Legislature(1993 - 1994)
02/03/1993 08:30 AM House FSH
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON FISHERIES
February 3, 1993
8:30 a.m.
MEMBERS PRESENT
Representative Carl E. Moses, Chairman
Representative Harley Olberg, Vice Chairman
Representative Irene Nicholia
Representative Cliff Davidson
MEMBERS ABSENT
Representative Gail Phillips
OTHER MEMBERS PRESENT
Representative Fran Ulmer
COMMITTEE CALENDAR
Overview: Alaska Seafood Marketing Institute (ASMI)
WITNESS REGISTER
Kim Elton, Executive Director
Alaska Seafood Marketing Institute
Alaska Department of Commerce and Economic Development
1111 W. 8th Street, Suite 100
Juneau, AK 99801-1895
Phone: 586-2902
Position Statement: Provided overview of the fishing
industry, ASMI's structure, ASMI's
budget and important issues on the
horizon.
Representative Fran Ulmer
State Court Building, Room 601
Juneau, Alaska 99811-1182
Phone: 465-4947
Position Statement: Asked about ASMI's access to Federal
dollars and questioned the effectiveness
of ASMI's marketing strategy.
Christopher Gates, Director
Division of Economic Development
Alaska Department of Commerce & Economic Development
P.O. Box 110804
Juneau, AK 99811-0804
Phone: 465-2017
Position Statement: Spoke of intent to work to increase the
number of value-added seafood production
and manufacturing facilities in Alaska.
Donna Parker, Fisheries Development Specialist
Division of Economic Development
Alaska Department of Fish & Game
8800 Glacier Highway, Suite 109
Juneau, AK 99801-8079
Phone: 789-6160
Position Statement: Commented on the recommendations by the
Salmon Strategy Task Force.
ACTION NARRATIVE
TAPE 93-3, SIDE A
Number 000
CHAIRMAN CARL MOSES called the meeting to order at 8:40 a.m.
He noted all members in attendance and stated that Mr. Kim
Elton of the Alaska Seafood Marketing Institute (ASMI) would
be giving an overview of marketing.
KIM ELTON, EXECUTIVE DIRECTOR, ASMI, opened by stating that
ASMI added value to a common property resource and was a
good example of the success achieved when state government
and industry worked together. He covered four subjects in
his overview: Dimension of the industry, structure of
ASMI, ASMI's budget, and issues on the horizon.
MR. ELTON surmised the fishing and seafood processing
industry was the largest private employer in the state and
the largest private employer in five of the seven regions of
the state. He stated more than half of the seafood
harvested in the United States was harvested in waters off
the coast of Alaska, and 19,000 people were employed year
round either fishing or in the seafood processing industry.
If indirect and induced employment was added, it then
totalled about 35,000 year round jobs in the seafood
processing and fish harvesting industries, he added. The
wholesale value of seafood products landed in the state
totalled over $3 billion, while the value of this fisheries'
resource to the fishermen was about $1.3 billion.
MR. ELTON described the structure of ASMI as follows: An 18
member board of directors, comprised of seven Chief
Executive Officers (CEOs), of large processing firms, five
CEOs of small processing firms, five fishermen and one
public member. The board was selected by the Governor and
served staggered three year terms. The board had set up a
system of committees staffed by people from the private
industry, which devised the marketing strategy and quality
enhancement program, and reported to the board. The
committees also incorporated another 75 members from the
private sector, he added.
MR. ELTON declared ASMI's mission was primarily defined by
its budget, which had four sources: The General Fund,
federal dollars, private industry, and overseas
participation. The General Fund support was of immediate
concern to the board, he said, and added that in FY 93 the
state appropriated $1.3 million for domestic promotions and
a little over $1 million was used as a cash match to secure
federal funding. Federal dollars for FY 93 totalled $8.52
million and was secured through the market promotion
program, in which ASMI has participated for five years.
MR. ELTON advised that currently, 61 different commodity
groups across the US participated in the market promotion
program; and of those 61, ASMI rated number seven. The pool
of money used for this program was appropriated by Congress
every year, he added. Federal dollars were used in overseas
markets, and the federal government advised which coutries
to work in and which species to market. Currently, ASMI
worked in Germany, Italy, the Netherlands, the United
Kingdom, France, Japan, Korea and Australia; and, the
species being promoted overseas were salmon and crab, he
said.
