House of Commons - Agriculture

Select Committee on Agriculture Eighth Report

VI. MARKETING AND PROCESSING

155. The previous sections of this Report have mainly concentrated on the catching sector and the far-reaching changes it has experienced in recent years. However, there is little point in vessels landing fish if there is not an established chain of fish merchants, primary and secondary processors and retailers to deliver it to the customer. These land-based elements of the fishing industry are less visible or newsworthy than the fisherman in his boat but they also are in the process of adapting to dramatic changes, brought about in their case by the consumer's changing taste in fish. Here, we examine the different links in the chain and how weaknesses can be overcome in order to increase the amount of UK-sourced fish purchased in this country.

Fish markets

156. Fresh fish is traditionally sold through auction markets. It is landed by fishermen, sorted and graded and sold by the box to fish merchants. There is a price support system which works by withdrawing fish from the market and using it for non-human consumption if the price falls below a minimum set for the species by the Council of Ministers. The general state of the UK market can be judged by the fact that historically just 1% of the UK catch is withdrawn.[577] Prices vary from day to day and from market to market. White fish has increased in value over the last year, while pelagic fish has fallen, due to crises in the main overseas markets for mackerel and herring. Of course, the amount of fish on a market also varies according to the weather, the day of the week or indeed the price likely to be realised there since vessels can land wherever they wish. For example, one of the difficulties in attracting more non-UK vessels to land at our markets is that the price for hake, monk or megrim is much better in Spain[578] and there is strong demand for other species in Norway, France or the Netherlands.

157. The industry in general is supportive of the auction system. The Fleetwood Fish Forum called it "the most efficient means of selling and marketing fish [which] consistently achieves the highest price available"[579], whilst the Grimsby Fish Merchants' Association believed that all fish should go through the auction to improve accountability.[580] In most cases, auctions still involve the conventional auctioneer moving from box to box surrounded by would-be customers, although even in the most old-fashioned markets the buyers now have mobile phones to communicate with their clients. Some markets, however, have invested in electronic auctions whereby fishermen log their fish on landing straight onto a computer which means the fish can then be bid for by a customer in any part of the world. All that is needed is an agent to arrange the actual transportation of purchased fish to its eventual destination. Electronic auctions had been used in other EU states for some time before their gradual introduction into the UK. The transformation of Plymouth in recent years was attributed by some we met to its enthusiasm for modern technology, while other ports were lagging behind.

158. Opponents of the electronic auction system complain that the process takes too long and that it involves "buying blind". Supporters argue that electronic auctions "provide a totally transparent sale with the ability to increase competition by including remote buying stations",[581] and that the system contains its own checking mechanisms as any customer who is sold poor quality fish will avoid that supplier or market in future. We also heard that the length of electronic auctions has been exaggerated and that electronic auctions could bring benefits to all parties since fishermen would get better prices by having more customers, and processors would gain a more stable supply of fish. The Fleetwood Fish Forum argued eagerly that an electronic auction "could provide an incentive for continental fishermen to sell their fish at Fleetwood, thus providing an opportunity to strengthen Fleetwood's position as a regional centre of excellence within the national fishing industry".[582]

159. The Scottish Fish Merchants' Federation pointed out that there were some difficulties to be overcome before electronic auctions were introduced more widely in the UK. It considered that "if electronic auctions come in immediately without proper shore-based grading and weighing facilities there will be just a catalogue of disasters because continental customers will be bidding directly for these supplies and finding they do not match up with the European grades".[583] Once this was sorted out, however, "it could be a very, very useful system, it would save a lot of travelling and we would do all of our buying from the office instead of going to the auction".[584] It did not think investment would be a problem as "any port authority would be delighted to put in the money because they would take a share of the revenue".[585] On balance, while we understand the reluctance of some to abandon old methods of working, we believe that the benefits of electronic auctions outweigh the disadvantages and that properly introduced they could make a substantial contribution to the world-class, efficient fishing industry we wish to see in the UK. Until recently, some public funding was available for port schemes under the FIFG but we do not think subsidies would be necessary in this case. Instead, we recommend that SFIA undertake a campaign aimed at the industry and port officials to persuade them of the benefits of electronic auctions and that guidance be given where necessary on the updating of the grading equipment.

