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Swimming in a real sea of troubles, salmon industry seeks new markets.

Record harvest comes just as primary market for American salmon in Japan is hit by recession and potential competition from as far off as Norway and Chile. Marketing group testing the waters in Korea, Germany and elsewhere.

When the salmon ran in Alaska this year, they were really on a run. Sockeye catch set a new record of 66 million fish, or 332 million pounds, and catch for all species was more than 112 million fish and 559 million pounds.

With that much salmon to market, the Alaskan industry had to contend with a virtual collapse (for the time being) of the Japanese market that has traditionally sustained it. It was bad enough last year, when a near-record catch exceeded immediate demand and brought sales to a standstill -- this year, Japan is in a severe recession.

Eventually, virtually all the 1991 salmon was sold, and the industry thus entered the 1992 season without the burden of a huge carryover. Still, total salmon exports last year were only 255.5 million pounds, vs. 307.7 million in 1990, according to U.S. Department of Commerce figures -- and the average price was only $1.71 a pound, vs. $2.16 in 1990. Japan bought 202 million pounds last year, at an average price of $1.75, compared with 244.4 million in 1990 at an average price of $2.30.

Mindful of the importance of developing alternative markets for salmon, the Alaska Seafood Marketing Institute (ASMI) is launching new promotional/advertising efforts in South Korea, Australia, Germany, the Netherlands, Italy and the U.K. Unfortunately, the ASMI doesn't have much more money to spend this year than last -- $9.7 million vs. $9.3 million for foreign markets, plus about $3 million for the domestic market. Foreign Agricultural Service (FAS) funds contribute $8.5 million to the foreign effort; the rest comes from state funds and industry assessments.

With its budget stretched so thin, the ASMI is concentrating on trade promotions. It had a booth at a recent American Food Fair in Seoul, which drew Korean retailers, and it will have three booths at this month's SIAL show in Paris. ASMI representatives also attended an Australian Food Marketing Institute show in Sydney, and will attend other shows at Brussels and Utrecht in Belgium and the Netherlands -- but without springing for booths. But don't think the Alaskans don't know how to stretch a buck, and they're more elastic than ever this year.

For example, there are those "wild Alaska salmon" videos that have been showing in Japan. No need to produce new tapes; the voiceovers can just be translated into Korean. So can pamphlets previously used to promote Alaska salmon in Japan. In Europe, where marketing efforts have heretofore been concentrated on France, promotional material can be translated in German, Dutch and Italian. And some of the footage from Japanese salmon videos can be recycled in videos tailored to European tastes.

France has been the main European market for frozen salmon, at 9,289 tons out of a total of 13,856 exported to EC countries last year by the United States (vs. 9,530 of a total of 13,383 in 1990). Germany and Italy are seen as potential frozen markets, whereas the Netherlands is considered a canned market -- like Britain. But Britain is showing more interest in salmon these days, says Linda Dellarosa, ASMI export marketing director, and some of the marketing effort there will thus be shifted from canned to frozen.

Korea is also a frozen salmon market, and "They seem to be quite excited about Alaska salmon coming in," Dellarosa says. The United States already accounts for some 34% of salmon imports by Korea, she notes (since U.S. exports were a scant 1,280 tons last year, the total salmon market can't amount to more than about 8,000 tons). But competition is developing: "We saw Russian smoked salmon in department stores in Seoul," and while Russia reportedly had too poor a salmon catch this year to pose much of a threat, there could be a real challenge in years to come. Moreover, farmed salmon from Norway and Chile is beginning to appear in Japan, where the U.S. has traditionally held 70% of the market.

