Legislature(2019 - 2020)GRUENBERG 120
02/26/2019 10:00 AM House FISHERIES
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| Presentation: Ak Seafood Marketing Institute | |
| Adjourn |
* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON FISHERIES
February 26, 2019
10:00 a.m.
MEMBERS PRESENT
Representative Louise Stutes, Chair
Representative Bryce Edgmon
Representative Chuck Kopp
Representative Jonathan Kreiss-Tomkins
Representative Geran Tarr
Representative Sarah Vance
Representative Lance Pruitt
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION: AK SEAFOOD MARKETING INSTITUTE
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JEREMY WOODROW, Interim Executive Director
Alaska Seafood Marketing Institute (ASMI)
Juneau, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation about
the Alaska Seafood Marketing Institute.
ACTION NARRATIVE
10:00:36 AM
CHAIR LOUISE STUTES called the House Special Committee on
Fisheries meeting to order at 10:00 a.m. Representatives Kopp,
Kreiss-Tompkins, Tarr, Vance, Pruitt, and Stutes were present at
the call to order. Representative Edgmon arrived as the meeting
was in progress.
^Presentation: AK Seafood Marketing Institute
Presentation: AK Seafood Marketing Institute
10:01:52 AM
CHAIR STUTES announced that the only order of business would be
a presentation on the Alaska Seafood Marketing Institute.
10:02:31 AM
JEREMY WOODROW, Interim Executive Director, Alaska Seafood
Marketing Institute (ASMI), provided a PowerPoint presentation
about ASMI. He said his focus would be on providing an overview
of ASMI's value to the seafood industry plus challenges and
opportunities going forward.
REPRESENTATIVE TARR requested Mr. Woodrow to provide some
information about his background.
MR. WOODROW said he is a lifelong Alaskan from Juneau and was
raised in a commercial fishing family. He said he has worked
with ASMI for a couple years and, in addition to being Interim
Executive Director, serves also as Communications Director. He
said he previously worked for the Department of Transportation &
Public Facilities (DOTPF).
10:04:49 AM
MR. WOODROW, addressing slide 3 of his PowerPoint presentation
[hard copy included in the committee packet], explained that
ASMI is Alaska's official seafood marketing arm and a
public/private partnership between the State of Alaska and the
seafood industry. He spoke to how ASMI is funded in part by the
seafood industry through a voluntary 0.5 percent assessment of
ex-vessel value. He defined ex-vessel value as the first sale
between a fisherman and a seafood processor. He explained how
ASMI pools together these assessments, about $8-9.5 million per
year, to market the industry's products around the world.
10:06:02 AM
CHAIR STUTES asked how much funding ASMI receives from the State
of Alaska.
MR. WOODROW said ASMI currently receives zero from the
Unrestricted General Fund (UGF). In response to a question
about funding for the travel industry, Mr. Woodrow said the
Alaska Travel Industry Association (ATIA) is to receive $7.5
million in the governor's amended budget.
MR. WOODROW, referencing slide 4, summarized ASMI recent
annual budgets as well as its projected fiscal year 2020 (FY 20)
budget. He highlighted the importance of operating from
carryforward funds "leftover industry funds that have been in
the ASMI account" - as ASMI no longer receives state funding
from the general fund. He said ASMI draws from its carryforward
funds because its marketing budget currently exceeds revenues
from federal and industry sources. Mr. Woodrow said he expects
the ending carryforward funds for FY 20 to be between $11-12
million. He said carryforward funds help carry the organization
at the outset of the fiscal year until industry funds are
received. He said ASMI's budget authorization usually exceeds
its marketing spend plan because it is important for the
organization to remain flexible should it be forced to respond
to a crisis. He referenced the April 2011 Fukushima
earthquake/nuclear disaster as an example.
10:08:14 AM
MR. WOODROW, addressing slide 5, said that ASMI was asked to
draw down in its spending as it became less reliant on general
funds. He said ASMI was actively seeking new funding sources.
He announced that ASMI was recently awarded additional federal
funding from the Agricultural Trade Promotion Program (ATP).
The ATP funding is $5.5 million to be spent on marketing
activities over three years.
MR. WOODROW said the industry has the option to increase its
voluntary tax to ASMI from 0.5 percent to 0.6 percent, which
would result in an additional $1 million annually. The 0.6
percent figure is the highest allowed by current statute. He
said there have not yet been discussions to make this increase.
MR. WOODROW said that ASMI closed its Seattle office in 2018 in
order to fulfill a goal of ensuring all ASMI positions were
Alaska-based. He said ASMI reduced its spend plan over the past
few years to provide a more sustainable budget to meet its
revenues.
10:10:13 AM
MR. WOODROW moved to slide 6, titled "FY19 vs FY20 Amended
Budget." He reiterated that ASMI expects not to receive any
general funds from the state in FY 20. Mr. Woodrow pointed to a
sizeable reduction in ASMI's travel budget, which will be cut
from $368,300 in FY 19 to $158,700 in FY 20. Mr. Woodrow said
that this reduction will make it difficult for ASMI to fulfill
its core mission. "It's really hard to market seafood outside
of Alaska," he said, "if you don't travel outside of Alaska."
MR. WOODROW detailed ASMI's efforts to identify efficiencies and
reduce travel costs. He said ASMI has reduced travel costs by 20
percent since FY 12 resulting in approximately $100,000 in
savings.
MR. WOODROW addressed slide 7, titled "What Does ASMI Accomplish
for the State of Alaska?" He remarked on several notable
returns on ASMI marketing efforts. He said online sales of
Alaska Seafood in China reaped a sizeable return on investment
(ROI), over $1 million in product sold for only $10,000 spent on
advertising. He said partnerships with other agricultural
brands allow ASMI to "stretch the dollar" in promoting Alaska
Seafood.
MR. WOODROW pointed to another example in which a week-long
promotion in Japan produced over $223 million in sales on
$35,000 spent by ASMI. He emphasized the importance of
strategic marketing plans that target specific times of the year
that customers are more likely to purchase Alaska Seafood.
MR. WOODROW asserted that Alaska Seafood remains the number one
ranked protein brand on menus nationwide.
10:12:49 AM
REPRESENTATIVE KREISS-TOMKINS, regarding the protein brand
ranking, requested the source of the statistic.
MR. WOODROW said he could not recall the exact research firm but
explained it is third-party research and not ASMI's own. He
said he would have to get back to the committee with that
information.
10:13:41 AM
REPRESENTATIVE EDGMON asked what the future held for market
opportunities with China. He asked to what degree Governor Bill
Walker's May 2018 trade delegation mission to China had helped
ASMI "open doors."
MR. WOODROW explained that his final slide would cover that
topic. He concluded slide 7 by highlighting recent research
indicating that 71 percent of domestic seafood eaters are
willing to pay more for seafood labeled with the "Alaska
Seafood" logo.
10:14:45 AM
MR. WOODROW addressed slide 8. He referenced ongoing trade
disputes with China and Russia as major challenges. He
explained how the Russia embargo has led to a trade imbalance in
which Russian seafood can be imported by the U.S., but Alaska
Seafood cannot go there. He said this has forced the industry
to seek out new markets for products that previously went to
Russia. Mr. Woodrow also cited challenges relating to reduced
harvest of high value species such as king crab, halibut, and
sablefish, as well as the high price of key seafood species that
create an entry barrier to some customers.
MR. WOODROW said ASMI emphasizes the story of Alaska Seafood,
calling it "a great story to tell." He called the Alaska
Seafood industry "the gold standard" of sustainability
management. He said this resonates with customers worldwide.
MR. WOODROW addressed slide 9. He said ASMI's international
program operates in 8 different markets in 31 different
countries. He highlighted the success of ASMI's e-commerce
platform in markets such as China and Japan. He detailed ASMI's
trade missions and efforts to bring international buyers, chefs,
and media members to Alaska. He announced that ASMI recently
held its first Women of Seafood trade mission.
