Legislature(2015 - 2016)CAPITOL 120
02/10/2015 10:00 AM House FISHERIES
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Alaska Seafood Marketing Institute (asmi) | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
February 10, 2015
10:04 a.m.
MEMBERS PRESENT
Representative Louise Stutes, Chair
Representative Neal Foster
Representative Bob Herron
Representative Jonathan Kreiss-Tomkins
Representative Dan Ortiz
MEMBERS ABSENT
Representative Craig Johnson
Representative Charisse Millett
COMMITTEE CALENDAR
OVERVIEW: ALASKA SEAFOOD MARKETING INSTITUTE (ASMI)
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
MICHAEL CERNE, Executive Director
Alaska Seafood Marketing Institute (ASMI)
Juneau, Alaska
POSITION STATEMENT: Presented the overview of the Alaska
Seafood Marketing Institute (ASMI).
ACTION NARRATIVE
10:04:42 AM
CHAIR LOUISE STUTES called the House Special Committee on
Fisheries Committee meeting to order at 10:04 a.m. Present at
the call to order were Representatives Stutes, Foster, Herron,
and Ortiz. Representative Kreiss-Tomkins arrived as the meeting
was in progress.
^OVERVIEW: ALASKA SEAFOOD MARKETING INSTITUTE (ASMI)
OVERVIEW: ALASKA SEAFOOD MARKETING INSTITUTE (ASMI)
10:05:36 AM
CHAIR STUTES announced that the only order of business would be
an overview from the Alaska Seafood Marketing Institute (ASMI).
10:05:37 AM
MICHAEL CERNE, Executive Director, Alaska Seafood Marketing
Institute (ASMI), began the overview by introducing ASMI as a
public private partnership between the State of Alaska and the
Alaska seafood industry. As Executive Director, he explained
that he reports to a seven member board, appointed by the
governor, and supervises twenty full time staff located in
Alaska and Seattle. In addition, there are four ex officio
members: one from the governor's office, one from the
Department of Commerce, Community & Economic Development
(DCCED), and two legislators, one from each body. The institute
is the official seafood marketing arm for the State of Alaska
with a mission statement, which reads: To increase the value of
Alaska seafood in the U.S. and worldwide.
10:07:00 AM
MR. CERNE explained that ASMI is primarily funded through a
voluntary industry tax, of 0.50 per cent of the ex-vessel value,
which is collected by the Department of Revenue (DOR) from
processors and forwarded to the institute. The ex-vessel value
is based on the price that the processor pays to purchase the
catch from the fisherman. Other funding is received from a
federal grant that averages about $4.5 million and the state is
required to match the grant. Thus, the state contributes $4.5
million in matching general funds (GF) and provides an
additional, unrestricted GF allocation of about $1.8 million.
He directed attention to the committee handout, page titled
"ASMI Funding," to point out the line labeled "Voluntary
Industry Tax and Carryforward," in the amount of $13,324.6
million, to tell the committee that ASMI is a cash based agency
and, as such, requires maintaining a bank balance. Thus, the
board required the institute to create a $10 million reserve,
which is included in the carryforward total. The fishing
industry is volatile and fluctuations require this offset
reserve to keep ASMI functional.
10:09:33 AM
REPRESENTATIVE FOSTER asked what the projected difference is
between the FY 15 and FY 16 budgets.
MR. CERNE responded that it has been reduced by 14 percent, or
approximately $1 million.
10:12:33 AM
MR. CERNE continued, and said that due to the market commodity
competition for the variable federal grant money, the matching
GF also changes, and makes the carryforward/reserve an essential
aspect of the budget. Should the grant money be reduced or
eliminated in a given year, the carryforward amount would allow
ASMI to maintain the international program. The international
program is the largest program that ASMI operates, and keeping
it viable allows the institute to (a) either adjust the spend
plan for the following year, or (b) seek alternative funding.
The third reason to maintain the carryforward reserve is to
allow response to unforeseeable dynamics in the global seafood
market. The major seafood competition for Alaskan products,
comes from Norway, he said, which maintains a marketing agency
budget of $75 million, or about two thirds more than ASMI's.
The ASMI budget covers aspects of marketing programs, both
national and international for food service and retail, as well
as expenditures for communications, technical support, food aid,
and fiscal and administrative costs. One of ASMI's greatest
strengths, he opined, is ASMI's robust committee work, which
includes: four committees focused on species specific marketing
issues; three marketing committees; a technical committee
focused on food safety and quality; and a customer panel that
represents Alaska's worldwide customers. The members of these
committees are seasoned seafood industry leaders, who provide
marketing insights and support, as well as approve the
institute's annual budget.
10:13:35 AM
REPRESENTATIVE KREISS-TOMKINS asked which markets have Alaska
and Norwegian products competing head to head.
MR. CERNE responded that the majority of the competition is in
overlapping markets where Alaska operates in 21 countries and
Norway in 25.
10:14:14 AM
MR. CERNE reviewed the foodservice promotional programs that
ASMI pursues, with activities which include: use of Alaskan
seafood in 28 national/regional restaurant chains; product
distribution to 14 foodservice distributors to supply Alaskan
products for kindergarten through high school food programs;
conducting events at 6 different universities; attending
conferences and events to educate chefs and buyers, such as at
the Culinary Institute of America, the National Restaurant
Association, the International Association of Chefs, and Disney
Corporation; and research for future targets for promotion of
products such as fish sandwiches/tacos.
10:15:55 AM
MR. CERNE provided that for each single dollar allocated by ASMI
to partner with a restaurant chain, the result is a 10:1 return
ratio, with the chain spending $10.00 promoting the Alaska
seafood and ASMI brand logo. The Alaska seafood brand is the
number two nationally ranked brand that is requested in
restaurants; number one is Black Angus beef. The ASMI retail
program works with stores throughout America to not only promote
Alaska sea foods, but to educate the sales representatives
behind the counter to answer consumer questions. Retail point
of sale materials are created and distributed to support in-
store promotion and sale activities. For example, in response
to the record 2013 harvest, a massive pink salmon campaign was
hosted in 2014. The aggressive promotion was funded with $1.5
million from the carryforward fund, to an unqualified success.
He described how research is conducted for future promotions,
based on bar code analysis. Information gleaned from the
reports provides a means to establish competitive pricing and
product types demanded by the consumer. Retailers benefit from
this research he reported, and described how one national retail
chain doubled its sales of coho salmon, and tripled the sale of
chum salmon, based on the marketing strategies devised from this
type of research sharing. Mr. Cerne encouraged committee
members to visit the newly designed ASMI website, for a
firsthand experience of its effectiveness. Further, he said
consumer polls indicate that, not only is Alaska wild preferred
to farmed or other sourced seafood products, but are more likely
to be recommended above any other source of protein.
10:19:44 AM
MR. CERNE reviewed the estimated market share by value, for
2013, explaining that, while the U.S. is the largest single
consumer for Alaska seafood products, two-thirds are exported,
making the international program the largest marketing facet
with an annual budget allocation of $8-$9 million. The agency
is active in 21 countries, with 8 regional programs serving
Japan, China, Europe, and Brazil.
10:20:42 AM
REPRESENTATIVE KREISS-TOMKINS asked what market has seen the
most growth over the last ten years.
MR. CERNE offered to provide further information, and disclosed
that the domestic market in China is growing.
10:22:19 AM
CHAIR STUTES asked what percentage of Alaskan fish are shipped
to Asia for reprocessing and then sent back to the U.S. for
market distribution.
MR. CERNE said about 90 percent of the catch is handled in that
manner and he offered to provide further information on the
actual volume represented.
