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Demand for organic salmon far outstripping supply

Consumers want organic salmon, but producers just can’t keep up.

Organic salmon may be more much expensive than the conventional alternative, but demand is not waning, and instead it is far outstripping supply at the moment, a number of suppliers told IntraFish.

David Chapman, head of commercial at Waitrose-dedicated supplier Aquascot, said there's no issues with consumer interest in organic product -- but availability is a bottleneck.

"We’ve just not been able to get the supply to keep up with the demand," Chapman told IntraFish.

Other suppliers, including Dutch processor Visscher Seafood and UK processor JCS Fish, confirmed the demand for organic salmon is outweighing production -- and more volumes would easily be absorbed.

“Is there growth in terms of demand? Yes, absolutely. If we could get more volume, equally spread out through the year, we could definitely commit to more long-term agreements with our customers,” Tim Brouwer, general manager at Visscher Seafood, which currently produces around 2,000 metric tons per year, told IntraFish.

“Because that is the way to go; selling organic on the spot market is extremely difficult. If you have demand from your customer there is no supply and vice versa.”

Rising prices

The lack of volume growth is best reflected by prices for organic salmon, which have been steadily rising in recent years.

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Brouwer said in the past two to three years, prices went from €7 ($8.60) to more than €9 ($11.10) per kilo for head-on gutted Norwegian product and to more than €10 ($12.30) per kilo for Irish organic salmon, which is valued even higher because of its Naturland certification.

“So I would say volumes are tight,” he said.

Even organic farmers have biological challenges, and although less exposed to diseases and plagues because of their organic methods and regulations, when they do happen “it is a catastrophe."

Last year issues jellyfish caused a very high mortality rate in Ireland for example, while farmers also have much fewer options to fight diseases because of the strict regulations.

Aquascot’s Chapman said there is a usually a 25 percent premium on organic salmon compared to conventional salmon which works out at about a £1 (€1.10/$1.40) per kilo difference, depending on the spot market.

He said the challenge is getting the supply to meet the demand for various reasons – the Scottish market is constricting this year, as is the Irish market.

Multiple sources

To mitigate problems with supply, Aquascot uses a dual sourcing strategy. Traditionally it has always supplied a combination of Scottish and Norwegian organic salmon, but three years ago was forced to switch to solely Scottish.

“That gave us an all year round supply. Then last year that wasn’t anywhere near enough so we went to a dual supply we now take Scottish and Irish," he said.

“We would love to get more but the Scottish market is slightly restricted, hence why we went to Ireland, but Ireland again has had its biological challenges going into this year.”

Nevertheless, Chapman expects to see more supply coming through over the next couple of years.

Aquascot clocked growth of more than 30 percent in 2017, and Chapman it is forecasting another uplift in the region of 20 percent this year.

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“From our perspective it is picking up, but that’s really our ability to dual source, having both Scottish and Irish supply for the full year, for the first time, is really where that growth is coming from,” he told IntraFish.

Visscher Seafood also has agreements with several of its customers based on flexibility of origin, meaning the company can use Norwegian, Irish and Scottish salmon, making it less vulnerable to biological issues.

"Next to that you need customers for frozen, so that you can absorb the additional volume in weeks where the farmers have more volume," Brouwer told IntraFish. "Basically what we do is we tell the organic farmers: send us whatever you have."

Producers then send as much as they have available for that week.

"For us every week is a surprise what we receive in addition to our contracts," he added. "Nevertheless most of the weeks we have to disappoint customers, because we lack enough volume. But there are weeks with a lot of extra volume as well."

Limited production data

As organic aquaculture is a relatively new field, there is not much data collected yet on overall demand levels, and what little information there is isn't particularly reliable.

All Irish salmon production is organic and 2017 saw strong growth in both volume and value, Ireland’s Bord Iascaigh Mhara (BIM) told IntraFish.

“Indeed the demand for Irish organic salmon outstripped supply last year,” a spokesperson said. In 2017, 19,981 metric tons of Irish organic salmon was produced, worth €147 million ($181.1 million).

However, Louise Coulbeck, director of Grimsby-based JCS Fish, told IntraFish that because the availability of organically produced salmon is limited, it’s difficult to be precise about production figures.

“From a JCS Fish point of view, we believe there is certainly growth potential,” she said.

The Soil Association’s recent 2018 Organic Market Report suggests the UK organic market overall is now worth £2.2 billion (€2.5 billion/$3.1 billion) and grew by 6 percent in 2017.

“So it seems logical to assume that the potential for growth in organic salmon specifically is probably in line with these figures,” said Coulbeck.

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Additionally, Nielsen data for supermarkets showed a 26 percent growth in organic fish sales over the year to December, while non-organic grew just 3 percent in the same period.

Coulbeck said that, at least in the UK, the sense is the consumer demand for organic salmon is growing.

“All our organic customers are currently in the UK so we can’t comment on other markets, but we sense that demand is strong," he said. "We don’t believe there’s currently enough organic fish being produced to meet potential demand.”

Specialty product

In 2008/2009 when the recession hit, consumers in the UK could -- and did -- trade down on buying organic, said Chapman, but this is picking up again.

While Waitrose and Ocado are Aquascot’s main customers, the company also gets the odd enquiry from specialty retailers and online retailers.

“We also get some enquiries from EU retailers as well looking for organic volume, but we can’t supply our core customer at the moment, so diversifying or expanding is not an option as it stands,” he said. “But is shows there is a wider supply and demand issue than what we’re seeing in the UK.”

Visscher Seafood’s Brouwer said it is hard to know how much consumers are looking for organic salmon or how much they would ultimately pay.

However, “what we see at retailers for whom we produce the full range of salmon is that the ratio of conventional or Aquaculture Stewardship Council versus organic on the shelves ranges from 5:1 to 9:1,” he said.

Visscher Seafood has a wide variety of customers when it comes to organic salmon, selling to retailers and distributors alike.

“This is in order to make volumes and we sell to boutique smokehouses and organic wholesalers that allow us to make good margins,” said Brouwer.

In JCS Fish’s experience, organic salmon is generally sold to specialist and upmarket retailers -- in the United Kingdom at least. Additionally, online sales are also increasing – this again is in line with the Soil Association report which suggests a 9.5 percent increase in delivered sales of organic products overall – ahead of the overall market.

A league of its own

Despite the rise in certifications and labels such as the Aquaculture Stewardship Council (ASC), organic still has its place on the shelf, the suppliers said.

Organic salmon is in a league of its own,” said Brouwer. “It’s easy to develop a cynical attitude towards all these certifications, but our business is thriving because we are among the first companies to offer these new concepts like ASC and organic salmon.”

Visscher Seafood started in the category three to four 4 years ago and now organic salmon makes up for 15 percent of its business.

Louise Coulbeck from JCS Fish said the identification of fish as organic is certainly a marketing advantage and also underlines the specific quality of the product.

“Our salmon is certified by the Organic Food Federation and the quality of this fish is very high due to the higher welfare and more rigorous production standards demanded by this standard,” she said.

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