reLAKSation 361. Callander McDowell
No fall out: Interviewed by Kyst.no, Trond Davidsen of FHL farming has indicated that, following the removal of the ‘Minimum Import Price’ by the European Commission, there have been no discernable after-effects in the marketplace. We, at Callander McDowell, are not really surprised as we didn’t really think there would be. The market situation is very different to that when the European Commission withdrew the European Salmon Agreement which limited Norwegian exposure to the European market. Following the reopening of free trade, there was a surge of Norwegian salmon on to the market which did affect market conditions. This was not unexpected but European salmon producers claimed that this was evidence of continued Norwegian dumping and this subsequently led to the re-imposition of the MIP. This time, the market conditions were much improved and despite the presence of the MIP, the flow of salmon into Europe remained unimpeded. This means that there has been no obvious effect on the marketplace and nothing for the independent European salmon producers to complain about.
Only time will tell whether the market remains unaffected, however we can see potential problems ahead. Some of the independent Scottish farmers found that they will unable to compete with the large producers and opted to diversify into premium niche markets for both organic and high quality Scottish salmon. The problem now is that the credit crunch is forcing shoppers to change their buying habits. The Guardian newspaper reports that organic food sales have fallen more than at any other time in the last decade as shoppers try to cut costs. The most noticeable falls are in sales of eggs but all sectors record falling sales. Experts warn that consumers are now more confused than ever about whether it is worth paying the higher prices for organic food. This confusion has led to some agricultural farmers to quit organic production altogether.
The market for organic fish is still small but we would expect to see similar falls in sales. We regularly monitor prices of all proteins and have noticed that prices for organic meats have been reduced to encourage sales. This is not yet happening for organic salmon but this could be because availability is limited. By comparison, premium salmon is being offered at discounts. This week, Marks & Spencers are offering packs of two fillets of their Lochmuir salmon at half price.
The question is if shoppers do desert organic and premium salmon for cheaper presentations, will this affect the viability of the small independent farms? If these farms find themselves once again under pressure, can they again blame Norway? Or can they blame the removal of the MIP? And will Brussels be prepared to listen if they pursue another complaint? Or will any future problems simply be the result of a series of unfortunate events in the general economy?
Shock Horror: During the last dumping case, Callander McDowell, were invited to Brussels three or four times by head of the investigation division, Fritz-Harald Wenig. He said that he disagreed with the views discussed in reLAKSation and wanted to ‘educate’ us about the realities of the salmon dumping case. Fritz-Harald is a likeable person and is very hospitable however, he was completely uninterested in discussing the issues, preferring to hold court and hear the sound of his own voice. During three meetings, he failed to answer one single question. We now know where we went wrong.
During a six-month investigation, the Sunday Times tape recorded Fritz Harld discussing the possibility of payment or of a lucrative job in return for inside information. He thought that he was speaking to lobbyists for a Chinese businessman and leaked the names of two Chinese companies likely to get special status if the EU imposes a protective trade barrier against Chinese candlemakers, however the lobbyists were in fact undercover reporters for the Sunday Times. The information is potentially worth millions to those trading with these companies.
The Sunday Times says his actions appear to be in breach of European Commission regulations and raise questions about the standards of probity in Brussels. Mr Mandelson said that he would launch a comprehensive and thorough investigation. We, at Callander McDowell, suspect that if the investigation is as thorough and comprehensive as the one conducted into salmon dumping, then Mr Wenig has nothing to worry about. The investigators simply have a preconceived idea as to his innocence or guilt and investigate accordingly. In the salmon case, the investigators had already determined Norway’s guilt before the investigation was initiated.
The Sunday Times revealed that Mr Wenig also disclosed that Peter Mandelson will back moves for further tariffs on Chinese footwear even though other Commissioners will not be told until Wednesday. Mr Wenig also offered to help a company linked to the Chinese client if it applied for special status to exempt it from the footwear tariffs and he agreed to pass on information about which other companies would be given special tariff rates in a Commission investigation involving aluminium foil.
