reLAKSation 7.
Normalised trade: Jan Petter Lindsetmo of NSL has called for 'normalised free trade' to replace the EU salmon agreement, when the current agreement comes to an end.
At last common sense is starting to prevail. The EU salmon agreement is an unjustified piece of protectionist bureaucracy, which has poorly served the European consumer. The agreement resulted from attempts by the Scottish industry to exclude Norwegian salmon from the European marketplace at a time when demand for salmon was rapidly increasing. This demand continues to grow, provided the industry produces salmon in the forms the market wants. As long as this continues to happen then there is no need to impose limits on either price or volume.
The future viability of salmon farming depends on market innovation and development. Both will be stifled by anything but normalised free trade. Let us hope that Jan Petter Lindsetmo can get his message heard.
Cold times for Iceland: The British retail group Iceland, which specialises in frozen food, has seen its share price drop from 339p to 149p following the issue of a profit warning.
The basis for this drop is that Iceland had adopted a much greener policy on behalf of its customers. The company announced that only organic produce would be used in its own label range. Unfortunately, the company failed to ask if this is what its customers wanted. When their customers found that the usual offers had been dropped, because of the smaller margins available, then they simply deserted the store group and shopped elsewhere. It did not help that Iceland was actually unable to source some products and when anything was unavailable in organic form, then no alternative was offered.
The move to organic produce was not their first attempt to influence their customers. Iceland had already banned use of pigments in their eggs, although seemingly not in salmon. Yet, forcing this green credential onto its customers did not go down well with either the stock market or their customers.
Can the salmon industry learn from Iceland's experiences? Certainly, the underlying message is that the customer is king. It is important to listen to the customer and watch customer behaviour. However, when listening to customers it is also important not to put words into their mouths.
For example, country of origin is considered by the salmon industry to be an important aspect of consumer choice. Yet, evidence from the market place shows that country of origin is one of the least important factors used by consumers in making their buying decision.
Iceland's example shows how easy it is for a company to believe that its ideals are the same as their customers. This perception of a company forcing its ideas on to a reluctant consumer translates into the type of production-led philosophy operated by the salmon industry. This is when the producer expects the consumer to buy what he wants to produce. However, to overcome such customer resistance, it must be preferable adopting a more market-led approach in which the producer tailors his production to exactly what the consumer wants to buy.
Salmon promotions: The Scottish salmon industry is indebted to Don Staniford of the WWF for providing us with regular up-dates of the dubious comments about salmon farming, which have appeared in the press.
These news stories and letters have been prompted by the BBC TV programme, Warnings of the Wild. Sadly, many of the correspondents are simply misinformed about the subject. This can be illustrated by a reference to an apparent difficulty in selling salmon after the programme was televised. John Gibb, writing in the Sunday Herald said that Sainsburys had been forced into offering salmon steaks at two for the price of one.
Unfortunately, because Sainsburys has sold salmon on special offer after the programme, Mr Gibb wrongly assumed that salmon sales had suffered as a result. The problem is that this isolated observation tells no such story, since most of the multiple retailers regularly offer salmon on promotion in this way. More interestingly, few such offers have appeared at all in the period following the programme, suggested a different interpretation of consumer demand.
These promotions can take a variety of forms, but the most common three are 1) price discounting, where the basic price is discounted or a fixed amount is knocked off the price. 2) Buy a fixed weight of salmon for the price of another weight, such as 720g for the price of 480g. 3) BOGOF - Buy one get one free.
The multiple retailers have used all these to promote salmon sales and they do this because many consumers have still not recognised that salmon represents a value for money purchase. Equally, salmon is attractive to retailers because it is of predictable and consistent, price, availability and quality, unlike many traditionally consumed marine fish, which are now in short supply.
Commentators, looking to undermine the salmon industry, might say that supermarkets have had to give salmon away because of the adverse publicity and the supposedly questionable ethics of salmon farming, but this would be very wrong.
Discounting, extra free product and BOGOF are common promotional tools used by the multiple retailers and are not exclusive to selling salmon. However, they are not widely used by the salmon industry itself, as the salmon marketing organisations prefer to promote quality and exclusivity. This is mainly achieved through the distribution of recipe cards at the point of sale.
The key question is which of these two promotional methods significantly attracts new consumers to try salmon? The new consumer is attracted to salmon because it represents value for money. This is the sole reason why the market has expanded. A recipe idea is unlikely to be sufficient incentive alone to attract new consumers, whereas a financial incentive might well be. It is interesting to note that even Marks & Spencer, a store group renowned for its quality image, regularly offers salmon at a discount.
According to research conducted by the salmon industry in Scotland, salmon is still only consumed by a minority of the population. The falling price has attracted many new consumers to try salmon, but it is clear that extra incentives are required if salmon is to be consumed by more and more of the general public. Price-focused promotions are an obvious way forward, especially those that do not appear to reduce the overall price. Such promotions are a natural part of the marketing mix and not just a knee-jerk response to dispose of supposedly unwanted salmon following the TV programme.