Legislature(1997 - 1998)
03/10/1997 03:21 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 73 - SALMON MARKETING ASSESSMENT & ASMI CHAIRMAN ROKEBERG noted due to time constraints, Mr. Schactler would also give testimony on HB 73, "An Act extending the termination dates of the salmon marketing programs of the Alaska Seafood Marketing Institute and the salmon marketing assessment; and providing for an effective date." BRUCE SCHACTLER, Kodiak Seiners Association, testified via teleconference from Kodiak. He said the Alaska Seafood Marketing Institute (ASMI) is very important. If you don't have marketing, you don't have anything. The world market, as it currently is, makes ASMI all that much more important. Mr. Schactler said his association supports the extension of the 1 percent marketing tax and urged the committee members to move HB 73 forward. CHAIRMAN ROKEBERG asked Mr. Schactler to forward the association's written position to the committee. He indicated the committee would go back to HB 167. HB 73 - SALMON MARKETING ASSESSMENT & ASMI Number 1900 CHAIRMAN ROKEBERG announced the committee would take further testimony on HB 73, "An Act extending the termination dates of the salmon marketing programs of the Alaska Seafood Marketing Institute (ASMI) and the salmon marketing assessment; and providing for an effective date." REPRESENTATIVE BILL HUDSON, sponsor of HB 73, said he was the original sponsor of the current law. Representative Hudson said, "It was no easy task to get the fishermen and women of this state willing to pay a 1 percent assessment for marketing in those days, but in the years that have ensued, I think that this domestic marketing and these monies for this domestic effort has proven invaluable." Representative Hudson explained HB 73 would extend the current 1 percent domestic salmon marketing assessment when the law sunsets on June 30, 1998. It is a measure that has to be dealt with either now or before the end of next session. He explained ASMI works to create a brand identity for Alaska seafood. He noted he was the executive director of ASMI for three years and has seen how it can effectively help the industry recover from a botulism incident that literally tied up thousands of cases of canned salmon. He noted there are people from ASMI in attendance. He referred to the ASMI Board being large and said when the salmon marketing tax was created, they wanted to incorporate the harvesters into the decision making process. Historically, the processors were on one side and the harvesters were on the other side and they were trying to make one industry out of the whole industry. As a consequence of having 12 people from the harvesting side and 12 from the processing side, we have brought the fishermen and women into the marketing element. One element of the marketing program is to take fishermen into the marketplace. He indicated there is strong competition with the farmed markets. This marketing tax, in his opinion, has far exceeded expectations. We now have a broader industry perspective because when the harvesters/fishermen go back to their various gear groups, they can speak about full industry marketing. The 1 percent tax wouldn't have happened without their approval. He said the feedback he has received indicates that they believe this is a valuable tool and should be maintained. Representative Hudson said it is necessary that HB 73 is passed before the program sunsets. The 1 percent tax generates approximately $3.5 million and it would go into the 1997 projected revenue. It might be a little bit more for 1998. Number 2124 REPRESENTATIVE HUDSON said in addition, included in ASMI is the seafood marketing assessment. The assessment is voluntarily paid by processors. It is one of the few industries where both the processors and the harvesters have agreed to ante up their own taxes for something that they mutually feel is important. The only other source of funds that is available is from the federal government which is the overseas USDA marketing plan. That is about $3.1 million. There is about $550,000 to match the $3.1 million from the federal assessment. Representative Hudson noted the director of ASMI is in attendance. Number 2206 RODGER PAINTER, Member, Board of Directors, Alaska Seafood Marketing Institute, came before the committee to give testimony in support of HB 73. He explained the 1 percent tax is vital to their overall program. They are projecting revenues from the 1 percent tax, in fiscal year 98, of about $3.8 million. That would represent about 36 to 38 percent of their overall funding. The loss of that would be devastating to their programs. Mr. Painter stated a little over 60 percent of their domestic marketing program is supported with the 1 percent tax. The feedback from the fishing community has been