10:23:03 AM
MR. CERNE moved to the international marketing program, to
report on ASMI's presence at the global trade shows. As the 6th
largest seafood exporter, Alaska's had a large footprint at 25
international shows, for targeting the seafood industry,
distributors, hotel/restaurant buyers, chefs, and major
retailers. The agency does all of the ground and leg work to
allow Alaska based companies to showcase their products at
venues that otherwise would not be available to them. The
largest show is the annual Global Seafood Expo, held in
Brussels, where seafood sales were projected to be $544 million.
At the recent gathering, ASMI hosted 22 companies, 11 of which
were smaller Alaska based operators, which ASMI subsidized and
assisted in promoting their products. The Brussels show draws
over 30,000 attendees with representatives from 140 countries.
He said a major change is occurring in the Asian market, where a
shift is being made to on-line promotions and internet
purchases. He said this has been very productive approach; a
one week promotion resulted in approximately $1 million in
sales. Along with outreach, ASMI hosts delegations arriving in
Alaska for press and trade trips from areas such as Brazil,
Germany, Europe, and Japan, providing them with firsthand
knowledge of Alaska seafood.
10:26:00 AM
MR. CERNE reviewed the results of the outreach program in China
to report that 91 percent of the consumers consider Alaska
seafood to be a better quality product than the competition, 76
percent report purchasing Alaska seafood in the past year, and
92 percent stated they would buy Alaska seafood if they knew it
was "wild, natural, and sustainable." He said new market
exploration is ongoing and test markets have recently occurred
in Dubai, Mexico, and Brazil. Brazil has proven to be a success
story and an office that ASMI established there three years ago
has seen orders increase in magnitude. Southeast Asia is now
being explored and shows were attended in Manila, and Singapore.
10:27:03 AM
MR. CERNE reported that the communications program oversees the
areas of public relations, social media, press tours/events,
media requests, outreach, and an image library, as well as
providing information services. The program is funded for $1.5
million, an investment which equates in an earned media return
of about $59 million, or the extrapolated cost to produce the
media coverage and stories generated by the program. The in-
state and industry outreach included media coverage in various
magazines, major newspapers, and a number of television
opportunities. He played a recent clip from a popular
television series episode of "Master Chef," which featured the
main ingredient of Alaskan, wild caught, King salmon. He
explained that the show was a result of a long standing
relationship with the producers. Also a partnership with
Princess Cruise Lines has been finalized for the upcoming
Alaskan cruise season, and will provide additional exposure
through on-board demonstrations and promotions; an area that
holds a high potential for growth.
10:32:27 AM
MR. CERNE moved to the global food aid program to state that
ASMI works with government and non-government organizations to
provide food aid in global settings to relief hunger. He
reported that, as a result of these efforts, recent product
distribution has included: $42 million of canned pink salmon,
newly developed products, and under-utilized species and
byproducts. He said the technical program is stipulated in
statute, which requires the agency to include activities such
as: making resources/expertise available to industry and buyers
to ensure seafood safety and quality; labelling and product
certification; and contributing to the U.S. Department of
Agriculture (USDA) nutritional database.
10:33:27 AM
MR. CERNE continued with a discussion of the challenges and
opportunities that ASMI has identified. The Bristol Bay run of
sockeye salmon was 14 percent higher than predicted, and
promotion of the product is underway with the forecast of
another record year. The Frasier River, in Canada, will also be
contributing to the excess supply of sockeye on the current
market. The Russian trade embargo has had an impact on Alaska
seafood products and alternative markets are being explored.
