An Examination Of The Caviar Market Economics Essay

The home based business is looking to produce a substitute caviar product in Russia and Kazakhstan, with a view to exporting it to the UK. It is anticipated that the primary targets because of this product will be those in the low to middle income bracket who would not generally be able to afford real caviar. Consumption of caviar in the united kingdom is not as widespread as in a few other regions which is regarded as primarily due to the high price that is commanded by caviar in the country.

The aim of the business is to provide an affordable alternative that'll be provided over the internet and by phone, enabling rapid delivery of products that are affordable. Loyalty offers will be accessible and the business enterprise aims to target the overall consumption market rather than the exclusive, luxury segment of the market. Initially, the mark would be the UK alone, although there is absolutely no particular reason that this could not be extended with time as production increases. Substitute caviar composed of a number of different ingredients will be available to be able to satisfy the widest selection of tastes possible.

Overview of Research Process

A multifaceted research approach has been taken, due to the fact that whilst completing the original research it became clear that the UK market may well not be the best initial overseas market to focus on, and this resulted in a wider analysis than actually anticipated. Consideration was presented with to the global market for both export and import of caviar and caviar substitutes, with a view to gaining a knowledge of the overall movement of caviar and also in an attempt to understand where the value lies and where there is opportunity for growth.

Another research approach was to look at commentary specific to the united kingdom market and the way in which UK consumers view the caviar products, in order to get a concept as to if there may very well be a demand for a caviar substitute of the type proposed. This type of research will naturally require greater depth and primary research in the form of consumer questionnaires; interviews would also be desirable to supplement the overall media reports.

Information was also obtained in relation to the production industry in Kazakhstan and Russia, that was also seen as important as this gave an indication as to if these countries had the ability to increase their production and had the necessary facilities to take action at an acceptable price.

Critique of Research Process

The research process was somewhat scattergun in nature, aiming to cover a wide range of issues and this resulted in lack of depth at times. By wanting to determine the market in the UK, the overall market for caviar and caviar substitutes, the general production processes and the way in which caviar substitutes are developed, this research was naturally less detailed than may be necessary within the next stages of business development. A far more focussed approach, for example, looking specifically at the united kingdom and the various caviar substitutes available, may have been a far more productive approach at this time.

Evidence Gathered

A wide selection of evidence, of varying reliabilities, has been gathered, as noted below. In terms of the info relating to the united kingdom, there was not a lot of general access information available and media interpretations had to be relied upon. This in itself is a potential weakness. However, out of this research it is clear that caviar in the UK is very much indeed an extravagance product that can command a substantial price, but it isn't growing in popularity because of this of the increasing price that is stimulated by the shortage in supply.

Evidence was also gathered in terms of the global market all together, identifying Japan as a considerable consumer, as well as the US. This raised the query concerning whether or not the UK is the best choice as a target for this new product. This research also looked at the export side of the market and discovered both Russia and Kazakhstan as being crucial players. That is likely to be a good factor, as this implies that the supply chains for this kind of product are already present, although it may raise concerns associated with saturation of resources, with respect to the exact type of substitute that is being used.

Critique of Evidence

Some of the issues have been raised already in relation to the reliability of this research. It's been noted that there is not a lot of information available with regards to the UK consumption of caviar and caviar substitute, so media commentary has had to be relied upon. There is a danger that this analysis is biased and will not present all of the available data which factor needs to be considered when looking at the research below.

Furthermore, there is little research that truly distinguishes between the relative desire to have caviar and caviar substitute, which is potentially fundamental to the likely success of the proposed business. A lot of the information available is produced by the industry itself and for that reason there could be issues of bias. The research will not contain information from the last twelve months and again this may bring about a amount of weakness in the figures being produced, as matters may have changed significantly lately and particularly during the financial crisis.

Recommendations for Future Research

Based on these, it is suggested that future research is required to supplement the initial research undertaken. A much more detailed analysis of the buyer demand for caviar and caviar substitutes in the UK is required. That is more likely to involve primary research, which would include consumer analysis in a bid to ascertain just how likely consumers would be to switch to a cheaper substitute and whether the availability of a cheaper substitute would encourage more consumers to get this product.

