Callander McDowell
Callander McDowell
reLAKSation no 413
Potential for growth: The population of the United States is estimated to be over 300 million. This target market offers endless opportunities for salmon producers which is why the Norwegian salmon industry is now looking again at how it can exploit this enormous market. The renewed interest in the US has been prompted by the reduced production in Chile and the opportunity to meet the shortfall. However, there will be a time when Chilean production recovers and the industry there will seek to regain its former markets. It is therefore not surprising that the Norwegian Seafood Export Council is now considering whether it can grow the market for Norwegian salmon in the US.
In a poll of its readers, IntraFish asked whether they thought NSEC could grow US consumption and 52% said no (22% said yes and 26% said maybe). No doubt that this is not what NSEC would like to hear but they certainly have an uphill battle. The latest US consumption figures from the National Fisheries Institute shows that whilst salmon remains popular as the third most eaten seafood behind shrimp and canned tuna, the amount consumed has fallen from 2.4 lbs (1.08kg) in 2007 to 1.8 lbs (0.82kg) in 2008 although it had risen in 2007 from 2.03 lbs (0.91kg) in 2006.
IntraFish discussed NSEC’s plan of attack on the US market with marketing director Merete Kristiansen who said that they had engaged the New York based Food Group to help answer some key questions. These include what are the perceptions of Norwegian seafood? Where do consumers buy fish and what products do they buy? Unfortunately, it seems that it might be NSEC and not the consumers who have the preconceptions as Ms Kristiansen suggests that Norway has some benefits in the US marketplace that Chile doesn’t. For one she says ‘that ‘Norwegian salmon’ still means something in America. It’s a brand that carries some cachet from back in the days when salmon was a treat’.
Ms Kristiansen refers back to the days before Norwegian salmon was excluded from the US market, well over fifteen years ago. Norwegian salmon may have had some cachet then but that was a long time ago and the market has changed significantly since then, not least by the influx of salmon from Chile. However, it is not just that that has changed. A worldwide survey conducted by IPSOS Marketing found that 64% of consumers considered value for money as being most important when deciding what foods to buy.
Cachet is not something that is going to persuade today’s consumers, especially in the current economic climate. It is possible to see how relevant Norway’s cachet has become in the US salmon market by considering this week’s promotional offer from Tom Thumb stores, part of the Safeway Group. The store is offering Norwegian salmon at $5.99/lb with a saving of up to $5/lb, near enough half price. This doesn’t sound like a product which can generate the type of price premiums that are associated with a cachet?
We, at Callander McDowell, have always argued that origin doesn’t seem to result in a price differential. A study, conducted by the now defunct International Salmon Farmers Association, showed that country of origin was only a minor consideration for many salmon buyers and this appears to be reflected in many stores. This is due to the fact that it makes no sense for any retailer to sell two identical salmon products separated only by country of origin. Most consumers, who want to buy salmon, will want to make a choice based on the presentation, i.e. fillet, steak, loin etc and not from where it originates (unless their choice is based on the negative stories emanating from some of the environmental NGO’s). The lack of a focus on origin will present a major headache for NSEC, whose single strategy is to promote the Norwegian origin. In Europe, this strategy is likely to be more successful since outside the UK, Norwegian salmon dominates the market place and any promotion of Norwegian salmon could be seen as being akin to the promotion of the generic ‘salmon’. In the US market, it is a very different story with salmon available from Canada, Scotland and Chile as well as from Norway, not forgetting the local wild salmon.
Interestingly, when speaking to IntraFish, the example of a successful campaign that Norwegian Seafood Export Council has cited occurred not in an export market but actually at home in Norway. They said that they identified that salmon sales decline during the summer months so they devised a campaign to position salmon as a product for the barbecue. In the first year, the category grew 22 percent prompting retailer and producers to develop a range of new BBQ related products.
This is the dilemma facing NSEC. Should they promote the Norwegian brand, which is unlikely to grow the market or should they base their promotion on new ways of eating salmon, leaving the Norwegian origin in the background?
IntraFish have suggested that once NSEC has identified its priority market and begun to craft its plan, then Salmon of the Americas and the Alaska Seafood Marketing Institute will no doubt be watching to either counter with their own campaigns or piggy back on the NSEC’s efforts. We hope not. The last thing that the US salmon market requires is a battle based on origin. Actually, SOTA don’t seem to highlight the origin of their salmon and tend to focus more on salmon’s health benefits. Given that salmon consumption in the US has fallen, perhaps a joint approach may be more worthwhile although we suspect that many Chilean producers would be loath to spend money promoting salmon whilst they cannot supply the fish. It is also unlikely that the Alaskans would be willing to participate in a joint promotion given that they see themselves as being distinctly separate from the farmed salmon industry.
