reLAKSation 48.
Zero, nil, nothing: Whilst news that imported Chilean salmon may be rated at zero duty will not be welcomed by all European producers, it is great news for the international salmon farming industry. With supplies of wild caught marine species continuing to decline, the wider availability of a low cost and nutritious fish will be much appreciated by the European consumer.
Now that the European Commission has decided to open up free trade with Chile, they must give similar consideration to the Norwegian salmon industry. Once the EU salmon agreement terminates, it must not be replaced. Nor must any other arrangement be put in its place. Norwegian salmon should be granted the same free access to the European market as salmon from both Chilean and European producers. It is now time to put an end to all the various trade disputes between national industries and for each to recognise that they need to collaborate to ensure that consumers choose salmon for their choice of meal, rather than other fish, sausages or even pizza.
This is now an ideal time to finally put an end to the production-led strategies, which dominated the industry throughout the 1990's. The focus on production and national identity meant that the international industry was plagued with trade disputes and claims of over-production. These claims have distracted the industry away from the need to develop the market-led strategies necessary to help the industry meet ever-changing consumer needs.
Some of the past disputes have been based on a belief that some salmon merits a premium price. However, there is no reason why free trade should stop those consumers who want to buy such salmon by paying a premium price over other salmon, irrespective of whether it comes from producers in the same country or those from overseas. This is because there is not just one target market for salmon, but many different ones. This is why the development of market-led strategies is so fundamental to the modern salmon industry.
We can only hope that international producers rise to the challenge of free trade and do not descend into further squabbles based on an issue of national identity, which is clearly irrelevant to most consumers.
One into Three: Svein Berg, Managing Director of the Norwegian Seafood Export Council (NSEC) has told IntraFish that the joint generic marketing campaign has been hailed a success by all three partners. After evaluating the effects of the campaign in ten different markets, it has been found that for every krone spent, an average of three were received back in increased sales.
Oystein Myrland of the University of Tromso and Henry Kinnucan of Auburn University, Alabama undertook one of the independent analyses of the campaign for the period 1998/9. They used a complex conceptual econometric model based on four different elements, advertising, beliefs, preferences and consumption, which led to the conclusion that the advertising campaign was a success. Much of this success is based on increased awareness rather than direct sales. What the study failed to take into account was whether the subsequent increase in sales would have increased regardless of the advertising campaign or not.
It is our view that the campaign has made little sustained impact on sales of salmon over the run of the EU salmon agreement, which provided the necessary campaign funding. Instead, other drivers of the market have encouraged consumers to buy more salmon. The main driver is undoubtedly price, although as we have mentioned in previous issues of reLAKSation, the price of salmon in many supermarkets has not reflected the continued fall in farm gate prices. This is because supermarkets are still unsure about which market image they should promote. They buy their salmon from an industry, which talks about high value and premium prices yet their customers perceive salmon to be a low cost value for money meal option.
Supermarkets have overcome this dilemma by retaining a higher permanent price, but regularly promoting salmon on special offer. This may or may not be supported by an intensive advertising campaign. For example, over the May public holiday in UK until May 14th, the supermarket chain Sainsburys are offering chilled salmon packs at 50% free. This offer is supported by an advertising campaign in all the major newspapers and on national and local commercial radio.
Such commercial promotional campaigns and price discounting must have an effect on both awareness and consumption of salmon, in addition to that generated by the industry.
Other drivers may include those in which the supermarkets display their produce. Many fresh fish counters rely on stacks of salmon fillets and steaks as a way of attracting consumers. The public gain confidence in salmon by the large number of offerings, whilst other more traditional species may be limited to only one or two pieces. They perceive that the large number of cuts reflects on the increasing popularity of salmon and they subconsciously want to subscribe to its success.
Price and availability are key drivers for the salmon industry. It can be too convenient to ascribe all the success of developing salmon sales to the generic campaign. (See the reports section of our website).
Chicken of the sea: One of the captains of the Scottish salmon industry has said that salmon are not the chickens of the sea. This was in response to a presentation made by Mike Alcorn of the Northern Irish company O'Kane Poultry at the Trouw business seminar in Glasgow.
IntraFish report that the audience of salmon farmers was advised by Mr Alcorn that they should take a leaf from the chicken industry's book but many farmers do not think that the two industries have much in common, especially as the length of time taken to take the respective animals to harvest is so different. Yet, despite these reservations, we at Callander McDowell, have for a long time believed that the salmon industry has much to learn from their counterparts in the poultry industry.
In common with salmon, chicken was once a luxury product, which through massive increases in production, evolved into a low cost value for money meal option. To counter the inevitable fall in prices, poultry farms consolidated into a very small number of large integrated producers. These not only produce large quantities of chickens, but also manufacture their own feed and added value process much of the resultant chicken flesh.
Mr Alcorn said that O'Kane poultry invested heavily in added value processing and continuous new product development. They carry a range of up to 250 different products and presentations, of which about 80 are changed every year.
No one is yet suggesting that salmon farms should invest in such an extensive range of products, but they need to start considering this option. This is because as prices remain low, added value processing is the only way to regain lost margin. It might be argued that as prices remain low, there will be no spare funds available to invest in adding value, however, there are other ways to pursue this processing without the usual large-scale investment.
The most significant point made by Mr Alcorn is that the modern poultry industry is high volume and market-led. This must be a viewed as a realistic model for salmon producers of today.