supportive. He said he would hope that when the industry is having problems, the legislature would see fit to continue with what is a voluntary effort, on behalf of the industry, to provide for generic marketing programs. Number 2280 REPRESENTATIVE COWDERY questioned what portion the state is funding. MR. PAINTER explained the 1 percent assessment on fishermen funds about 38 percent of the program. The remainder of that funding comes from a voluntary .3 percent assessment on seafood processors. Another $3 million comes from the federal government through a market assistance program for international programs. The state is supporting about $550,000, which is dedicated solely to match that federal grant. The federal government is supplying about $3.1 million. He noted the federal government does require a certain match. Number 2341 REPRESENTATIVE JOE RYAN said a couple of years ago Senator Stevens gave a speech where he said people were looking at how to market Alaska salmon in the Far East where there is potentially a huge market. He thought that it had come about to where the fish would be quick-frozen in plastic sleeves and shipped on large ships to the Far East, but what the state needed to do was to investigate those markets and see what is going on. Representative Ryan said he has spoken with a number of people who hold commercial fishing licenses and they have not been very enthusiastic about what is happening to their industry, seeing it go away due to farmed salmon. He said farmed salmon can be harvested at any time. He asked what ASMI has done to investigate promoting Alaska salmon in Asia and Southeast Asia such as the Peoples Republic of China and the technology Senator Stevens spoke about. Number 2384 MR. PAINTER said ASMI has been aggressively working in the Far East. Last year, they participated in a trade show in China. They will participate in a trade show in Hong Kong in May. Mr. Painter said there is also another trade show scheduled in China in 1998. Number 2412 ART SCHEUNEMANN, Executive Director, Alaska Seafood Marketing Institute, came before the committee to give testimony in support of HB 73. He said the Asian markets are markets of the future. He said ASMI currently has active programs with the Foreign Agricultural Service in about nine countries. Mr. Scheunemann informed the committee that Hong Kong, Taiwan and China are on their list of countries. He noted they haven't been to China in the past because the dollars that ASMI receives, to a point, are somewhat dictated by the federal government in terms of the markets. He said ASMI makes application for the funds and the federal government says, "Yes, that's a good idea," or "no, that's not such a good idea." Mr. Scheunemann said they have just received funding, within the allocation of money, from the federal government. He said that he believes this is second year that they have asked for an allocation within the total to do things in China. They have done a trade show in Qingdao, and some people just came back from a trade mission to Shanghai and Taipei. Mr. Scheunemann said there is a lot of interest in the Asian Markets. TAPE 97-19, SIDE B Number 001 MR. SCHEUNEMANN informed the committee ASMI is aggressively pursuing all of the things that Senator Stevens has been talking about. He noted Senator Stevens has supported the Market Assistance Program of the Department of Agriculture. Number 077 CHAIRMAN ROKEBERG questioned why ASMI is spending money on television adds within the boundaries of the state of Alaska. MR. PAINTER said one of the things ASMI is concerned about is that the people of the state of Alaska understand the importance of the industry to the state, so ASMI dedicates a certain amount of money to that effort. Number 064 MR. SCHEUNEMANN, in response to Chairman Rokeberg's question, said the board of Directors feels very strongly about the issue of advertising, promoting and marketing outside of the state of Alaska. The balance on that is there is a need to let people know what ASMI is doing. He said over the last year, ASMI has spent maybe $10,000 on some advertising, mostly on local public broadcasting channels in Juneau and Anchorage. He noted they have also done some radio spots. Mr. Scheunemann said ASMI spends time and effort talking to fishermen/processors in Alaska. From a marketing perspective, the ASMI board agrees that their major effort needs to continually be directed outside Alaska to the marketplace. MR. SCHEUNEMANN explained that in the United States the salmon product has to compete against beef, pork and chicken. Salmon has 1.3 pounds, per capita, consumption. He noted that is all salmon including farmed salmon and wild natural Alaska salmon. Over the last year and a half, in the whole salmon category, there has been a 27 percent