News of Norway, November 27, 2002
"One thing many people don’t know about salmon," Dag Ryste explains, "is that they get seasick in bad weather." Ryste, a regional manager at a major seafood producer named Pan Fish has his boat running the waves, one motor dead. Out here—on a fjord just outside the Norwegian west-coast town of Ålesund—Mother Nature meets us with clear-blue water and high snow-covered mountains.
The salmon farm we are looking for holds three of the 848 licenses issued for farm-producing salmon and trout in Norway. Pan Fish is a major player in the game, and Norway is one of the major global players in the production and export of farmed seafood. In fact, Norway is the world’s biggest producer of Atlantic salmon—putting out twice the production of runner-up Chile. In 2001, Norway produced 415,000 tons of salmon; almost three times as much as it marketed a decade ago.
Much of the Norwegian salmon production goes to the United States—but not as much as Norwegians had hoped. A number of factors have contributed to Norwegian salmon being looked upon as a luxury item in the United States--something reserved for fine restaurants and rich celebrities. News of Norway recently traveled to Oslo, Ålesund and Massachusetts, Virginia and Washington, DC, to find an answer to the following question: If Norwegian salmon is as good as they say, how come you can’t find any in restaurants and supermarkets all across the United States?
Our search for an answer began at a computer-run salmon farm outside Ålesund, Norway. Securely anchored to the seabed—presumably to prevent seasickness in the fish—the farm’s nets floated unnoticed amidst the towering mountains. This farm consisted of three nets and a small hut. The hut, the heart of the operation, contained fish-food and the technology needed to control its distribution.
"There are sensors built into the nets that will measure how hungry the fish is. If the food we give them is eaten quickly, we know they are hungry, so we feed them more. But if they eat slowly, we feed them less. They get exactly as much as they want, and when they want it," says Kurt Myrvang, who overlooks the farm.
Most of the fish inside these nets are ready to be harvested. They are close to two years of age and have already gained a weight of around five kilograms (about 10 lbs.). The salmon is processed on land at a processing facility only minutes away from the nets. Once processed, they are categorized according to color and shipped to different markets worldwide.
One of these markets is the United States, and one of the most important ports of entry in the US is Boston, MA. Here, the smell of fish is in the air, in the feel, even in the names of the restaurants. But Norwegian salmon is hard to find.
"I don’t have any Norwegian salmon right now," says the man behind the counter at Frank Giuffre & Son’s Fish Market on the North Shore in Boston. "Sometimes I get it, and my customers like it because it is fatter, and that adds to the flavor," he says. But on this fall day in October he was one of many fish dealers unable to offer anybody a decent piece of Norwegian salmon. At the Boston Fish market, famous for its long row of fish-stalls displaying everything from tuna steaks to raw oysters, Norwegian salmon was hard to find. All the salmon at this market, on this day, was Chilean or Canadian. One stall owner said: "We never take in Norwegian salmon any more. It’s too expensive."
At that same moment, in a warehouse a little further south in Boston, there were some 50 boxes of fresh fillets of Norwegian salmon waiting for a customer. The boxes had been there for five days already, and today was Friday.
"We hope to get something like $3.20 per pound for this salmon," says Seth Kamich, a salesman at Pan Fish in Boston. "And we hope to sell it by Monday, though the price is a dollar more than they pay for Chilean salmon."
The situation in Boston illustrates a couple of points: first, Norwegian salmon is hard to sell in the United States; second, the big challenger is Chile.
In the late 1980s, when the salmon-farming industry was just about to take off in Norway, trade relations across the Atlantic were quite relaxed on export-import issues. However, in 1991 the United States introduced an import tariff on imports to secure a place for its domestic salmon industry. A standard price was set and anything below this was considered "dumping." For Norwegian salmon, the additional cost of shipping across the Atlantic and new export taxes at home dealt a massive blow to salmon exports to the United States.
"We dislike the tariffs and we disagree with the notion that dumping is selling anything below a set price," says Svein Ludvigsen, the Norwegian Minister of Fisheries.
Ludvigsen is faced with similar problems in relation to the European Union--a market in which Norwegian salmon also is priced higher than EU-produced fish because of high import taxes. The EU, of course, is potentially a much more important market for Norway than is the United States. The value of annual Norwegian salmon exports to the seven biggest importers in the EU region is more than 5.7 billion NOK (equal to $760 million). In comparison, exports to the US in 2001 were worth only some 459 million NOK ($61 million).
