What price differentiation?
By Nick Joy
The climate for fish sales and prices globally is generally set fair, with the odd bump. This is in stark contrast to the outlook for production globally, especially for salmon.
The Canadian government isn’t just making life hell for agriculture but also for salmon farming. Then we have the new Norwegian sea lice system, closely followed by the Scottish. Neither set of regulators are even vaguely willing to debate their systems with anyone outside their circle, which tells you a great deal about the science involved. I know that in my day, the large companies were unwilling to challenge government in any meaningful way, and I suppose the position is similar now. I wish it were not so.
Maybe it would be better to dwell on something else more interesting. When we started Loch Duart all those years ago, differentiation was on our minds. There had been organic farms, and there still are, but the organic standard being applied to intensive fish culture makes even less sense than it does with cattle or sheep.
It is fairly simple. The principle of organic farming means that the ability to treat animals for illness has to be restricted; how can this be compatible with welfare? So we avoided organic.
The difficulty of how to differentiate, when you are a small company, becomes stark when having someone else putting a rubber stamp on your product is impossible. So we decided to go down our own brand route, knowing how difficult it would be but also knowing that the rewards would be commensurate.
“Organic salmon” can be substituted by anyone else who wishes to produce it. If you go down the brand route, you own the brand and its inherent value, which leads us to the next problem.
If you can’t get a stamp from an external organisation, which I wouldn’t necessarily support, then on what basis can you be different? We chose, primarily: sustainability, naturalness of production and finally – and most importantly – taste. The key question is whether it connects with consumers and customers.
I have two quick stories to illustrate this. First, the people producing the TV show Landward decided they wanted to interview us and I got the short straw. The first question I was asked on camera was: “So you call yourself sustainable. Why do you think that other farms aren’t sustainable?”
A classic journalist question, steeped in cynicism and delivered by a master. My reply was: “You have to be a hell of cynic to see the world that way. Just because we call ourselves sustainable doesn’t say anything about anyone else. It just tells our customers what we are focussing on!”
In a meeting in Nick Nairn’s cook school, I met all the buyers from the supermarkets. They said that our thinking didn’t resonate with them at that time. My reply was that it was our job to get our message to the consumer for two reasons. First, it made us hard to substitute and secondly it meant that every enactor between us and our consumers became service providers if we got our message through. Surprisingly this did not please our supermarket colleagues.
If you differentiate, there will be people who disapprove. In quite a lot of cases these are the people who will benefit most if you do not succeed. The first principle of supermarkets is to reduce difference between competitors within a sector. They will tell you that this is what the customer wants, but it is not. It is what they want. If your product is undifferentiable, then they can pressure your price because your product can easily be swapped for another. The situation not only suits them, but is actively designed and pursued by them.
Of course the prize to be gained is consumer recognition and to achieve this you have to have a number of things. The first is a genuine difference, measurable and recognisable to the final user.
After that comes a message or story which appeals to the consumer. Finally, and one with which we are all blessed, a good provenance. Of course citizens of any country think they have good provenance, but here in Scotland we have one which is recognised and loved all around the world. Is there a single salmon company using a truly Scottish name, however? Oh yes there is one!
The time to talk about differentiation is now because, according to the latest figures, global production is starting to stagnate. Add to that we are now a mature industry and have seen consolidation on a massive scale. I am not in any way suggesting that this should be reversed, but large companies should see advantage for their profitability in producing fish aimed at different sectors of the market. Salmon produced to the lowest common denominator cannot be good in the long term. We are not just producing tasteless protein. If we do we will be replaced by chicken, as it’s cheaper and easier to produce!
