reLAKSation 60.
At others expense? Intrafish report that the final analysis of the EU generic marketing campaign has now been completed. This revealed that for every krone spent on marketing, an estimated 3 krone is generated in producer profit. However, researcher Oystein Myrland has suggested that whilst the Norwegian industry has been responsible for all of the investment in this EU-mediated marketing campaign, others have been reaping the benefits. Mr Myrland estimates that Norway has only received 44% of the investment, whilst Chile has gained 23%, Scotland and Ireland 15%, Canada, 9%, the Faroe Islands 5% and the remaining salmon producers, about 4%.
We, at Callander McDowell, are passionate exponents of marketing and welcome any attempts to increase the marketing activity within the salmon industry. However, we do wonder whether the benefits ascribed to this EU generic marketing campaign by Mr Myrland have been significantly overstated.
Mr Myrland has calculated the net profit gained by each industry on a global basis, yet the EU generic campaign was only aimed at three target markets. These were France, Germany and Spain. It is inconceivable that TV and magazine advertisements, which have appeared in these three European countries, have boosted global consumption. Mr Myrland appears to suggest that the generic campaign has increased the size of the ‘cake’, but clearly if the cake has increased in size, it is not due to a localised promotional campaign. If salmon consumption has increased globally, this must be due to the influence of some other factor. We believe that it is simply the ‘value for money’ price of salmon, which has encouraged consumers to eat more salmon, together with a recognition that the salmon must be in a form that the consumers actually wants.
The marketing activity undertaken through the EU generic campaign did not reach as far as the UK market, yet salmon consumption has continued to increase throughout the period of the EU salmon agreement.
Annual consumption has doubled over this period, yet British consumers have not received the benefit of any promotional activity, with the exception of the appearance of a few recipe cards in some fishmongers. These alone are not responsible for such significant growth.
Mr Myrland has suggested that others have benefited from this Norwegian funded campaign. We would disagree. We are not even convinced that Norwegian producers have benefited from this promotion as has been claimed, If consumption is growing elsewhere in Europe at rates comparable to that found in the UK, then perhaps the growth attributed to the campaign is actually due to the same factors responsible for the growth in the UK market. Such generic campaigns are so non-specific that it is actually hard to attribute any benefit to them at all.
Certainly, not all producers in Norway are convinced. Intrafish report that Gudum Stromsnes of PanFish has expressed the view that the funds generated by the EU salmon agreement have not been used most effectively. Both the industry and the market are changing and the producers need to respond accordingly. They need to be targeting specific consumers rather than individual countries.
Two evils!: Not for the first time, the salmon industry is faced with the possibility of being forced into making an unacceptable choice to avoid punitive duties on salmon exports. Following the 1996 dumping action, Norwegian producers were offered the EU salmon agreement as an alternative to the imposition of punitive duties. At the time, the salmon agreement appeared the lesser of two evils, although producers soon started to complain when prices fell to around the MIP. It was also realised that salmon from other countries could be imported in to Europe freely and at prices below the MIP, whilst that from Norway was regulated. Recently, some producers suggested that the low levels of tariff, which would have been imposed instead, might have been preferable to the salmon agreement since the flow of salmon to Europe would have been easier to manage.
With Chilean salmon producers now facing the possibility of tariffs for salmon exported to Europe, the suggestion has been made that Producer Organisations might be a preferable option. Certainly, representatives of the Norwegian industry have indicated that the Scottish and Irish industries became more sympathetic towards them once they suggested that PO’s might be an option. According to Intrafish, the dialogue between the three countries is now progressing nicely.
Clearly, the Norwegian industry has forgotten the conclusions of the ECON report, which rejected PO’s as a way of regulating Norwegian salmon production. Nothing has changed within the salmon industry to now conclude that producers would benefit from this type of regulation.
Professor Chris Ritson of Newcastle University first conceived salmon PO’s in response to accusations of over-production. This was when Scotland was producing only 28,000 tonnes of salmon. The fact that the salmon industry has continued to expand since then demonstrates that his argument for controls was mistaken. Producers Organisations may work when there is a finite resource, as in the fishing industry, but when the production is effectively infinite, it is the market, not production, which should be addressed.
The problem for salmon farmers is that no-body actually knows the size of the market. This is because the salmon market is extremely diverse consisting of a whole range of products, not just the raw material. Producer Organisations will thus penalise those producers, who are pro-active in the marketplace, creating a niche for their own produce. By comparison, it will only help those who have ignored the need to market their produce. This may sound similar to a previous suggestion that the dumping actions against Norway and Chile have been brought by those who have previously taken a backseat in relation to market development.
PO’s will be a bureaucratic nightmare. It may seem the lesser of two evils now, but it will soon become apparent to all participants, however willing now, that the low level tariffs, which will result from this current investigation will be much more preferable.
Up and down: As prices started to rise during August, we, at Callander McDowell, were about to raise our hands and admit we had made a mistake. Although we do not claim to be short-term forecasters, we did believe that prices would fall in the run up to Christmas. However, before we could admit our error, prices took an about turn. We will therefore continue to wait and see before we can be convinced that any price rise can be sustained.