So, when the question is posed why we don’t see more Norwegian salmon in the United States, how exactly do the tariffs affect the answer?
"The effect of the tariffs—which now amounts to some 26 per cent for most companies—is that any number of Norwegian companies, beginning in 1991, stopped exporting whole fresh salmon to the United States," says Tore Arildsen, head of the Norwegian Seafood Export Council. "The US was without a doubt the most important market for Norwegian salmon prior to the introduction of the tariffs. The United States is obviously the world’s largest and fastest growing market for farmed Atlantic salmon, growing even now at an estimated 20 per cent for the year 2002."
The anti-dumping tariffs of the United States not only affect the import of whole, fresh salmon. There’s much more to salmon than that. While Norway’s export of whole fresh salmon to the US was worth around 25 million NOK ($3,3 million) between January and September 2002, the export of salmon fillets and smoked salmon—which are not affected by the tariffs—was almost then times that much (239 million NOK, or $32 million).
"Around 40 per cent of all our smoked salmon exports go to the United States—and the numbers have been increasing rapidly in 2001 and 2002," Mr. Arildsen says.
So, salmon exports not affected by the tariffs are imported to the United States ten times more than salmon products affected by the taxes. Then why all the fuss?
"It is a matter of principle," Minister Ludvigsen says. " Who knows what would have developed if the import taxes had not been imposed ten years ago. The tariffs may not add up to very much in the economic situation right now, but they do give grounds for a certain unpleasantness in our trade relations," he continues.
Most modern families want their dinners to be quick to fix. That is why fillets are about to take over—if not completely dominate the salmon market. And no one knows fillets like Chile. In 2001, a staggering 81 per cent of all fresh salmon fillets brought into the United States came from this Latin-American country. Norway’s piece of the pie was a little more than 2,000 tons of fillets—a measly 2.6 per cent of the total imports.
"Our main challenge now is to increase the distribution of Norwegian salmon within the food service sector," says Tore Arildsen. "Two-thirds of all the seafood sold in the United States pass through this sector, so that is where we need to focus our attention."
He admits that Norway has a less favorable position in the US market than that of Chile or the US domestic producers.
"Because of the relatively high price of Norwegian salmon, and because of the current strength in the exchange rates of our currency, our most important challenge right now is to identify the niches where people are willing to pay a bit more for Norwegian salmon," he says.
According to souse chefs Marc Kennedy and Todd Peginsky at the McCormick & Schmick's
seafood restaurant in McLean, VA, most customers don’t worry too much about the price as long as they get a superior product.
"The price is not the issue if it’s a matter of paying a dollar extra per pound of salmon. Our customers appreciate the quality, then they pay the price," says Kennedy. He works for a chain of 60 restaurants across the country that serves two different dishes with salmon as the main ingredient. Kennedy is very picky when it comes to quality.
"Chilean salmon is too inconsistent," he says, "so we never buy that. Almost all our salmon comes from Maine or Alaska."
Not that he would mind serving salmon coming from across the Atlantic.
"If you bring me a superior product, I’ll buy it. But no one has ever come up to me to sell Norwegian salmon. So I’ve never served it. I’ve heard it’s good, though," he says.
For William B. Folsom, formerly of the National Marine Fisheries Service, this is the core of the issue:
"The tariffs were introduced ten years ago. Norway has had a great opportunity to sell its salmon to the United States—it just has to understand the market. It does no good complaining about decade-old taxes. What the Norwegian salmon exporters need to do now is to make a marketing effort that will give people greater access to the product."
Setting marketing and politics aside, back in Ålesund, Dag Ryste is giving a tour of the processing factory located close to the city.
"The salmon is first gutted by a machine, and then it comes into this hall," he explains.
The hall is the size of an airport hangar. The workers, approximately 25 in number, are all wearing protective plastic suits and head gear in order to prevent the fish from being contaminated and the workers from getting spillage all over their clothes. They do not seem distracted by the sweet smell of freshly smoked salmon filling the room—and the earphones they wear seem to make them immune to distractions of other kinds as well.
