Demand and demand: The market report in the new Seafood International magazine informs that the Mediterranean sea bass and sea bream industry continues to collapse as a result of over-production and low prices. They say that as a result a number of major companies are in administration or about to go bankrupt.

Seafood International forecasts that prices will stay low as long as there is an abundance of fish on the market. We, at Callander McDowell, disagree. Prices will stay low as long as demand remains low. The sea bream industry is not over-producing, it has simply failed to stimulate consumer demand.

The magazine also suggests that the sea bream and sea bass industry is suffering from a lack of creative marketing. We totally agree. This is the fundamental problem that is at the root of all the industry’s troubles. Surprisingly, this is nothing new, not just to sea bream and sea bass farmers, but also to other contemporary aquaculture production. We, at Callander McDowell have recently discussed the problems affecting the cod farming industry which could be resolved with the implementation of more market-led strategies, not forgetting the salmon industry which has suffered for many years after outgrowing their out of date focus on production.

It would seem that this common problem arises from a refusal to acknowledge that aquaculture producers should become involved in the marketing of their produce. Instead, they seem to want to abrogate responsibility to others further down the supply chain. However, marketing is much more than promotion. It is about producing the right product for the consumer at the right time and at the right price and most importantly, to do so profitably. There seems little point in churning out more and more fish, if they cannot be produced at a profit, yet some farmers appear more than happy to do so. This is not surprising since, after all, isn’t producing what producers do? This may be true but somewhere down the line, there has be some market control that can direct what should and should not be produced.

The lack of market focus means that those who seek answers to the current low prices largely ignore market related options. Instead, production-oriented industries will opt for production-led solutions. This is exactly what has happened with the sea bream and sea bass industry. The Federation of European Aquaculture Producers (FEAP) had asked the European Commissioner for Fisheries, Joe Borg, to withdraw 20,000 tonnes of sea bream from the market. The intention was to freeze the fish in long term storage and release them in a controlled manner back into the market. The European Commission were less than enthusiastic about the idea and according to IntraFish, told FEAP Chairman, John Stephanis that such a freezing programme was ‘more or less impossible’.   

We, at Callander McDowell, are surprised that the European Commission would suggest that freezing the fish was ‘more or less’ impossible rather than just saying no. Intervention, such as a freezing programme, is a really bad idea. It doesn’t address the problems and effectively destabilises the market since buyers know that at sometime or other, freezing will have to come to an end. This is what happened to the Norwegian salmon industry when they decided to remove fish from the market. The freezing operation proved extremely costly and the cost was not recouped when the fish were sold because they were no longer considered top quality fish. The whole exercise was expensive and the after effects reverberated round the industry for many subsequent years.

As it happens, the low price stimulated demand and as it increased so did prices. IntraFish report that the price has now recovered to €3.50/kg after bottoming out at €2.50/kg. This is still below production costs of €4.50 -5.00/kg.

Having had the interventionist approach rejected, Greek fish farmers are calling upon other Mediterranean countries to follow their example and form a network of Producer Organisations to ensure that the price crash cannot be repeated. Unfortunately, a system of Producer Organisations can not make any such a guarantee. According to IntraFish, a European Commission-run group is to be set up in the New Year to look at the viability of PO’s across Europe. This will be a waste of time.

This is because the European concept of Producer Organisations was conceived as a system to distribute a fixed allocation of fish catch. The Scottish salmon industry tried to adapt the idea to farming without success. This is because they tried to convert the fixed fishing quota to a market linked production limit. However, as no-one really knows what level of production gives a profitable return, it is impossible to fix an acceptable production limit. If such a system was put into operation, there would be huge disagreements about distribution of production. If the industry thinks it had problems now, just wait to see what unrest a PO system would bring. The problem would be heightened because those producers who actually took any marketing initiative would be penalised to help those who refused to, or couldn’t be bothered to do so.

The salmon industry went through a protracted debate as to the merits of PO’s and rightly rejected the concept. The sea bream and sea bass industry should do the same.