When asked to comment, Mr Wenig denied that he had given away any secrets describing the information as semi-public. He refused to comments on whether he had broken any rules however what it does question is whether he can be really be judged to be an impartial arbitrator of trade cases. We have always argued that there has never been any dumping of salmon. This revelation simply justifies that we are right to be concerned.
Friday the fifth: Friday saw the start of Seafood Fortnight, the UK’s ‘successful’ annual seafood promotion. This year's theme is '2 a week', the same as previous years. During the fortnight SeaFish aim to remind everyone that seafood is one of the healthiest, most convenient and delicious foods available. It is also versatile and great value for money, quick and easy to prepare and there are literally thousands of recipes to choose from.
As in previous years we, at Callander McDowell, toured all the major retailers on the first day to observe what sort of efforts each supermarket chain had taken to promote fish and seafood in their stores:
Asda – nothing
Booths - nothing
Coop – nothing
Marks & Spencers – packs of fish and seafood carry the ‘2 a week’sticker. No mention of Seafood Fortnight.
Morrisons – The entry gates were wrapped in ‘Seafood Fortnight’ banners. Some of the stabbers used on the fish counter carried the ‘2 a week’sticker. Four different recipe cards were available from separate dispensers attached to the counter. A small label was attached to the shelves of the chiller promoting a co-promotional competition with Jus-Roll Pastry with packs of stickered fish. Competition stickers were attached to packs of salmon.
Sainsburys – some packs of chilled fish carry the ‘2 a week’sticker. No mention of Seafood Fortnight either at the fish counter or on the chilled section.
Somerfield – nothing
Tesco – nothing
Waitrose – nothing
Morrisons aside, it seems that one or two suppliers are the only ones to have made any effort to promote Seafood Fortnight as they have attached the ‘2 a week’ sticker to packs of their fish. This sticker may be an improvement on the version used last year in that it actually includes a recommendation to eat at least two portions of fish, but it is still not linked to the Seafood Fortnight promotion.
Morrisons appear to be the only store group to have taken any trouble to promote this new enlarged Seafood Fortnight from the outset. Their efforts this year are much improved from previous years and all customers entering the store can be left in no doubt that seafood is being promoted. Whether this will encourage them to visit the fish counter is unclear but at least the fish counter in Morrisons can be seen directly from the entrance. It is likely that shoppers encountering similar advertising on entering other supermarkets would have forgotten about the promotion by the time they reached the vicinity of the fish counter unless the message was re-enforced on the way.
It is still early days in this fourteen day promotion and the promotion may become more apparent as the days progress. We will keep you informed.
Consumers behaving?: As Seafood Fortnight gets underway, Seafoodintelligence.com reports that Seafish have just sent out a tender for market research to help them understand consumer’s decision making processes when buying seafood so that they can provide expert knowledge and support to the industry. This seems an odd time to start this process. Surely, it would have been better to gain an understanding of how consumers perceive seafood before engaging in a major two week long promotion rather than during it?
SeaFish has identified four research areas, which we believe are worth comment, the first of which is the ‘nature of the supply chain’. However before we discuss this and the other areas we would first like to consider one fundamental question. The invitation to tender uses the term ‘consumers’ throughout but we believe that this is too general as different groups of ‘consumers’ have very different requirements and aspirations in relation to the fish and seafood market. We think that there are three very distinct groups of consumers; those that regularly eat fish and seafood and those who don’t eat fish and seafood at all. The third group are those whose only source of fish is breaded and battered or from the fish and chip shop. In terms of the wider fish and seafood market, these fish and chip consumers have more in common with those who don’t eat fish and seafood rather than those who do.
Many of the questions posed by SeaFish in their invitation to tender really only apply to existing consumers. This brings us back to the fundamental question as to whether promotions like Seafood Fortnight are really aimed at persuading existing consumers to eat more fish or instead towards persuading non-consumers to start eating fish.
Returning to the first research area relating to the nature of the supply chain, Seafish pose four questions.
