Bank expert: Industry must improve on ‘profitable problems’ in 2019
A seafood industry expert at Norway’s DNB Bank says 2018 has been a year of good salmon prices, but believes the industry has several challenges that should be improved next year.
“These challenges are especially fish health and biology. The two are financially profitable for the industry as a whole because they raise prices,” says Dag Sletmo, adviser to the Seafood Department at DNB.
“However, farmers who are affected and not geographically diversified may be exposed. We see a much greater variation in operating margins between different companies and regions than we did a few years ago.”
In a Christmas interview with Fish Farming Expert’s Norwegian sister site, Kyst.no, Sletmo said that there had been many positive events and transactions for DNB – Norway’s biggest financial services group - in seafood in 2018.
Upswing in Chile
“If I was to pick out one thing, it may be the upswing in Chile. It has been important for the industry and good for our business, with the listing of Camanchaca on the Oslo Stock Exchange as the dot over the I.”
If you would have received a Christmas wish for the aquaculture industry, what would it be?
“I wish the politicians who talk about a fivefold production increase in the party talks, instead do something concrete to achieve the goals. For example, take a trip to the Norwegian Petroleum Directorate and learn about uniform regulation of an industry,” he says.
Good prices
Sletmo believes salmon prices in 2018 have been good, especially in the first half.
“We see that the market accepts these high prices, so we are not afraid of ‘demand destruction’ as many in the industry are talking about. But lack of volume growth will be negative for the demand for salmon in the long term because it makes it harder to develop new segments and markets.
“The high prices contribute to a high profitability that increases the risk of disruptive innovation and can be an attraction for the tax collector,” he adds.
What do you think about the prices next year?
“I listen to Norway’s best salmon analysts, Alexander Aukner and Tone B Hanstad in DNB Markets, who say 60 kroner per kilo.”
Market excitement
Sletmo believes that the salmon industry is usually very production-oriented.
“But this year perhaps the most exciting news has come on the market side. Then I’m thinking about the pledge to the industry made by Alibaba (the Chinese internet trading giant) in Bergen in March, with subsequent strategic agreements with the Seafood Council and Marine Harvest, Gfresh’s corresponding pledge in Chile, Marine Harvest’s new brand strategy (MOWI) and restaurant plans in China.”
Sletmo points to three key things the aquaculture industry should do better and focus on more in 2019.
Reputation building
“They must improve the biology, marketing efforts and reputation building. Biology is responsible for costs and volumes. Market efforts are important in order to increase value creation. Salmon is no longer the ‘commodity’ it was - the market has become more differentiated and with many more price points. As Norwegians, we are instinctively production-oriented. But it can also create great values in marketing.
“The industry has a wonderful story to tell - but one must remember to actually tell it. Reputation management is important for all industries, and especially for industries that depend on the public’s acceptance to operate in general,” he expands.
Exactly what more should the industry do to improve its reputation?
“They must enter into dialogue with the public, be more open and transparent, as well as provide relevant information and facts. The industry should also spend more money on communications workers and less on lawyers,” he concludes.