increase. Mr. Scheunemann informed the committee that Alaska has been recognized by the Natural Fisheries Institute and a number of other bodies around the country as having contributed to that. He said ASMI does a lot of television and radio advertising during good years and when there is more money. He said when they have leaner years, they go to the stores and do demonstrations. Fishermen have been in the stores to educate the industry and to promote to the consumer on a direct basis which is the most effective way to get new consumers. MR. SCHEUNEMANN said ASMI has gotten a lot more aggressive in the restaurant food service feeding category and institutional feeding. Those programs have shown growth in sale volumes. He said the only thing they can't guarantee is increased prices to the fishermen and processors. He said he can guarantee that ASMI is continually getting the message out about Alaska seafood and salmon. Number 297 REPRESENTATIVE RYAN discussed his trip to Disney Land in Orlando ten years ago. There was an area where there were venues from a number of different countries and they all seemed to have restaurants associated with them. He said it was his understanding that on the average, 50,000 people a day came through that park. He said this would be an ideal place for the state of Alaska to set up a restaurant with salmon and seafood. He noted there were also movie theaters where they showed portions of films of the different countries. He mentioned this to Tourism and Marketing and they told him that they were investigating something similar to this approach. Number 337 MR. SCHEUNEMANN said it has crossed their minds. It is not part of ASMI's charter and it would be difficult for them to fund or set up. However, they are contacted, on a fairly regular basis, by restaurant entrepreneurs who are doing certain types of themes. He noted there is an Alaskan Klondike Restaurant theme at Disney World. He said it is left up to the private sector to develop that kinds of opportunity. Mr. Scheunemann said ASMI does have a relationship with Disney in terms of putting together a program with their food service decision makers. They also have an executive chef decision-making training program where ASMI has a partnership with the Culinary Institute of America. He said, "We had at one of our events, our training events, four day Alaska seafood training, how to make money and menu Alaska salmon and seafood profitably to the people who are making those decisions to buy the product and showing them why they can make money on their menus." Number 433 REPRESENTATIVE RYAN referred to fishermen getting $1.20 or $1.30 a pound in Cook Inlet and asked why it costs him $18.00 a pound in a restaurant. MR. SCHEUNEMANN said that is one of things that is not in ASMI's control. He noted there is an economic model that people can look at for just about every food product in existence. As you go up the food chain, the value continues to get added past the production and processing side. Alaska salmon is considered a high value product in many places and people will pay for it. Number 489 REPRESENTATIVE HUDSON said when he was the executive director of ASMI, they were looking at 6 cents a pound to transport salmon. Salmon sitting in a warehouse or freezer depreciated at 1 percent per month as there is wastage and spoilage. Representative Hudson said, in his opinion, the program works very well because it does compete against beef, pork, chicken and other seafood products. He continued to discuss how menu development occurs. He also informed the committee of a situation where Julia Childs had been making great strides at trying to prove to everybody that frozen salmon wasn't any good. Representative Hudson said they challenged her and took a frozen white king salmon to New York City and had a cook off. Julia Childs had to personally recognize that fresh frozen, if done correctly, was not only every bit as good as farmed fish, but better. He said absent a good marketing program, Alaska would be losing out to beef, pork and chicken in a big way. Representative Hudson referred to the farmed salmon and said they are all heavily subsidized whether they are from Norway, Chili or Scotland. The state only puts $550,000 into the program. CHAIRMAN ROKEBERG asked how much the matching funds are. REPRESENTATIVE HUDSON responded that the match is $3.1 million of federal money. He noted the program is bringing in over $6 million of industry money from harvesters and processors. The law states that the harvesters could vote themselves totally out of this tax. Number 723 REPRESENTATIVE SANDERS asked Mr. Scheunemann how much he thinks Alaskan salmon demand went up last year. MR. SCHEUNEMANN said that is tough question because they can't measure what the Chileans volume movement is in a