Price mark-up explained

Press, 25 September 1980, Page 21

Price mark-up explained

By

RUSSELL ARMITAGE,

Marketing Manager,

Fishing Industry Board. We often hear comments like: “How the hell can those gurnard fillets be $3.30 a kg when I know that fishermen are being paid only 33c a kg for the same fish — a mark-up of 10 times just cannot be right.” The problem is that although an egg is egg at all stages of the selling chain, a fish is very seldom a fish. It changes its form at each stage and this means that in making comparisons extreme care has to be taken!

In this article, an attempt is made to show what costs are incurred “on average” at each stage of fish trading from fisherman to customer. Seven general comments need to be made.

1. People often compare prices for whole fish with prices -for fillets, as though they were the

same product. They are not.

2. It is essential to be sure that when the price paid to fishermen is being compared with retail prices both prices relate to the same area.

3. The price levels that apply to any port will be influenced by the degree to which that port is involved in either the domestic trade or the export trade. No two ports have the same proportions of their total activity in these two markets.

4. The price levels for all species will also be affected by the over-all mix of species, which once again is different for every port. 5. Price levels will be influenced by the nature of port processing operations. An example is whether there is any advanced processing such as canning. 6. Prices will also reflect the different marketing skills of individual companies, the particular markets they service, and also whether they have access to airfreight trade.

7. On the domestic market, no two regions have the same preference for fish, and whereas snapper

might be a premium fish in Auckland, it does not have high acceptance in Dunedin.

A mark-up of $1.20 on the fillet may. appear excessive, but it can be seen that costs are very high. The profit of 20c a kg has to cover interest, taxation and depreciation, and is, in fact, only about 6 per cent on average retail shop turnover of $120,000.

For a number of reasons, the volume handled through many retail shops has declined over the last 15 years, meaning that less fish has to cover increasing operating and overhead costs. However, those retailers who have kept pace with trends in retailing and have modern shops, wellpresented and well-iced high quality fish, have experienced a growing demand and increasing turnover.

It can be seen that it is quite reasonable to have fillets selling at $3.30 a kg from whole fish costing 33c from the fisherman. The fact is,that nobody is making a killing out of the fishing industry and, weight for value and protein content, the consumer is getting a good buy.