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Rabobank: Salmon is winning, but must keep innovating

Salmon has all the right factors to be the winner, but watch out for new trends filling its space in the marketplace, exec warns.

In an environment where the animal protein sector is on the defensive from consumers demanding welfare, antibiotics reduction and healthier options, salmon is a potential winning protein, said Gorjan Nikolik, senior seafood analyst at Rabobank.

In the Western world, consumption of red meat is decreasing, mainly to the benefit of chicken.

Since the 1990s, consumption of beef in North America and Europe has fallen by 4.2 kilograms per capita, while pork consumption fell by 0.2 kilograms per capita and chicken consumption increased by 8.4 kilos per capita a year, Nikolik noted.

Although chicken continues to be the most in-demand protein thanks to its low cost, a low feed conversion ratio, stable prices and low fat content, animal welfare concerns are strong in this sector.

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The animal protein industry also has to deal with other limitations, including religious constraints, something that does not affect salmon or chicken, but affects the pork and beef sectors.

“Salmon is the only winner on market positioning as a healthy, premium protein with no religious constraints in the west," Nikolik said.

Salmon has unique factors driving demand up, and in terms of supply, the technological and logistical progress in the value chain also increases the opportunities and versatility of the product for different markets, especially with high availability of pre-packed options, value-added items, and ready-to-eat meals.

“It is more than simply expanding supply, it is the value perception and healthy image that matters,” said Nikolik.

“The industry is very good at innovating, at presenting a premium product, and the sustainability and freshness factors really drive up demand.”

But there is a price ceiling

Salmon is now the most-consumed seafood in the United States, but increasingly China is a force driving demand, and many of the big players are betting heavily on the market, either through retail or online.

However, there are challenges, such as strong prices and high supply volatility. Salmon is easily the most expensive animal protein when compared with beef and poultry, and prices are not expected to decline. In the United Kingdom, for example, prices in 2018 are on average £9.86 (€12.79/$11.22) per kilo, up nearly 5 percent from the year before.

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High salmon prices are not sustainable and are especially damaging in mature markets.

In the first half of 2017 -- with a steep increase in Norwegian salmon prices -- demand for the product in mature markets decreased nearly 20 percent, Nikolik's research showed. In immature markets, it decreased around 4 percent, and in emerging markets it increased over 10 percent despite the high prices.

New trends, new challenges

Though some of today's consumer trends seems faddish, others will become mainstream, and the salmon industry will need to innovate to cater to those whims, Nikolik said.

“Salmon has had a fantastic run, but the industry is not only competing with traditional proteins anymore,” Nikolik said.

“The competitors of the past are not likely to be the competitors of the future.”

In 2017, over one billion vegan meals were eaten in the United Kingdom alone, and only 14 percent of them were eaten by vegan people.

There are growing numbers of "flexetarians" among younger generations and brands are increasing their offers of vegetarian and reduced-meat options.

“Some of these options seem even funny to some of us, but they are important trends that have the attention of retailers,” Nikolik said.

Still, consumers today are keener to increase their seafood intake than any other protein.

In the United Kingdom, 39 percent of consumers are trying to consume more seafood, 34 percent are trying to consume more beans, and 32 percent want to increase their nut and seed intake.

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On the other hand, 60 percent of consumers want to avoid processed meats, and 35 percent would like to eat less red meat.

“There cannot be a clearer message," Nikolik said. "Salmon is the winning product but the industry needs to keep innovating, adding value, adjusting to different markets and looking at the markets and new trends."

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