SCOTLAND’s salmon-farming industry must focus on such premium-priced market segments as organic salmon or risk oblivion, according aquaculture experts.
Lars Liabø, founder and director of Kristiansund-based Kontali Analyse, a Norwegian firm that analyses the industry, said: “Scottish operators will either have to specialise in organic or else develop a brand [such as the Tartar brand]. They used to get a premium for their salmon in France, but they’ve destroyed that. They should steer clear of the commodity part of the market.”
Liabø added: “Scottish-based producers should be focusing on the big UK market and trying to fill niches rather than competing with mainstream and commodity players. Competitors in such places as Norway and Chile have far lower costs of production.”
Following a period of sustained low prices, the Scottish salmon farming industry is struggling to remain profitable and is undergoing major rationalisation and restructuring.
In Shetland, four salmon farms went into receivership earlier this year. Last week Kishorn-based Kinloch Damph, with annual sales of £7 million, went into administration.
Administrator David Hunter, of Glasgow-based accountants Campbell Dallas, said: “It was really the terms on which smolts [young salmon] were being sold that was the problem. This was not sustainable.”
Kinloch Damph, like many feed suppliers, had been extending lines of credit to financially shaky salmon farm operations following a model that large brewers had with the on-trade — pubs, bars, clubs, restaurants and hotels — in the 1970s and 1980s.
Hunter said: “It appears these terms were very, very poor and in effect the company has been financing many of the independent firms in Shetland. In many cases payment was not received until the relevant salmon had been harvested and sold to market.”
The costs of salmon farming are higher in Scotland because the size of farms is restricted by the authorities, bureaucracy and because the Crown Estate owns the seabed and charges salmon farms rent.
The Scottish Executive has made gestures of support, including putting together a “framework” last year and securing £1.5m of European money to help fund a campaign to promote the health benefits of salmon.
But the Executive’s actions are seen as too little too late by Scottish salmon farmers, who fear others will go the way of Kinloch Damph unless prices rise. Last week, the industry was disappointed when Allan Wilson, deputy environment and rural development minister, failed to attend an industry conference in Stavanger.
Wilson was meant to speak on “maintaining momentum in Scottish aquaculture” but delegated the task to civil servant David Wilson instead.
Scotland’s annual production of farmed salmon is expected to fall from 142,000 tonnes this year to around 130,000 tonnes in 2005. Norwegian and Chilean production is estimated at around 500,000 tonnes apiece.
But Cameron Davidson, managing director of Marine Harvest — whose parent, Netherlands-based animal feed and nutrition group Nutreco, organised the AquaVision 2004 event in Stavanger — disagrees with Liabø’s views.
“Our cost structure could easily be as good as Norway’s. But we have found it hard to generate economies of scale because of the slow pace of regulatory change, particularly over Allowable Zones of Effect (AZEs).”
“Also, there is no niche market big enough for 130,000 tonnes of fish. You can only sell a relatively small amount at a premium. Instead, what we have to do is to become cleverer in the way we market salmon and, as last week’s conference suggested, become market-led rather than production-driven.”
This article was published in the Sunday Herald on 27 June 2004