Increased marketing efforts can lead to better times
The large scale Russian cod fishery and onboard freezing of the 1990s was the start of China becoming a major producer in the market for cod fillet. Norwegian exports of frozen cod fillet products to the EU have collapsed from 50,000 metric tons to 12,000 metric tons and the number of companies specializing in fillet from 35 to 10.
“A higher degree of market orientation can lead to better times for the fillet industry,” says Scientist Finn-Arne Egeness at the food research institute Nofima.
He refers to the fact that Norwegian exporters’ answer to the double frozen hand-filleted cod fillet produced in China has been an increased concentration on fresh fillet products of cod.
“This has been a reasonable strategy because fresh products have been paid higher than frozen products. But Nofima’s analyses also point to the fact that frozen Norwegian fillet products achieve higher prices than Chinese products. This shows that the market differentiates between fillet products produced from fresh and frozen raw materials,” says Egeness.
High fresh quality
He refers to conversations with British buyers that indicate that possibly the most important reason that Norwegian fillet products achieve higher prices than Chinese double frozen products is that Norwegian producers have access to fresh raw material.
“This difference in quality can be strengthened further by Norwegian producers choosing an even better raw material in the production of frozen products,” says Egeness. Currently, the best raw material is primarily used for fresh products.
Egeness has written a report as part of the project “Production in China: Factors that influence the market for white fish” (financed by the Norwegian Seafood Research Fund (FHF), Norwegian Fishermen’s Sales Organisation, the Norwegian Seafood Council and Nordea.)
Find Norwegian advantages
The main conclusion of his report is that China’s most important advantage is a unique access to low-cost labour and good infrastructure that enables it to supply frozen cod fillets to the EU at a lower price and more accurate specifications than the competitors.
“Since Norwegian companies can’t compete on price, they need to identify other product characteristics that ensure a sufficient share of the market chooses Norwegian-produced fillet products ahead of Chinese products.”
Egeness refers to earlier research from Nofima which shows that fillet products labelled “line-caught” attract a price premium of 22 percent in British supermarket chains, while the national attribute “Iceland” has given a price premium of 5 percent.
“None of the frozen white fish products we observed on the British market were labelled with Norwegian origin. Consequently, Norwegian companies should investigate whether Norway as an origin can form the basis for a higher price. Only the supermarket chain Marks & Spencer advertised that the frozen fish fillet products were produced from fresh fish,” says Egeness.
“Maybe such communication in more supermarket chains can create greater demand for Norwegian products produced from fresh raw materials. Single frozen raw material is one of the most important buying criteria at the industrial level. We also need to exploit this at the consumer level.”
Concentrate on proximity
“Norway’s location near both the fishing grounds and the consumption markets provides opportunities for improved following up of customers and more rapid delivery of goods. This can be practical in connection with sales campaigns when large supermarket chains can require rapid supply of new goods in the event that demand exceeds expectations. This can provide added value and create the basis for the willingness to pay higher prices,” says Egeness.
“The locality of Norwegian companies also gives shorter time between the purchase of raw materials and the sale of the finished products. This involves a lower level of capital being employed and less uncertainty than in the Chinese fillet industry, where nearly six months can pass from the purchase of the raw material until one receives payment for the fillet products that are produced.”
From zero to 60,000
The production of frozen cod fillets in Norway fell dramatically after 1997, when the cod changed from being a national raw material to an international trading commodity that could be traded globally.
Modern freezing and thawing technology, combined with cheaper transportation costs, meant that cod could be sold regardless of where and when it was caught. This contributed to China’s production of frozen fillet products of cod growing from zero to 60,000 metric tons in less than a decade.
However, the disadvantage for the Chinese companies is the large distances, long response time and the fact that raw material that has been frozen twice reduces the willingness to pay among many European buyers.
This is where Nofima Scientist Finn-Arne Egeness believes that Norwegian industry can utilize proximity, freshness and single frozen, national labelling, line-caught and other quality characteristics on the fish packaging in market segments that emphasize characteristics other than simply price.