Demand for Atlantic salmon has been strong the last 20 years. Production region export values of Atlantic salmon have grown +12% per year over the last two decades. Global end-consumer spending on salmon has now pushed past €30 billion, growing +6% annually from 2017.
However, there is a growing complexity in realizing salmon demand growth at historical levels. Globally, both existing and prospective consumers are viewing the price point of salmon on shelves as a structural challenge to consume more. In addition, consumers have concerns about how to cook salmon or miss larger product variety (e.g. more convenience). Salmon will continue to be in demand, but the question is at what price.
Demand growth for salmon will be increasingly more complex
Theoretically, there is a lot of opportunity for continued demand growth, with household penetration only at ~50-75% in mature markets, and as low as ~10% in China.
Globally, the medium-term demand runway at current prices is ~25% from current levels. This is equivalent to supply growth during 2018-2025. Although the potential is significant in selected Asian markets, the existing markets are getting increasingly mature. Growth will be less about converting new consumers to salmon, and more about frequency. Growing take per shopping trip requires salmon to outcompete other proteins on frequency and basket size. A different go-to-market mindset than what the salmon farming industry has had in the last 20 years is required.
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Close collaboration with retailers will be key
To realize the demand opportunity, the industry needs to help customers and end-consumers in four ways:
- Increase availability of more convenient and innovative products
- Be top of mind as a protein through education and cooking inspiration
- Improve shelf life and availability
- Closer collaboration with retailers
Retail channels account for roughly 65% of volume today. Retail will continue to be the main growth vector as it is the most attractive profit pool. Yet salmon is operationally difficult for grocers: high shrink, and significant gross margin volatility have driven many retailers to cap shelf space and limit promotions of salmon in recent years. The margin volatility reduces grocers’ incentives to prioritize salmon over other proteins. This limits the opportunity for the industry to get increased shelf space and introduce the innovations required to grow frequency and basket size.
The future of salmon demand is not just about adding new customers and regions. The industry needs a new set of capabilities to get shoppers to choose salmon over other proteins. — Sverre Martinsen, Managing Director and Partner
What the industry must do next
To succeed, the industry needs to move from a strong commodity focus to a playbook closer resembling leading FMCG companies. Salmon farmers – due to their outsized share of the profit pool – must take an active role to achieve this. Processors and distributors typically don’t have the required scale. Companies should prioritize three initiatives:
- Invest in go-to-market and joint category plans with customers
- Strengthen category and shopper analytics
- Deploy supply-chain fixes that extend shelf life and cut shrink
Various farmers have different scale and ability to realize this playbook, and in this report we argue all have attractive margin opportunities available to them that require increased attention.
