Don’t ignore consumers
Aqua Nor, which is claimed to be the world’s largest aquaculture exhibition, recently wrapped up in Trondheim in central Norway. The exhibition had a record 17,500 visitors this year, 25 percent more than in 2009. They came from 61countries, yet another record.
One of the topics continuing to baffle those attending Aqua Nor is the dramatic fall in the farm-gate price of salmon.
Speaking at a seminar organized by the financial services group Nordea and the Norwegian Seafood Export Council, professor Frank Asche of the University of Stavanger said the price of farmed Norwegian salmon should remain at about NOK 30 (USD 5.53) per kilogram for the rest of this year and into 2012.
However, Asche had previously forecast that salmon prices would top NOK 50 (USD 9.22) per kilogram this summer, but instead they have collapsed to about half of that figure, are continuing to fall and are fast approaching Asche’s “horror scenario” of NOK 20 (USD 3.69) per kilogram. (There are reports that small salmon have even been selling below this price.)
Asche told the audience that there had been no increase in production that would cause prices to fall so dramatically. So what has made them crash?
Martin Jaffa, principal of Callander McDowell, a UK company that conducts strategic planning and marketing for the aquaculture industry, thinks he knows the answer. Writing in his newsletter, reLAKSation, he said: “The simple reason why prices have collapsed is that salmon became too expensive for many consumers and they stopped buying it.” Callander McDowell conducts regular surveys of salmon products on sale in supermarkets, so Jaffa should know what he is talking about.
In fact, his view makes perfect sense. Consumers will not purchase what has become a basic fish product whatever its price. There is a limit above which they will not go; once this level has been breached they will buy something else instead.
This is not a new scenario. The British White Fish Authority carried out research some 30 years ago that showed the relationship between fish sales and price was inelastic. If the price of fish went down, then consumers bought more of it. If the price went up, then they stopped buying it.
Farmed salmon is no longer a luxury item. It is a basic food product and is purchased accordingly. So, higher prices resulted in reduced sales. And, as Jaffa points out, the effect was the same as if production had increased.
The price collapse will inevitably lead to more salmon being sold. But when will farmed salmon producers, and the producers of other farmed species, not to say fishermen as well, get the message? They cannot ignore the consumer.
To summarize what a former senior executive from Marks & Spencer told the audience at a fisheries conference in Hull many years ago: Unless seafood is offered for sale at a price the consumer is willing to pay, then the fish might just as well be left in the water.
Jaffa makes the same point in another issue of his newsletter when talking about the tough times being experienced by Norwegian cod farmers, some of whom have had to close down. The whole rationale for setting up a cod-farming industry was that wild stocks were expected to collapse, he said, but this hasn’t happened.
“Wild cod is still widely available and not that expensive,” said Jaffa. “The cod farming industry is finding it difficult to match the price [of the wild fish] because the cost of production is just too high.”
It seems obvious, but the fish-farming industry must be finding it a hard lesson to learn. Everyone agrees that farming is the only way to increase fish supplies, but the resultant product has to be sold at a price that consumers can afford. And this is particularly relevant in the current economic climate.