Callander McDowell
Callander McDowell
reLAKSation no 425
Another nail in the coffin: IntraFish have drawn attention to an article in the Toronto Star which reports that Cooke Aquaculture has begun farming cod although it will be four years before the fish reach the market. Marketing Director Jean Lamontagne told the newspaper that ‘I think it’s going to be a very successful commercial fish.’ We, at Callander McDowell, wonder whether the cod farming industry in Norway would now agree.
For Cooke Aquaculture, with $8.5 million in funding from the Canadian and Newfoundland Governments, four years is still a long time away. The market for cod could have undergone significant change by then. For the existing Norwegian cod farming industry, the current market means that farming cod makes little economic sense. This week, Branco AS, a cod farming company based in Ålesund initiated bankruptcy proceedings as it ran out of money having failed to raise more capital. Last year, the company lost NOK 24 million.
At the same time, Kirkenes based SPoN Fish ASA posted a loss of NOK 31.7 million for the third quarter taking their loss for this year so far to NOK 86.1 million. The company has announced that they are looking at various alternatives for the future. According to IntraFish, these include integration with other companies, refinancing and re-capitalisation. Whether any of these are the solution to their difficulties is another question.
The reason for these losses is not hard to understand. The price of cod is much lower than the cost of producing them. Of course, this was not how it was meant to be. The premise on which cod farming was developed was that supplies of wild cod were rapidly diminishing due to rampant over-fishing. Environmentalists highlighted the total collapse of the Grand Banks cod fishery and its subsequent failure to show any signs of recovery. Dire warnings were issued that if nothing was done, cod fisheries elsewhere would not only collapse but also never recover. Consumers were told to avoid cod at all costs.
This seemed the ideal scenario to invest in farmed cod. Cod was highly regarded but plentiful supplies had always meant that it wasn’t commercially viable to farm. Market prices did not reflect the effort required to farm the species. However, as stocks vanished, the economic picture suddenly looked very different. Rising cod prices made cod farming look attractive with the prospect of rich rewards as wild fish disappeared from the consumer menu.
So what’s gone wrong for cod farming?
Firstly, the big users of wild cod, the frozen fish processors have switched from cod to other cheaper species including Alaskan pollock and despite concerns that there would be consumer resistance to such new species; the change has largely gone unnoticed by consumers who have been distracted by competitive pricing.
Secondly, lower demand for cod and restrictions on fishing for cod has meant that unlike the Grand Banks, stocks that have been considered to be threatened, have now shown some recovery. Improved management of other stocks has also contributed to an increased availability of cod in the marketplace. The problem now is that consumers are not so bothered whether they buy cod, or a different species, so that demand has not returned to its former levels. The marketplace is therefore awash with too much cod. This is why, for example, the British supermarket Morrison’s has this week had fresh cod fillet on half price promotion at just £4.74/kg. This is well below the price of basa fillet which can be bought in the UK for £6.99/kg.
In France, NSEC report that fresh cod consumption has risen to 12,240 to September compared with 8,119 tonnes the previous year, however prices have declined from €15.49/kg to €13.72/kg. Matthias Keller of CEP (the organisation of EU importers and exporters) suggested that demand for cod might be further boosted if prices were to remain low or go down even further. He said that this might encourage processors to start using cod again rather than Alaskan pollock, which is now why Alaskan pollock has replaced cod as the species most imported into the EU. Cod imports fell last year by 10% to 849,000 tonnes. That is still a lot of cod and demonstrates the problem facing the cod farming industry.
Of course, the wild catch is not a new problem for the cod farming industry. We have recently come across an article in ‘Fish Farmer’ from January 1983 which explored the potential of cod farming. It raises issues which are all too familiar.
The authors Bari Howell and Peter Bromley of the Fisheries Research Laboratory in Lowestoft wrote that ‘Cod has been a favourite food in Britain for a long time and remains so, despite reduced supplies and increasing prices. Its popularity makes it highly saleable and of interest as a species for farming.’ They then consider some of the biological problems and conclude that they problems that can be overcome.
They then move on to the market and economics. They wrote: ‘Marketing cod presents few difficulties. Demand is high and natural supplies are diminishing. Its low value, however, is a serious obstacle to profitable farming. In 1980, the first sales price of cod was only £560/tonne substantially less than the £2,055 paid for turbot, a species considered valuable enough to farm.’ They added that ‘farmed cod however, would probably attract a higher price that its wild caught counterpart because of its superior freshness and freedom from parasites.’
