reLAKSation 375. Callander McDowell
New Start, Old View: Scottish Aquaculture Minister, Michael Russell recently told Fiskeriblat Fiskaren that the salmon war is over and that it is time for a new start (see reLAKSation no 363). However, Mr Russell’s idea of a new start seems to offer little new but rather smacks heavily of an old and out-dated approach. Mr Russell has written the foreword to the new Strategic Framework and in his very first paragraph states:
“It (aquaculture) is however an industry that has had considerable difficulties in recent years. The removal of the Minimum Import Price (MIP) for farmed salmon is of particular concern and if there were any renewed evidenced of dumping the Scottish Government would argue tenaciously for the introduction of new anti dumping measures.”
This does not represent a fresh start but rather a continuation of the last eighteen years. Yet, at the same time, Mr Russell has tried to paint a new picture for Scottish aquaculture. At the launch of the Strategic Framework on the Isle of Skye, he said that the Framework aims to modernise the sector and build on the strong foundations already in place. He added ‘that much has changed in the five years since the original framework was published’, but clearly not enough.
Mr Russell said that demand for fish and shellfish is increasing and there are a number of challenges lying ahead, which is why the Framework must be relevant and flexible enough to meet these challenges. He said that Scotland must maintain an aquaculture industry that is ambitious, thriving, growing, diverse and profitable. We, at Callander McDowell, are not that convinced that the original Strategic Framework took the industry really forward so whether the renewed Strategic Framework will make a real difference remains to be seen.
The renewed Framework document, like its predecessor, covers a wide range of issues, such as containment, planning, health and finance, some of which may have benefited from the previous Strategic Framework, but we would like to consider the issues of just one theme and that is marketing. In this renewed Strategic Framework, this key theme is listed as ‘Markets, Marketing and Image.’
The original Strategic Framework did not really consider marketing. The nearest it came to market issues was within its economic principle where one of the objectives raised the question of adding value through differentiated products and niche markets. This suggested that the Scottish industry is capable of achieving premium and value adding opportunities through differentiation but that work was needed to enhance the potential of the brands and associated quality standards (TQM, Label Rouge, SQT, Shetland and Orkney).
The outcome of this objective was threefold. One was a revised standard for Label Rouge; the second was the award of Protected Geographic Indication (PGI) and the third was the implementation of a two year action plan costing £3 million. This was smaller than envisaged because of ‘improved trading conditions.’ Oddly, these ‘improved trading conditions’ occurred at exactly the same time that the Scottish Executive submitted their application for safeguards and the EUSPG submitted their dumping complaint to Brussels. We can only wonder how the Ministerial Working Group reached this different conclusion about the then conditions in the marketplace.
The second objective looked at the further development of the industry’s export strategy. The outcome of this objective was a market study of the French and Italian markets. How relevant and successful they were is unknown as no further information appears to be available, although we do know that the French study was directed just at the Food Service sector.
By comparison, the renewed Strategic Framework has a whole theme devoted to marketing, which is not only encouraging but clearly a step in the right direction. Unfortunately, closer examination of the proposals within this theme would suggest that it may not live up to the anticipated expectation. Regular readers of reLAKSation will know that we firmly believe that the future of the aquaculture industry is dependent on the implementation of strategies that are more market-led whereas up until now, the salmon industry has largely relied on those which are production-led. We therefore believe that it is fundamental that the focus of any new strategic framework must be directed towards the further development of market strategies. Unfortunately, whilst one of the five themes would indicate that the importance of the market has finally been recognised, its contents appear to offer nothing new. In fact, the theme of ‘Markets, Marketing and Image’ seems to have been more of an after-thought, into which all the issues that do not fit anywhere else have been dumped. Thus the theme includes such issues as ‘the image of the aquaculture industry’; ‘aquaculture as a viable career’ and ‘feed sustainability’, none of which will really help with a market-led approach.
We would happily discuss all seven issues included in these themes but time and space allows us to focus on just two. These seem to us to have a connection which is worth pursuing further.
