Legislature(1995 - 1996)
04/03/1996 05:00 PM FSH
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 504 - PROMOTION BY SEAFOOD MARKETING INSTITUTE Number 0050 REPRESENTATIVE IRENE NICHOLIA presented the sponsor statement for HB 504: "What House Bill 504 does is amend the current statutes governing the Alaska Seafood Marketing Institute by allowing the institute to promote Alaska seafood on a regional basis. "Currently, seafood promotions must be generic and statewide. House Bill 504 amends AS 16.51.110 to allow ASMI to promote seafood on a regional basis, [such] as Yukon River chum salmon, Bristol Bay sockeye salmon, Copper River reds, et cetera. "The existing framework for marketing salmon produced in Alaska waters assumes that generic product promotions will increase overall sales, thereby providing benefits to fishermen from all regions of the state. While this works to some extent and is a necessary part of an overall marketing program, regional disparities in the cost of production and transportation require that in certain areas, niche marketing efforts be undertaken. Promotions by brand names will still be prohibited." Number 0163 REPRESENTATIVE NICHOLIA pointed out the bill had a zero fiscal note. The change in law would be permissive, allowing opportunity, rather than mandating an action from the Alaska Seafood Marketing Institute (ASMI). Representative Nicholia cited the Arctic-Yukon- Kuskokwim (AYK) region as an example, saying that was the fishery she knew best. The AYK fishermen had unique characteristics and problems. "Arctic Yukon chums are the best in the world, but transportation and production costs are high," she said. "There are approximately 1,400 permit holders in this area. The traditional markets for fish from the AYK have been flooded by farmed fish, huge Hokkaido chum returns, and by Alaska's own state- subsidized hatcheries." Number 0261 REPRESENTATIVE NICHOLIA explained that AYK fishermen usually sold their product to either the Whitney plant in Anchorage, which recently closed and was for sale, or the Inlet Fisheries in Bethel, which had filed for bankruptcy. "ASMI has the marketing expertise," she said. "We are simply asking to change state law to allow ASMI to work with Alaska's vital fisheries as they struggle to find their markets in today's world." CHAIRMAN AUSTERMAN asked if there were questions and noted that HB 504 was a straight-forward bill. Number 0347 DAN ALBRECHT, Executive Director, Yukon River Drainage Fisheries Association, testified via teleconference from Seattle, Washington, saying the association supported HB 504 as a starting point to embracing regional or niche marketing for Alaska salmon products. He referred to the glutted market and suggested that with a generic promotion campaign, fish that cost more to produce and transport would be priced out of the market. By promoting salmon by region, fish unique to an area might find an appropriate market. Number 0508 MR. ALBRECHT emphasized the permissive aspect of HB 504. "This bill just gets the process started and ASMI could be the entity that has the expertise to help design appropriate niche marketing strategies for salmon from different regions of the state, depending on their characteristics and the markets they need to go to," he said. He concluded by noting that HB 504 required ASMI to conduct a statewide analysis, to include species not currently being analyzed. Number 0643 REPRESENTATIVE KIM ELTON referred to Mr. Albrecht's understanding that HB 504 would require market analysis for chum and said he did not see that requirement in the bill. MR. ALBRECHT acknowledged he was referring to some committee substitute language that he thought had been drafted. CHAIRMAN AUSTERMAN indicated he had not seen that language. REPRESENTATIVE NICHOLIA said she had not drafted anything, either. Number 0718 KARL OHLS, Resource Development Specialist, Division of Trade and Development, Department of Commerce and Economic Development (DCED), indicated that although there was little text to HB 504, it was complex and needed many details worked out. He explained that it was difficult to work out a position on the bill. While the Administration sympathized with the sponsor's concerns and the problem, they were troubled by the solution of opening up ASMI to regional marketing. "We want to keep ASMI focused on its current mission, generic statewide marketing of salmon. But at the same time, we want to address the special problems that are in the AYK region," Mr. Ohls stated. He noted he was providing written testimony. Number 0803 MR. OHLS believed regional marketing could work in concert with ASMI's current program. Interest could be created in Alaska salmon; then, in