Research into other potential markets also needs to be undertaken, as there appears to be a greater appetite for caviar in places, such as Japan and Sweden, that needs to be explored in more depth.

Research Analysis

Financial Implications / Ingredients of Caviar and Caviar Substitute (http://www. caviarist. com/index. php?s=substitute&x=0&y=0)

Although focussing on the caviar market, the report by 'The Caviarist' provides valuable financial information, as well as practical ideas in relation to the market for caviar substitutes. This report pays to, based on the fact it draws together several industry opinions and also is able to consider the worthiness of these substitutes, compared to pure caviar.

The reports made by The Caviarist noted that there is, in fact, an array of potential alternatives to the traditional black caviar, a lot of which give a substantially cheaper option, but these do not always talk with consumer approval, in terms of taste. A number of the key substitute options were noted as being snail caviar (De Jaeger) from France, Cajun caviar which is manufactured out of Bowfin Roe and originates from the united states, and Keta which comes from salmon roe. Each one of these could, potentially, be opponents for any new caviar substitute coming to the marketplace. A further option is by using aubergine which includes resulted in 'poor man's caviar' being produced and again shows the potential for cheaper substitutes to be taken to the marketplace.

Imitation caviar in Japan is, potentially, big business already, with one company, Hokuyu Foods Co Ltd. , specialising in the production of imitation caviar, which includes a gum that is derived from kelp, pectin from apples, sea urchin extracts, scallops, oysters and squid ink. The intake of this caviar is regarded as approximately 20% of the consumption of genuine black caviar and indicates the market for substitute caviar and the consumer willingness to use a substitute. It is, however noted that this imitation caviar, Cavianne, is seldom sold directly to consumers, as it is generally purchased wholesale at a price of around 11USD for a 50 gram jar.

A newer substitute which has come to the marketplace is that of Cabial, which is sea urchin roe and hails from Spain. The typical price because of this is between 10 - 12 Euros for a 120 gram jar. This, again, suggests that there will be a drop in quality, though it does create a real pricing challenge for just about any company looking to enter the market.

Substitution is not necessarily welcome, with some individuals only being ready to consider the 'real' caviar, due to taste and the perceived lack of quality associated with these cheaper options. For all those consumers who are ready to substitute, there is the issue of price competition, which is likely to be fierce and a barrier for any new substitute.

Current Market Trends UK, Russia, Kazhakstan / Competitors (http://www. fao. org/docrep/006/y5261e/y5261e06. htm#bm6. 4)

Reports have suggested that the marketplace for caviar has declined, in recent years. It was noted in this detailed report that the availability of wild roe is at decline and there was a resurgence of farmed sturgeon to satisfy the increasing consumer demands for caviar (or indeed caviar substitutes).

Production of sturgeon through the farming industry has increased from 150MT, in 1984, to a total of 158MT, in 2000, showing that this industry keeps growing, albeit not at an instant rate. Initiatives in the caviar industry are centered on this new form of farming; therefore, even where the production of caviar continues to be taking place, it is being done so with efficiency of production in mind which has reduced the costs of production, making the caviar substitute market even more competitive, on an ongoing basis. The main markets for producing farmed caviar are Russia (2, 050MT), Italy (550MT) and Poland (250MT).

When looking specifically at the position in Kazakhstan, it could be seen that despite being considered a lower-middle income country, it is a highly influential region as it pertains to the production of caviar. There is a total of around 16, 000 fisheries in Kazhakstan and a production of caviar at approximately 1, 153 MT (value of US$2, 469, 500), showing just how influential the caviar industry is to the region and that the likely competitive nature of the industry will lead to a cost war.

Russia sometimes appears to truly have a similar demographic in that it is also regarded as a lower-middle income country that relies heavily on the fisheries' industry. The number of fisheries in Russia is considerably higher than in Kazakhstan, with a complete of 316, 300 fisheries which 1, 300 produce farmed caviar alone. Total production in Russia amounts to 77, 132 MT and a value of around $204, 779, 000. Export income stands at approximately $1, 386, 000, indicating that there remains a considerable market for caviar and that the market will become increasingly competitive, as farming production becomes better and the economies of Russia and Kazakhstan strive to protect their position within the global market.

