reLAKSation
86.
Just another day: As we mentioned in the last issue of reLAKSation, the run up to this Easter brought some of the cheapest salmon ever sold through UK supermarkets. Yet at the same time, some supermarkets didn’t bother to discount their salmon at all. It is unclear whether the reduced number of offers this Easter was due to the lack of smaller whole fish or because prices now reflect salmon as being an everyday meal choice, rather than a dish for special occasions.
Supermarket
prices for whole salmon over the holiday period were as follows:
Asda
- £4.38/kg (no change)
Morrisons
- £2.95/kg (save £1/kg)
Safeway
- £4.99/kg (no change)
Sainsburys
- £3.49/kg (half price)
Tesco
- £3.34/kg (half price, although already reduced in some stores)
Waitrose
- £4.89/kg (save £1.70/kg)
Although
there was still some discounting of salmon prices, this year the supermarkets
have not viewed salmon with the same enthusiasm as a special Easter dish. Those
supermarkets, which publicised Easter offers in newspaper advertisements, did
not include salmon at all, whereas in previous years, salmon has usually been
the principal offer. Like the lack of offers, this change may now be an
indication that salmon has become just another fish on the fishmongers’ slab,
than the usual Easter treat.
We
have yet to see whether the salmon industry can capitalise on this change or
prefer to look back to the days when Easter and Christmas represented a peak in
sales with buyers prepared to pay a higher price. At least, the disappearance of
such peaks will bring some form of stability to salmon prices, even if it is not
the type of stability that the industry actually wants to see.
14.7%
growth: The British supermarket group, Tesco,
has just announced that its annual pre-tax profit has increased by 14.7% to £1.4bn
on sales of £28.6bn. According to Intrafish, the company has been following a
simple four- part strategy for growth, which focuses on the core UK business,
non-food, retail services and international business.
Tesco have said that they are no longer the same company as before and
they will continue to access more areas of opportunity and look for further
growth.
Many
farmers from across all sectors of agriculture have expressed concern that
supermarkets such as Tesco have forced down farm gate prices to fuel these
record profits. They see the enormous gap between what they get paid and what
supermarket customers pay as a form of profiteering. This, they believe, will
eventually undermine their ability to make a living.
The
supermarkets are however caught in a dilemma. Changes to customers’ lifestyles
have meant that less income is spent on food and more is spent on other things.
Customers expect better value for the money that they do spend and the
supermarkets have responded. Some commentators might suggest that customers’
expectation for value for money have only arisen because the supermarkets have
cut prices and this is now what customers demand. Certainly, it is clear that
those supermarkets which fail to respond to lower prices, have lost market
share.
Yet,
in addition to providing low prices, some supermarkets, like Tesco, have aimed
to divert customer requirement away from low prices to added value by meeting
their customers other needs. This includes the development of large ranges of
ready meal products fulfilling the needs of those customers with limited time.
The
retail sector may be perceived as being a long way down the supply chain, both
physically and in mind-set, from farmers involved in primary production, yet at
the same time, the supermarkets could be used as a model to improved
profitability.
Chief
Executive, Terry Leahy, recently let a group of Hertfordshire businessman into
the secret of Tesco’s success. Profiled in the Guardian, he told them that
‘Never stop listening to consumers and giving them what they want.’ He
apologised if they thought that this secret was rather an anti-climax, but he
said that ‘it is as simple as that.’ Perhaps, this also applies equally well
to the salmon industry?
Economic
miracle?: The Observer Food Monthly
highlights that the typical pork chop now costs £0.80, half the price of what
it was in 1953 (as a proportion of household income). The pork chop is also
eight percent cheaper than it was five years ago, during which food bills have
shrunk, supermarket profits soared and the UK pork industry has been decimated.
As
we discussed earlier, many farmers blame the supermarkets for the low prices,
but they are simply responding to consumer expectation. A 2001 survey by the
Food Standards Agency (discussed in a previous reLAKSation) found that 46% of
consumers named low prices as their first priority when buying food. This
contrasts with 18% who buy primarily for taste and 17% for quality.
In
much the same way, many farmers blame the supermarkets for high profits when
prices are in decline. They ignore the fact that much of the price differential
is not actually profit. The route from farm gate to plate is no longer as cheap
as it used to be with higher slaughter costs and additional processing required
to meet customer needs.
This
is not the only problem pig farmers have to contend with as they also face a
deluge of imported meat, especially from elsewhere in Europe. British farmers
claim that they are at a disadvantage since unlike some of their European
counterparts they have been forced to invest in animal welfare issues such as
the removal of sow stalls, when others have not. However, Compassion in World
Farming suggest that this has only added 2p/kg to the cost of production, which
is insignificant compared to other costs. For example, feed costs account for
65p of the 92p/kg cost of production in the UK which is 12p more than in Demark
and the Netherlands. The reason for this difference is that the feed suppliers
belong to the same co-operatives as the producers and work together rather than
in opposition. This means that feed production is not considered to be a
separate cost centre.
In
addition, some European countries, such as Denmark, have invested heavily in
brands and marketing and are better positioned to negotiate with the
supermarkets.
This
picture of pig farming seems to closely mirror what is happening to the salmon
industry. The question is whether anything can be learnt from the pig
industry’s experience?
Dr
John Strak, editor of the Whole Hog has said that the real issue is how one
places a value on a pork chop. He said that these days, it has less to do with
quality and everything to do with the convenience of a well trimmed piece of
meat. The supermarkets will argue that the meat is a nuisance and that what
people want is a ready meal, not some red thing that you have to go off and
cook. When that kind of value is added, then people are prepared to pay for it.
Clearly, the same principle applies to salmon farming, however salmon farmers
have a distinct advantage over their terrestrial counterparts.
Figures
from TNS suggest that that whilst sales of chilled ready meals based on seafood
are growing rapidly, those using pig meat are showing little growth. Seafood
chilled meals are still a long way from the level of sales of those meals using
chicken, but it is clear that consumers are actively selecting those based on
proteins with a lower fat, healthy image. Salmon fits in well with this picture.
The
salmon industry has often argued that many of its problems result from cheap
imports and over-production. However, the reality is that the market for salmon
and other proteins is changing. Consumers are no longer satisfied with just a
piece of raw flesh. If the salmon industry fails to respond to the challenges of
the changing marketplace, then it too could follow in the wake of the decimated
pig industry.