The aim of the key issue of this theme is to secure the Scottish premium. This seems to echo the ideas of the original Strategic Framework, although it doesn’t specifically mention any of the ways that might be expected to achieve this. Instead, the accompanying commentary points to the rationalisation of operations into larger more efficient farms, but how this is expected to secure the Scottish premium is unclear. Typically, the production of Label Rouge salmon is always cited as the prime example of premium pricing. Even the photo used on the Marketing Theme’s page of the Framework document is of salmon tagged with a ‘Label Rouge’ gill tag.
There is no doubt that Scottish farmers receive a premium price for their salmon produced to Label Rouge standard. The SSPO say, on their website, that consumers are prepared to pay up to 25% extra for Label Rouge salmon. How much of this is translated into profit after paying the extra costs of Label Rouge production is unknown but clearly there is profit in the process. The real problem of Label Rouge production is that after nearly sixteen years of Label Rouge production, total sales still only account for about 7,000 tonnes or 5% of Scottish production. This is a tiny proportion of Scottish production yet, it is often discussed as if it was typical of it all.
To be fair, Label Rouge is not the premium market which producers aspire to. Organic production also offers an opportunity to obtain a premium price. However, like Label Rouge, organic production is still a tiny part of total Scottish production at around 8,000 tonnes.
The Strategic Framework also refers to higher welfare standards but it is uncertain whether producing salmon to this standard will generate a higher price or whether it is more of a route to an assured market. Certainly, consumers are not being charged more for higher welfare salmon in those stores that now offer such salmon.
It is acknowledged that besides these niche markets, Scottish salmon does sell at a premium, at least at the farm-gate. It does appear that this premium is available not because of the Scottish origin but rather the local provenance and the ability of local producers to supply fresher fish than imported and be able to react better to supply needs. However, when salmon prices decline it is possible that this premium may be threatened.
This is perhaps why the second issue is given such prominence in the Markets, Marketing and Image theme of the renewed Strategic Framework. This is trade defence.
We have already discussed how Mr Russell has raised the subject of the MIP in his foreword, however it is also included as part of the Framework. What it seems to imply is that if the Scottish premium disappears, then the industry can fall back on trade defence. As this issue is included in the Marketing theme, it does seem to us that if the industry invested more in marketing its products, producing what the consumer wants, then such trade defence as the MIP would become irrelevant.
The commentary provided states that the European Commission’s monitoring mechanism will allow an ex-officio anti-dumping investigation should there by sufficient prima facie evidence of injurious dumping. However, it is clear that since the removal of the MIP, the EU’s monitoring mechanism will have been hard pressed to find even the slightest bit of evidence of dumping, this is because prices have remained extremely firm and the indication is that this is unlikely to change. This is because more UK retailers have committed to sell Scottish salmon, reduced supplies of Chilean salmon and increasing demand for farmed salmon as prices have readjusted downwards following the initial imposition of the MIP. The problems in Chile will impact on the market for sometime yet, so it is unlikely that we will see any further downward pressure on prices for quite some time yet.
The indications for the future are encouraging with independent farm Loch Duart announcing further investment and Marine Harvest Scotland posting strong profits this quarter.
However, it is worth remembering that salmon production will continue to grow and so will demand. Nevertheless the industry cannot continue expanding production without investment in marketing. It is not enough just to produce the salmon and expect customers to buy it. We must tell potential customers about our salmon, that it offers real value for money, is healthy food and that it is tasty and makes excellent eating. Without marketing, the public won’t know that salmon is available to buy and therefore won’t buy it. However, marketing is more than just the promotional message; it is also about producing the right salmon that the consumers want to buy. This is why marketing is so important but it is something that producers sometimes forget. Instead, they are often too busy producing salmon of the type that they think consumers should be buying. In the case of Scotland, the belief is that consumers want a premium product, which sales show is clearly not true. Most consumers simply want a tasty, value for money, meal choice. We would hope that this is something that this renewed Strategic Framework would recognise rather than targeting all its resources at securing a perceived premium. This would be a mistake.
Strategic Framework consultation document available at: