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« June 2006 Table of Contents

Species Focus: Atlantic salmon

Price and demand escalate amid consolidation and proactive marketing

For Kirk Avondoglio, the executive chef at Perona Farms in Andover, N.J., Atlantic salmon's appeal extends well beyond its mild flavor and omega-3-rich profile. Equally important is the consistent quality of farmed fish and its year-round availability.

Indeed, Perona Farms uses 5 tons of fresh Atlantic salmon per week to make its renowned smoked salmon, plus another 150 pounds at the hacienda-style restaurant the Avon­doglio family has run since 1917.

"In my smoking operation, if every fish is a little different, it's going to screw me up completely," says Avondoglio, who is also president of Food Specialties, the division that sells smoked salmon in grocery stores and online. "I need that consistency."

Perona Farms isn't alone in its commitment to Atlantic salmon. The fish - which, together with wild salmon, is the nation's third-most-popular seafood- remains a big seller at restaurant chains such as Applebee's, Outback, Red Lobster and Bennigan's.

It's also an all-year offering at supermarkets, club stores and Internet retail outlets and is increasingly used for smoked salmon and other value-added products.

That broadening reach comes despite a host of challenges and changes impacting the farmed-salmon industry. Environmental groups have targeted producers in recent years over myriad issues, 
including the levels of PCBs in fish. Salmon farmers, in turn, are participating in certification programs and ratcheting up efforts to tout Atlantic salmon's heart-healthy benefits, while stressing that the uproar over PCBs, for instance, stems from outdated data.

And the industry appears to be gaining ground. "Probably 90 percent of people [who eat seafood] have no problem with Atlantic salmon," Avondoglio says.

Meanwhile, consolidation continues to alter the global salmon-farming landscape, as big players get even bigger - most notably Pan Fish in Norway and Cooke Aquaculture in Canada - and Atlantic salmon prices hit their highest level in a decade.

Demand and prices rise

Atlantic salmon, or Salmo salar , is cultivated worldwide, primarily in Chile, Norway, Canada and the United Kingdom, as well as Ireland, Iceland and Maine.

Chile is by far the largest supplier of fresh Atlantic salmon fillets to the U.S. market. For 2005, it shipped 183.8 million pounds of fillets to the United States, compared with almost 175 million pounds in 2004, according to the National Marine Fisheries Service.

For the first two months of 2006, how-e ver, Chilean im­ports were roughly 25.5 million pounds, down from 33.9 million pounds for the same period last year.

Despite that drop - which some stakeholders attribute to higher-than-anticipated fish mortalities and a wider international distribution of product - industry representatives expect Chile's exports for all of 2006 to rise.

"We still should see volume to the United States continue to gradually grow in the fourth quarter, [though] below 2005 levels," says Jason Paine, general manager of Aquafarms International in Miami Lakes, Fla., the U.S. sales and marketing arm of Salmones Multiexport in Chile.

"There are definitely some product shortages, but the higher prices seem to have somewhat curbed demand," Paine adds, noting that Aquafarms has not reduced any of its U.S. volume.

Canada, which farms salmon on both its coasts, is another key supplier, mostly of whole fish, to the American market. For January and February 2006, Canada exported 25.5 million pounds of Atlantic salmon to the United States, up from 18.8 million pounds for the same period last year.

On the European front, Norway sent fewer fresh fillets to the U.S. market in 2005 than the previous year, albeit 2006 may be a different story.

Through February, Norway exported slightly more than 1 million pounds of U.S.-bound fillets, compared with just 301,324 p ounds for the same two months of 2005.

Rising demand, both here and in Europe and Japan, has led - surprise! - to higher prices. Chilean fillets last May were in the $2.80-per-pound range on 3- to 4-pounders; this year they are at $3.90 to $4 per pound, f.o.b. Miami.

At least one supplier in Chile is seeing prices for skin-on, fully trimmed fillets going for more than $4.50 per pound, f.o.b. Miami.

"And that's not meeting any resistance," he says.

