Salmon sales surge on demand for upscale fish
Written by Puget Sound Business Journal   
Monday, 30 May 2005 16:50
Upscale and health-conscious consumers' demand for Northwest wild salmon is growing, rejuvenating an industry that just a few years ago seemed on the verge of being smothered by waves of cheap farmed salmon from Chile.

With forecasters projecting a second strong year of sockeye production in Alaska, and prices trending upward, companies at most stages of the salmon food chain are making money.

The key to the companies' renewed strength: a tight focus on the niche market that wild salmon has become, and an emphasis on selling to the well-heeled buyers most willing to pay a premium for wild fish.

"The strategy of going after specialized customers is paying off, and I think it's paying off for the whole industry," said Vic Taggart, vice president of sales for the United States and Europe for NorQuest Seafoods Inc., a Seattle-based salmon processor.

Chris McDowell, who studies salmon markets for the Salmon Market Information Service in Juneau, expects the increasing value of salmon, coupled with the larger harvest, to add millions to the value of the 2005 Alaska wild salmon harvest. He said this year's harvest could reach $250 million in value, up from $237 million last year. This compares with a low point of $162 million in 2002.

The rebound is still far short of the industry's strongest years, in the 1980s and 1990s, when the value of Alaska's salmon harvest averaged $400 million, McDowell said. Today about 70 percent of the global salmon supply comes from farmed fish, and observers say the trick for the salmon processing industry, most of which is headquartered in Seattle, has been learning to capitalize on its slice of a much-larger pie.

"The crisis of farmed salmon price erosion has come and gone. It hasn't gone away, but it doesn't hurt as much as it used to," said McDowell. "Farmed salmon remains a major market factor, but it's a factor we've grown used to."

After several years of being pummeled by competition from cheaper and more uniform farmed salmon, the turning point for the wild-salmon industry came in January 2004, when the Pew Charitable Trusts released a controversial report in the journal Science about contaminants, including PCBs, that were found in farmed salmon randomly selected from supermarkets in North America and Europe.

That report concluded: "Although the risk/benefit computation is complicated, consumption of farmed Atlantic salmon may pose risks that detract from the beneficial effects of fish consumption."

While many in the industry dispute the report's conclusions, the document and its publicity did convert many fish purchasers to buying wild salmon.

"Due to a lot of media stuff in last couple years about farmed versus wild, the customer has been educated; they feel that wild salmon is the better of the two choices for them," said Tim Ferleman, buyer for Anthony's Restaurants' seafood division, which never serves farmed salmon.

The interest in wild salmon has been boosted by the greater awareness of the health benefits of eating seafood that has arisen from the farmed salmon controversy, and ironically in part by the tripling in global salmon consumption in the last decade, which in turn is due to the availability of cheap farmed salmon.

"There's been a huge increase in demand on the East Coast, where traditionally farmed salmon was what restaurants in the Midwest and East Coast served," Ferleman said. "I've got suppliers saying, 'Guys in New York, I can't get them enough fish.'"

The pattern is similar at high-end grocery chains such as the six stores operated by Kirkland-based Larry's Markets, Inc. There, Seafood Buyer Durell Herman said he only sells wild salmon; during the winter he even buys frozen wild salmon that he fillets in the store.

"I feel that my customers, that's what they're looking for. They would rather pay a little bit extra and get wild, rather than get farmed and the uncertainty of farmed," he said. "You pay more for wild salmon than farm-raised, but our customers are more discriminating."

The salmon market has seen a reversal of normal supply/demand curves that would have been unimaginable a decade ago: At a time when Alaska wild salmon catches are increasing, the prices they're commanding are going up also. This is a combination of the price floor brought into the market by the farmed salmon, and by the increasing demand for wild among discriminating buyers.

Kurt Sigfusson, assistant sales manager for the Seafood Producers' Cooperative in Bellingham, said buyers willing to pay $5 to $15 a pound more for wild salmon are driving a rebound for his members.

"Last year was a big year when it really took off, which was great," he said. "Wild salmon demand has been increasing steadily over the last five years, and it's displaced a lot of farmed salmon with wild."

The March issue of Salmon Marketing Bulletin, published in Juneau, Alaska, shows that prices for king salmon climbed 50 percent last year, while coho went up 35 percent. Even the two fish of lowest value, pinks and chums, went up 27 percent and 23 percent, respectively.

"The success of Alaska in product differentiation, that's carried across all the species, including pink and chum," said McDowell, who produces the bulletin.

This year will be the first year in a decade that Alaska will produce two years in a row of sockeye harvests exceeding 42 million fish, McDowell said. Alaska fishers will harvest 180 million salmon this year, exceeding the 10-year average by 8 percent, he said.

Sockeye, much of which is canned for the European market, usually accounts for about 60 percent of the dollar value of the Alaska salmon harvest. The high-end fillets usually served in restaurants, such as those from the fabled and highly marketed Copper River runs, are kings, sockeye or coho.

 
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