But look at it from the Norwegian viewpoint, which is that of salmon farmers trying to make a living in a market where the Americans have had a free ride for ages. A glut of farmed salmon has hurt the Norwegians as much as the record catches have hurt the Americans. Norwegian exports of fresh or chilled farmed salmon to EC countries totaled 77,738 tons last year, up from 72,488 in 1990. But the ECU valuation for the same salmon dropped from 353 million in 1990 to 349.6 million last year, meaning the average price fell from 4,870 to 4,497 ECU's a ton. Exports of Norwegian fresh or chilled salmon fillets also rose, from 1,118 to 2,177 tons, but with the average price falling from 7,008 to 6,839 ECU's a ton. While fresh and chilled products dominate Norwegian salmon exports, there were also 18,635 tons of frozen salmon shipments to EC countries in 1990 and 25,867 last year.

The glut was so immense and prices so low that Fiskeoppdretternes Salgslag, the sales organization of the Norwegian salmon farmers, went bankrupt last November -- sitting on an inventory of 37,500 tons of unsold frozen salmon. Aquastar, an international fish and seafood marketing company owned by BP Nutrition, was subsequently contracted to deal with the situation. Ingo Skulason, managing director of Aquastar Europe, had good news to report last month: "We can now see the end of the tunnel," he told Quick Frozen Foods International. "More than 95% of the 37,500-ton frozen salmon mountain has been sold. The total value is close to |pounds~100 million, which is far above estimates."

Leveling a Mountain

Aquastar's strategy was "disposal of the stock in a controlled way outside EEC markets. It was crucial to avoid dumping charges, stabilize the situation, and reduce the turbulence around the issue," Skulason explained. "This was both in the interest of the Norwegian fish farming industry, and beneficial to the entire salmon market of Europe." That meant finding alternative outlets in more than 30 countries -- mostly in Eastern Europe and the Far East. With the frozen inventory thus reduced to only 2,000 tons, he boasted, "There is a significant rise in prices, and demand is increasing constantly." A separate Aquastar office was established in Stavanger, Norway, to oversee the marketing drive.

While Skulason didn't offer any specifics on the new export markets, any continued Norwegian export drive in the Far East would put Norway on a collision course with the United States in the that market. There, as in Europe, the ASMI's promotional campaign will have to put greater emphasis on the variety and versatility of wild Pacific salmon -- and also on health concerns. "In the past, we've played up the wildness," said Dellarosa. "This year, we're adding the theme of 'natural and healthier.'" Farmed salmon is fattier than wild salmon, she points out, and it's a different, oilier kind of fat. But that doesn't guarantee Japanese consumers will prefer Alaska salmon: "Some people enjoy an oilier taste," she admits. And, even shipped halfway around the world, farmed Atlantic salmon can undersell wild Pacific salmon. Chilean farmed salmon, of course, has the advantage of a shorter shipping route, straight across the Pacific.

With increased competition a certainty in years to come. Alaska needs every edge it can get. One focus right now is the Japanese hotel trade, but another is the U.S. market. Linda Driscoll, director of the ASMI's domestic marketing effort, reports that salmon is getting specific attention for the first time. Previous promotions, aimed mainly at the foodservice market, have featured "all-species ads" that include halibut, whitefish and other species as well as salmon. Now there will be an educational program centering on the five major species of salmon, directed at consumers as well as industry. "People are confused when they see salmon selling at 99 cents a pound one week and $3.49 the next; they don't understand the difference between species," Driscoll explains.

For the salmon farming industries in Norway and Chile as well as the salmon fishing and processing industries in the U.S. and Canada, the big question now is: when can or will Japan start buying again? "They're not buying now, period," said Michael Epstein, international sales manager at J.S. McMillan Fisheries Ltd., Vancouver, BC, Canada. For McMillan, which exports Canadian sockeye, the situation isn't as bad as its competitors' in Alaska, Epstein said, because Canada targets a "higher quality market" and suffered a short catch (only about 28 million pounds) this year. Even so, he added, prices paid by Japanese importers fell to a mere 850 yen a kilogram this summer, compared to 900 yen a year earlier. Most Canadian product had been sold by the time the market dried up, he said, but about two million pounds was still left at press time.

