reLAKSation 4.
PO's - the debate continues: Speaking at Laksedagene, Richard Bates of the EU's fisheries department indicated that an alternative to the EU salmon agreement might be a joint Producer Organisation between Norway and Scotland.
Mr Bates suggests that as the European Commission do not want to resort to having to deal with further dumping actions, Producer Organisations would be an alternative method to regulating the market once the EU salmon agreement comes to an end. Both the EU salmon agreement and producer organisations have been discussed in these pages and there is a feeling that these proposals offer absolutely nothing new. In fact, the idea of a joint PO defeats the original rational for their introduction, which was to curtail the import of salmon produced from outside the European Community.
It is difficult to see how a joint PO would work other than in a similar way to the salmon agreement. A fixed percentage increase in production would be permitted if an independent panel decreed that the market warranted such growth. Such increases would be allowed across the whole farming community, but it is unclear what would happen if any farm opted not to increase production. Would other producers be given access to any unused capacity and at what cost?
How the production is shared out has its problems but these pale into insignificance when compared to the problem faced by those who will be appointed to establish the actual size of the market. Clearly, the past experience of the salmon industry illustrates that various sections of the industry have very different perceptions of the market size. It was not that long ago when the former director of NSEC declared that the European market was nearing saturation, yet the European market has continued to expand. This is because the market for salmon is extremely diverse and not just that of whole fish, fillets and steaks.
An example of this diversity involves imported Alaskan and Canadian salmon. Whilst the Scottish industry have previously fought to exclude Norwegian salmon from the European market, they remained indifferent to 24,000 tonnes of imported canned salmon from North America, claiming that it did not constitute a competitive threat.
If such canned salmon represents little threat to sales of fresh Atlantic salmon because it constitutes a different market, then so must canned Atlantic salmon. Companies in both Norway and the UK now 'can' farmed salmon and sell it throughout Europe. This competes directly against the imported Pacific salmon and in the UK would equate to about a fifth of Scottish production. This is a significant target market, but it could be stifled by any future constraints on production imposed by a potential blinkered market assessment.
Yet, there is an even greater difficulty in that any Producer Organisation will only manage a European market. How will any constraints affect salmon farming companies who have developed a market for their fish outside the European area? Could such markets also be stifled by a PO system?
Finally, the Producer Organisation will control European (and Norwegian) farmers producing for the European market. This ignores producers from outside Europe who have targeted the European market.
Exports from Chile to Europe are increasing as confirmed by the following data: The first figure is volume from Jan to Oct 2000/. The second figure is for the same period in 1999 and the third is the % change.
France. 3,091. 1,619. 90.9%
Germany 2,575. 1,251. 105.8%
Italy 494. 584. (15.3%)
Netherlands 1,259. 720. 74.9%
UK 1,654. 1,210. 36.7%
(FIS market reports)
It can be seen that although the imports are still small, they are growing and even the UK, which produces its own salmon, has imported fish from Chile. As the Chilean industry continues to grow, it will undoubtedly increasingly target the European market. Any controls imposed by a PO will encourage further such imports from outside Europe, especially if the controls maintain prices at an artificially high price.
It is clear that such Draconian measures that Producer Organisations might bring can only damage the long term future of the salmon industry. Instead, salmon farmers would be much better served by investing in innovative product development with the aim of diversifying the market whilst enhancing farm profitability.
The debate will surely continue.
Prices: Whilst promoting the idea for a joint PO, Richard Bates of the EU Fisheries Department also said that 'the EU salmon agreement had protected Scottish interests (and without it) EU consumers would otherwise have been able to purchase cheaper salmon.'.
Surely, EU consumers have been deprived of buying salmon at a true market price. This must be protectionism by the back door, since the EU agreement has simply cushioned parts of the EU industry from the realities of the commercial marketplace. It is clear that as prices contracts, the market expands so such protectionism is a two edged sword. If prices are too high, the market will shrink and farmers will find it increasingly hard to sell their salmon. Equally, low prices mean that they must work harder to maintain profitability, but consumers will be much more willing to buy the salmon produced.
The EU salmon agreement aims to achieve a balance between the two, yet there are so many commercial factors, which could upset this balance, it must be preferable farmers to rely on sound business practices than government intervention to provide the protectionist cushion in future.
Noodles and Oodles: There is a lot of discussion about how to promote salmon to the consuming public. National marketing organisations tend to focus on the country of origin, but this is of minor interest to most consumers since the question they ask is whether to buy salmon or not and thus it makes little difference as to its origin. Such detail is relevant only to the most committed consumers, who find this information of interest.
The generic campaign ignored origin and tried to get the message across that salmon is a simple dish to prepare. Yet, the TV advert used in the last campaign confused the message by giving the impression that salmon was special and not really the type of every day meal option that might attract the wider consuming public.
Research by the marketing organisations has shown that much of the salmon sold is consumed by a minority of the population. The majority never eat salmon. If the salmon industry is to attract a wider audience then it not only must promote salmon in those places visited by the public, but also give them some incentive to do so.
The British supermarket group, Sainsburys, have done exactly this. They have taken adverts in this weeks' Sunday newspaper supplements highlighting a recipe - Salmon Teriyaki with Noodles. The recipe and the picture of the finished dish take up the majority of the advert, about 55%. The bottom 20% has the legend Noodles and Oodles of Offers together with the Sainsbury name, whilst the remaining 25% is split between highlighting an offer on prepacked boneless salmon fillets. In this offer Sainsburys, give away 50% extra free with 720g of salmon fillet for £5.99 (£8.32/kg). The remaining part of this section features a bottle of Chateau Tertre du Moulin 1999, intended to go with the salmon meal, which has been reduced by £1.00.
This advert promotes salmon in a way which might appeal to the non-salmon consumer whilst providing the incentive to follow it through. Traditionally recipes are distributed at the point of sale, but most non-salmon consumers are also non-fish consumers and therefore may never be exposed to such promotion. Sainsburys should be congratulated for trying to bring salmon consumption to this untapped market.