Still, the price hike has been offset by the strength of the Chilean peso to the U.S. dollar and the increased cost of fishmeal, "so it's not as if we're dancing a jig down in Chile," says Paine of Aquafarms.

"But are we doing better than we were in a $2.20 market? Without question."

In early May, prices for European fillets were averaging $4.30 to $4.45 for 2- and 3-pound fillets, $4.40 to $4.55 for 3s and 4s, and $4.50 to $4.65 for 4s and 5s, according to Urner Barry data.

Whole, farm-raised salmon, meanwhile, were listed anywhere from $2.20 to $2.85 per pound, f.o.b. Northeast, while West Coast fish were at $2.35 to $2.80 per pound, f.o.b. Seattle.

The across-the-board higher prices have made their way into foodservice and retail channels. At Bennigan's Grill & Tavern, part of Metromedia Restaurant Group in Plano, Texas, the cost of the 300-unit chain's annual contract for Atlantic salmon has jumped 20 percent.

"We've been dealing with increases in pricing, and just recently we've had a shortage," says Shawn Glenn, creative services manager for Bennigan's, which annually uses a half-million pounds of frozen sal­mon from Chile.

"But we can't take it off the menu, because it's just incredibly popular," adds Glenn, citing three new $11.99 skillet entrées, including the pico-de-gallo-topped Southwest Salmon.

Perona Farms is also spending more for salmon. The company, which switched entirely to Scottish product about a year ago, is paying around $4.50 a pound for fresh fillets.

But that's still a relative bargain compared with wild Alaska salmon, "which costs four times as much," Avon­doglio says.

In the retail world, the supermarket chain Hy-Vee, with more than 220 stores in the Midwest, recently had farm-raised Atlantic salmon fillets listed as a special for $7.49 a pound.

And the five perishables-focused Bloom stores run by Food Lion in the Charlotte, N.C., area offered Canadian salmon fillets in three 
varieties - signature, tomato-basil marinated and honey marinated - for $6.99, billed as a $2-per-pound savings.

The big get bigger

Consolidation is the watchword in the aquaculture industry these days. And there's no better example than Norwegian conglomerate Pan Fish.

Last month, the Oslo Stock Ex­change gave Pan Fish approval to buy Fjord Seafood, another major fish-farming business in Norway. That comes on the heels of Pan Fish's acquisition in March of Marine Harvest, a jointly owned creation since February 2005 of two other huge players, Nutreco Holding and Stolt-Nielsen.

"This is not a traditional acquisition, but a merger of three unique seafood companies with individual strengths that will be preserved in the new group," Atle Eide, the CEO of Pan Fish, stated in a news release about the Marine Harvest deal. "Such a process … will form a strong foundation for a company with a leading global market position in the fast-growing fish-farming industry."

Pan Fish, which in 2005 produced 67,000 tons of salmon, has stated that its combination with Marine Harvest represents 20 percent of the world's salmon production. Now, with the addition of Fjord, Pan Fish will own up to 25 percent of Norway's national license biomass for farmed salmon and trout.

Cooke Aquaculture in St. George, New Brunswick, is getting larger as well. The family-owned company is a $200 million player after three acquisitions in 2005: Heritage Sal­mon's hatcheries and processing facility in New Brunswick; Stolt Sea Farm's East Coast farming and processing assets; and Marine Harvest's East Coast operations.

Cooke now has about 80 farms in Nova Scotia, New Brunswick and Maine and approximately 1,200 employees.

"Before we purchased Heritage, we had 500 employees, so this has been a massive change for us," says Nell Halse, Cooke's communications director.

And there's more work ahead: New members of the Cooke clan collectively lost $30 million to $40 million last year.

"That's our challenge," Halse says. "But obviously we believe we can [turn things around], or we wouldn't have taken it on."

Challenges abound

Despite the world's hunger for Atlantic salmon, fish farmers face ongoing scrutiny from environmental groups, the media and seafood buyers over such issues as PCB levels in cultivated fish, antibiotic use and the effects of escaped farmed sal­mon on wild stocks.

