Costco has been making a push lately to move away from purchasing meats – chicken, beef, pork, and fish – that have been reared using antibiotics that fight human infections. As a result of this, they are rethinking some of their sources and have decided to move away from Chile for their farmed salmon supply. Of course, there are economic reasons to move as well since the value of the Norwegian Krone has fallen against the US Dollar in the last year, as well. In any case, Costco will be moving the bulk of their farmed salmon purchasing to Norway starting this summer.
The fisheries in Chile have been having a bit of a rough time keeping their fish healthy and have been treating them with antibiotics to fight salmon rickettsial syndrome (SRS) and sea lice. Whereas in Norway, the fisheries are not having these types of health issues.
As you might guess, Costco is one of the biggest fresh salmon purchasers in the world, so any changes in their contracts is a big deal in the fishing world. Currently, Costco buys around 600,000 pounds of fresh farmed salmon each week, so they need suppliers than can handle that big demand but still be cost effective so that prices can remain reasonable for Costco’s members. It seems that Costco will be getting 66 to 75% of their fresh salmon supply from Norway now, but will still maintain ties with Chile for the remainder of their supply.
The big question is how Norwegian fisheries are going to cope with Costco as a customer. Not only is it about the amount of fish, but also the trimming that Costco requires. Costso uses an F trimmed fillet with no fat, skin, or brown meat on it, which is apparently a much higher standard of trimming. This means that you can’t use the entire fish, but someplace between 43 and 45%, and that means that the supply of raw fish must be quite high to reach the sort of volumes that Costco purchases. The other thing that makes processing difficult is the pin bone removal which needs the fish flesh to be a bit more firm, so it can’t be done when it is super fresh (who knew?). The problems come about mostly in keeping the prices down because, as you can probably imagine, processing fish in Norway is much more expensive than in Chile.
Currently, Costco uses six different companies in Chile to service their fresh salmon contract and it seems likely they will follow that model in Norway as well. It’s never a good thing to get all of your supply from one company. There are several very large Norwegian producers that will probably benefit greatly from this move by Costco, but Marine Harvest is one of the biggest and clearly a front-runner to get Costco’s business. Marine Harvest is the largest salmon farmer in the world, and supplies salmon from Norway, Scotland, Ireland, the Faroe Islands, Canada, and Chile. It seems like they would be a great supplier choice for Costco. Of course, this change comes at a very good time for the Norwegians as they are affected by bans on their salmon in China and Russia. There is obviously a lot of pressure for the Norwegian companies to find other places to sell their fish and this might have prompted them to be a bit more open to deal making with Costco.
However, no contracts have been signed yet (at least that is what is being reported), so maybe there is still time for Chile to sway Costco to keep their contracts with them.
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