reLAKSation 80.
The
penny drops: Disappointed by poor annual results, the company, Leroy
Seafood, has stated that there is a need to become more market oriented.
According to Intrafish, the company has indicated that whilst the seafood
industry has significant potential, more resources must be allocated to product
development and other downstream activities. We at Callander McDowell,
wholeheartedly agree. However, we are slightly puzzled that it has taken until
the current spate of poor results for the ‘penny to drop’ and for
recognition of the need to adopt a more market-led strategy.
Much
of the blame for these poor results has been attributed to the low price of
salmon. Yet, despite repeated predictions that they should rise, prices have
remained low. This has been both predictable and inevitable and it is therefore
somewhat surprising that more companies have not reviewed the reliance on high
salmon prices as their preferred route to profitability. Instead, they must
anxiously wait for prices to rise.
Meanwhile,
companies like Leroy Seafood, have now recognised that they must become more
proactive to maintain their profitability. It is not surprising that Leroy are
now at the forefront of such change as their Group Managing Director, Ole-Erik
Leroy is also Chairman of the Governing Board of the Norwegian Seafood Export
Council. This is the combined
marketing and information agency for the whole of the Norwegian fisheries
industry. NSEC is responsible for much of the salmon marketing activity
including the joint generic promotion, operated under the EU salmon agreement.
The
problem for companies like Leroy Seafood is that whilst NSEC operates a large
marketing budget, it is primarily focused at promoting raw salmon via the
distribution of recipe ideas etc. Unfortunately, whilst many consumers might
like the idea of some of the resulting dishes, they are unwilling to buy salmon
as a raw ingredient and then cook it. Instead, these consumers are now used to
more convenient meal options (as we will discuss later) and if salmon producers
want to attract these consumers to eat salmon, then they must start to produce
salmon in the form that these consumers actually want. Leroy Seafood have
clearly identified that they now should try to satisfy the needs of such
consumers and at the same time increase the potential for improving their long
term profitability.
Ready,
Steady, Cook: Latest research from market research company, Mintel, shows
that British consumers buy more ready-made meals than any other European
country. Demand has soared by 44% over the last four years as compared with 29%
in the rest of Europe. One of the main reasons for this dramatic increase is the
way in these meals are perceived by consumers. Mintel analyst, Anne Bourgeois
told the Daily Mail that in the UK, ready-made meals have undergone a change of
image from being deemed unhealthy, lazy food to being repositioned as a premium
indulgent food. Retailers have further enhanced the image of chilled meals by
using premium packaging and premium positioning. This repositioning has resulted
in sales of around £1.9bn in the UK, double that of sales in France and six
times as much as those in Spain.
This
progression towards premium positioning should suit those involved in the salmon
industry. Certainly, salmon producers in Scotland have always argued that they
are involved in the production of a premium product, but have largely resisted
the move towards added value. However, this research from Mintel clearly shows
that the consumer market is evolving and the message is that the salmon industry
must evolve with if it is to survive. The development of premium positioned
ready meals offers the salmon industry a unique opportunity to become more
market oriented.
Currently,
ethnic dishes dominate the market for added value ready meals, with Indian and
Chinese meals being particularly popular. Yet, the supermarkets have recognised
the potential to expand the ready meals market with other ranges of products.
Salmon, once only used in salmon en-croute, is regularly being used increasingly
in a variety of recipe dishes and the opportunity now exists to capitalise on
the low price and bring salmon to an even wider number of consumers.
Leroy
Seafood have recognised that they must meet the needs of these new consumers.
They may be one of the first, but they surely will not be the last?
(Transparent)
Labelling?: Intrafish report that the UK’s Food Standards Agency has
now resolved many of the issues relating to labelling fish products and that
they intend to put the legislation to a future session of Parliament.
Since
January 1st, 2002, EU legislation has required all seafood to be
clearly labelled, but the UK has yet to enact the relevant legislation. However,
most of the major retailers now label seafood with the information as laid down
in the European legislation. Of course, the lack of UK enforcement does mean
that there are some inconsistencies or omissions.
Intrafish
highlight the case where trout has been labelled as farmed in France or Denmark.
They also state that they have been reliably informed that a Scottish
supermarket is selling salmon which was ‘farmed in Scotland or Norway’. As a
result, labelling may not be as transparent as hoped…
As
regular observers of the marketplace, we at Callander McDowell have been closely
watching the way in which supermarkets label their seafood products. We believe
that there has been major progress in the way seafood has been labelled and this
should be welcomed. We are aware of several incidences where the most critical
observers might complain that consumers are being misled, but we would argue
that it is better to label fish as ‘farmed in Norway or Scotland’ than
‘Packed in the UK’ as used to happen. Scottish producers may feel that their
salmon is being devalued by association and that those consumers who want to buy
Scottish salmon may be sold one from Norway. Yet, with this dual label,
consumers are at least aware that some of the salmon could come from Norway. If
they are that bothered, they can opt to buy from a retailer who can guarantee
that the fish comes from Scotland.
However,
our observations suggest that the most of the consumers who buy fish from the
major retailers are not interested in the origin of the fish they buy. They
prefer to rely on their retailer to supply the best quality salmon at the best
possible price, irrespective of the origin. In most cases, consumers do not even
bother to read the labels. We know that this is the case because, as we have
previously highlighted, one major retailer is selling whole fish tagged with the
TQM, but labelled as ‘Farmed in Norway’. Clearly, the presence of a tartan
tag provides insufficient incentive for anyone, either staff or consumers, to
question the exact origin of these fish. It is simply not an issue.
Whilst
consumers should be able to identify the origin of the fish they buy, clearly,
they are more interested in the price or presentation. This new legislation,
when it comes, will make little difference to most consumers.