Shift in focus for the Scottish Salmon Company

Siri Elise Dybdal siri@fishfarmingxpert.com

Craig Anderson, new managing director for the Scottish Salmon Company (SSC), had never previously worked in the aquaculture sector or in Scotland before joining the SSC last year. The head of the salmon farming firm had in fact been based in Russia for 20 years, working in various businesses such as communication and property development. Anderson admits he did not know the extent of the success of the Scottish salmon farming industry before returning to Scotland, but has found it thrilling to be part of the sector. “It is very exciting and energising to be back in the UK, and to work in Scotland. Aquaculture has been a great challenge, but I love it! It is a complicatedly simple business – although the complexity surprised me,” Anderson confesses.

He believes coming in as an outsider is in many ways a good thing, as you approach the job from a different angle: “I think it can be good to come in and look at different areas with fresh eyes. It might be a cliché, but I believe you should not make small problems into big ones and move forward,” Anderson says.

Ultimately, he has however not found the aquaculture business too different from other industries: “The way I see it, aquaculture has a beginning, middle and an end bit. If you take the aquaculture bit out and push them together, it is just like any other business. “I have been using my experience from other businesses overseas in aquaculture to build and gradually change the SSC into a great company producing great salmon,” he claims.

Good first quarter Edinburgh-based SSC produces more than 25000 tonnes of fish annually, accounting for an estimated 20% of the total of farmed Scottish salmon. The firm employs more than 400 people at 60 locations across the Highlands and islands and supplies leading UK retailers as well as exporting fish to more than 20 countries worldwide. SSC said it produced 6,004 tonnes of salmon in the first quarter of 2014, up from 5,092 tonnes at the same time a year ago. Exports now make up nearly 50% of total revenue, up from 35% this time last year, as demand is rising in Europe, the US and the Far East.

Capital investment for the year ahead is estimated at around £12million, while the company has committed further spending to a project to develop farmed Ballan Wrasse – or cleaner fish – for use in salmon pens as a compliment to conventional sea lice treatments.

“We have done well so far, but it has been complimented by what seems to be the usual bumpy ride with regards to the price of salmon – high and low.” However, Anderson says the company uses analytical information from Fishpool and Norway to predict the ups and downs. “Put together and used correctly, it is a good guideline to where we are going,” Anderson says.

He believes it is vital to get the balance right between having long term clients and contracts and selling to spot price. “Getting the percentage right is very difficult. In 2014, we took the decision to have 60% in contracts and 40% spot price. This is a fair balance that gives us a bit of protection and also means we can be looking after old clients and new clients at the same time.”

Increasing export Another area it is important to balance correctly is the export share, he says: “Export is also very important to us and we have a 60% - 40% divide in that too. We are changing this though, and it is getting more and more towards 50-50%.”

SSC’s 20 export markets include France, the US, China and Japan amongst others. He says there are benefits with exporting, such as a diverseness of clients: “Long-term contracts are wonderful, but you need diversity if something should happen. “We need to also look at what clients we want to go into partnership with. We are already a multicurrency company, which is good and exciting. It is no secret that most salmon companies are looking towards China for growth. But there are only so many salmon coming out of the sea. We know how much we plan to produce in 2015-2016 and existing clients needs have to come first. So extra growth has to come from new sites or be organic in order for us to sell to new territories.”

He says clients come with a capital C and explains that SSC’s customers are able to ask questions and get honest answers on everything from sustainable methodology to food nutrition programmes, biology etc.

“There are no preset answers. All our staff will answer openly and honestly. It is great that they want to know. But we want to know who our clients are too. The first thing that happens when you open a new bank account is that the bank asks questions about you, even though you are the one giving them the money,” Anderson points out.

Scottish provenance Selling a Scottish product is an extremely important selling point in SSC’s foreign markets, according to Anderson. “Scottish is as important to us as the word Scotch is to whisky - it really is! Scottish provenance is high on the agenda with foreign clients,” he underlines.

Anderson believes this is because clients know Scottish salmon is a quality brand, and confirms that there is a thing known as the Scottish premium which goes over the Norwegian. “But Scottish salmon gets a premium for a whole bunch of factors. It is not just for being Scottish, but what that entails. There is a natural storyboard there. “It is a proud thing as well, and it is very admirable what has been achieved,” he adds. Due to the emphasis on a Scottish product, the SSC is engaged in a new, Scottish broodstock programme, which Anderson describes as “very exciting.”

“Going forward we will have a truly Scottish salmon. We can be Scottish all the way and it is a way to differentiate ourselves.” He says it is still early days, but there is steady progress. Although he reckons it will take two cycles at least before the programme is completed.

