CEO Direct Channel podcast to industry #10
Next week should be interesting – the WAFIC Chair Murray Criddle, Deputy Chair Adam Radford and myself are doing a coastal tour between Geraldton and Carnarvon and to lots of places in between – so we’re very much looking forward to the opportunity of meeting fishermen one-on-one at the jetty, on the beach or in the factory. Or possibly in the beer garden, you just never know!
This week I want to talk about a really important issue for our industry – something which goes to the very heart of the ultimate success of overall fishing profitability.
This is value-adding.
I know this is an excessively bandied-around concept – which is often misunderstood and mis-used – and it’s always proved to be easier to say than to do – but just now, at this point in time, it’s worth kicking around.
I guess there’s been a wonderful example of value-adding over recent years with the western rock lobster industry – which has used high technology and supply chain innovation to deliver fresh live lobsters to a premium market in China. The landed price in China was multiples of the beach price received in WA on just the previous day.
So without modifying the wild-caught lobster, it’s maximum adding of value came from delivering it ‘live’ to a market overseas which was prepared to pay a lot of money for the privilege.
However the market dynamics are currently changing and there’s likely to be more overseas suppliers competing in that ‘live’ space in the future. And in a bid to spread risks, there is now an ongoing search for new diversified markets for lobsters – but from what can be seen, the demand in the main is likely to be for frozen tails. Obviously these are fairly easy to process and deliver, but they are certainly a lower value product than ‘live’.
Let me explain something about marketing. Last weekend I was in a shop and I was looking at the price of salt. As we know, salt is salt. It’s one of the most common things in our globe and there aren’t too many derivatives – it’s sodium chloride – the only variants you see are related to granularity or colour. But either way, it’s still plain old garden variety salt.
In the shop there were a number of different brands on offer. There was the black and gold special at about $4 per kilo, others at $10 per kilo. But the most expensive was the pink Himalayan crystallised salt which was in a small pretty container and had obviously been kissed by the gods as it cost $110 per kilo.
But regardless of what was printed on the label – it was the same product throughout – the differences in price were simply due to packaging and marketing – as well as consumer perceptions.
The next day I was in one of those fancy gourmet shops and saw a better one – this time $250 per kilo, but it was infused with Manjimup truffles.
Now this remember, is for salt. Lobster or abalone or crab or prawn or fish are surely worth a whole lot more than salt. So surely there is the capacity to explore the potential of higher prices for our seafood products.
Personally, I don’t believe that boiling and freezing a lobster can be considered to be value-adding – nor selling abalone in an unprocessed form — far from it.
We can all argue about where our future marketing strategies should be heading, but surely we’ve got to take a stroll down the value-adding pathway.
Who knows – a lobster tail simmered in mirin essence and sprinkled with that same Manjimup truffle salt – and then vacuum packed and marketed in pink packaging to a discerning customer might sell for $500 per kilo. With some native finger lime flesh on top, perhaps it might go higher?
Across the seafood industry we’ve got to accept that we have a limited catch – we are constrained by stock availability or gear restrictions or quota. It’s not as though we are manufacturers and can become more profitable by keeping the engines running all night and manufacturing increasing amounts of products for the marketplace. We clearly have a finite amount. Therefore, if we wish to increase profitability, we will need to sell our produce for more than we did in the past – we have no choice.
And this is where value adding comes into play – instead of large consignments to a handful of markets, we may need to look at smaller lots being consigned to more differentiated markets which are characterised by every increasing levels of sophistication. We may have to sell to 100 countries to meet the discerning needs of buyers in Rome, London, Paris, New York and Abu Dhabi – and also targeting the zillionaires and millionaires in India, Brazil, Egypt, Kazakhstan, and Uzbekistan.
The entire nature of our seafood marketing may have to change over coming years to address the realities.
And this will require an associated shift in mindset at our end – but the point I’m making is that – one way or another – we must generate more money per unit of product than we are getting just now.
So in what other ways can we improve the value of our products? I’d like to think that a pinch of that over-priced truffle salt will make a big difference if done with a bit of marketing finesse – but there are many other ways as well – but the very first ingredient we need to add is a pinch of willingness to look at doing things differently.
For instance, look at the herring industry in The Netherlands – they export their herrings in jars full of vinegar and it accounts for 1% of their GDP. And the products taste awful.
Look at Norway and its herring, look at Scotland and its sardines and cured salmon products – this is living proof that for generations the world markets always have – and always will – pay a lot of money for a transformed value-added product.
There are some good news stories in WA of course, but we need to see more. I’m very impressed by the Westerbergs in Albany who have recently invested heavily into value-added products and while it’s still very early days, they certainly already have some top-notch offerings in the marketplace – particularly the pilchards in oil which now sell in Farmer Jacks – delicious, trust me.
Since I was a twenty year old lad working in a beach salmon team on the south coast, all I’ve ever heard is talk about the potential of doing something value-added with salmon. In the old days it was turned into canned products of fairly average quality or even into basic cat food. But when the cannery closed, in many ways so did the industry.
There’s been all sorts of half-baked attempts to do something with salmon over the past 25 years but there’s never been the proper follow-through. It seems that this is the missing element across our industry as a whole – the ability to execute the necessary changes in full.
Yes, there’s a frustration with the status quo, there’s a willingness and hope for change, there’s often a new pathway pegged out to take us there, but the journey is always lit by an ever-fading torch which eventually leaves us standing in the dark.
As a result, we’re not capitalising on the value-added end of the spectrum. For salmon, my wonderful colleague Mannie Shea – who many of you will know – is forever banging on about the immense potential for dried salmon products in the premium pet food market, especially in Tokyo. Of course, she has a conflict of interest given she has a couple of fleabags who are already spoiled rotten, but she definitely makes a salient point – there is huge high-price potential in this emerging differentiated market.
So that’s my bit for this week. It adds a layer on to what I was mentioning two weeks ago – about the need for the seafood industry to maintain a watch – and a sense of stewardship – over the markets. We don’t necessarily want to become sellers ourselves, but importantly we do need to maintain responsibility for the strategic oversight.
And value-adding means something we should all easily understand – it means more money coming back to you for your products. And who knows, there might be much higher premiums available for value-added western rock lobster than can ever be secured in the best paying overseas ‘live’ markets.
But just now, the sellers of salt are getting more than us.
So perhaps it’s time that we as a seafood industry get smart and start to invest some extra efforts in developing value-adding options. Our future relies on it.