Instead, they should establish a marketing organisation or a marketing initiative.

Sadly, the sea bream and sea bass industry have heard all this before … and have done little about it.

In reLAKSation no 376, we discussed how the Italian industry had blamed Greek producers for the low sea bream prices. They say that high volume Greek production has undermined the luxury nature of sea bream and sea bass (where have we heard this before?). However, this is not the first time that they have made such accusations.

The sea bass and sea bream industry went through a similar crisis in 2001. At the time, various complaints were submitted to the European Commission about the activities of Greek producers but when the Commission failed to act, subsequent complaints were submitted to the European Ombudsman

( http://www.ombudsman.europa.eu/decision/en/031419.htm ). His findings were that the Commission were wrong not to register the letters as a complaint and that was the end of the matter. Even if the Commission had made the complaint against Greece official, we doubt that they could have actually done anything about it. After all, it would make little sense to penalise a farming industry at a time when stocks of wild fish were under threat and the likelihood that supplies would be reduced. The Scots took a similar approach against Norway but managed to persuade the Trade Directorate to take action although this progressed only because the information supplied was significantly flawed. All the time and effort and cost to limit Norwegian production achieved little and the time could have been better spent boosting the market demand for their own fish. The same applies to sea bream producers.

The EU Directorate of Fisheries did however commission a study on the market for aquaculture produced sea bream and sea bass, the final report of which was published in April 2004. The main conclusion of the 94 page report was that production growth was not matched by market development and it seems that the same is also true of the current situation. Because the study was university mediated, it doesn’t contain as much practical advice as perhaps it could and so the industry could be forgiven for not taking the necessary action.

The key question now is whether an improving price will encourage producers to forget their calls for action or will the realisation eventually sink in that something must be done to prevent further similar recurrences in future. Aquaculture producers often seem to develop amnesia once the money comes in, at least until the next time problems arise. What is needed is that some of the returning margins be redirected towards a well defined market-led strategy producing what consumers want.

The salmon industry has shown how consumer demand has changed and how the market has had to respond accordingly. It wasn’t so long ago that most salmon was sold whole. However as the market for whole salmon became saturated, the market changed. Rather than see salmon as a fish for a special occasion, consumers began to recognise that it made a tasty and value for money meal choice for which they required to buy a couple of portions rather than the whole fish. Supermarket fish counters began to supply more and more fillets to the point now that fillets and fillet portions dominate the offerings with whole fish only making an appearance for occasions such as Christmas and Easter.

This market evolution has not just happened with salmon. Chicken also followed a similar route but went much further into a whole range of different offerings. The salmon industry is no different and neither are sea bream and sea bass.

The culture of fish consumption is undoubtedly different in the Mediterranean region to that of Northern European countries but TV cookery programmes and more widespread travel have increased awareness of new species and the willingness to try something different. However, this is not enough on its own and products must also be adapted to local requirements.

Farmed sea bream and sea bass have been typically sold as whole fish but although some consumers in northern European countries such as the UK are willing to buy fish this way, most are deterred. They want to buy fish that looks as least like fish as possible, which is why tuna steak is so popular.

Although most supermarkets retain a fish counter, many consumers prefer to buy their fish prepacked but even prepacks do not give sufficient motivation to those who are not confident about buying and cooking fish. They need the added incentive of a recipe which is why there has been a growth in such added value meal products.

The market for fish is very varied and there is no single solution to encourage potential consumers to buy fish. What may be attractive to one consumer could possible deter another. This is why a very diversified approach is needed and which is why the sea bream industry is always in crisis. It is not enough to churn out portion-sized fish in huge volumes and then expect all consumers to want this single option. Some may describe such production as over-production but there is clearly a market for all the fish the sea bass and bream industry can produce, but the lack of marketing means that it is simply not in the form that many consumers want to buy. This must change whether it be a single company or the whole industry. 

What is clear is that any time spent trying to persuade the EU to intercede or trying to establish a PO network is time lost which could be directed to the development of a long- term market-led strategy.