The salmon’s first stop is a small table where nimble and experienced hands chop off the heads and send the fish down an assembly line to a machine that carefully cuts the flesh from the bones. There are two exits from the machine – one for fillets, the other for heads and bones.
"We use the leftovers in the production of fish oil and fish flour, which are the key ingredients in the food we give the salmon," Mr. Ryste says with a smile. "So you may say we’re good at recycling."
From the fillet-making machine the fish is sent down an assembly line where workers trim the fillets into consumption-ready portions. The pace is fast, each worker focused. In the space of a year, 35,000 tons of salmon fillets are sent down this line. After the trimming, fillet portions are arranged so they can be sent through a machine that takes away any bones remaining within the flesh. Boneless and neat looking, the fillets now head for the most impressive of all the machines—the classifier.
"It’s impossible to tell when the fish is still alive what color its flesh will have," Mr Ryste says. "And it would be very difficult for human eyes to determine its color after the fish has been filleted. So we send the fish through a color scanner."
When it comes to salmon, color is all-important.
"The best-colored fish—the fish with the reddest color—will be sent to smoke-houses abroad, from where it goes to customers in the high-end market. The fish with the poorest color will be frozen—the salmon loses much of its color when frozen, anyway, so this is a good solution. And the color makes no difference in the taste," Mr. Ryste assures us.
So, whether or not it tastes any different, color is the most important factor in salmon production. And color comes from the food the fish eats.
"There are two ways we can add color to the meat. Both are more or less artificial, but the solution we have chosen is to use natural substances that are similar to those the fish would eat in the wild," Mr. Ryste says.
Timing is an all-important element when it comes to the color of the meat. The salmon is a very special fish in that it always returns to its birthplace to mate. And once it starts heading back to the river where it was born, it stops eating. The same thing happens to farmed salmon – once it gets ready to reproduce, it will stop eating. The minute it seizes to eat, the color within its flesh will start to move out toward its skin. The salmon undergoes massive changes once it gets ready to reproduce. The whole fish changes: its proportions, shape and color. What was a silver-colored, hydro-dynamically shaped fish in salt water now changes into a creature with a curved mouth, a hunchbacked and with reddish skin. And since it doesn’t eat while undergoing this change, the coloration that produces the change in its skin comes from its flesh. A salmon that is traveling in a river, ready to mate, will have little color in its meat. For any salmon farmer, avoiding this is of the outmost importance.
"A few of the salmon in here today have already started the process. They’ll all go to the freezer market," Mr. Ryste says with a disappointed shake of the head.
Approximately 1500 tons of frozen salmon fillets from Norway will have been exported to the US market during 2002—around half the Norwegian exports of fresh fillets. The export prices for both frozen and fresh fillets have stabilized during the last year. Frozen salmon now brings a bit more per kilogram – in October 2002 the export price of a kilo of frozen salmon fillet was around $3.30, while a kilo of fresh fillet brought $3.10. In comparison, the figures in October 2000 were $4.80 per kilo of frozen fillet and 3.70 per kilo of fresh fillet.
The tough market, combined with the rising value of the Norwegian krone, has given companies like Pan Fish a double blow. On November 15, 2002, the value of the Pan Fish stock fell to a new low of 0.99 kroner. Since the same date two years ago, the stock has plummeted 97.69 per cent. Other seafood companies are facing the same problems. Fjord Seafood fell 94.18 per cent during the same period. The Lerøy Seafood Group, another big player in Norway, was first listed on the Oslo Stock Exchange in June 2002. Since then, the value of its shares has fallen over 40 per cent.
The only way from here, it seems, is up. At a seminar in Tromsø in November, director Jan Trollvik of the Norwegian Seafood Export Council stated that the road ahead should be traveled with a carefully developed strategy in facing tough new competition from countries like Chile and China.
"My message is this," he told representatives of the Norwegian seafood companies, "start focusing on products of high quality that will travel well as a fresh product. There’s more money in the market for fresh fish than for frozen fish, so we must dedicate ourselves to this segment."
"We can’t compete with countries like China when it comes to price, but we can compete with anybody when it comes to quality, stability and continuity of supply. We can offer something the Chinese cannot: fresh fish," he concluded.
There might still be hope for a slightly seasick industry.