Nearly thirty years later, super-freshness is being promoted as one of the main USP’s for farmed cod, but it does seem that whilst the market is happy to be supplied with fresher fish, there is a reluctance to pay more for it.
Kyst.no provides a price graph for farmed cod and what is clear is that there is a small niche market for super fresh farmed cod, probably much less than 100 tonnes a week. However, as soon as the volume increases, this niche market is over-supplied and prices quickly fall as farmers have to compete with wild fish for sales. It only takes a quick look round the marketplace to see that a lot of the cod sold by supermarkets has actually been previously frozen and seemingly consumers are happy to buy such fish. In such a market, it is unlikely that many consumers would be willing to pay a price premium for fresher cod. This is why farmed cod has become a niche product and it will remain so until the industry addresses the issue of the market.
Unfortunately for the industry, the focus has remained firmly on production issues, especially in relation to reducing the cost of production. This is understandable since if production costs exceed the market price, the obvious route would be to lessen the impact of production costs on the margin. However, whilst it has clearly been important to minimise the effects of costs, little regard has been given as to whether it is possible to boost the sales price. This is where improved marketing would help; that is marketing in terms of getting the right product to the right market at the right price and making a profit whilst doing so and not the type of marketing that appears as advertising and promotions. To some extent, the problem is caused by the fact that farmed cod has not been sufficiently differentiated from the wild fish. Consumers are reluctant to pay more for something that is in effect the same fish.
It is very difficult to provide an example of what we mean because firstly this is effectively new territory for aquaculture and secondly we are a business too. However, one simple example is that of fizzy cola drinks.
A two litre bottle of Coca-Cola (Coke) retails in UK supermarkets at £1.56. By comparison, a similar bottle of supermarket own-label cola cost just 47p and some supermarkets also offer a value version costing at just 17p a bottle. Despite the presence of cheap and very cheap cola on the supermarket shelves, Coke remains a best seller, even though a bottle costs £1.09 more. The reason is that 1. It is has the right market image (developed at vast expense) and 2. It tastes much better.
Even if cod farming expands, it will never reach the same market share as Coke but then cod farmers don’t have the same aspirations and thus the important point is that this doesn’t mean that cod farming companies need to make the same sort of investment that Coke does. In fact, we, at Callander McDowell, believe that it can be done with minimal investment but with a lot of hard leg work instead.
Like Coke, Cod farmers need to create the right sort of image for their fish that will persuade consumers that when they buy farmed cod they are buying into a different lifestyle and thus be persuaded that this lifestyle will come at a price. Like Coke, cod farmers are already half-way there. Their fish tastes better than the wild and is preferred by consumers (NSEC research in France). Now the challenge is to make these consumers to dig deeper into their pockets to buy it.
The choices for the cod farming industry are fast disappearing. Capital resources continue to diminish every day whilst waiting in hope that prices may recover leading to improved revenues. This day may come, but equally it may not. Each day that passes may well represent yet another nail in cod farming’s coffin!!
Further reading - reLAKSation no 78, 82 & 99
Do they care?: Mike Urch, a contributing editor at SeafoodSource.com posed the question whether consumers really care about sustainability. He was prompted to ask the question after reading the results of a Defra (UK Government Department for Environment, Food and Rural Affairs) survey which found that consumers thought less about sustainable fishing than they did about wasting food, composting, buying seasonal food and even growing their own fruit and vegetables. Mr Urch writes that if this is what UK shoppers think then their European counterparts care even less if the results of another study that showed British consumers to be the most ethical in Europe is to be believed.
Mr Urch goes on to make the point that some British supermarkets have been wholeheartedly behind sustainable sourcing and make every effort to tell their customers about it. However, he says that the message is obviously not getting through to consumers. WWF say this is because shoppers may be suffering from logo fatigue because of the plethora of sustainability statements and logos that appear on seafood packs. We, at Callander McDowell, disagree.