10:17:41 AM
REPRESENTATIVE VANCE, referencing slide 9, asked why there was
an emphasis on a trade mission with Ukraine.
MR. WOODROW explained that this mission was in Dutch Harbor
where ASMI highlighted the cod and pollock industries. He said
that a lot of cod and pollock goes to Eastern Europe. He
identified Ukraine as a specific market in that region ASMI
wants to grow. He noted this is partially a reaction to not
being able to sell in Russia. Selling to Ukraine, he said, ends
up being a favorable opportunity for the seafood industry.
10:18:27 AM
MR. WOODROW addressed the final point on slide 9. He affirmed
the benefit of participating in the Seafood Expo Global, the
largest seafood conference in the world. He said ASMI hosts a
pavilion at the Brussels-based conference that in 2018 generated
$52 million in onsite sales for the Alaska Seafood industry. He
said the total projected sales generated through connections
made at the conference will exceed $640 million.
10:19:12 AM
CHAIR STUTES asked whether any other state or nation brands its
seafood with its name. She remarked how she never sees king
crab from Russia advertised as "Russian king crab," for example.
MR. WOODROW said other locations have realized how impactful it
is to place an origin on their food labeling. He pointed to
Norway and Iceland as examples that have begun major campaigns.
CHAIR STUTES asked whether those locations would differentiate
between wild-caught and farm-grown in their branding and
labeling.
MR. WOODROW responded that this remains to be seen.
10:20:19 AM
REPRESENTATIVE PRUITT related that he has heard people on the
East Coast speak with pride about Atlantic farmed salmon. He
asked if it is correct to assume some buyers prioritize farmed
seafood over wild-caught.
MR. WOODROW confirmed Representative Pruitt's assessment. He
indicated that farmed fish, especially salmon, dominates the
markets. He said wild salmon only accounts for 15 percent of
the global salmon marketplace, though many seafood buyers have
developed an affinity for Alaska [wild] salmon. He said ASMI
must be strategic with where it markets its products given
Alaska's size relative to the rest of the global market.
10:21:51 AM
REPRESENTATIVE VANCE asked how much of that 15 percent is
dominated by Alaska.
MR. WOODROW said it varies year to year. He mentioned that
Alaska produces about 98 percent of the wild-caught salmon in
the U.S. He said the majority of Alaska's global competition
comes from Russia. Russian production numbers, he explained,
vary wildly year to year, but in 2018 they produced over a
billion pounds of pink salmon. He shared the statistic that
Russia produced more pink salmon in summer 2018 than Alaska has
ever harvested in a single year of all its species [of salmon]
combined. He said Russia's 2018 salmon haul represented nearly
50 percent of the global wild market.
10:23:03 AM
MR. WOODROW addressed slide 10. He highlighted efforts to reach
domestic consumers through digital outreach, media relations,
and live events held in New York City. He pointed to the
considerable earned media coverage that results from hosting the
New York events. He mentioned the success of ASMI's annual
culinary retreat in building long-lasting relationships with
chefs and media members who have become enamored with Alaska
Seafood after visiting Alaska. He offered the statistic that,
in 2018 alone, ASMI's public relations efforts resulted in 340
stories and just under a billion impressions.
MR. WOODROW addressed slide 11 and listed some of the
restaurants, retailers, and organizations ASMI has worked with
to promote Alaska Seafood to consumers.
MR. WOODROW addressed slide 12 and explained ASMI's developing
partnership with Amazon Prime, Amazon Fresh, Serious Eats, and
Simply Recipes. He explained that one common concern for
seafood eaters is they don't know how to easily cook fish. Mr.
Woodrow explained how consumers can now access online shoppable
recipes that will automatically place an order for all the
ingredients they need into their Amazon Prime box. He compared
this process to similar meal delivery services like Blue Apron.
Mr. Woodrow said ASMI is excited to see where this new trend can
go.
10:26:18 AM
MR. WOODROW addressed slide 13. He highlighted ways in which
ASMI works with the industry to ensure quality throughout the
supply chain. He said ASMI develops buyers guides that help
processors and sellers talk about Alaska Seafood more in-depth.
