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The changing market position of farmed salmon in the UK : is salmon losing its luxury image?

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  • The United Kingdom is the world's second largest producer of farmed Atlantic salmon. It also represents one of the larger markets for the product. During the 1980s, there was rapid growth in the industry stimulated by high market prices and major technological advances. While there was a substantial increase in the supply of fresh salmon, the growth in consumption was sufficient to maintain relatively high prices. By the end of the 1980s however, production growth had exceeded the growth in consumption and prices fell to almost half of their 1985 level. In the past, salmon has been regarded as a luxury product with high price, and income, elasticity of demand. The demand for salmon has also historically been very responsive to income changes and has traditionally been considered to be the food product for the wealthy. Due to the dissipation of supply and price seasonably, income growth, increased availability of the product, and the resulting downward trend in prices, demand expanded. Production continued to expand in the 1990s yet on the UK market, while low prices remained steady at around £3.00 - £3.50/kg[2]. The situation of increasing supply and steady prices may indicate that salmon is moving away from its luxury position as it enters the mature stage of its product life cycle. Food products in general tend to be insensitive to price fluctuations, given their characteristic of being a necessary purchase. However, when broken down into distinct categories, demand becomes more elastic, as consumers switch from one good to another in response to relative price changes. Luxury goods are generally characterized as chosen, which have few substitutes (i.e. they are cross-price inelastic) and have income-elasticity of greater than one. If an individual's income increases, proportionally more of their income will be spent on these goods. Should salmon be moving away from its position as a luxury good, not only would the income elasticity of demand for salmon be declining, but demand would also become less price elastic. Demand for products, which are regular purchases, and therefore less of a luxury, tend to exhibit a smaller response to price changes than to luxury goods (Ritson, 1993). The purpose of this study is to attempt to determine the current market position of fresh salmon in the UK market by examining the demand characteristic for the product. The empirical study is restricted to the United Kingdom domestic market for fresh-farmed Atlantic salmon given the relatively heavy reliance of the domestic industry on this market. In 1992, 71 percent of domestic consumption was supplied by UK producers which represents 56 percent of total production (Ernst &Young, 1994).
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  • Clay, Patty L., Brian J. Revell. 1996. The changing market position of farmed salmon in the UK : is salmon losing its luxury image? Peer Review: No. In: Proceedings of the Eighth International Conference of the International Institute of Fisheries Economics and Trade, July 1-4, 1996, Marrakech, Morocco. Compiled by Ann L. Shriver. International Institute of Fisheries Economics & Trade, Corvallis, Oregon, USA, 2002. CD ROM.
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