Cod farmers want long-term contracts to supply supermarket chains year-round.
"The extent to which cod farmers succeed will to a large degree depend on their ability to utilise their most important advantage in competitive markets, namely good control of quality and freshness and the possibility of supplying what the customer wants," says Senior Scientist Geir Sogn-Grundvåg.
One example is a continual supply of high quality products to supermarket chains. Production costs also need to fall significantly.
Photo: Frank Gregersen
Fresh research from Nofima shows that Norwegian cod farmers sell their cod on fixed contracts to supermarkets only to a small extent and that they primarily sell on the market in late autumn. At that time of year, only small supplies of wild captured cod are available and prices are at their highest.
There are several reasons behind this sales strategy.
Firstly, few cod farmers have sufficient fish to supply big chains.
Secondly, few cod farmers are able to provide a weekly supply year-round.
This can mostly be attributed to problems associated with early sexual maturity and high summer water temperatures off the coast of Southern Norway.
"Last, but by no means least, it is not silly that cod farmers sell their fish for the highest possible prices so they can service their bank loans and others who finance their companies while they develop further and increase production volumes," says Sogn-Grunnvåg.
The fact that cod farmers sell the majority of their production in the autumn does not mean they do not want to establish long-term contracts with supermarket chains or other attractive customers.
"What we see is that several cod farmers have the feelers out to establish long-term contracts to supply supermarket chains year-round," he says, adding that only a small minority of cod farmers have reached the production volumes to achieve this.
Staff are Important
Photo: Frank Gregersen
Competent staff is one of the terms for ensuring cod farming is successful.
Scientists interviewed management at eight cod farming companies and found that they partially prioritised different properties or sources as competitive advantages to succeed in cod farming.
The most important advantages were favourable location for cod farming, high level of product quality, competent staff, the ability to supply as requested and good relationships with other companies.
"It is important to have control over and master the technological and biological challenges in cod farming," says Sogn-Grundvåg. "Competent staff is therefore decisive in reducing the company?s production costs."
The fact that companies are trying to use different competitive advantages implies that different strategies are being tested. Some will succeed and others will fail.
But management at other companies can learn from the experiences and adopt the most successful strategies.
In this way, they can contribute to future growth and development within the dawning cod farming industry.
The project was carried out by Nofima Market and the Nordland Research Institute. It was funded by the Research Council of Norway.