King Salmon pulls plug on China
New Zealand King Salmon has stopped selling into the Chinese market, chief executive Grant Rosewarne says.
It has pulled out of the Chinese market at a time when many other companies were moving into China because it could not supply enough salmon to meet future demand, he said.
Rather than "just limp along" in the market, King Salmon had decided to "pull the plug", Rosewarne said. Its last order went in last week.
China was the sort of market where one could get good prices, he said, but there were very high costs going in as well. "You need to have critical mass, volume going in, to make it worthwhile."
King Salmon went into China anticipating it would have nine new farms in the Marlborough Sounds and be able to sell 5000 tonnes, earning between $80 million and $90m a year. But it received approval for only three new farms.
"We have no prospect of sending meaningful volumes," Rosewarne said.
"With three [new] farms we can only serve growth in the existing markets."
He said it was "really disappointing".
"It's a lost opportunity. We're disappointed for our customers, we were in high premium outlets, mainly food service."
The company had been selling about 50 tonnes a year in China, Rosewarne said.
It had been getting the business to the point at which contracts were being put in place and growth to take up the potential 5000 tonnes from the proposed nine farms looked likely.
"With only three farms, we can't get it above 100 tonnes . . . It just couldn't go anywhere. We decided to pull the pin now in the early stages rather than just limping along."
Rosewarne said supplementing New Zealand-grown product with that from farms elsewhere was a possibility, but King Salmon was reluctant to do that.
"We are very much a New Zealand-based business here. Ninety per cent of our people are in the top of the South Island.
"We are very reluctant to set up elsewhere, but we may have to do that because of the [lack of] growth prospects in New Zealand."
Chile would be the first country King Salmon would look at for that, he said. Chile had "really embraced aquaculture".
Tasmania had expanded in a big way, but its industry was much smaller.
"It is not something we are seriously contemplating. But in our discussions, we have looked at the geography."
King Salmon applied to the Environmental Protection Authority in 2011 to set up nine salmon farms in the Marlborough Sounds, proposing a new zone be formed called "coastal marine 3" specifically for salmon farms.
Most of the proposed sites were in the Marlborough District Council's zone "coastal marine 2" which rules out any marine farming.
After a 10-week hearing by a board of inquiry sitting in Blenheim in 2012, the authority approved four farms with conditions.
That decision was appealed to the High Court, which backed the authority's decision, but that was appealed to the Supreme Court, which ruled in April this year only three of the farms could go ahead.