MR. ELTON disclosed the third source of money was from
private industry. This $3.2 million resulted from a
volunteer assessment that the processors placed on
themselves by a majority vote of processors licensed to
operate in the state of Alaska, he advised, and added that
the $3.2 million fluctuated as it was based on .3% of the
value of all seafood products landed in the state of Alaska.
MR. ELTON disclosed further that the fourth source of money
was based on overseas dollars, and ASMI mandated
participation from foreign partners. In the UK, ASMI did
mostly canned salmon promotions, he noted, and canned salmon
in the UK was handled by several major distributors. This
leveraging had given another $8.2 million to use for
overseas promotions, he said.
Mr. ELTON made one last point about the budget: ASMI had
two market tests. First was the leveraged money from
private partners overseas who obviously felt they were
getting a substantial return on their money and in return,
ASMI got income from them. Second was the support from
industry in the state of $3.2 million for generic
promotions, which showed one unique way that the State was
working with industry. The onshore processors were putting
a substantial amount of cash into the generic marketing
program that they could be using to promote their own, he
said, which was good for the industry and small processors
who could not afford to market on their own.
MR. ELTON advised that the Salmon Strategy Task Force (SSTF)
had reported to the Governor in February, 1992, and
recommended that the domestic market had the most dramatic
potential. Unfortunately, this was the market that had seen
diminishing marketing efforts because of cutbacks. The SSTF
recommended $10 million per year for the next five years for
salmon marketing in order to stabilize the salmon markets.
The source of the $10 million had not yet been determined,
but there were legislative proposals in 1992 that tried to
address that, he said.
MR. ELTON advised further that Representative Hudson had
introduced legislation that would have added a couple of
members to the ASMI board, thereby creating a sub-group
controlled by fishermen. That legislation would have also
assessed fishermen one percent of the value of the product,
which would have created about $5 million, in a normal year,
in salmon promotions in the domestic marketplace.
MR. ELTON stated the Department of Revenue was considering a
landing tax, assessed in the offshore industry of about four
percent, which would raise about $15 million per year. If
one percent of that was diverted toward marketing, it would
total about $3 million. Currently, the offshore industry
contributed nothing toward the ASMI assessment, he declared.
Number 145
MR. ELTON pointed out another issue for FY 93 was the ASMI
appropriation, which was about $257,000 short in the cash
match category in 1992. Of the $8.52 million of federally
awarded money, $1.3 million was inaccessible because of the
shortfall in the cash match. The governor had included that
in his supplemental request for $196,000 to the legislature,
because due to the shortfall, ASMI had sequestered funds
from the overseas marketing in FY 92 so we could move
forward about $60,000, he said.
Mr. ELTON noted also that ASMI submitted its budget to the
Governor who, in turn, submitted his budget on December
15th. During that time, ASMI did not know what the cash
match award from the federal government would be for FY 94.
In addition, the hatchery program and the management of the
wild resource by the Alaska Department of Fish & Game
(ADF&G), had been a real success story that was being used
as a model around the world, he stated.
REPRESENTATIVE FRAN ULMER asked if ASMI had made some effort
to measure the effectiveness of the marketing and how so.
Number 198
Mr. ELTON responded that private partnerships evaluated
their effectiveness on their own brand of product so ASMI
saw those results. On the federal side, pre-imposed
research was done which enabled ASMI to evaluate and hone
the program to make it more effective. On the domestic
side, ASMI used the Nielsen Reporting Services to alter
advertisements so that ASMI would buy 30 seconds of an
advertisement to talk about generic Alaska salmon, and a
retailer would purchase the other 30 seconds to say where to
buy the salmon. The Nielsen scan information would track
how well that ad did, he said.
MR. ELTON disclosed ASMI had recently solicited competitive
bids for an organization to analyze the effectiveness of
programs and give the board some additional guidelines to
use in the future. The bid has been awarded and would be an
additional tool for evaluation. He added ASMI has, in the
past, used the services of advertising agencies, and now
looked forward to the results from the competitive bid for a
broader perspective.
REPRESENTATIVE HARLEY OLBERG asked if there had been an
attempt to deal with the congressional delegation and have
Alaskan seafood products treated the same as other
commodities through price supports, marketing orders,
subsidies and guaranteed loans in foreign countries.