"Sales have been almost at a standstill since mid-August," reported Michael Bristow, president of Ocean Premium Marketing, Inc., Seattle, Washington. "Prices are a good 10-15% below what salmon were selling for during the season." A couple of examples: Cook Inlet four to six pound sockeye, down from $3.50 to $3-3.15 a pound; Bristol Bay sockeye, same size range, down from $3.25 to $2.80. Some 65-75% of Alaska salmon is grade A, he added, vs. 20-30% grade B and only five percent grade C. Price differentials are usually 15-25 cents between grades A and B, and 25-50 cents between grades B and C. Nearly all frozen salmon, he stressed, is grade A, but even the highest quality salmon won't move out of the warehouses the way things are now.

Some Japanese importers bought salmon on consignment during the season, other for a minimum guaranteed price. Buyers that paid 1,150 yen a kilogram just a couple of months ago for Cook Inlet salmon could get only 950 to 980 yen by September, Bristow explained; now they have the choice of either selling their salmon at a loss, or holding onto it in hopes prices will go back up. A weak dollar, meanwhile, is hurting exports to Europe, because it takes two to three weeks to ship salmon to France or Germany -- with the franc or Deutschmark appreciating significantly during that time. Nevertheless, Bristow predicts, exports to Europe will be up strongly this year, especially value-added products vacuum-packed salmon, five and 10-kilo packs, fillets, etc. And the Japanese market, too, should pick up by the middle or the end of this month, due to the poor catch by Russia and reduced exports from Canada.

Mark Sandvik, vice president of sales for Icicle Seafoods, Inc., also of Seattle, is also optimistic. "The Japanese will ultimately buy it all, just as they did last year," he opined. "Just now, the market is up in the air because they are still chewing on a record catch." Sandvik predicted a higher percentage of the catch than usual will be canned; because this year's catch of pinks was only 57 million vs. 128 million last year, the 1992 market for canned salmon is stronger than usual, with prices firm and rising dramatically, so species other than pinks can find an outlet through canning. It took until March-April of this year to market the 1990 frozen inventory to Japan, and it's anybody's guess how long it will take to dispose of this year's Alaskan salmon mountain.

Meet the Norwegian Salmon Farming Champs

Skaarfish Foods, Floro, Norway, with sales of 1.2 billion Norwegian kroner a year, is believed to be the largest farmed salmon processor in the world, and 97% of its output is exported to Europe, the United States and Japan.

With all production geared to actual orders, not to stock, Skaarfish has to shift gears on its fillet processing lines daily or even hourly. To help maintain both flexibility and quality, the company recently installed a Portioner, the computer-controlled water-jet cutter from DSI, a Frigoscandia Process Systems unit. At the same time, it also installed a Frigoscandia GYRoCOMPACT P42 spiral belt freezer.

It used to take seven men to cut fillets by hand, and they couldn't do it as quickly or accurately as the new device. "In other words, the accuracy of the DSI Portioner gives us more yield and makes us more competitive," says Skaarfish's Ingmar Sumstad. "And each fillet has the exact weight specified by the customer." Moreover, he goes on, "Fish meat is very delicate. In manual cutting, you have to handle the fish. No matter how gentle you are, you're going to get some damage each time you handle it." Installing the DSI machine is thus a matter of quality, not just man-hours and yield, he declares.

Skaarfish was founded more than 20 years ago, when hardly anyone had even heard of farmed salmon. Today it has 500 employees, two plants (the second is in Hareid) and a roster of 60 salmon farmers supplying raw material. Rolf P. Almklov, marketing director, is sold on the superiority of farmed salmon to wild salmon -- "Fish that come back to the rivers to spawn are usually exhausted," he notes. "All their energy has been diverted to their sexual maturation, and the meat starts turning white." If any fish like that get into the Skaarfish processing line, they are immediately rejected.
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Title Annotation:includes related article
Publication:Quick Frozen Foods International
Date:Oct 1, 1992
Previous Article:Resistance to fresh fish price hike sparks new frozen merchandising push.
Next Article:Demand for value-added seafood products provides opportunity for Third World.

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