reLAKSation 73.
D(r)aft Strategy: After much anticipation, the Ministerial Aquaculture Working Group has finally made its Draft Strategy available for public consultation (www.scotland.gov.uk/about/ERADRA/FFAME/00015953/). So far it has provoked little public comment, although Intrafish reported that Dr Graeme Dear of Marine Harvest hoped that it would bring tangible, positive benefits to the sector. However we, at Callander McDowell, are not convinced that it will.
Writing in reLAKSation no 53, we expressed concern that the final strategy would probably reflect the make-up of the Working Group and so it has proved to be. This is despite the fact that Deputy Minister, Allan Wilson, hoped that everyone would be able to look beyond the confines of their own interests to create a framework beneficial to the country as a whole. The strategy recommends 34 different action points, which fall under four different headings. Nine of these are classified as Economic, 10 as Environmental, 4 as Social and the final 11 fall under Stewardship.
The most important part of the strategy must be that covering those economic issues. This is because any farms, which are not economically viable, will fail. Should this occur, then the remaining action points simply become invalid. For example, if a salmon farm should go out of business, then the question as to whether it should relocate is irrelevant.
The Working Group could not have foreseen that the public consultation would begin at a time when the Scottish salmon industry were faced with the premature termination of the dumping case against Chilean and Faeroese imports and that the salmon agreement with Norway is likely to be abandoned. Speaking to fishupdate.com, Shetland Salmon Farmers Association chief executive David Sandison warned: "If it's going to be a free for all for everyone, it will be a very serious situation indeed. Also in Shetland, prominent salmon farmer, Angus Grains, believed that the salmon industry could well face financial ruin. According to Shetland Seafood News, Mr Grains said that the salmon farming industry is close to collapse. Against such a background, the only question is whether the Draft Strategy can provide farmers like Mr Grains, with an alternative to such potential devastation?
The Working Group offers the following vision. “Scotland will have a sustainable, diverse, competitive and economically viable aquaculture industry, of which its people can be justifiably proud. It will deliver high quality, healthy food to consumers at home and abroad, and social and economic benefits to communities, particularly in rural and remote areas. It will operate responsibly, working within the carrying capacity of the environment, both locally and nationally and throughout its supply chain.”
Clearly, this vision stresses the need for a competitive and economically viable industry, however, only one of the nine economic Action Point addresses this issue. Action Point EC4 is titled “Adding value through differentiated products and niche markets” something, which we, at Callander McDowell, would heartedly endorse.
Although the title of the Action Point should encourage the salmon industry towards a better future, the actual recommendation fails to live up to expectation. The Draft Strategy states that the “industry is capable of achieving premium and value adding opportunities in the market by delivering branded differentiation and niche products, but it will need to work with the relevant sector bodies to enhance the potential of its brands and the associated product standards”. Simply, this means continue exactly as before.
In the case of the salmon industry, 65% of Scottish salmon have been labelled with the product quality standard Tartan Quality Mark for the last ten years. The aim of this standard is to demonstrate that the salmon are produced to an establish standard, for which it is hoped that farmers can gain a premium price. Clearly, if producers were achieving this goal, then they would not be berating the fact that the industry was on the point of collapse.
The simple fact is that consumers have begun to recognise that salmon is now not both cheap and plentiful. They are no longer prepared to pay a premium price unless they perceive they are receiving extra benefit for the added cost. Most consumers are now unable to identify sufficient difference between Scottish and imported salmon and therefore are unwilling to pay a higher price for what they see as the same product. The Scottish tag is no longer sufficient reason alone to anticipate a price premium. And before one or two specialist producers start to write to say that they do obtain a premium price, there are of course exceptions. These tend to be small niche markets such as Label Rouge, which falls into this category as it covers only 5,000 tonnes a year.
This indifference to salmon’s origins is reflected by the presence of the Tartan Quality Mark in the retail sector. In 1999, the Scottish Office and Highlands & Islands Enterprise sponsored an investigation into the economic state of the salmon industry in Scotland. (The Scottish Office Economic Research paper no 7). The researchers claimed that Scottish branding gives additional reassurance to consumers and is likely to be used where ever possible. They reported that several large multiple retailers, who had previously resisted using the Tartan Quality Mark, were now doing so. Unfortunately, this is no longer the case. Only two store groups now use the mark, although neither applies the mark to their packaging. In fact most of their customers would have no idea they were buying Tartan Quality Mark Salmon, because the mark is just not apparent. All the remaining retailers have stopped using the TQM, including Marks & Spencers, whose representative actually sits on the Working Group. Whilst he must believe that the mark has value, the message is clearly not being communicated to M&S customers.
It is also interesting that the Working Group should recommend that the industry should work with the relevant sector bodies to enhance the premium opportunities, for this is exactly what they have been doing. Intrafish reported in December 2001, that Highlands & Islands Enterprise had joined with SQS and SSFA to fund a three year £2.5 million project intended to achieve a retail premium price of 10% over their competitors. There is little evidence from the retail sector to indicate that the premium obtained is approaching this level. In fact, the evidence from those retailers selling salmon from more than one source suggests that different salmon are being sold at the same price, regardless of origin.
Thus, the Working Group has put forward a strategy, which is remarkably similar to that currently being pursued by the Scottish salmon industry. If after a decade of promotion, consumers have not yet been persuaded to part with more money for Scottish salmon, they are unlikely to do so now. The Draft Strategy is therefore unlikely to offer salmon farmers any immediate solutions.
Sadly, the Strategy reflects those strategies still pursued by much of the salmon industry. They are still opting to follow those strategies, which are production-led. These involve producing the finished product then looking for an appropriate market. The Working Group’s Draft Strategy follows a similar approach. It states that the intention is to produce a premium image, irrespective of whether the consumer wants it or not. The main reason that the salmon industry has suffered from repeated problems in the marketplace is because it continues to expect its fish to be seen as a premium product, despite the fact that consumers have shown that this is not a key motivating factor for choosing salmon.
Unfortunately, rather than recognise such consumer choice, the salmon industry has blamed low cost imported fish for undermining any potential premium, but the reality is that consumers just want affordable meal options. The Scottish industry has to compete for this market, instead of relying on the hope of trade protection from the EU.
However, this does not mean that Scottish industry has to become a low cost producer and compete directly against foreign imports. The opportunity to develop the marketplace, which the Draft Strategy has missed, is to start to produce the type of products that the market actually wants and then enhance them with a specific identity (see reLAKSation no 72).
The Scottish salmon industry has evolved significantly from its early development and so has the marketplace. This is why emphasis must be diverted away from the production-led strategies to those which are much more market-led. If the Draft Strategy is to be a success then it too must to become orientated to the marketplace.
Super Salmon: If the salmon industry wants proof that the marketplace has changed, it need look no further than the latest Asda Magazine (Januray 2003). This customer magazine produced for Asda (part of the WalMart Group) contains a four-page spread about salmon. The by-line states: “Fresh salmon is fast becoming the new chicken. Its on sale all year round, is very affordable, endlessly versatile and good for you. No wonder we love it!” The words premium and quality are not discussed in the main feature, as the store rightly assumes that their customers will expect them to offer fish of the best quality available.
However, there is a separate feature about their supplier. This states that they buy salmon from farms in Scotland, Ireland and Norway, all of which have the ideal environment for salmon farming. They say that all farms are inspected by their technical department for good manufacturing practices, welfare standards and food safety. This is to make sure that Asda gets the best quality fish.
This is no more than customers would expect!