0115 966 7955 Today's Opening Times 10:30 - 17:00 (GMT)
Place an Order
Instant price

Struggling with your work?

Get it right the first time & learn smarter today

Place an Order
Banner ad for Viper plagiarism checker

An Examination Of The Caviar Market Economics Essay

Disclaimer: This work has been submitted by a student. This is not an example of the work written by our professional academic writers. You can view samples of our professional work here.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

Published: Mon, 5 Dec 2016

The new business is aiming to produce a substitute caviar product in Russia and Kazakhstan, with a view to exporting it to the UK. It is anticipated that the main targets for 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 UK is not as widespread as in some other regions and this is thought to be 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 will be provided over the internet and by phone, allowing for rapid delivery of products that are well priced. Loyalty offers will be available and the business aims to target the general consumption market rather than the exclusive, luxury segment of the market. Initially, the target will be the UK alone, although there is no particular reason that this could not be extended in time as production increases. Substitute caviar made up of a variety of different ingredients will be available in order to satisfy the widest range of tastes possible.

Overview of Research Process

A multifaceted research approach has been taken, due to the fact that whilst completing the initial research it became clear that the UK market may not be the best initial overseas market to target, and this resulted in a wider analysis than originally anticipated. Consideration was given to the global market for both the export and import of caviar and caviar substitutes, with a view to gaining an understanding of the general 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 UK market and the way in which UK consumers view the caviar products, in order to get an idea as to whether or not there is likely to be a demand for a caviar substitute of the nature 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 general media reports.

Information was also obtained in relation to the production industry in Kazakhstan and Russia, which was also seen as important as this gave an indication as to whether or not these countries had the ability to increase their production and had the necessary facilities to do so at a reasonable 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 attempting to determine the potential market in the UK, the general 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 in the next stages of business development. A more focussed approach, for example, looking specifically at the UK and the various caviar substitutes available, may have been a more productive approach at this stage.

Evidence Gathered

A wide variety of evidence, of varying reliabilities, has been gathered, as noted below. In terms of the information relating to the UK, there was very limited general access information available and media interpretations had to be relied upon. This in itself is a potential weakness. However, from this research it is clear that caviar in the UK is very much a luxury product that is able to command a substantial price, but it is not growing in popularity as a result of the increasing price that is stimulated by the shortage in supply.

Evidence was also gathered in terms of the global market as a whole, identifying Japan as a substantial consumer, as well as the US. This raised the query as to 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 identified both Russia and Kazakhstan as being crucial players. This is likely to be a positive factor, as it indicates that the supply chains for this type of product are already present, although it may raise concerns relating to saturation of resources, depending on 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 has been noted that there is not a great deal of information available in relation 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 does not present all of the available data and this factor needs to be considered when looking at the research below.

Furthermore, there is little research that actually distinguishes between the relative desire for caviar and caviar substitute, which is potentially fundamental to the likely success of the proposed business. Much of the information available is produced by the industry itself and therefore there may be issues of bias. The research does not contain information from the last 12 months and again this may result in a degree of weakness in the figures being produced, as matters may have changed dramatically in recent months and particularly during the financial crisis.

Recommendations for Future Research

Based on the above, it is suggested that future research is needed to supplement the initial research undertaken. A much more detailed analysis of the consumer demand for caviar and caviar substitutes in the UK is required. This is likely to involve primary research, which would include consumer analysis in a bid to determine 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 purchase this product.

Research into other potential markets should also be undertaken, as there seems to be a greater appetite for caviar in places, such as Japan and Sweden, that should 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 suggestions in relation to the market for caviar substitutes. This report is useful, based on the fact that it draws together several industry opinions and also is able to consider the value of these substitutes, in comparison to pure caviar.

The reports produced by The Caviarist noted that there was, in fact, a wide range of potential alternatives to the traditional black caviar, many of which offer a substantially cheaper option, but these do not always meet with consumer approval, in terms of taste. Some of the key substitute options were noted as being snail caviar (De Jaeger) from France, Cajun caviar which is made out of Bowfin Roe and comes from the US, and Keta which is derived from salmon roe. Each of these could, potentially, be competitors for any new caviar substitute coming to the market. A further option is to use aubergine which has resulted in ‘poor man’s caviar’ being produced and again shows the potential for cheaper substitutes to be brought to the market.

Imitation caviar in Japan is, potentially, big business already, with one company, Hokuyu Foods Co Ltd., specialising in the production of imitation caviar, which consists of a gum that is derived from kelp, pectin from apples, sea urchin extracts, scallops, oysters and squid ink. The consumption of this caviar is thought to be approximately 20% of the consumption of genuine black caviar and indicates the potential market for substitute caviar and the consumer willingness to use a substitute. It is, however noted that this imitation caviar, Cavianne, is not often sold directly to consumers, as it is generally purchased wholesale at a price of approximately 11USD for a 50 gram jar.

A more recent substitute which has come to the market is that of Cabial, which is sea urchin roe and originates from Spain. The typical price for this is between 10 – 12 Euros for a 120 gram jar. This, again, suggests that there will be a drop in quality, although it does produce a real pricing challenge for any company looking to enter the market.

Substitution is not always welcome, with some individuals only being prepared to consider the ‘real’ caviar, due to taste and the perceived lack of quality associated with these cheaper options. For those consumers who are prepared 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 market for caviar has declined, in recent years. It was noted in this detailed report that the availability of wild roe was in 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 is growing, albeit not at a rapid rate. Initiatives in the caviar industry are focused on this new form of farming; therefore, even where the production of caviar is still taking place, it is being done so with efficiency of production in mind and this has reduced the prices 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 can be seen that despite being considered a lower-middle income country, it is a highly influential region when it comes 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 this region and that the likely competitive nature of the industry will result in a price war.

Russia is seen to have a similar demographic in that it is also considered to be a lower-middle income country that relies heavily on the fisheries’ industry. The number of fisheries in Russia is considerably greater than in Kazakhstan, with a total of 316,300 fisheries of 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 substantial market for caviar and that the market will become increasingly competitive, as farming production becomes more efficient and the economies of Russia and Kazakhstan strive to protect their position within the global market.

This market analysis shows both positive and negative trends for a company looking to enter the market. Whilst it is clear that there is a growing market for caviar (both natural and farmed), it is also an incredibly 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 UK (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 is the most recent of its type and is a key indicator of the consumption trends of caviar, in the UK. It was noted, in this report, that from the UK point of view, the availability of caviar has dropped substantially; this is likely to be attributable to the fact that the UK relies entirely on imports and does not have its own production facilities. The availability of top quality caviar, e.g. Beluga caviar, remains relatively low and therefore the pricing of this caviar has risen to reflect this lack of supply. For example, it was noted that 50g or Beluga sells at £210 in top restaurants, in the UK, making it very much a luxury product. It is no surprise, therefore, that the consumption of caviar has dropped, in recent years, mainly due to the escalating prices. What is not clear is how much of this reduction is simply a matter of taste and how much of it is down to affordability. This will be a key issue to determine when looking at the viability of a caviar substitute. It is estimated that the amount of consumption in the UK is around four tonnes per year; when this is compared with Sweden at six tonnes and bearing in mind that Sweden has just 10% of the population of the UK, it is clear to see that the market for caviar, for whatever reason, is not large in the UK.

The consumption of caviar in the UK is, therefore, seen very much as a luxury specialist product that is consumed by very few individuals. This raises interesting questions in relation to the potential for a cheaper caviar substitute, in the UK market. As the price of caviar has risen, so has the level of sales and this would suggest that 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 price were to reduce, substantially, it may be that it simply is not a popular choice with UK consumers and that other markets should be considered, in order to introduce this substitute caviar product.

A Global Trade Perspective

The 2005 Report considered the global market for caviar, in terms of where the most production was achieved and where in the world the greatest demand for caviar was. This is particularly relevant in the context of this business plan, as the market for a caviar substitute is likely to follow the same trends as the market for caviar itself. There is, however, the potentially larger scope of caviar substitutes, due to the fact that they are cheaper to produce and therefore will be sold at a lesser price, which may, ultimately, attract a wider consumer base.

This report gives an excellent overview of the global position in relation to caviar and caviar substitutes, indicating that the largest exporter of caviar and caviar substitutes is the US, followed shortly by Iran and then Russia. By contrast, the largest importer is Japan, followed by France. The UK is the 10th largest importer, indicating that there is a demand for the product; however, there may be a larger demand in other regions which have been overlooked so far during this study, notably Japan. Nevertheless, this report does consider caviar and caviar substitutes, together, and therefore consideration will have to be given as to whether there is a greater demand for substitute caviar, in certain regions, possibly those that are generally considered to be less affluent, such as Latvia and Hungary, which currently rank relatively lowly, in terms of import.

When it comes to imported caviar and caviar substitutes, in Europe, the main targets are France, Germany and Sweden, with the UK ranking relatively lowly, in 8th position, taking under 4% of the European import market. This suggests that the current approach of targeting the UK may not be the best possible business plan, because there is a considerably larger market in other regions of Europe, for example, France which takes up 26% of the European import market.

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


To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Request Removal

If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please click on the link below to request removal:


More from UK Essays