Is Tassal salmon a commodity? Sure it is. Huon and Petuna...

Is Tassal salmon a commodity? Sure it is. Huon and Petuna salmon tastes the same to me as Tassal salmon. But I’m a barbarian… I can’t tell the difference between Coke and Pepsi either; and most red wine tastes the same. Expensive spring water, or the Coles brand stuff – the same. Without branding, most products are substitutable; especially with low value-added goods. That’s the genius of being able to sell something for more than a competitor when it’s more or less the same product. Chiquita or Dole bananas? They’re the same. In 1991, Intel started putting “Intel Inside” stickers on PCs and branding their microchips, which were essentially a commodity at the time. (https://www.marketingweekly.in/post/intel-inside-creating-a-brand-for-an-invisible-product ). Intel successfully built a brand around a commodity.

The fact is, people willingly pay up to double the price of Coles or Woolworths brand tinned fruit because it has “Edgel” or “Golden Circle” on the label. I prefer the Coles brand baby beetroot myself. I like the baby beets and they’re dirt cheap. Can anyone really tell the difference between a can of Coles brand tomatoes at 90c or $1.80 for the Admona brand? Not me.

Without referring back to the annual report, Tassal consistently rate highly in brand recognition from consumer surveys. Clearly the public knows the brand, trusts it, and buys it. While writing this, I’ve seen that Bug1 has posted again with the table from a Tassal presentation showing brand awareness which I was going to post here. I won’t bother to post it again. Suffice to say, we know who our customers are, and they know us.

I get the “battery hen of the seas” reference. But the fact is, food has to come from somewhere. Primary industry businesses all have X number of animals or seafood per square metre or kilometer. It’s in Tassal’s best interests to be as sustainable as possible -- not only to promote this image and profit from it, but practically, to have clean waterways in which to farm. The key question is, what is the optimal number of salmon to have in a cubic metre of water and how much feed do they need per day? I have no idea. I suspect Tassal does, and Richard Flanagan does not. I personally choose to believe that Mr. Flanagan appeals to inner city liberals with his alarmist writing on salmon and climate change. Companies with staff holding PhDs in animal husbandry have calculated fish requirements to a level beyond my abilities as a mere investor. It only matters that our density of salmon is healthy and sustainable. If that’s one fish per X cubic metres of water, fine. If it’s ten fish, okay. My only concern is an assurance that we are within industry best practices.

I dislike the word “protein” to describe animal/fish meat. Aside from the occasional serving of seafood (Tassal, of course J) my diet is 95+% plant-based. There is protein in almost food. You can’t be protein deficient on a healthy, sensible diet. However, unless everyone adopts an almost exclusive plant-based diet, with a fast-growing world population we need sustainable aquaculture. Otherwise, where is the food going to come from? More and more people are becoming plant based, but with an increase in affluence comes an increase in meat consumption (https://ourworldindata.org/grapher/meat-consumption-vs-gdp-per-capita ). To criticise the aquaculture industry for environmental transgressions, one cannot do so in a vaccum. That is, it must be compared against other industries producing animal and seafood meat. Unless everyone plans to go vegan, of course. Dabozza has done this in previous posts. Aquaculture-farmed salmon is far better for the environment than almost all other alternatives.

If every country in the world ate like America, we would need four to five extra Earths with which to farm the necessary cows and other animals (https://www.bbc.com/news/magazine-33133712 ). I suspect Australia wouldn’t be far behind. The Chinese are not a beacon of virtue either. Their illegal fishing fleets strip our oceans with their nets. It is easy for the likes of Flanagan to criticise Tassal. I would like to see him outside the US or Chinese embassies and to see how far he gets with his complaints. Better yet, fly to Beijing and stand in Tiananmen Square with a placard demanding sustainable fishing practices and animal cruelty legislation. No, as with the NBA, it is easier to amplify perceived injustices at home, protected by the very system you despise, rather than take on the real offenders.

Mark Ryan has responded to many of the environmental criticisms of Tassal. In fact, a large portion of their website is dedicated to this topic. On a visit to its website, the main link on the first part of their homepage tackles this very issue (https://tassalgroup.com.au/thefacts/). Mark himself said in the most recent investor call that Flanagan’s points are “either distortions, exaggerations or simply wrong”.

Interestingly, Bug1 referred a few weeks ago to the British Columbia salmon association. I did a deep dive on their website a couple of months ago, spending a whole morning reading about the damage that uninformed, inner-city virtue-signalling liberals can do to rural communities with their campaigns against entire sectors of the agriculture industry. Unfortunately, the salmon industry in British Columbia has suffered at the hands of a Centre-Left minority federal, and a liberal provincial government -- which relies on keeping progressive, even harder-left elements (the wealthy, inner city voters) onside, in order to stay in power. Fortunately, in Tasmania (and in Australia generally) we seem to have Labor and Liberal governments which are supportive of our industries, at least in comparison with abroad. Take the Labor government in WA as an example, with its unqualified support of Woodside Petroleum, which currently faces a court hearing regarding its recently-announced multi-billion dollar gas expansion. I suspect our particular style of political system in Australia protects against the extreme swings in public policy seen abroad.

Nike has successfully navigated sweat shop arguments to sell billions of dollars’ worth of clothing. Apple sells $1,000+ premium smart phones by the million, and is the world’s most valuable company as a result. I.T. companies operate in mainland China with modified versions of their standard website or app to comply with local laws; laws which most of us here would disagree with. They receive no blow-back at home for it. Would you know if the shirt you are wearing now was produced using Xinjiang cotton? I wouldn’t.

I don’t see Tassal as being on the wrong path. ESG has increasingly become a feature of the investing landscape. Companies are finding it easier to pander to the very vocal minority Left – which is almost always aligned with supportive left-leaning major media outlets – than to take a centrist position. This is because the Right generally does not threaten boycotts and negative publicity for companies selling products it does not like. I mean, does anyone really think Australians weren’t buying Coon cheese, and are rushing to buy it now the name has been changed to Cheer? Did the parent company really think it was addressing a genuine issue, or was it simply behaving pragmatically and cynically to avoid negative publicity? Colgate were selling “Darkie” toothpaste for years in mainland China featuring a dark-skinned man. It was only changed to “Darlie” relatively recently after a pressure campaign in the US. The original Chinese words on the box (Black man’s toothpaste) were not changed and remain to this day. (https://en.wikipedia.org/wiki/Darlie) . I am not arguing the merits of either case, rather to highlight that companies are increasingly facing ESG pressures and towing the line out of self-interest.

I apologise for turning this post into a political discussion, but simply can’t avoid it. Flannigan and others like him are supported by The Guardian, The Age and the ABC. There is a wider agenda at play which this discussion fits into. As our sales numbers, and Bug1’s chart on our brand recognition shows, Australians are not falling for this nonsense. However, it is something we need to be aware and constantly vigilant of. I think Optimistus is right to raise this issue.

I can’t see an anti-salmon movement gaining too much prominence here. I fully understand and respect why Optimistus has avoided TGR share ownership. I have also focused a lot on branding and other companies in this post. It is a messy post. All over the place, and the largest imaginable straw man. However I hope some readers will appreciate some of the points I’ve made (or tried to make!). Optimistus’s main points seem to be that ESG considerations will affect sales, and that producing too many salmon reduce the premium attributes of the product (high volume commodity sales vs. a premium, exclusive product).

Optimistus, I have enjoyed reading many of your insightful and balanced comments on the SCG and CSL forums. I take your points here regarding Tassal, and you are correct -- they are important -- but find myself respectfully disagreeing with you.