JanTrollvik of the Norwegian Seafood Export Council echoed a theme raised previously by some other commentators that salmon is a recession-proof food that is bucking the global economic situation. He said that salmon exports were up by 13 percent last year demonstrating that people around the world still want salmon. He therefore asked ‘what crisis are we talking about?’

We, at Callander McDowell, remain open-minded. There is no doubt that whilst construction and some parts of the manufacturing industries have collapsed, the food industry should be better placed to ride out the recession because as Mr Trollvik says ‘people have to eat’, but at the same time, figures from last year are not really an indication of what is happening now. The effects of the recession are not necessarily immediate but rather more long lasting as people who are still spending start to recognise that they may have to tighten their belts.

Having said that, as long as the salmon industry continues to provide a tasty, value for money meal choice, then there is no reason why salmon farming cannot continue to buck the recession.

European salmon farmers are fortunate (maybe not the best choice of words) that the recession has hit at the same time that the problems of disease have magnified in Chile. Global production will fall and most commentators believe that this will continue to bolster prices.

Dag Sletmo of ABG Sundal Collier suggested that a projected 4 percent drop will supply will produce a good price picture for salmon farmers. He said that prices could go way above NOK 30/kg. IntraFish reports that this week, prices for all salmon, except the smallest sizes, are already higher than this.

However, Mr Sletmo points out that salmon prices and markets have been historically tied to economic growth. He went on to say that salmon’s typical two to three year profit cycle would put companies back on to profitability again in 2010. The question, he added, is this cycle a coincidence or is it a model?   

We are in no doubt that it is not a model but rather a coincidence. We do not believe that any of the apparent cycles that the salmon industry has gone through since 1989 are indicative of a model since on every instance, the cycle can be shown to be the result of some form of interference, either direct or perceived. In most cases, this interference has come from the recurring trade war between Scotland and Norway. The salmon industry has never really had an opportunity to operate free from such interference and demonstrate its real potential. Even now, external factors are still exerting an effect.

What is also interesting is that whilst forecasting high prices, Mr Sletmo suggests, with some care, that the outlook for supply is very bullish, but demand is looking bearish. If this is the case, then the forecast for continued high prices is looking less optimistic since it is demand and not supply that is driving prices.

It does seem rather incongruous that, whilst we are currently in the midst of a credit crunch, salmon prices have continued to strengthen. Logic would suggest that consumers would be reluctant to pay more for their salmon at this time and we believe that this is the case. Higher salmon prices are not really filtering through to the consumer and when retailers have increased prices they have quickly been returned to their former level, suggesting a high level of customer resistance. Of course the market is not just affected by higher salmon prices; currency exchanges also have had an impact on the need to increase retail prices. This is apparent from price increases on a range of imported foods sold in UK supermarkets.

The retailers are trying different methods to recoup some of the prise rises by different means. A recent change to supermarket fish counters is the use of pricing in pence per 100g rather than pounds per kilo in an attempt to make prices sound cheaper. More successful has been the change to fixed portion size at a set price. Thus consumers know exactly how much each piece of fish is and how it affects their budgeting. This is especially important in a tough economic climate. What is less apparent is the higher price paid for this method of presentation.

Such changes to the way salmon is sold is no guarantee that consumers will be prepared to pay more for their salmon. History has repeatedly shown that high salmon prices suppress consumer demand. Some commentators may suggest that with the problems in Chile this is no bad thing and that salmon can be diverted to other markets such as the US. However, there is equally no guarantee that US consumers, used to value for money Chilean salmon, will be prepared to pay more for European fish. There are plenty of other species competing for any gap in the market.

We have written previously that higher prices have already damaged the European market, not necessarily for fresh salmon but in those sectors that use salmon for processing. Salmon products have either disappeared from the shelves or have been replaced with products made from cheaper, and less desirable, Pink and Keta salmon. The incorporation of such salmon may even deter some consumers from buying such processed products again if they start to think that the taste and texture associated with these Pacific species is typical of all salmon.

Interestingly, Steven Raffety, CFO of Cermaq, told the conference that the salmon industry will be unable to meet current demand. He told FishfarmingXpert that he expects that output will decrease by 6% this year and this shortage will affect prices although he expressed the hope that he doesn’t see NOK 30/kg. This hope may be now a little late but it does reflect the difference between the views of analysts like Mr Sletmo who seem to welcome high prices and the industry, who recognise the potential damage that high prices can exert. But then the market in which the analysts are most interested is the stock market whereas the industry is more concerned about what happens in the salmon market.

Recession v. Sustainability: The IntraFish blog also looked at the question of sustainability in relation to the current recession as this was raised at the European Retail Seminar held during the North Atlantic Seafood Conference. This was prompted by the presence of Andrew Mallison from Marks & Spencer, a retailer that supports the Marine Stewardship Council and sustainable seafood. This is despite recent surveys that have shown that consumer concern about the environment peaked in 2007 and fell 9 percent between 2007 and 2008 as concerns about the economy increased.