1. Do consumers fully understand where their seafood comes from? We certainly doubt it but more importantly, we believe that most consumers prefer to put their trust, rightly or wrongly, in their retailer to provide fish which meets all the necessary concerns such as whether it is sustainable, ethical, of the right quality. The important drivers of consumer purchase are that it is good to eat and that it is affordable.
2. Do consumers know/understand that seafood in retail as chilled is actually previously frozen and defrosted? More importantly does SeaFish? We think that there will be a few processors who will be very upset at the insinuation that the fresh fish they supply has been previously frozen when it is delivered fresh. This question shows that SeaFish actually knows very little about the UK supply chain. It only takes a cursory look at the products available in the retail sector to know that much of the fish is fresh chilled and has never been anywhere near a freezer, although it is true that some has been previously frozen. This practice is discussed more in the next question.
3. Are consumers aware that some species have to be previously frozen to allow them to get a year round supply? The answer is that they will if they read the pack labelling. This states, albeit not in the largest lettering, that products may have been previously frozen and defrosted in a way to maintain the quality and in most cases allow refreezing at home. This is not just a question of year round supply but also about the logistics of supplying fish. The fact that the environmental lobby have placed so much emphasis on sustainability means that there is pressure to source fish that has been MSC certified. Currently, the bulk of certified species, such as Alaskan Pollock, Pacific cod, Pacific halibut and Alaskan salmon, originate in the Pacific. The long distances from the market means that it needs to be shipped economically and this can only be achieved by freighting it frozen.
Other species that are non-certified, such as tuna may also have been frozen, but again the labelling makes it clear that this is a possibility. As the information is available, it is up to the consumers to take the time to read the labelling if they want to be properly informed. If they are not interested, then that is their prerogative.
4. How does this affect the perception of the categories? Presumably, SeaFish want to know whether consumers feel cheated if the product has been previously frozen. We doubt it. A previously frozen piece of fish that has been commercially defrosted still makes much better eating than a piece bought deep frozen and defrosted at home.
The second research area is described as ‘buying behaviour’.
1. SeaFish wants to know how do consumers shop the chilled, frozen and counter areas? We very much suspect that, depending on the exact product, most consumers have a very clear perception of where they shop. There will be some interchange between the three areas but in most cases, our view is that the shopping patterns are very distinct. Most visitors at the fish counter tend to be either of older age groups or of ethnic origin, whilst the chiller attracts younger consumers. The difference is due to confidence in knowing what they want. The chiller enables shoppers to pick and examine the fish and contrast and compare. This is much harder to do at the fish counter since many feel that conversation with the counter assistant equates to a commitment to buy.
The freezer cabinet is dominated by battered and breaded fish and attracts lower income consumers but this also depends on the store visited. Waitrose and M&S attract a much more affluent consumer whilst Asda and Morrisons shoppers tend to look more for value. Waitrose’s freezer cabinet offers a much different range of products to that in Asda and hence the consumer response will be different.
It is already well established that more affluent shoppers eat more fish and thus consumers in the south east of England have a higher consumption than in the north. Older shoppers also eat more fish than those of a younger age, although it is quite possible that younger Waitrose shoppers buy more fish than an older consumer shopping at Asda.
2. Do they have different perceptions of each category? Do they go to certain sections for certain products e.g. the freezer for battered and breaded products? We suspect that most shoppers keep to their preferred shopping area which is why all the major retailers offer a chilled version of breaded or battered fish in addition to the extensive range of frozen offerings.
Finally, SeaFish wants to know the decision making determinants. They say that ‘we know that price and quality are key but beyond this why do consumers buy what they buy? What are they looking for/not looking for and how does this change across the categories?’ Our view is that most consumers simply buy what they like although they can be persuaded to change if the price is sufficiently attractive enough. Based on whether they like what they taste, they may buy the product again once the promotion is over. Consumers may be willing to try different species if they feel confident enough to prepare and cook it. If not, they just buy what they like.
There are two more research areas to consider, ‘barriers to purchase’ and ‘consumer awareness’ but we will discuss them in the next issue of reLAKSation.