specific markets, the appropriate entity could sell the higher priced AYK salmon by promoting its advantages and attributes, for example. Mr. Ohls emphasized the concern that ASMI not be disrupted in its current program by opening the ASMI board up into a situation where members would battle over allocation of ASMI's resources to promote products from specific regions. He indicated willingness to work with the sponsor, people in Western Alaska and the legislature toward developing and funding a pilot regional marketing project. He mentioned there was one limited project already underway, for about $50,000, involving Yukon salmon, conducted by the Yukon River Drainage Fisheries Association. Mr. Ohls indicated that project had potential for expansion. Number 0891 MR. OHLS suggested ASMI could play a meaningful role assisting development of regional marketing strategies and technical materials. He believed the broad statutory authority, to promote all seafood species and by-products harvested in Alaska and processed for sale, allowed this. "Additionally, we think a marketing project contract, funded by an outside source, could be administered by ASMI or another appropriate entity," Mr. Ohls said. "But we think ASMI expertise in marketing should be utilized to the fullest extent possible, without creating the problems within their board and their current program." He mentioned that grant and loan programs in DCED and the Department of Community and Regional Affairs were currently being reviewed for possible funding sources for a pilot project. Number 0959 MR. OHLS pointed out that regional niche marketing was a partial solution. Marketing programs would take time to develop. Product and business development also needed to occur in the region. He said transportation costs were a major factor hurting the competitive nature of the products. MR. OHLS concluded by saying whatever the costs of addressing the problem now, the costs of not doing anything would, in the long run, be much greater. While development of new seafood markets was expensive, the cost of dealing with social and economic dislocation would exceed that sum many times over. He reiterated the Administration's willingness to work on the problem. Number 1025 RODGER PAINTER testified that he was an oyster farmer and ASMI board member, but that he was not representing the ASMI board on this issue. Although well crafted, the bill was a terrible idea, he said, and changing the statutes to try to accomplish the goals was unnecessary. Mr. Painter thought it was important for ASMI to retain its current generic marketing focus. He foresaw many fisheries other than those in the AYK region wanting a specialized focus on their products, which would be extremely disruptive for ASMI programs. He did not want to see the board divided. Number 1141 MR. PAINTER said niche marketing worked well tagged onto what ASMI was currently doing. He himself sold all his product in niche markets, he said. "Our product is priced so far above our competitors from the Lower 48 that we're forced to deal with niche markets," he said. "And we do get the higher price for our product, and ASMI is very helpful in its broad approach in establishing a good image for Alaska seafood. And that image and aura works wonders in marketing our product." He pointed out that ASMI could help AYK fishermen in many ways, providing technical expertise, marketplace contacts and "golden opportunities" to tag onto targeted campaigns. He suggested that ASMI was already working with fishermen from the AYK on that particular problem. REPRESENTATIVE GARY DAVIS asked why Mr. Painter thought the bill's wording was masterful. MR. PAINTER replied, "What it does is take away the prohibition that currently exists in statute from geographic marketing. And it is permissive, indeed. It opens the door for ASMI to be pressured, I guess, to change its programs from strictly an Alaska seafood to promoting seafood from particular regions." Number 1273 REPRESENTATIVE DAVIS said he understood the intent but did not see how the wording did that. REPRESENTATIVE CARL MOSES suggested it would be simpler to strike the language and just say "seafood by specific brand name". REPRESENTATIVE SCOTT OGAN thought the language almost neutralized itself. He also thought saying seafood could not be promoted by specific brand name would accomplish the bill's intent. Number 1350 REPRESENTATIVE ELTON recommended retaining the sponsor's language. He explained that a second exception was being added, with the wording "or from a geographic region of the state", which would allow regional marketing. He preferred this language, rather than just the prohibition against a specific brand, because there had been overtures made to ASMI in the past of joint promotions with Chilean or Canadian salmon farmers, who wanted to tag onto the ASMI program. Although he did not envision ASMI being involved in such a promotion, he preferred to see it confined to the state, rather than removing the geographic exception. "I don't want anybody to even entertain a notion that they could do a joint promotion with Chile," he added. REPRESENTATIVE DAVIS commented that if the bill passed, it would give the Kenai River and Cook Inlet an unfair advantage. Number 1445 ART SCHEUNEMANN, Executive Director, Alaska Seafood Marketing Institute (ASMI), Department of Commerce and Economic Development, stated that Mr. Ohls had put the matter into context in terms of problems, issues and the importance of working on a cooperative basis to find any way possible to assist, from a marketing standpoint, areas of the state having problems, "whether they be structural or whether they be market-driven." He acknowledged the issue was complicated and said comments by both Mr. Ohls and Mr. Painter were appropriate. MR. SCHEUNEMANN said ASMI believed it was not necessary to change the statutes to hold ASMI accountable to provide marketing and technical assistance. While niche marketing had its place, it required structure at the local level to drive it and make it successful. There were immediate, interim and long-term needs. For the AYK region, there was an immediate need to stabilize processing abilities in the region, which was a structure issue, not a marketing issue. He suggested there may be more immediate opportunities on the niche basis in export markets than in domestic markets because of consumer sophistication with salmon in Asia and Europe. Number 1589 MR. SCHEUNEMANN said on an interim basis, once there was a plan, forecasts and evaluations had to be made as to whether the plan had a chance to be successful. On a long-term basis, issues related to structure, such as processing and alternative or value-added products, needed to be considered to create even more of an identity, he said. Transportation and quality were issues, as well. "We stand ready to provide technical marketing assistance, quality training assistance, and working with the folks in whatever way possible," Mr. Scheunemann said. "And we believe we have the broad scope and authority to do that within the current statutes." REPRESENTATIVE OGAN asked about the composition of the ASMI board and whether it was by region. MR. SCHEUNEMANN replied that the intent under statute was to reflect statewide distribution of fishermen and processors. There were 12 fishermen and 12 processors from a wide range of interests in the state, plus one public member. Number 1716 ANDY GOLIA testified via teleconference from Dillingham in support of HB 504. A Bristol Bay commercial salmon fisherman for 30 years, he had seen prices drop since 1988. He expected prices to stay down until something was done to move Bristol Bay salmon. Farmed salmon were competing directly with wild Bristol Bay salmon. He understood that ASMI members opposed the bill. However, he felt that he, as a contributing fisherman, should have a say. He suggested there had been benefits to Southeast, Prince William Sound and Kodiak fishermen in terms of ASMI's promotion, with little benefit to Bristol Bay fishermen, who paid a large portion of the 1 percent ASMI tax. CHAIRMAN AUSTERMAN referred to Mr. Golia's indication that he felt other areas of the state received more from ASMI advertising than Bristol Bay did. Chairman Austerman understood the advertising was generic, not speaking to any particular part of the state. MR. GOLIA responded that one example was the work by ASMI to request the Governor to get the U.S. Department of Agriculture to buy canned pink salmon, which came from an important Southeast Alaska fishery. "We have no pink salmon fishery up here," he said. "I think we'd feel better if we had some of our canned salmon ... go to that market, too." Number 1897 BRUCE SCHACTLER testified via teleconference from Kodiak that he opposed HB 504. He believed the AYK region had no special problems. "We've got marketing problems, we've got processing problems right here in Kodiak," he said. "I personally don't have a place to sell my pink salmon here this year, or my dog salmon, or my sockeye, or anything." Mr. Schactler thought the bill was allocative and would be extremely disruptive to ASMI. "Their marketing help is there for anybody, anywhere, who wants to do niche marketing," he said. "They have just volumes of material and hours and hours of help available to anybody in any organization that wants to do any type of niche marketing. Everything is already there." He suggested the legislature acted only as a tax collector to ASMI. "If you want to dictate to what ASMI will or will not do, with legislative action, then you should take a financial interest, not just money generated from higher prices from ASMI's marketing, into the general fund, to spend on whatever you want to do," he said, adding that the legislature should leave ASMI alone. Number 2070 REPRESENTATIVE DAVIS asked Mr. Ohls to elaborate on his willingness to work with the sponsor. MR. OHLS responded they had been in contact with people from the AYK region about problems there, including the closure of a plant in Bethel and lack of markets. Regional marketing had come up repeatedly as a solution. "It's on our list of things to look into," he said. "We have a variety of grant programs in the state. When we look through those, there are none, of course, set up exactly for targeted marketing. So, it's difficult to fit them in." Mr. Ohls indicated they were looking at starting a pilot project for AYK fish. Number 2133 REPRESENTATIVE ELTON expressed conflict over the issue. "This absolutely needs to happen," he said. "And I think that we need to have niche marketing; I think we need to encourage regional marketing." However, he believed it should be done some other way. He thought that under HB 504, those areas needing the most help, such as AYK, would get the least. For example, Bristol Bay fishermen contributing their 1 percent would ask for marketing for Bristol Bay. "What's going to happen is, if we do this, in this form, Bristol Bay is going to get a lion's share of the money, because they contributed a lion's share of the money," he said. He suggested AYK would not receive enough to do anything, because their 1 percent assessment would be minuscule compared to others. Number 2224 REPRESENTATIVE ELTON said the beauty of the current structure, as well as one of its shortfalls, was that there was a truly generic marketing program. "And if we begin dividing it up by species and region, there's going to be an unequal benefit," he stated. "And the people that are going to lose out are going to be the smokers in Gustavus and the fishermen in AYK." He noted that this had been an issue in ASMI for years. He recalled that the legislature had crafted language to ensure every Alaska fisherman was represented when the ASMI board had been expanded. REPRESENTATIVE ELTON noted there was no prohibition on ASMI providing materials, including footage for television ads, which was available for free to marketers. "We have consumers that don't understand the difference between a pink salmon and a chum salmon," he said. "If we start confusing the marketplace by saying `AYK chum salmon,' we're creating even more cognitive dissonance in the marketplace, more difficulty for the consumers to make a choice. So, I really believe that ASMI's generic marketing approach is appropriate. And, having said all that, I absolutely believe that this state ought to be providing assistance to regional marketers and to regional groups that organize on their own, as either for- profits or non-profits." Number 2430 REPRESENTATIVE ELTON emphasized there were special problems in areas such as AYK because of high-cost production. "If we're talking about rural economic development, that's it, in its purest form," he said. "I'm just hesitant in having it occur this way, because I think we lose what we've got." He noted that through the legislation on salmon assessment, a salmon committee had been created within ASMI that controlled how dollars from salmon fishermen would be spent in the marketplace. TAPE 96-16, SIDE B Number 0015 REPRESENTATIVE ELTON suggested the legislature might want to wait a year before making any changes to ASMI. He was not sure there would be an ASMI program if the state was not cooperating but the fishermen were. REPRESENTATIVE OGAN mentioned that he had a strong visual memory of the ASMI logo, in which ASMI had invested a lot of money. He suggested that if subdivided into many smaller images, it would lose its effectiveness. He also thought the bill would produce an allocation fight. CHAIRMAN AUSTERMAN stated he also had a problem with the bill. "Right now, the way it's set up, I think it opens Pandora's Box for an organization that has been set up to specifically, generically, market Alaskan seafood," he said, indicating that without a plan in place from ASMI, he could not support the bill. Number 0137 REPRESENTATIVE NICHOLIA emphasized it was not a mandate to ASMI but provided an option. REPRESENTATIVE ELTON said it was an important enough issue that he would commit to working with Mr. Ohls, DCED, the sponsor, and perhaps someone from ASMI to discuss other ways to accomplish the goal.