Legislature(1995 - 1996)

04/03/1996 05:00 PM FSH

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                  
 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               
 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            
 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             

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