Illegal Russian crab continue to impact the Alaskan market, and
ASMI is diligently working to educate legislators and world
leaders on this topic. The economic analysis shows a negative
impact on crab prices due to more illegal Russian crab being
available on the market than legal Alaskan crab. He pointed out
that competition in the market place can be healthy but also
provides challenges, and remarked on global and national market
dynamics including the effects of tilapia prices as well as
protein sources that compete with seafood for a place on the
dinner plate: beef, chicken, and pork. Further, he compared
Alaska's limited fiscal ability to respond to market
fluctuations with that of other states, and nations and provided
pertinent anecdotal situations regarding the sales of Maine
lobster, varying pork prices, and the Norwegian Atlantic cod
catch. He reiterated that these competitive situations can
provide opportunities but most often create challenges given the
fiscal divide. Like all state supported entities, ASMI is
facing a funding cut; $1 million. The reduction is compounded
by a prediction from the agency's contract economist of
$300,000-$800,000 less in industry revenues for 2015, and the
direction for the agency to assume the new responsibility for
seafood certification, with a conservatively estimated cost of
$600,000; an expenditures that ASMI will need to absorb in the
current budget.
10:40:51 AM
MR. CERNE reviewed the Marine Stewardship Council (MSC) seafood
certification process to highlight the significant, costly
changes, which have been the impetus for developing the
Responsible Fisheries Management (RFM) plan. He explained that
not all fisheries enjoy the level of sustainable management by
which the Alaskan fisheries are governed. About 15 years ago,
there was a marketing movement, in response to conservation
organization concerns for fisheries to be identified based on
management practices and a certification method was adopted in
many markets; the MSC. Compliance requires a third party to act
as the certifier, and, since 2000, Alaska has partnered with the
MSC. The expectation has been that an eco-label, indicating a
sustainably harvested product, informs the consumer and demands
a higher price. The MSC is a private organization, founded by
the World Wildlife Foundation (WWF). It has changed the fee
structure and upgraded the standards for use of the touted eco-
label. These changes have created a steadily rising bar of
excellence but has resulted in an erosion of the iconic Alaskan
brand. The focus is being placed not on the origin of the
product but rather the MSC rating standard, applied to product
labels on a global basis. The ramifications of this are having
far reaching effects, which include: reducing Alaskan premium
products to a common commodity status; interfering with the
governance of Alaska resources by imposing private interests
changes through restricted market access; and the realization
that what started out as an asset and reward for well managed
fisheries has become a major cost and control issue. In 2010
the industry requested ASMI to take action and the RFM
certification was created, in accordance with worldwide
standards and directives, which all major Alaskan producers have
joined; successfully withdrawing from the MSC umbrella. A
backlash did occur among the environmental non-government
organizations (eNGO), but support has also been evident. In
2014 ASMI hired a full time employee to take charge of the
program, stabilize the standard, ensure international
compliance, and provide public relations support. Retailers are
becoming aware of the different standards and understand the
flexibility that is inherent in having more than one
certification.
10:48:41 AM
CHAIR STUTES asked whether any of the European suppliers have
moved from the MSC to the RFM.
MR. CERNE said it may not be a choice of one or another, but the
expectation is to have RFM recognized along with the MSC
standard. An international effort is being made to create a
benchmark standard for seafood eco-labels for both aquaculture
and wild caught products. The RFM program will be pilot tested
against the new standard being established by the Global Seafood
Sustainability Initiative (GSSI). He reviewed the state and
federal support that ASMI has received from Alaska's top
officials and congressional delegation to support the
certification and marketing efforts.
10:53:40 AM
MR. CERNE summarized the economic impact of the Alaskan seafood
industry, stating that it is directly responsible for over
60,000 workers, and another 10,000 jobs indirectly. One in
every eight workers in Alaska are in some way related to the
seafood industry. Seafood contributes over $100 million in
local and state tax revenues. Finally, he underscored, seafood
is the largest private sector employer in Alaska, expending more
labor income than mining and tourism combined. In finishing he
provided a graph to indicate the steady growth in the value of
Alaska seafood.
10:54:52 AM
CHAIR STUTES announced the upcoming meeting, and thanked the
day's participants.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at 10:55
a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| ASMI Fisheries Committee 2015.pdf |
HFSH 2/10/2015 10:00:00 AM |
ASMI |