The problem about sustainability is that most of today’s shoppers don’t really want to know where their food comes from. They have too many other pressures of living in our modern society to have to worry about such issues when they go shopping. If asked, they will say that they want their food to be raised in an ethical and welfare friendly way which has as little impact as possible on the planet. However, when they push their trolley up and down the supermarket aisles, they have other things on their minds and prefer to relinquish responsibility to the retailer to ensure that their food is raised or caught in the most sustainable manner. They prefer to trust their supermarket to only supply fish that is sustainable. They do not want to have to make that decision. When they visit the fish counter, they take it as read that the fish is sustainably sourced. They don’t need any logos to tell them. The fact it is there on the fish counter is enough for them – end of story.
Whether the retailers are able to justify that trust is another question but that is a matter between the suppliers and buyers and should the trust be broken , then the shoppers can make the decision to continue shopping at that store or change to another.
The only reason that fish sustainability is in the news at all is because of the huge amounts of money that some NGO’s spend trying to persuade consumers about buying sustainably sourced seafood (even if it isn’t all as sustainable as they think) but as Mike Urch reveals, most of this money is being wasted since sustainable fisheries are not a major concern for most consumers.
This lack of concern can be clearly illustrated by reference to a new website www.Fish2Fork.com . This has been set up by Charles Clover, author of the book ‘The End of the Line’, which has recently been made into a movie and shown around the world. Fish2Fork is designed to provide reviews of restaurants based not only on the quality of their food but also on their impact on marine life and the sea. The public are invited to submit reviews of restaurants as well as comments on various news items.
The website was set up at the end of September and was given a boost by the Prime Minister’s wife Sarah Brown when she urged her 928,000 followers to visit the website. Stephen Fry, Actor and celebrity tweeter also told his 890,000 followers to visit the website and last Sunday, the Observer newspaper included a link to the site in one of its articles.
Despite all this publicity, the website has not received one single review from the public, who have equally been less inclined to comment on any of the news items. So far Mr Clover’s interest in highlighting the sustainable credentials of British restaurants has remained his alone. Consumers are clearly more concerned about other issues than sustainable seafood.
Mr Clover’s website says that the restaurant that tops his ratings is Raymond Blanc’s Le Manoir au Quat’ Saisons. Mr Clover had criticised the restaurant for failing to provide any information on its on-line menu about the provenance of its seafood. The restaurant responding by posting details of all the demands it puts on its suppliers. These are:
In effect, their policy is to use MSC certified fish where possible. They also plan to rewrite their menus to show whether a fish is farmed or wild and if wild, how it was caught. However, we suspect that diners paying £41 for a dish of Braised Cornish brill, scallops, wild asparagus, cucumber and wasabi or Slow-roasted aromatic Cornish turbot, scallop and citrus fregola don’t want to be burdened with the how and where of the food they eat. Le Manoir au Quat’ Saisons is the type of hotel and restaurant for a special occasion not for a lecture on saving the planet.
Off the menu: One of the news items on Charles Clover’s new website was featured in the Observer newspaper last Sunday. The BBC is to change its policy on food served up on the TV cookery competition MasterChef after conservationists accused the programme of putting an endangered species on the menu. Three chefs in one episode of the programme were told to prepare two dishes using smoked eel as the main ingredient. However, critics said that this could have stimulated demand for eel from viewers. Willie MacKenzie of Greenpeace said that serving eel up on a popular TV programme was irresponsible and could lead to even more demand for a species that is just as endangered as tigers and pandas.
A BBC spokesman told the paper that they absolutely recognise the very important issue of sourcing sustainable ingredients. The eel in question came from a farm in Northern Ireland run by priests who assured them that the fish came from a sustainable source. They added that for future series, the contestants will be required to consider the endangered fish list when submitting menus.
We hope for Mr MacKenzie’s sake that it will not be contestants that will have to submit menus for vetting on future programmes because as the article appeared last Sunday, celebrity chef Simon Rimmer and presenter Tim Lovejoy on the BBC cookery and chat programme, Something for the Weekend, had quite a long discussion about cooking eels during a feature on fish pies. The consequence of this exchange was that Simon has offered to cook eel in a future edition of the programme. So much for sustainable fish cookery on the BBC We’ll keep an eye out for the recipe and make sure that Mr MacKenzie gets a copy.
As ‘Something for the Weekend’ is broadcast on Sunday morning, perhaps it’s a case of the early bird catches the worm (or in this case catches the eel)