particular chain. He said, "I would guess that just given the volume of product that we moved through the domestic marketplace in the last year, and that's all salmon consumption - that's canned, fresh frozen and fresh as well, I would bet some good money that we probably have 15 percent of that or maybe more of that percentage change. I think the important thing to keep in mind is that that line had stayed pretty flat for about five year period of time prior to 1993, at about a pound. I think when the 1 percent was instigated and put in place, there was some idea that we were going to increase market share by two or three pounds. There was these huge percentages and that type of thing which in any analysis of gaining market share, you don't make those kinds of strides in any food product or any food category. So three-tenths is pretty significant. Now low prices, a lot of volume, but a lot push behind that low price, high volume." MR. SCHEUNEMANN informed the committee one thing that isn't in ASMI's control is the price to the fishermen or how it is set and determined. He said referred to Denny's Restaurants and said they have 1,800 restaurant chains around the United States. They have been serving six ounce portions of chum salmon fillets for $4.99 to $6.99. That one deal consisted of about 800,000 six ounce portions. Number 897 REPRESENTATIVE SANDERS said a couple of years ago the federal government came up with a program where they were going to use salmon in school meals. He asked if that was included in the increase of salmon being eaten. MR. SCHEUNEMANN said that would be separate category. The federal government has purchased canned salmon from the seafood industry in Alaska for a number of years. They buy it under school lunch emergency buying entitlement type programs. It is bought as a commodity and it is put out on the shelves. He said ASMI had something to do with pushing that through. The federal government is also interested in getting schools to purchase value-added products such as salmon nuggets. Mr. Scheunemann said they contributed to the Fisheries Development Foundation in Anchorage where they gave assistance in pushing that through. The current issue is that there are a lot of processors that make salmon nuggets and the USDA has purchased a fair amount of nuggets for their school lunch program. The question is, "How much more money does the federal government, through its entitlement programs, give to school districts to buy certain classes and categories of food products?" He noted a lot of that has to do with politics. Mr. Scheunemann said every one of our processors, in his view, are creating new products. He noted pouches of salmon could revolutionize the industry and could be custom tailored for the large contract feeders of the world that service cafeterias. He said there are microwaveable products and center of the plate portions. There are a lot of things that are happening, but one of the questions is, "Will that solve the problem of our production?" He said he believes it is only a small portion of our production that goes to those products. The other question is, "Can those kinds of changes happen fast enough to make a difference in the short term as it is more of a long term proposition?" Number 1030 CHAIRMAN ROKEBERG asked how long ASMI has been in existence. MR. SCHEUNEMANN said last July, ASMI celebrated their sixteenth anniversary. CHAIRMAN ROKEBERG asked if there is any way to determine the amount of imported fish into the United States. He said of the 27 percent increase in salmon consumption in the United States, how much of that was Alaskan salmon. MR. SCHEUNEMANN explained there is no doubt that they could find out how much salmon is imported. He said they would have to pull apart all the gross custom's district data and do an analysis. Mr. Scheunemann said ASMI hasn't done that. The 27 percent figure is an educated guess based on the number of units in stores they promote in. MR. SCHEUNEMANN said when ASMI goes into a retail chain, the chain signs a contract with ASMI to report their sales volume data based on that promotional time period. For example, they are currently in the Lenten period which is a typical promotion time period because during the religious period, people buy more seafood. If they contract with a retail chain like Kroger, for example, they have to report to ASMI the volume of sales movement. He noted they don't get into price or where the product comes from. Mr. Scheunemann said they then compare from period to period as to whether the volume has increased. He said when they're not promoting, they also look at whether there are continued maintenance sales of those products. During the summer months, there seems to be more interest in fresh seafood. Mr. Scheunemann explained the question