Looking at what global consumers expect when they buy food products, our suggestion for a simple campaign might take the form of something like:
(Norwegian) SALMON
- good for your wallet
- good for your health
- and GREAT TO EAT ©
Charity case: IntraFish recently quoted a story that appeared in the Homer News reporting that when the fishing boat F/V Realist caught 150 lbs of Pink salmon in their nets, the skipper Christy Fry decided that it was better to give them away to the local community rather than sell them. This was because she would only receive a total of $15 for these fish as pinks were then being sold at just $0.10 a pound £0.13/kg). Used as we are to discussion about the cost of production of farmed salmon, ten cents a pound for whole pink salmon seems remarkably cheap. Yet, whilst we are aware that pink salmon is increasingly being used as a substitute for now costly farmed salmon in some added value products, we wondered whether consumers, as well as local communities, are benefiting from these cheap salmon.
Pink salmon do not appear to be sold on fish counters, with Sockeye, Coho and Chinook and even some Silverbrite (Keta) taking centre stage. Instead, most pink salmon appears to be canned. We have looked at canned pink salmon prices both in the US and the UK market and found that prices are relatively similar at around £4/kg although cheaper and more expensive options are available. Given that canning involves a manufacturing cost as well as a higher transport cost because of the metal containers, then this does not seem an unreasonable price.
We are not so clear about the frozen market in the US, but in the UK, frozen pink salmon fillets are becoming increasingly available in the retail freezer section both branded and as own label.
We can only take a wild stab at production costs but using the same price differential between whole salmon and salmon fillets sold in a typical mainstream British supermarket, the cost of pink salmon fillets would seem to be about £0.19/kg. After being packed and transported to Britain, examples of natural pink salmon fillets in the retail sector include:
Asda
Own label £7.50/kg – currently on promotion at £6.87/kg
Birds Eye £14.24/kg
Sainsbury’s
Young’s £8.87/kg
Tesco
Own label £15.00/kg –currently on promotion at £7.50/kg
Given that this week’s best fresh prepacked farmed salmon deal in a British supermarket is just £7.15/kg, it is clear that British consumers buying frozen pink salmon fillets cannot be considered a charity case!!
Down the pan (not in it): Fishnewseu.com reports that investors in the Belgian tilapia farming company VitaFish have withdrawn their support and as a result administrators have been appointed. The farm, which was established in 2006, was expected to produce 300 tonnes a year in what was thought to be the largest closed recirculation system in Europe.
The company blames declining fish prices, in particular the low cost of cod from the Barents Sea and increased Icelandic and Norwegian quotas as contributing towards their problems, however, we suspect that this is more of a convenient excuse rather than admit the true reason for the failure.
Back in 2007, sales and marketing manager, Sophie Jonkheere told IntraFish that they were planning to initially target African communities in Belgium, France and Great Britain before moving onto the wider retail sector. They hoped that sales would be boosted by their proximity to the market and their ability to deliver fresh product.
Based on tilapia’s popularity in the US market, there has always been the hope that tilapia would also become just as mainstream in Europe, but this expectation has yet to be realised. Instead, most tilapia still seems to be bought by consumers from the ethnic communities who are more familiar with the fish. VitaFish’s intention to initially target this specialist market was the right decision so attributing their failure on the low price of cod is misleading. The specialist ethnic market wants tilapia not cod so the price of cod is largely irrelevant.
Interestingly, the UK now has a number of small tilapia farms also growing fish in recirculating systems. Some of these fish find their way to the fish counters of the major retailers and they look very different from the tilapia imported to the specialist ethnic fish retailers that VitaFish hoped to service.
We, at Callander McDowell, suspect that the main reason for the demise of VitaFish is that like several other high profile examples of recirculating farms, the costs were too high and the premium attained for freshness was not high enough. Recirculating systems are still not commercially viable unless the farm can attain a significant price premium for the fish. It is unlikely that this view of recirculation systems will change for some time to come.
We believe that this story is relevant because tank based recirculation was one option recently promoted as way of boosting aquaculture production in the UK in a report produced for the British Government’s Department of Environment, Food and Rural Affairs that we discussed in reLAKSation no 411. VitaFish’s failure is clear warning that such systems are still not a commercial solution to boosting aquaculture development.