reLAKSation 499
First consumers, then…: IntraFish reports that Viviers Marins, the French processing arm of Norway Seafoods, has reported that it has cut its purchase of fresh salmon by 25% this year. As a company that produces products for the retail sector this is clearly a reflection of the continued fall in consumer demand for salmon in the traditional markets, such as France. Viviers Marins’ general manager, Henri Hellin said that this shows that high prices are not sustainable.
The news that key processors are now buying less salmon comes as no surprise to us at Callander McDowell. Whilst we understand that salmon producers are unlikely to turn their backs on high prices, there is every risk that the salmon market could be seriously damaged if the industry ignores what is happening in the traditional markets. M. Hellin suggests that the new fast growing markets may be more attractive to producers than those that they have supplied for years but even their demand will hit the ceiling. If the traditional markets have already moved away from salmon, then it could be disaster for producers because it will be too late to change.
IntraFish report that demand for salmon in the French market fell by 14% last year. The expectation is that demand will fall further even further this year.
Yet, the export statistics from the Norwegian industry seem to tell a very different story. Over recent weeks, salmon exports to France have exceeded those for the same time the previous year. This is no doubt partly in expectation of the Easter peak and partly because imports had been down in the previous weeks, at least compared to the year before. The recent export boost might have been needed to offset any shortfall in the smoked salmon market.
Whilst demand for fresh salmon fell last year, consumption of smoked salmon continued to increase due in part to prices increasing by under 4% as compared with a price rise of over 17% for fresh salmon. Now that high prices are starting to impact on processors, the question is whether the demand for smoked salmon can be sustained. We, at Callander McDowell, are not so sure.
Last week, our representative was in France undertaking our usual pre-Easter market assessment and survey of retail sector. His view was that the smoked salmon offering is just a shadow of what it used to be. Clearly, the salmon smokers are not investing in production in the way that they once did. We assume that smokers are simply finding it difficult to produce smoked salmon at the price points demanded by the retailers. Thus the shelves are comparatively bare at a time when smoked salmon sales are expected to boom.
It very much seems that Viviers Marins are not the only French company to have cut back on buying salmon.
UK too: It was a relief to return from France and focus our attention to our survey of Easter promotions in the UK market. We will include a summary of our findings in the next issue of reLAKSation. Meanwhile the Grocer reports that Britons have been buying less chilled fish and opting to buy frozen instead. The main reason for this change according to Phil Smith, an analyst with Kantar, is price.
However, we at Callander McDowell are not so convinced that those consumers who have chosen to stop buying chilled fish are now looking for alternatives in the freezer section. Instead, they may be forgoing fish altogether and buying other proteins instead. The data supplied by Kantar Worldpanel indicates that sales of natural chilled have fallen by 10% to 49.4 million kg whilst frozen natural fish sales have increased by 3.5% to 16.6 million kg. This suggests that whilst chilled sales have fallen by 5.5 million kg, sales of frozen natural fish have increased by just 0.7 million kg. This means that frozen has not really become a replacement for more expensive chilled fish even though Kantar argue that chilled fish prices have increased by 4.8% whilst frozen prices have fallen by 0.2%.
Although some fish prices have increased regardless, the main reason for the price rise is attributed to the problems in Chile. This suggests that it is salmon that has been the main loser in the decline in sales. This would seem to fit in with the disparity between declining chilled sales and increases in frozen.
Frozen salmon is certainly a lot cheaper than its chilled counterparts. Frozen salmon fillets can be bought for as little as £6.25/kg whilst chilled are double that. Consumers might be expected to take advantage of this cheaper offering but seemingly are not. There is a very simple reason why.
The chilled natural salmon is usually farmed Atlantic salmon whilst the frozen alternative is Pacific Pink salmon. The two are very different fish and have totally different eating qualities. The Pacific Pink salmon is a very much inferior eating experience and this is not considered a direct alternative to chilled Atlantic salmon. This is why sales have not match those of the chilled salmon. One or two stores do sell frozen farmed Atlantic salmon but it is very much more expensive that the Pacific Pink option and is unlikely to give consumers any cost saving.
So if frozen fish has not become a replacement for chilled, then what are shoppers buying instead? The answer is almost certainly other meats and chicken. British supermarkets are all offering beef, pork and chicken on a variety of multibuy promotions especially those offering a selection of three different or the same meats for £10. There are some similar offers on fish products but these are not as widespread. The unanswered question is that once fish prices come down, if ever, will these consumers start to buy fish again? The answer may not be one the industry wants to hear!
White v.dark?: It is not just sales of chilled natural fish that have slumped; the Glasgow Herald reports that sales of Scotch whisky in the home market have slumped by almost a quarter between 2005 and 2009. Scotch now accounts for only 24.3% of the UK spirits market, down from 31% in 2005. This decline is largely due to a rise of a generation of whisky-averse younger drinkers and competition from more aggressively-marketed white spirits such as vodka. Younger consumers are said to enjoy the versatility of the spirit. The Scotch whisky industry has not been too concerned by this decline as increasing exports have more than compensated for the loss.
There is more than a hint of similarity between the Scotch and fish industries with both showing a decline in sales, especially with regard to younger consumers who have opted for other more versatile choices instead, yet not that much concern, especially from the farmed salmon industry who have seen reduced sales in the home market but soaring demand from abroad.
There is certainly nothing wrong with having a healthy export market but exports can be unpredictable with factors such as currency fluctuations being outside control so ideally exports should be supplemented with a strong local demand.
The predicament affecting the whisky industry was highlighted at the recent World Whisky Congress in Glasgow. According to the Glasgow Herald, Scotch’s perennial problem was identified by analyst Chris Brook-Carter in a session looking at the challenges of whisky innovation. He posed the question how is it possible to create the novelty that young drinkers crave?
One local business that might show the way is VC2, based in Stirling, who thrive on innovation such as flavoured vodkas and unique beers. By comparison, Scotch is very traditional often reliant in Scottish heritage, which has little appeal to younger drinkers.
In much the same way, fish seems to have lost its appeal to younger consumers but there seems a reluctance to look to innovation to produce the type of fish products that younger consumers might want to buy. A new survey by Young’s and published by the Metro newspaper found that half of consumers surveyed did not buy fish because of the smell. In the simplest terms, these consumers could be open to buying fish if the issue of smell is addressed. This does not mean that the industry should look for ways to remove the smell but rather that innovative products should be investigated where the smell is masked by other ingredients. Something like fish curry springs to mind.
The problem is that with salmon prices at an all time high, there is no incentive to investigate such products especially as the cost now prohibits the production of such innovative products. The solution is for salmon producers to follow the example of the whisky industry and focus on exports leaving the question of boosting home consumption to those dealing with competitive products.