that they don't have an answer to is how much carry over is there. That is a function of how much inventory is in the marketplace and how much is being sold after the promotional periods and between the seasons. Number 1156 CHAIRMAN ROKEBERG pointed out there are two different dates in the bill. "One is for the tax itself as the year 2003, and the other one is for the -- I believe is the 10 percent or less than 10 percent of the other activities of the board that expires in the year 2004. Could you explain why there is the difference of the two years?" MR. SCHEUNEMANN said he isn't clear on that rationale. CHAIRMAN ROKEBERG told Mr. Scheunemann that he is pleased that ASMI is working with the Culinary Institute of America. He asked if they have looked at other cooking schools or the Hotel Management Department of the Cornell University, which has the most well respected hotel management and culinary program curriculum in the United States. MR. SCHEUNEMANN said they haven't had contact with Cornell University. He said one of the factors of working with the Culinary Institute is that ASMI has a limited amount of money in the food service arena and what they are trying to do is rather than contacting the chefs, they are trying to contact the decision makers who are in a position who decide whether to buy product to develop the menus. It would be a good strategic direction to go if there was more money being put into food service area. He noted the Seattle Art Institute has a cooking culinary program and last month ASMI trained 40 chefs in a one day seminar. Number 1284 CHAIRMAN ROKEBERG said, "Historically, there has been a controversy about the retention of your advertising agencies. As I understand it, there is more of an Alaskan contract now. Do you want to make a very brief comment on that?" MR. SCHEUNEMANN said in January, ASMI signed up the Nerland Agency, which is a well respected Anchorage firm. He said they went through a total review process a little over a year ago and the board chose a Minneapolis based advertising agency. It didn't work out as there were internal management problems that the board couldn't have known about. Number 1356 CHAIRMAN ROKEBERG referred to the unmarketable hatchery fish, particularly the incident that occurred in Southeast Alaska last summer with the chum dump and roe stripping and asked if ASMI was involved. MR. SCHEUNEMANN explained ASMI doesn't get involved in any of those policies. He said it is a management issue and ASMI's charter doesn't include their involvement in that by statute. CHAIRMAN ROKEBERG asked if it has a negative impact on marketing. MR. SCHEUNEMANN said he thinks it has an impact, to some degree, on ASMI's relationship with the industry and not so much with the trade. CHAIRMAN ROKEBERG said he has concerns about the issue in that if poorly looked after fish are given away in a program, and they end up in the Pacific Northwest, it will reflect negatively on the rest of the industry in Alaska. Number 1394 MR. HUDSON referred to the two different dates in the bill and said he believes what they did was say, "We collected right up until 1993, and then we permit them to spend it because they collect it into the following year." CHAIRMAN ROKEBERG said he thought that was the case. Number 1496 KAY ANDREWS, Gillnetter Deck Hand, testified from Ketchikan. She said she is in support of continuing the ASMI program as it is necessary not only for processors, but also fishermen. Number 1524 DEAN PADDOCK, Executive Director, Bristol Bay Driftnetters Association, came before the committee to give testimony in support of HB 73. He said his organization feels it is necessary to advertise or die. He commended ASMI for the job that has collectively been done. Mr. Paddock referred to 1989 and said the average per capita consumption of salmon was .470 of a pound. In 1995, the consumption is 1.41 pounds per capita. The National Fisheries Institute gives credit for that to the ASMI and to the efforts of the pen rearing industry. Number 1735 JERRY MCCUNE, United Fishermen of Alaska, came forward to testify. He said 80 percent of the groups within his organization supports the 1 percent tax. The others are waiting to have board meetings to make their decisions. Number 1766 CHAIRMAN ROKEBERG closed the public hearing. Number 1770 REPRESENTATIVE COWDERY made a motion to move HB 73, with attached fiscal notes, out of committee with individual recommendations. CHAIRMAN ROKEBERG objected for the purpose of discussion. He said the fiscal note is rather high, but it is programs receipts. Chairman Rokeberg said he believes it is a very good program. He then removed his objection. Hearing no other objections, HB 73 was moved out of the House Labor and Commerce Committee.
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