Earlier this month, New Zealand King Salmon received a fourth star for Best Aquaculture Practices (BAP) from the Global Aquaculture Alliance (GAA), the certification program’s highest designation, which indicates that a product originates from a certified feed mill, hatchery, farm and processing plant.
As well as making it the world’s first king salmon producer and the first salmon producer in Australasia to achieve four-star status, company CEO and Managing Director Grant Rosewarne maintains that the award provides further valuable third-party evidence that the company can be an increasingly important contributor to the New Zealand economy while also meeting the highest global farming standards.
“The big picture is that we passionately believe aquaculture is an incredibly good environmental, social and economic story, but we also know that it’s poorly understood by a segment of the general public,” Rosewarne told SeafoodSource, adding that he’s frequently amazed by the level of pseudo-science and misinformation that’s stacked up against aquaculture and which, “in many cases, still often wins the day.”
He said, “We really want to set the record straight; that aquaculture is being done extremely well in the majority of cases. We think BAP is something that helps communicate the positives, and with four-star BAP, New Zealand King Salmon is one of the companies that is doing that.”
BAP certification is also expected to open up further opportunities for the company in its various markets, mainly in retail, but also in foodservice. Aligned with the certification, it also has a green-rating (best choice) from the Monterey Bay Aquarium Seafood Watch program, which Rosewarne said is extremely helpful, especially in the U.S. market.
“They certainly help communicate the amazing story of what aquaculture is and what it has to offer, and from that perspective, we think they’re very important elements in the mix.”
Profits
Rising international demand for the company’s fish, largely attributed to the successful branding of its Ōra King and Regal products, along with a strong harvest brought by favorable growing conditions, contributed to record first-half profit of NZD 15.7 million (USD 11.5 million, EUR 9.3 million) for the six months through 31 December 2017.
While Ōra King is positioned as a unique variety of king salmon, bred specifically for what chefs want, the retail brand Regal is marketed on provenance and the “merroir” or taste of the Marlborough Sounds’ waters, and both strategies “worked extremely well” in the period, with “a very positive effect” on the company’s margins, said Rosewarne.
“We’ve always had much stronger demand than the ability to meet that demand, so our challenge is to get our products to the customers who appreciate them most and are willing to pay the highest prices for them. The more that we tell our story for both of those brands, the more that comes to fruition,” he said.
Unfortunately, very high sea temperatures across the whole of Australasia in the summer months are contributing to a far more disappointing second-half, particularly in terms of mortality rates.
“We will probably end up combining our worst farming result ever with a record financial performance, which is a bit of a paradox,” said Rosewarne.
Extreme weather events aside, the company’s long-term prospects remain very good, he said. Its Ōra King salmon, which saw a 22 percent rise in sales in the first-half, continues to build momentum in the foodservice arena and New Zealand King Salmon estimates that this product now appears on around 1,000 restaurant menus around the world.
This popularity has been enhanced through the annual Ōra King Awards, which have been running for the past five years recognizing chefs that use Ōra King in innovative and creative ways. The last competition attracted 300 chef entries from around the world, with separate awards for winners in the United States, Australia, New Zealand and Japan, which were handed out at the final round in Tokyo. Young and/or aspiring chefs working with the product also benefit from a Next Generation programme complimenting the awards.
“We are helping to lift and create the profile of chefs. In return, they do amazing things with our salmon and use social media to provide many others with fantastic dishes and pictures. It’s an incredibly valuable tool for boosting the profiles of chefs, restaurants and also, of course, the Ōra King brand,” Rosewarne explained.
Tyee
The Ōra King opportunities don’t end there. The company is also now supplying a 30-pound (13.6kg) salmon, called “Ōra King TYEE,” with a flavor profile and price tag on par with bluefin tuna.
Native to North America, the Tyee is a king salmon that can grow up to 60 pounds (27.2kg) and is part of the species’ survival mechanism whereby if the main run, which typically comes back in year-three or year-four, is wiped out (for instance, due to an earthquake, landslide or drought), then these large, eight-year-old fish return and spawn in the upper reaches of rivers to repopulate them.
Once very plentiful, these fish were named “Tyee” (which translates to chief, boss or king) by the Chinook tribe. There is still a very small number of Tyee caught in the wild, and to be a Tyee fishermen you need to catch a king salmon weighing more than 30 pounds on a hook with no barb, using a line less than 20lb from a wooden row boat propelled by oars (no motor).
New Zealand King Salmon didn’t realize that it had these special fish until a few years ago, explained Rosewarne. They had been part of its breeding program for nearly 30 years but had been prematurely sold to customers when they didn’t mature.
“When we found out about these late-maturing, large-growing fish two years ago, we kept hold of them. They have grown into these massive fish, much to the surprise and delight of all of us, and chefs have really taken to them. They are an absolute phenomenon,” Rosewarne said.
Like bluefin, Ōra King TYEE has a creamy taste, very high oil content and an intense red color. In terms of pricing, Ōra King is priced around 80 percent higher that Atlantic salmon and Ōra King Tyee are 300 percent up on Ōra King.
Because they are a natural occurence from the company’s classical breeding program, New Zealand King Salmon currently has only around 400 Ōra King Tyee available annually, but with a proactive breeding program now underway specific to TYEE, the aspiration is that they will constitute 15 percent of its total production within 10 years.