So IntraFish asked will M&S take a page from the discounters and start offering low price, no frills products? According to Mr Mallison, not hardly. He said that M&S remains bullish on sustainability, particularly after the success of its company wide ‘Plan A.’ Yet it is worth remembering that sustainable seafood is only one small part of a plan that affects every area of the business including clothing.

Mr Mallison said that concern for the ‘environment’ remains strong amongst M&S consumers even they are more worried about the cash in their pockets than they have been for years. He said that in a poll last May concern for the environment still remained the second most important concern for consumers. IntraFish doesn’t say what is first but it is not difficult to guess that it is money.

As already mentioned, the blog seems to indicate that M&S will stick with its principles and avoid offering low-price no frills products. However, it doesn’t mean that M&S will not react to the need for better value for money offers to attract more customers to its stores. In addition to ‘Dine in for £10’ deals and £4 specials, M&S have launched their Wise Buys, a range of value products. One of their new advertisements for this range appeared in the tabloid press this week in which they offer a pack of ‘Gala’ apples for 99p. The ad says that they have reduced the price of hundreds of everyday products without compromising their quality. For comparison, a pack of ‘Gala’ apples costs £1.67 in Asda, £1.57 in Tesco, £1.89 in Sainsbury’s and the same price in Waitrose. Whether the number of fruit in each pack is the same is not clear.

Mr Mallison says that going forward M&S will continue its support of MSC fish. So far, no chilled fresh fish appears to have been rebadged as a ‘Wise Buy’ but M&S does already offer a ‘value’ bag of salmon portions and some presentations of key fish species have been repriced down. Price is certainly an issue, even at M&S.

The Watchdog supermarket survey discussed in the last issue of reLAKSation found that 35% of shoppers believed M&S to offer the best quality food followed by Waitrose with 29% of respondents. Yet, less than 5% of shoppers actually visited M&S whilst around 10% shopped at Waitrose.

The problem for M&S is that they only offer a limited range of products, most of which are under their own label. Shoppers would find it extremely difficult to carry out a complete shop in M&S stores so rather than visit two as they had in the past, they now typically opt to do their shopping in just one store. The move to offer more affordable options under the ‘Wise Buy’ label shows that M&S is keen to attract these shoppers back.

They are not alone. Waitrose has also stood by the quality and ethical standards of their products. The problem for Waitrose is that most of their customers perceive that their shopping is up to 25% more expensive than Tesco or Sainsbury’s, even though 2,500 products match the price offered by Sainsbury’s. The Guardian newspaper reports that Wairose Chief Executive, Mark Price, has just announced the biggest decision and biggest launch in the history of Waitrose in an attempt to reposition the middle class brand.

The launch to take place on Monday is of the new ‘Essential Waitrose’ label which will involve the rebranding of 1450 of Waitrose’s own label products and cutting prices on 450 lines to stop increasingly cost conscious shoppers from defecting to rival supermarkets to find cheaper prices. The launch will focus on meat, fruit and vegetables, with some prices being slashed by 25%. Other products will follow throughout the summer.

So will the recession kill sustainability? We, at Callander McDowell, don’t think so, at least for the time being. Stores like M&S and Waitrose will no doubt retain their commitment to the MSC and sustainability but we suspect that any premium will vanish. Shoppers will want to continue buying sustainable fish but only at a price they are prepared to pay. However, whether fishing companies will want to pay to certify sustainable catches if they will not get rewarded for doing is a totally different question.

Shut up: In the same European Retail Seminar, Vidar Olsen category manager at the major Norwegian retailer Norgesgruppen, didn’t pull any punches when he addressed the audience. The IntraFish blog reports that he blasted the industry’s lack of innovation and imagination, a lack of brands and missed opportunities adding that ‘we don’t want to buy your fish, but products made from your fish.’

He went on to say that the retail sector shouldn’t have to chase producers but rather they should serve retailers. He said that they are keen to develop the fish category but why should they be the only ones to invest in the market to make this happen. He has a point.

However, it is worth mentioning that the Norwegian retail sector differs significantly from that in other parts of Europe and especially in the UK. The Norwegian market is not as well developed and often focuses on basics. By comparison, British retailers offer a huge range of products and services. Whilst Mr Olsen comments apply to the Norwegian market, they still have relevance elsewhere.

The reality is that much of the salmon farming industry sees itself as being first and foremost farmers. Their responsibility (and interest) stops once the fish are harvested or have undergone primary processing. We have heard many times comments such as ‘what has the retail market got to do with us.’ We agree with Mr Olsen, absolute everything.

The farming industry might produce salmon but it is the end-consumers who eventually pay for it. The industry needs to take increasing note of what consumers want and ensure that the products match their requirements. It should not be up to the retailers to drive this forward; rather it should come from the industry. After all, modern retailers sell tens of thousands of products. What would happen if the retailer had to drive every one of these?