Fishermen and retailers

160. A significant drawback of the auction system as a whole is that the buyer is often not aware of what fish is likely to be available on a particular day. This is a growing difficulty as the power balance in the industry shifts from the catching sector to the retailer. The SFIA explained that "traditionally, fish being something you cannot plan, you cannot go out and catch exactly so much of one species, it has always been a supply-driven industry".[586] The decline in specialist fishmongers and their replacement by supermarkets, "conditioned to continuity of supply, consistency and standardisation", had created "a lot of structural problems in the supply chain".[587] The SFIA explained this situation in greater detail in its report, Major Market Trends including the Impact of Imports and the Competitive Edge of Domestic Landings. Among other observations, it noted that the patterns of UK landings were "unhelpful" as "the bulk of domestic landings ... continues to be made on Thursdays and Fridays", while to satisfy customer demand for fish "catches ... need to be landed on Wednesdays to provide sufficient time for processing and distribution".[588] The SFIA also highlighted the lack of a system for forwarding information on catches to ports so that suppliers could know what to expect,[589] a point also made by the Grimsby Fish Merchants' Association.[590] Greater communication and consistency of supply would therefore reduce the need of processors and retailers to source fish from other countries.

161. The supermarkets themselves confirmed this view. Although all the multiples who provided evidence to us bought large amounts of fish from the UK, in general exclusively through UK-based processors, they cited a number of obstacles in the way of increasing the UK industry's share of the market. Some of these, such as demand for fish not native to UK waters, out of season, unavailable due to bad weather or limited in supply by quotas, are obviously beyond the control of fishermen and processors.[591] Others are not. The most commonly cited difficulty was consistency of supply and price. Marks and Spencer spoke for them all when it explained that it bought "limited amounts of fish from UK auction markets, as it is our policy to ensure that we have consistency of quality and availability along with maintenance of price stability in order that we can satisfy our customers' needs".[592] Several linked this to the problem of the lack of synchronicity between landings and customer demand, where fishermen land on five days a week to supply a seven day market[593] and the concentration of landings on certain days of the week.[594]

162. There was also an issue as to the effect of the auction market system upon the quality of the fish. Marks and Spencer again was particularly concerned that the demand for fish in the UK meant that a poor quality product could be sold at market for a reasonable price, resulting in "a reduction in the incentive to handle fish properly".[595] Tesco and Asda too believed this was an area where improvements were needed, particularly as regards hygiene and temperature controls. Tesco explained that "Fish boxes get over-filled and ... it damages the quality of the fish".[596] It also attributed an inbuilt disadvantage to auctions in that "it puts more time in the chain ... and more margins to be taken out in the middle, so what the customer gets is a more expensive product that is older".[597] Recent reports on visits by supermarkets to fish markets suggest that much needs to be done to improve the hygiene standards before the fish sold there can meet the high standards demanded by the customer. In evidence to us, Asda confirmed that it did "see a future for the fish and auction markets and we will continue to buy through those fish markets"[598] but it could only support a move towards concentration of fish-buying in this way "if we were guaranteed the right levels of quality, chilled distribution, a quality seven-day fish market".[599]

163. This is closely linked to the issue of how fish is handled onboard vessels before it reaches the market. The Scottish Fish Merchants' Federation believed that "the quality of fish that has been landed of late has deteriorated from what it used to be ... because of the changes in the fishing practices".[600] Research from SFIA showed that "there is a difference of up to 40 per cent in quality, depending upon whether a trawl is four hours or two hours ... but the efficiencies are in having a longer trawl".[601] There is therefore a need to persuade fishermen that it is in their interest to land better quality fish. Asda called for enforceable "levels of hygiene and temperature control throughout the supply chain".[602] The SFIA itself does "a lot of work in trying to persuade the need for the market to give more attention to quality"[603] but more needs to be done.

164. Several of the multiple retailers have attempted to improve consistency of supply within the industry by bypassing the markets altogether and developing direct links with processors and vessel owners. Morrisons and Safeway both had a number of suppliers who operated direct procurement contracts with fishing vessels.[604] Even closer arrangements have been forged by Asda and Tesco who now have their own flagged vessels. Both supermarkets work through processors, rather than directly with the vessel owners, but the link is still far stronger than under traditional customer-fishermen arrangements. Tesco's scheme began in October 1998 and it now has seven vessels, with the intention of increasing the fleet to 30 by this summer.[605] The supermarket takes 95-100% of the catch, including in some cases unusual fish which can be used for display purposes.[606] Asda moved into this area six months later and currently has four trawlers under contract to provide 60% of Asda's fresh cod requirement.[607] It had "entered into it on a trial basis"[608] but intended to procure up to 20% of its fish from contracted trawlers in the long run.[609] Asda too "will buy whatever they catch", although the next stage might be to target particular species.[610]

