persuade consumers who have never eaten salmon to try it.
One feature of the US market is the high rate of preference for eating out and convenience foods, especially at the lower end of the market. We, at Callander McDowell, have always argued that that it is easier for the industry to produce what consumers want to eat rather than persuade consumers to eat what the industry wants them to eat.
This ties in with one of the other recommendations made by ProChile. They say that the industry should participate in more cross-promotional activities such as those that include other products such as seasonings, wine and produce to expand the menu ideas. In essence, this may sound like a good idea but such promotions when undertaken in the UK have not been a great success. This is because neither the salmon, nor the cross promotional product have a strong enough market image to really catch the eye, or the imagination, of the consumer.
Although not involving salmon, an example of a successful co-promotion is currently running in the UK between the sandwich chain ‘Subway’ and Levi Root’s ‘Reggae Reggae Sauce’.
‘Reggae Reggae Sauce’ is a success story in itself which involves a TV Business Angel programme but it is not for telling here. Needless to say that the meteroric rise of the sauce prompted Subway to develop a unique sandwich that has been publicised nationally. Both Subway and ‘Reggae Reggae Sauce’ have benefited, especially the sauce which can now be found in most supermarkets. By comparison, farmed salmon has no perceivable brand image since it is just raw fish flesh and therefore would need to find a really strong partner to bring it to the consumer’s attention.
The final recommendations made by ProChile focus on boosting farmed salmon’s market image. We discussed earlier that demand for farmed salmon in the US may have declined this year. This could be because of the adverse publicity about Chilean farmed salmon in the media. A similar decline in demand was seen in the European market following the outbreak of ISA there but even though the disease has not been eradicated, the market has recognised that it is not a consumer issue.
The underlying issue is however not ISA itself but rather the media’s readiness to publish negative stories about aquaculture in general and salmon farming in particular. This is not unique to the US or to Chilean salmon. Salmon farming is seen as fair game amongst some journalists even if their knowledge is somewhat lacking for there is always the opportunity to pad out stories with unproven and misleading facts. For example, this weekend’s Guardian newspaper in the UK has had a pop at salmon farming in the travel section. The article was about a holiday collecting wild food from the sea but the reporter managed to include the following (he was writing about the sonar found on fishing vessels used to identify shoals of fish) “…., huge vessels scooping up edible sardines or Antarctic krill to feed to farmed salmon (along with chicken feathers and feet, artificial colourants and antibiotics.)” Some journalists see aquaculture as the pariah of food production and will ‘have a go’ at any excuse. The problem is that they rely on the environmental lobby for facts rather than go looking for themselves. ProChile recommends that the industry carries out a public image campaign at the institutional level to inform influential media representatives about salmon farming. This is an absolute priority but a campaign is not enough. The key must be to take such journalists to the farms so they can see the industry for themselves and they be given free access so that they are confident that they are not being shown what the industry wants to show them. If journalists are familiar with the industry then they will be able to see through the adverse stories that the environmental lobby hope will undermine the commercial salmon farming industry. We see that it is more important to ensure that any news about salmon farming is factually correct (and hopefully positive) rather than trying to correct any previous adverse publicity since corrections tend to simply prolong and reinforce the negative publicity.
At the same time, the industry needs to continue to promote the good eating qualities and health giving properties of salmon through all the usual women’s and food magazines wether through editorial, advertorial or direct advertising. To some extent the industry already does this through the offices of ‘Salmon of the Americas’. Based as we are in the UK, we are unable to monitor how much media presence SOTA achieves but we do wonder whether it is fully committed in this direction. We say this because as regular subscribers to IntraFish, we have always been puzzled as to why this web based fish and seafood news site carries permanent advertising for SOTA. When the link is followed, readers are taken to SOTA’s consumer site. No offence to IntraFish, but surely, SOTA would be better advertising where consumers, rather than industry people, can read about the benefits of eating salmon. If the industry is not aware of these benefits by now, then we can only wonder what sort of industry we work in.
ProChile also suggest that the industry should target its advertising to chefs and restaurants as they believe that they are the ones that can influence what products will succeed or fail in the market. We are not so sure.
There is a huge variety of restaurants of varying standards and quality. Those whose chefs are perceived to be most influential tend to be at the top end of the market and are usually quite snobby about their food and menus preferring to use what they consider to be of the highest possible quality. Thus when it comes to salmon, chefs opt for wild rather than farmed salmon as, rightly or wrongly, the connotations of wild imply a better quality than any farmed produce. This view can be seen from comments made by Roger Berkowitz, owner of Legal Seafoods restaurant chain who said that farmed salmon is like jug (house) wine. He said that it has got a lot of people eating salmon but now they can start expanding their horizons and try wild fish. The implication is clearly that farmed salmon is akin to cheap and cheerful wine but if consumers want to try the complexities of a good high quality wine, then they should try wild salmon. It is going to take more than a bit of advertising to persuade Mr Berkowitz that farmed salmon is every bit as good as wild fish.
However, fuelling the debate between the qualities of wild and farmed salmon means that the underlying issue is lost and that is how can we persuade more people to eat salmon.
Our view, once considered to be heresy amongst Scottish salmon farmers, is that if the industry needs to put salmon in fish sticks (fingers) in order to get more people converted to salmon, then that’s what needs to be done.
The US population is very diverse and if more of the population is to eat salmon, then the salmon offers need to be more diverse too. This is the real challenge facing the Chilean salmon industry.