This market analysis shows both negative and positive trends for a business looking to enter the market. Whilst it is clear that there surely is an evergrowing market for caviar (both natural and farmed), it is also a remarkably competitive market. Moreover, as real caviar can be produced more cheaply, this will naturally put a strain on the market for caviar substitutes.

Demand in the united kingdom (http://news. bbc. co. uk/1/hi/uk/1055748. stm)

A report from the business section of the BBC has looked specifically at the issue of caviar in the UK and who actually consumes caviar. Although this review dates back to 2000, it's the latest of its type and is also a key indicator of the consumption trends of caviar, in the united kingdom. It had been noted, in this report, that from the united kingdom point of view, the option of caviar has dropped substantially; this may very well be attributable to the actual fact that the UK relies entirely on imports and does not have its own production facilities. The option of top quality caviar, e. g. Beluga caviar, remains relatively low and therefore the pricing of the caviar has risen to reflect this insufficient supply. For instance, it was noted that 50g or Beluga sells at 210 in top restaurants, in the united kingdom, making it quite definitely a luxury product. It is no surprise, therefore, that the consumption of caviar has dropped, lately, due mainly to the escalating prices. What is not yet determined is how a lot of this reduction is merely a matter of taste and how much of it is right down to affordability. This will be a key issue to determine when looking at the viability of your caviar substitute. It's estimated that the amount of consumption in the UK is just about four tonnes per year; when this is compared with Sweden at six tonnes and considering that Sweden has just 10% of the population of the UK, it is obvious to see that the marketplace for caviar, for whatever reason, is not large in the UK.

The consumption of caviar in the UK is, therefore, seen quite definitely as a luxury specialist product that is consumed by very few individuals. This raises interesting questions with regards to the prospect of a cheaper caviar substitute, in the united kingdom market. As the price tag on caviar has risen, so gets the level of sales which would suggest a cheaper substitute (end of sentence?).

Despite this, it is not clear whether there really is the appetite for caviar, in the UK, and even if the purchase price were to lessen, substantially, it might be so it simply is not a popular choice with UK consumers and this other markets is highly recommended, in order to introduce this substitute caviar product.

A Global Trade Perspective

The 2005 Report considered the global market for caviar, in conditions of where in fact the most production was achieved and where on earth the best demand for caviar was. That is particularly relevant in the context of the business plan, as the market for a caviar substitute will probably follow the same trends as the market for caviar itself. There is certainly, however, the potentially larger scope of caviar substitutes, due to the fact they are cheaper to produce and therefore will be sold at a smaller price, which might, ultimately, attract a wider consumer base.

This report gives a fantastic overview of the global position in relation to caviar and caviar substitutes, indicating that the major exporter of caviar and caviar substitutes is the united states, followed shortly by Iran and then Russia. By contrast, the greatest importer is Japan, accompanied by France. The UK is the 10th greatest importer, indicating that there surely is a demand for the product; however, there may be a more substantial demand in other regions which have been overlooked up to now in this study, notably Japan. Nevertheless, this report does consider caviar and caviar substitutes, together, and therefore consideration will have to be given concerning whether there is a greater demand for substitute caviar, in certain regions, possibly the ones that are generally considered to be less affluent, such as Latvia and Hungary, which currently rank relatively lowly, in terms of import.

When it involves imported caviar and caviar substitutes, in Europe, the primary targets are France, Germany and Sweden, with the united kingdom ranking relatively lowly, in 8th position, taking under 4% of the European import market. This suggests that the existing approach of targeting the united kingdom may not be the perfect business plan, because there is a considerably larger market in other regions of Europe, for example, France which occupies 26% of the European import market.

Based upon this report and the overall demographic of the import and export of caviar and caviar substitutes, it could seem that there surely is a much greater demand to be enjoyed in regions that could have previously been overlooked. For example, there's a substantial market in Japan and France, neither or which was immediately obvious, available plan. This report does not distinguish between caviar and caviar substitutes, which may change the demand structure, due to the fact that the price associated with caviar substitutes is less, potentially, encouraging better market penetration, in certain less affluent regions.

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