He also highlighted research-based plans to increase the
industry's value through creative utilization of resources.
MR. WOODROW addressed slide 14. He explained that ASMI operates
the Alaska Responsible Fisheries Management (RFM) program, which
is a sustainable certification program benchmarked against
Global Sustainable Seafood Initiative's (GSSI) standards. He
said it's important to have a third-party certification to
satisfy the needs and demands of buyers worldwide.
10:28:40 AM
MR. WOODROW addressed slide 16. He called Alaska Seafood "a
cornerstone to Alaska's economy." He said it directly employs
more workers than any other private industry in Alaska, about
60,000 workers annually. He said Alaska Seafood contributes
approximately $146 million annually in taxes to state, local,
and federal government. He said Alaska Seafood also contributes
approximately $5 billion in economic growth to the State of
Alaska. Mr. Woodrow noted that if Alaska were its own country,
it would rank eighth globally in wild harvest volume.
MR. WOODROW addressed slide 17 and listed the top ports in
Alaska ranked by value: Dutch Harbor, Naknek, Kodiak, Cordova,
and Sitka. He emphasized that the seafood industry stretches
statewide, from Utqiagvik to Dutch Harbor to Ketchikan.
MR. WOODROW addressed slide 18, which featured two pie charts
displaying harvest volume and ex-vessel value of Alaska Seafood
by species. He compared the dispersion of high-volume and high-
value species to a diversified financial portfolio. He
explained that this is beneficial because wild species can be a
volatile resource that vary year to year, but very rarely is
there a down year for all species in one year. He said the
diversity of seafood species has led to a consistent return of
about $1.9 billion annually.
MR. WOODROW addressed slide 19, which featured line graphs
plotting year-to-year trends in total harvest value and ex-
vessel value. He pointed out that while total harvest volume
has remained consistent over the past 15 years, ex-vessel value
has trended upward. Mr. Woodrow asserted that this data
reflects a healthy industry.
10:33:08 AM
MR. WOODROW addressed slide 20, titled "Product Type." He
explained that 39 percent of Alaska Seafood products are headed
& gutted (H/G) and wholefish. He said these products are sent
elsewhere to be processed as they are not finished products. He
highlighted the growing popularity of fillets versus canned
seafood. He attributed these trends to changes in seafood
consumer demographics.
10:34:09 AM
CHAIR STUTES asked whether ASMI is pursuing any kind of value-
added products generated in Alaska.
MR. WOODROW highlighted ASMI efforts working with the Kodiak
Marine Science Center to produce more value-added products. He
said ASMI works with the industry to identify hurdles to
creating value. He identified the high cost of energy as one
key hurdle. He said it can also be difficult to hire enough
employees.
CHAIR STUTES asked whether there is a push within the state to
educate Alaskans about Alaska Seafood.
MR. WOODROW responded that it is not a major priority. He said
that Alaskans are a relatively small market share and many
Alaskans catch their own fish and therefore don't buy Alaska
Seafood. He mentioned the Alaska Marine Conservation Council's
Catch 49 program that creates direct sales from Alaskan
commercial fishermen to Alaskan seafood buyers.
10:36:26 AM
REPRESENTATIVE KREISS-TOMKINS asked how Alaska Seafood compares
to other producers in adding value to its wild salmon product.
MR. WOODROW said he didn't have numbers for other countries. He
said that, other than Russia, the other main countries producing
wild salmon are Canada and Japan. He said he would investigate
what value-added products they and other countries might
produce. He pointed to smoked salmon as a significant value-
added product that is dominated by farmed salmon.
10:37:56 AM
REPRESENTATIVE TARR, referencing a graph on slide 19, observed
in the 2019 timeframe a decline in both total volume and ex-
vessel value. She inquired as to the cause of that unusual
trend.
MR. WOODROW said he did not know off hand and would have to look
it up.
10:38:48 AM
REPRESENTATIVE KOPP asked whether Russia's major pink salmon
haul is related to hatcheries.
MR. WOODROW confirmed that Russia has a large hatchery program.