Salmon of the Americas (SOTA), a trade group formed three years ago by Chi­lean, Canadian and U.S. producers, is emphasizing the nutritional merits of farmed salmon - for starters, it's high in heart-healthy ome­ga-3 fatty acids, - while countering what the association sees as misleading information in the media.

In January 2004, for example, Science magazine published a study that claimed PCB levels are higher in farmed salmon than wild salmon. (Polychlorinated biphenols are chemicals that were used as coolants and lubricants in electrical equipment until 1977.)

"We have people still using the data from Science magazine, which was for fish that were tested in 2001," says Alex Trent, executive director of Salmon of the Americas in Princeton, N.J.

"People need to think about what the PCB levels are in farmed salmon today. They're at, or below, levels in wild salmon."

In British Columbia, "we're often the focal point for some of those kinds of attacks," says Mary Ellen Walling, executive director of the B.C. Salmon Farmers Association in Campbell River. "We try to engage more effectively with different stakeholders to improve their understanding of the industry and lead to policy decisions that are based on good science."

Certify this

Certification is another way salmon farmers are assuring buyers and consumers that farmed salmon is produced responsibly.

A high-profile example is the work that SOTA and a Chilean trade association, SalmonChile, are doing on the Safe Quality Foods (SQF) program. SQF, run by the Food Marketing Institute's SQF Institute in Wash­ington, D.C., is a food-safety and quality-management certification initiative for suppliers that includes training and independent auditing.

Participating salmon producers in Canada and Chile are in various stages of implementing the program, which allows approved providers to label their products with a distinctive orange seal.

"I think you'll start to see labeled salmon [in stores] within the next six months," says Trent.

Admiral Fish Farms in Grand Manan, New Brunswick, already is touting the SQF logo.

The company has "made a commitment to go SQF all the way," Glen Brown, president, states on Admiral's Web site. "The reason is simple - consumers expect integrity and commitment from those who supply their food."

At least one retail heavyweight is aboard the certification bandwagon. Wal-Mart in Bentonville, Ark., announced it will require its Chilean salmon suppliers to be SQF-certified within three years.

A Wal-Mart representative recently told attendees at an event sponsored by the Technological Salmon Institute (Intesal) that certification was the best way to assure customers that farmed product is "safe, healthy and environmentally sustainable."

Adding value

Atlantic salmon has long been used to make value-added products, especially smoked salmon. And that trend shows no sign of ebbing.

In 2004, Aquafarms International introduced its Premium Nova Smoked Salmon to the U.S. market. Last month, the product received the American Academy of Taste's American Gold Medal in the cold-smoked-salmon category.

"It's still a small percentage of our sales, but it's an exciting product for us, and one that is growing," Paine says.

Cooke Aquaculture is also upping the ante on value-added selections. It has a plant on Prince Edward Island that is now dedicated to making value-added items, including smoked salmon, marinated portions and kabobs.

"The percentage of value-added is on the rise - that's a major change for us," Halse says.

In northwestern New Jersey, Perona Farms has been smoking salmon since the late 1980s. It now devotes 6,000 square feet of space to its on-site smoking operation on Perona's 100-acre grounds.

The company's oak-smoked, vacuum-sealed salmos comes in multiple varieties. In early May, online prices for pre-sliced Ming Tsai Tea Rubbed Smoked Salmon were $6.25 for 4 ounces, $12.50 for 8 ounces and $25 for 16 ounces.

Perona Farms does significant mail-order business during the holidays and also sells smoked salmon in supermarkets and gourmet shops. At ShopRite stores in New Jersey, New York and Connecticut, a 4-ounce pack retails for about $6.

All told, from Chile to Europe to Canada, industry representatives say the outlook is promising for At­lantic salmon.

"Globally, the demand is strong, and there's no reason it should soften," says Bert Bachmann, VP and general manager of Camanchaca, which has salmon farms in Chile and a sales office in Miami.

"It's going to be 10 or 15 percent growth [annually], easily."

Contributing Editor Rick Ramseyer lives in Cumberland, Maine