MR. ELTON advised that the delegation had been very
supportive in dealing with federal program managers. The
Department of Agriculture (DoAG), however, had not
considered seafood as a commodity. One recent success was
that seafood was being considered in the school and prison
lunch programs. The ASMI was able to convince the DoAG that
seafood was a commodity and there were dangers in the market
due to over-production. The tougher area for the
congressional delegation had been the overseas food
programs, which put up credit and then allowed countries to
pick which food commodities they wanted to use. The former
Soviet Union, for example, was more interested in wheat now,
as they have fishing resources that were under-utilized. In
Africa, canned seafood was not a traditional food, he noted.
REPRESENTATIVE OLBERG asked if Tyson Seafoods would have a
beneficial effect on the seafood market.
MR. ELTON advised that it was much easier to market several
types of seafood products at once, and with the entrance of
Tyson Seafoods, there would be other product lines of salmon
available for promotion. Tyson Seafoods also had a
vertically integrated marketing strategy, which deleted
traditional brokers and traders.
REPRESENTATIVE ULMER asked when the money in the governor's
supplemental budget for ASMI was needed in order for ASMI to
access federal dollars.
MR. ELTON advised those funds were needed by the end of this
legislative session. The ASMI had convinced the federal
government to fund it on the state fiscal year and not on
the federal fiscal year, he noted. The domestic marketplace
had the most potential and, therefore, the federal
government did not want to divert money from domestic
advertising to secure additional funding for the overseas
market, he said.
REPRESENTATIVE CLIFF DAVIDSON asked if Tyson Seafoods had
mentioned cooperating with the ASMI for promotional
purposes.
MR. ELTON said he had advised Tyson Seafoods that as a
goodwill gesture, they might donate to the ASMI's
promotions. Tyson Seafoods also spoke of sending research
and development people to speak with the ASMI
representatives, he added.
CHRISTOPHER GATES, DIRECTOR, DIVISION OF ECONOMIC
DEVELOPMENT, DEPARTMENT OF COMMERCE AND ECONOMIC
DEVELOPMENT, introduced himself and advised that he would be
focusing on increasing value-added seafood production and
manufacturing facilities in Alaska, and would work on a
program to deal with Tyson Seafoods. He added that the
Division had a matching grant program for entrepreneurs that
became involved in the seafood industry.
DONNA PARKER, FISHERIES DEVELOPMENT SPECIALIST, DIVISION OF
ECONOMIC DEVELOPMENT, ADF&G, noted the fishing industry
outlook was not very promising. With the passage of the
individual fishing quota program by the Secretary of
Commerce, the organization of the fishing industry would
change dramatically, she said, and noted the recommendations
of the SSTF as follows:
1. expand marketing efforts; and,
2. diversify the products available to the consumer,
particularly convenience products.
MS. PARKER pointed out the U.S. market was the biggest
opportunity in the entire world and the problem was the lack
of markets. She added the problems in moving into product
diversity were: Inconsistency, production costs, lack of
proper technology, unstable prices, and run returns. The
task force hired consultants, like the Seafood Management
Corporation, to facilitate the development of a successful
strategy for the development of value-added production for
pink and chum salmon, she disclosed.
TAPE 93-3, SIDE B
Number 000
MS. PARKER continued speaking of the importance of value-
added production. The consultant was specifically supposed
to look at seafood resources in other countries and states
to see how to increase value-added production, she said, and
added that in the Prince William Sound area, salmon
production paid for the machinery and overhead costs in the
facilities, because the groundfish market had not
flourished.
MS. PARKER concluded that fish marketing was a priority of
the Division of Economic Development, and they were working
with the ASMI and Commissioner Paul Fuhs to seek marketing
assessments.
REPRESENTATIVE DAVIDSON commented that fishermen were less
able to rebound from low levels of fish than processors.
MS. PARKER pointed out when prices fluctuated, the
processors' proportionate share of revenue remained rather
consistent, but fishermen did not have that luxury. She
said fishermen were looking into long-term contracts and
risk-sharing.
REPRESENTATIVE DAVIDSON asked why the Governor's SSTF
recommended more resources be directed at domestic marketing
while the entire line item for a contribution to the ASMI in
the Governor's budget had been omitted.
MS. PARKER advised that the ADF&G'S Commissioner had met
with the Governor on that issue, and the Governor had wanted
the ASMI to become more privatized.
ADJOURNMENT
CHAIRMAN MOSES adjourned the meeting at 9:50 a.m.
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