“The SSC has been working on it since 2006. Since I have come onboard we have certainly put more cash and resources into it. Is it credible and possible? Yes it is. Can we get the production from it? Yes, it looks like we can. In the future this is where we are going - we want a Scottish salmon to be a Scottish salmon.” In time, the firm will be working on securing partners and creating a good brand for this product he says. “But we are not at that stage yet. I am happy with the current progress,” Anderson adds. Shift in strategy Where the new managing director perhaps has set his strongest mark on the SSC is with a shift away from a production-led strategy towards a more market-led strategy.

“When I joined the company, one of the biggest problems we had was connected to an imbalance - a natural north-south divide in Scotland,”Anderson says.

He says the imbalance in production effected the company’s two processing factories, one in Marybank in the north and one on Loch Fyne further south, which meant that even in odd years, there could be more production up north or in other years down south.

“Last year, we changed the sites. Now, the production in the north and production in the south are almost the same, both in even and odd years. This means our price per kg is higher, and the operation runs more efficiently. Our processing factories are being fed day in and day out. There are no stoppages.” The MD says the strategy from now on is to compliment the sites they have, rather than taking just any site they can get. He also reveals that new sites which were going to be brought on in March 2016, are now up and running. The contract and arrangements were sorted within four months. This has given the company an extra 2000 tonnes, which helped balance the system. “We want a production growth of 5-7% per year and we plan to do that through new sites and organic growth. We will use the step by step method. We want steady growth, building up volumes. It is a new and different angle. The forecast for 2015 is 28000 tonnes,” he adds. Anderson says that through the process, he has been impressed by the team he is running: “When I joined the company we sat down with a clean sheet of paper - the planning team, the production team, the environmental team and the processing team. Then we looked at what we could do. Are we being clouded in what we have been doing? I think all companies can get stuck in the way you have always done things. That is not a criticism,” he underlines. “When a managing director joins there are always some changes. We went through the process where some people left and some joined. But what I found out was that we have a great team within the SSC with a talent, loyalty and a fresh eye for solving problems in new ways, which is great for me. Then we looked at how we can massage this. “Clients who come to see us now, see the same faces, but with new attitudes,” he claims.

Deal making business This year, Anderson visited two of the biggest seafood expos held in Boston and in Brussels. He found the experience exhilarating and saw it as a great opportunity to nurture further growth

“I found it really exciting! In Brussels I met people who were saying it was their 15th or18th show and it was all terrible. I couldn’t understand it. I was there with rose tinted glasses on, loving the business, wanting to develop the business and burning shoe leather trying to make deals. We are in the deal making business,” he underlines, but adds that it is very important to reach fair agreements that will work in a volatile market:

“We want steady linear growth, both in foreign markets and in the UK. However, we want to make sure it is a fair deal for the client and a fair deal for us. We want to produce good fish and get fair money for it. Then we can make a profit and continue to invest in what we are doing,” he says.

In the ring Anderson believes sustainability and credibility is very important for the Scottish salmon farming industry and its clients, also when defending the industry against those who don’t like it. “Consistency and documentation needs to be good and openness is paramount. We are attacked by those who don’t like the industry, and that’s okay. But I say show us your documentation, show us your figures and then we will talk.”

He admits that a lot of midnight hours have gone by reading reports and documentation: “We are in the ring and are engaged with quality insurance. If there are doubters, we talk to them. We don’t want mud throwing competitions in newspapers. If there is a proper agenda, we will go in negotiations. But there needs to be a credible reason. Sometimes the answer can be ‘no’, that is the case in any business,” he concludes.

Best practise So far this year, the biological situation has been good for SSC. Although warmer waters have meant that they have had to harvest somewhat sooner than expected.

“Touch wood, we have seen good health and good growth,” Anderson says. He believes in being proactive and working with the production team and says training for staff is crucial for the health situation on the farms: “They need to be able to see an element of anything - to be able to spot it and react as quickly as possible.” Sites are monitored daily. “But in aquaculture, one day can be a long time,” he admits and claims that anyone making statements on health should be careful. “What is important is to maintain best practice standards, be engaged and monitor,” he adds.

As for what lies ahead, Anderson believes that with the new market-led strategy, the future looks bright.

“There are challenges with growth, markets and competitors. It is important to be on the ball at all times to be represented at the highest level. But I think it is a brilliant time to join the aquaculture industry. We have worldwide companies such as Marine Harvest in Scotland. The Canadians are buying in, which is great for Scotland. There are two Norwegian companies here. We will not expand outside Scotland, but this gives us protection. And we are definitely in the room,” Anderson underlines.