INCREASED DEMAND FOR SALMON: ENTERING NEW MARKETS

Aquaculture has been the world's fastest growing food production technology for the last three decades. Salmon has been among the most successful species, with a production growth that has been even faster than for aquaculture in general. There are two main factors which explain this growth. First, control with the production process has allowed a number of innovations that has reduced production cost and made salmon more competitive. Secondly, increased demand allows larger quantities to be produced profitably. While there is a large literature on innovation and productivity growth, demand growth has received less attention and are more poorly understood. In this paper we will study the relatively recent introduction of salmon to a new market, South Africa, where salmon consumption is now growing rapidly. We believe that the insights from this market provide valuable information with respect to introducing not only salmon, but all new high-end aquaculture species to new markets.

Demand for a product can grow in to dimensions - geographical space and product space. When demand grows in the geographical space, new consumers are recruited because the product becomes available in a larger area. When demand grows in product space, a larger product spectrum contributes to increased consumption in existing markets.

In the early days of the salmon farming industry, demand growth in the geographical space was by far the most important, as there were little product development. For the Norwegian salmon industry, that meant that after the domestic market was saturated, one started to export. However, the export development was patchy. One started with the neighborhood countries Sweden and Denmark, continued to the largest seafood importing country in Europe, France, and then somewhat surprisingly jumped to the USA. This suggest that transportation and logistics costs and market potential are important for export patterns, as one would expect based on gravity models of international trade. From the late 1990s, demand growth has been occurring in both geographical and product space. However, little attention has been given to the more detailed process.

Salmon consumption "takes off" in new countries all the time as new markets become more attractive when established markets get saturated and/or when logistics and transportation costs is reduced. In this paper, we will study the process closer for one such market, where salmon is a recent success, South Africa.