165. Tesco argued that "This model transforms and stabilises the supply chain and delivers important benefits to customers, fishermen, processors and Tesco".[611] These benefits included ensuring that fishermen delivered what customers want, guaranteeing the delivery of a higher quality product due to the speed of its transportation from vessel to store, guaranteeing a secure market for the fishermen and improving communication between supermarkets and vessels so that Tesco could plan for the type and amount of fish which was available.[612] Some disadvantages to the arrangement suggest themselves. For example, the power of supermarkets in their monopoly of retail outlets could allow them to dictate conditions to their suppliers. Asda told us that it set constraints as to the length of fishing trip and the landing time to ensure seven day delivery and as to storage conditions to ensure quality.[613] However, it thought these stipulations not "dramatically different" from the practices generally followed by some vessels.[614] Both Asda and Tesco thought it unlikely that all fish could be supplied in this way.[615] Secondly, in an industry where prices at auction change so frequently, there were concerns about tying vessels in to fixed price contracts. The Scottish Fish Merchants' Federation believed that "when the price goes way above what Asda is paying on the open market, they will suddenly find there are no fish caught by these vessels".[616] In fact, Asda's contracts are for just three months and can be renegotiated to reflect increases in the average market price.[617] Overall, we have few reservations about the contract system and congratulate both the supermarkets and the fishermen they work with on this initiative.

166. Some of the advantages of the contracted vessels arrangement could be delivered in other ways without supermarket involvement, although we would strongly advocate the close attention to the needs of the customer which Asda and Tesco have brought into the system. The Scottish Fish Merchants' Federation believed that these particular types of contract were impractical in mixed fisheries "when you cannot tell the person you are under contract with what you are going to catch".[618] However, as MAFF officials told us, "There are some examples, not in the UK, of large scale fishing effectively resulting in fish on the vessel being sold before it is landed".[619] As with the supermarket arrangements, the vessel reports back what it has caught, with the difference that "those interested in buying it can bid for it and then it is landed to the appropriate person".[620] This has the advantage of allowing the auction system to continue in some form, as the Scottish Fish Merchants' Association advocates,[621] combined with speed of delivery and freshness.

167. The EC has taken an interest in the marketing of fish and brought forward proposals for the development of relations "between catchers and either first stage processors or, perhaps in the case of wet fish, directly with retail companies".[622] MAFF officials told us that these proposals, which will not be "of a regulatory nature", and which are now due to be decided in October 1999, arose because "The Commission see it as being in the interests of the industry and perhaps also the consumer to have a greater degree of vertical integration and a more streamlined flow from catchers to processors and retailers".[623] The Commission also "aims to enhance the POs' role" in marketing,[624] interpreted by Mr MacSween of the Scottish Fishermen's Organisation as an explicit recognition that "one of the problems facing the catching sector is the growing strength of the retail sector".[625] Under the existing EU fish marketing regime, POs already have an established role to play.[626] It may be possible for the more advanced of the POs, at least, to act as brokers in forging relationships between their members and processors in order to give fishermen the stability of a certain market for their catch while keeping themselves out of direct control by the multiples. This would enable the catching industry to overcome some of the problems caused by its fragmented structure.

168. The key to the success of any such arrangements is the level of communication and trust between the links of the chain. Supermarkets are not reliant on the supply of fish in the way that fishmongers are and so they have more power to wield. Nevertheless, it is "a core product"[627] which they wish to sell. The UK catching industry cannot expect to supply 100% of fish eaten in the UK, but if it is willing to alter its practices, it can increase its percentage share of the retail market. Asda believed that, although "many members of the industry ... seem unable or unwilling to adapt to the needs of retailers", the industry as a whole should see the changes detailed in the SFIA report "as a challenge and opportunity, rather than a threat".[628] Tesco too argued that "there can be a strong and viable future for the UK sea fishing industry", so long as it becomes "less producer-led" and focuses "more on the needs of the consumer".[629] To enable it to do so, there needs to be a forum for constructive dialogue between all parts of the industry. As Asda commented on its flagged vessels, "The better the communication, the better the dialogue, the better the level of trust you develop, the more sustainable and fresher everything works for everyone".[630]

169. The SFIA ended its report with a call for "the development of a cohesive and proactive marketing strategy to be implemented from the top of the supply chain [which] would have the potential to identify new opportunities and greatly enhance the competitive standing of domestic supplies".[631] The report did not elaborate on who should organise or implement such a strategy, nor what its elements would be, but this is clearly a task for the SFIA itself. It would probably need extra funding to enable it to do so. We recommend that the SFIA, in consultation with the industry and taking account of the views of supermarkets, devise a marketing strategy to cover the catching sector through to the suppliers with the aim of increasing the competitiveness of the UK fishing industry. We are aware that the SFIA has recently set up a consultative body (the Fish Industry Forum) which brings together industry interests but we think this should be developed into a much more focused group dealing with supplier relations. Therefore, we recommend that a forum be established under the auspices of the SFIA to bring together retailers and merchants and industry representatives on a regular basis to discuss how both sides can adjust to the needs and concerns of each other. Although we have not specifically referred to the catering sector in this discussion, we acknowledge the continuing importance of this market and we recommend that a separate working group be established to focus on areas of difficulty and opportunity for UK fish sales to the catering sector. There is a case for Government funding to help the fishing industry adapt to the changes needed for increased competitiveness. The appropriate scheme for grants to improve facilities at ports and to improve the conditions under which fish products are processed and marketed was closed in May this year. The list of projects helped under the August 1998 round indicates just what can be achieved with a relatively small outlay of £811,000 from the EU and £178,000 from MAFF.[632] We recommend that the marketing, processing and port facilities scheme be reinstated in order to enhance the competitiveness of the UK sea fishing industry.

