reLAKSation 69.
(R)evolution?: Delegates at a recent conference in Lisbon, Portugal, expressed concern that cod, once the most popular of fish is losing market share. According to Intrafish one speaker at the ‘(R)evolution in the cod market’ conference said that it was absurd that the industry still had so little knowledge of consumer preferences.
Another speaker said that a 20% drop in cod consumption has occurred in the space of only a few years and this has had a serious effect on the industry, especially for those who deal exclusively in cod products. He suggested that market researchers should use their theoretical models to generate more data to help counter the fall in consumption.
We, at Callander McDowell, are not so convinced that a reliance on theoretical models would help. Whilst it is always important that any industry should know and understand its consumers, this fall in consumption may have more to do with the availability of supplies. The current state of the wild-catch cod fisheries is well documented and the subject of serious debate in the European Community. Stocks of cod have fallen to an all time low and this is reflected in the market place with fewer supplies and higher prices.
This change can be illustrated by data from Seafish
Species Purchases 2000 (t) % change since 1994
Cod 64207 -23%
Haddock 32840 -14%
Plaice 6432 -43%
By comparison
Salmon 22721 +91%
As cod becomes less available, the rising price has deterred many consumers who have sought cheaper, more accessible species. Farmed salmon, which has a more predictable price and widespread availability, has become much more popular with consumers as a result and it is likely that salmon producers will continue to benefit from declining marine species. Yet, unlike their colleagues in the wild-catch cod industry, salmon producers really do need to invest in marketing so that they can understand changes in consumer demand and react to them accordingly.
The decline in wild cod stocks has not just created an opportunity for the benefit of salmon farmers, it has also prompted the marine aquaculture industry to move into cod farming. This has been the subject of extensive discussion in both the press and news services.
The editorial in the latest issue of Fish Farmer magazine posed the fundamental question as to how realistic an option is farming cod? Certainly, the experience of the last thirty years has shown that marine aquaculture has not been as successful as salmon farming. Why should cod be any different?
Cod has the advantage over any other marine species in that it is already popular and well established in the consumers’ mind. Consumers will not have to be persuaded to buy farmed cod as long as it is available at the right price.
The problem is that whilst cod is a favourite with consumers, there is no tradition, which would induce consumers to pay above market prices for farmed cod. This can be already seen from the way consumers have swung away from cod to lower priced salmon.
However, there is a suggestion that cod farmers do not intend to compete with the wild catch at whatever level quotas allow, but instead aim to complement them by developing a niche at the top end of the retail sector. Yet, the salmon industry has already tried a similar strategy, without real success. European producers have tried to promote their fish as a high quality product, which merits a premium price. Unfortunately, consumers faced with a choice of high quality Scottish salmon or cheaper imported fish have consistently opted to buy the lower priced salmon.
The question for cod producers is whether identifying the fish as farmed will be sufficient incentive for consumers to pay a premium price. The adverse publicity aimed at farming would suggest not. It is more likely that most consumers will view farmed cod as just being cod and will insist on paying the same price. Certainly, there is already a question mark over whether high prices for niche market farmed fish can be sustained.
Top store group Marks & Spencer launched a pack of farmed halibut this year. These were priced at £7.99 per pack, but at launch were discounted to £5.99 as an initial promotion. However, once the promotion came to an end, the price remained at £5.99 and this has been further discounted to £5.49 during further promotions.
Halibut is often viewed as more of a luxury fish than the more widely available species such as cod and haddock. Its potential market is much smaller and although production is already more established than for cod, the need to reprice the product in M&S must be of concern. M& S customers are much less price conscious than the wider public and if they are unwilling to pay £7.99 for halibut, will they react similarly when offered more expensive cod?
If prices cannot be sustained for farmed marine fish even at launch, what will happen to prices once production starts to increase? According to Intrafish, the official estimate of production output for farmed cod in ten years is 25,000 tonnes although other forecasts put this up to 30,000 tonnes. As output increases, the experience of the salmon industry is that prices will come under increased pressure. Yet, there are sufficient differences between salmon and cod farming to persuade some to consider that cod will perform differently. It therefore may be more pertinent to look at the price development for another marine fish instead. The following figures come from the Federation of European Aquaculture Producers (www.feap.org).
The graph clearly shows that as production increases, the price of sea bass has fallen. Can we expect the same to happen to cod? The answer must be yes.
Salmon farmers have been able to reduce production costs to compensate for lower prices, but marine fish producers have only been able to do this to a limited extent. This is because of the difference in larval rearing, which is much lower cost in salmon production. Cod farmers will probably experience the same difficulties as their counterparts producing sea bass, leaving cod farmers with the possibility of low margins.
There is already a great deal of hype about the economics of cod production. Recently some Norwegian farmers rearing wild caught fish were credited with margins of NOK 20-30/kg. The farmers concerned had to correct press reports saying that they would be lucky to break even.
The greatest unknown for cod farmers is how much the wild catch, if there is one, will influence the uptake of farmed fish. This is a problem which salmon farmers did not have to face to the same extent, as wild salmon stocks have always been small, which is why the fish was regarded as a luxury food. By comparison, reports indicate that the UK , for example, consumes over 140,000 tonnes of cod in total. Although declining stocks will influence this consumption, it will be some time before it is clear whether the availability of farmed cod has any effect on the way that cod is consumed?