Markets
Overseas sales account for a large proportion of New Zealand King Salmon’s business, with around 50 percent of its production or 4,000 metric tons (MT) exported. As a 75 percent foodservice business, its products are proving particularly popular in the U.S. restaurant channel where provenance and storytelling are strong marketing tools. At the same time, the company has established a strong position in the Australian market and has high hopes for escalating its penetration in Japan, especially with Ōra King TYEE.
As well as highlighting additional commercial opportunities in South Korea, Taiwan, mainland China and Hong Kong, and to expand on the company’s solid European customer base, Rosewarne revealed that New Zealand itself has lots of potential both as a market and as the inspiration to develop overseas channels.
Through recently sourced data on the smoked salmon markets of New Zealand, Australia and the United States, the company learned how well-developed New Zealand’s retail market for smoked salmon had become. Whereas Australia has a population five times the size of New Zealand’s, its smoked salmon category is only twice as big, and the enormous U.S. population should lead to a category 70 times larger than New Zealand’s, but it’s just 3.5 times bigger.
Yet in terms of overall volume, New Zealand doesn’t consume much salmon because the public doesn’t eat a great deal of fresh salmon. Rosewarne attributes this trait to the lack of supply because of the country’s strong export focus.
“We supply the local market, but with a few exceptions we never really stimulated it because we couldn’t supply the fish,” he said.
“Because smoked salmon has a better margin historically, we have developed that market, but what we didn’t appreciate is just how well supermarkets do out of smoked salmon in New Zealand. For example, most of our SKUs (stock keeping units) do at least 15 units per store per week and when we are on promotion, we might do 100 or 150 units per store per week. However, the average retailer in the U.S. might buy two units per store per week. There are fewer SKUs, [a smaller] range of products and they don’t sell well."
“So while the United States has a very developed foodservice category for smoked salmon, it’s not the case in retail," Rosewarne reasoned. “As far as we can tell, New Zealand is in the surprising position of having the most developed per capita retail market for smoked salmon, and we think that we have a lot to offer it.”
Historically, cold-smoked products have led New Zealand’s smoked salmon category but following a big push on hot-smoked, the latter is now the biggest seller in the retail market.
“New Zealand is the only market where hot-smoked has eclipsed cold-smoked in retail, and not to the detriment of cold-smoked; it’s just both have grown, but hot-smoked has gone off the charts. We believe that we now have license to work on similar strategies with retailers around the world,” Rosewarne said.
Indeed one U.S. retailer is already onboard with the plan, with Regal products appearing in 120 stores and sales at a level of 6-7 units per store per week.
Relocation
Meanwhile, on the production side, New Zealand King Salmon continues to wait on decisions from the new coalition government on the relocation of six of its Marlborough Sounds sites to higher waterflow areas. While Rosewarne accepts that the process is complicated because there are so many stakeholders involved in the consultative process, he said that he was encouraged by a recent meeting that allowed him to explain the operation and “go through the numbers,” including the low freshwater usage, limited use of space, job creation and revenues generated, as well as the non-use of antibiotics and sea lice treatments.
“One analogy that really gets attention is the point that only 80 surface hectares of salmon farming space would completely eliminate New Zealand’s NZD 2.8 billion (USD 2.0 billion, EUR 1.7 billion) annual trade deficit with the rest of the world, with an environmental footprint that would be hard to measure," Rosewarne said.
“At the base of it, what we’ve got is an incredibly beautiful place that has a lot of stakeholders that want to use it for their own purposes. The disappointing thing is that those in opposition to us use misinformation to try to get their way. But we are battling our way through that and I believe we are rising to the top.”
As such, the company’s immediate priorities are increasing its water space and establishing a well-researched king salmon diet rather than utilizing proxies from Atlantic salmon and from ocean trout farming system. A new facility operated by aquafeed partner Skretting is almost complete, while local R&D partnership programs are also progressing.
“Our focus is very much around the fish because that’s where our growth potential is coming from. Our objectives are additional water space, and that means both inshore and offshore in New Zealand, as well as better nutrition for our fish to achieve better growth,” said Rosewarne, who stressed that the “long game” is offshore farming.
“Once offshore, you will literally not be able to measure aquaculture’s footprint because the nitrogen cycle works so well in that environment," he said. “As New Zealand’s largest producer we want to be there and take full advantage of offshore.”
The company chief, who has worked in multiple sectors, including coffee, breakfast cereal, wine, dairy, herbs and spices, also believes there is a big opportunity to grow salmon’s premium segment. Even if that segment is a modest 300,000 MT or 10 percent of the total 3 million MT global supply (combining the wild catch and aquaculture), the industry has a long way to go to fill it, he said.
By way of comparison, coffee and salt have premium segments of 25 percent and 5 percent respectively.
“Salmon is such a naturally premium protein because its got taste, appearance, health and convenience going for it; it’s hard to think of ways to make it much better. It has got all the attributes to have a large and successful premium segment," Rosewarne said.
“And when New Zealand King Salmon is offshore, we’re not going to be the whole market, but we will be aiming to be one of the leading players in that emerging premium segment,” he concluded.