Markets for fish

170. Within the fresh fish sector of the market, there have been significant changes in the pattern of consumption over recent years. The supermarkets confirmed that the trend is away from "the traditional 'wet fish' products to more prepared convenience foods", such as breaded fish or fish with sauces.[633] Nevertheless, the number of fish counters in stores is increasing and several companies were keen to stress the role played by "highly skilled fishmongers [who] are able to prepare the fish to a customer's individual requirements, offer advice on preparation and give recipe suggestions".[634] This development is linked to the growth in niche markets, particularly for exotic fish[635] or "really fresh, high quality fish".[636] Tesco was "stocking increasing numbers of exotic fish that people might want to try", having experienced different products on visits overseas.[637] Obviously, not all of these fish can be found in UK waters and they will never provide a mass market but MAFF officials agreed that "for short-term profitability one would perhaps be looking for rather narrow market segments ... there are a lot of micro-markets for very specific products".[638] The experience of Cornish and Scottish fisherman in adapting to new fisheries and markets suggests that UK vessels are well placed to take advantage of these changes.[639]

171. At the opposite end of the spectrum from exotic fish is the growing popularity of regional branding based on the "strong perception that if you use locally caught products that it will be fresher".[640] Tesco has a "locally caught" scheme in which it works with key suppliers in five areas of the UK to procure fish which can be marketed as "locally caught" within that region. The regions involved are Yorkshire, Devon and Cornwall, Scotland, Northern Ireland and Wales.[641] In Cornwall we ourselves heard how the industry was keen to build upon the "unique" image of Cornwall to build a niche market for Cornish fish.[642] In Scotland, this concept had been developed into the Seafood Scotland project, one objective of which was "to promote and market Scottish fish"[643] and we also visited the Shetland Catch fish processing company in Lerwick which trades upon its locality. There are clearly benefits in such initiatives, although they will be limited in their ability to achieve market share (Asda estimates the potential as "about five per cent of the market place rather than 50 per cent").[644] The SFIA has begun to move into this area, following a recommendation by the Government's policy review of its activities last year that "the Authority give consideration to regional fish promotion".[645] The SFIA is somewhat hampered in its efforts by rules on EU state aids because of the parafiscal nature of its funding, a similar situation to that of the Meat and Livestock Commission. Nevertheless, the Authority appears to be finding imaginative ways around the constraints and we offer our support to its work on regional fish promotion.

172. The success of these initiatives indicates that there is scope for increasing the market for fish by appealing to the consumer in new ways. The SFIA is currently receiving an EU grant for an advertisement campaign "directed very much at the younger households and trying to get younger households into the habit of eating fish".[646] The Chief Executive also supplied details of work with supermarkets such as the development of recipe cards to promote fish sales.[647] These campaigns have to overcome customer resistance to what is perceived as a difficult food to prepare, with "negatives, which are mainly smell in the house from cooking, skin and bone".[648] Fish is regarded as a healthy food choice but customers want "a more convenient, easy to prepare, less fiddly protein portion"[649] before they will buy. The proof of this and the potential of the market is the massive growth in the sales of salmon, described by Mr Cooke of Tesco as "the ultimate convenience food" which "people want to buy ... because it is just right".[650] There are two issues to resolve here as far as the sea fishing industry is concerned. The first is its ability to deliver such quality products. If it does not, then all the supermarkets indicated that they would turn more and more to aquaculture which could guarantee a regular supply of fish exactly meeting customer demands.[651] The second is the need for customer education on the virtues of fish and more importantly how to prepare it. We accept that the SFIA is working hard to fulfil its remit in this area but it is fighting against a culture which traditionally chooses animal protein over fish. Generic and regional marketing both have a role to play, as do promotions aimed at persuading consumers to try fish other than cod, plaice and haddock. We are confident that the new Food Standards Agency will support the promotion of fish as part of a healthy diet and we recommend that the Government together with the SFIA and the Food Standards Agency initiate a campaign to promote the perception of fish as a healthy, convenient meal option for all ages.