He noted that pink salmon live only two years, so even- and odd-
year returns can vary.
REPRESENTATIVE KOPP referenced the fishmeal plant in Naknek and
asked if there are any other plants dealing with fish by-
products.
MR. WOODROW responded that there are plants across the state and
nearly every plant is looking into expanding what it can do with
fish by-products. He identified the Trident plant in Kodiak as
an example, explaining that it fillets its pollock products and
turns the rest of the fish into surimi.
10:40:59 AM
CHAIR STUTES mentioned a fishmeal plant in her district that
also produces fish oil.
REPRESENTATIVE KOPP thanked Mr. Woodrow for ASMI's work in
helping improve fish handling through the industry. He detailed
damaging industry practices that, through awareness and
education, have been curtailed.
MR. WOODROW credited one of ASMI's partners, the Bristol Bay
Regional Development Association, for successes in quality
control.
10:42:52 AM
MR. WOODROW moved to slide 21, titled "Factors Impacting Value."
He identified large harvests, surplus inventory, and competition
with other species as supply factors. He identified consumer
preferences, new markets, and new products as demand factors.
MR. WOODROW moved to slide 22, titled "Currency Rates Impact
Value." When U.S. currency value decreases, the value of Alaska
Seafood products increase.
MR. WOODROW moved to slide 23, titled "Global Competition." He
identified the primary competition or substitute for each
species of seafood produced in Alaska. He said, for example,
that Alaska pollock most directly competes with Russia pollock,
though he believes Alaska pollock to be of higher quality
because it is not twice frozen. Mr. Woodrow praised black cod
as a great product but noted that it competes with sea bass. He
said that consumers do not necessarily know the difference
between different seafood products. ASMI exists, he said, for
the purpose of educating them.
10:45:32 AM
MR. WOODROW moved to slide 24, titled "Export Markets." He said
60 percent of Alaska's seafood harvest is exported
internationally accounting for 60 percent of the industry's
value.
MR. WOODROW referenced a world map on slide 24. He highlighted
countries where ASMI has active marketing programs. He also
noted some markets in which ASMI does not have an active
presence. "Our funds are limited," he said, "so we can't be
everywhere ...; we must be strategic."
MR. WOODROW acknowledged China's position as "a very important
market to Alaska Seafood." He said most products sent to China
are reprocessed and exported to other markets.
MR. WOODROW drew attention to ASMI efforts to expand operations
in Brazil, which he called a "growing market." He mentioned
that Brazil has the world's largest population of Japanese
expatriates. "They obviously are seafood eaters," he said,
explaining one reason ASMI sought to pursue business there.
10:47:00 AM
MR. WOODROW moved to slide 25, titled "US - China Tariffs." He
explained that a 25 percent tariff was implemented by China in
July 2016 that applies to Alaska Seafood exports to the Chinese
domestic market. He clarified that this tariff does not apply
to products sent to China to be reprocessed. He detailed the
challenges associated with the tariff including the added
difficulty of reaching the world's fastest-growing middle class.
He shared statistics on the impact of the China tariffs to the
Alaskan seafood industry including a 21 percent decrease in
exports to China compared to one year ago.
MR. WOODROW addressed the retaliatory tariff implemented in
September 2018 by the United States. He said there is currently
a 10 percent tariff on Alaska Seafood products coming back to
the United States after having been sent to China for re-
processing. He said these tariffs exclude salmon, cod, and
Alaska pollock products, but stressed how much of a challenge
these tariffs are on the Alaska Seafood industry. "We have put
a lot of effort into growing the Chinese market," said Mr.
Woodrow. He said the industry cannot just pivot toward new
markets overnight.
10:50:47 AM
REPRESENTATIVE TARR requested clarification on the exact
percentages of tariffs and the timeline of implementation.
MR. WOODROW clarified that there is a 25 percent tariff on
Alaska Seafood products that enter the Chinese domestic markets
and a 10 percent tax on Alaska Seafood products imported from
China after reprocessing. He explained that these tariffs are
on top of existing tariffs. He noted that the 10 percent tariff
on imports was set to increase to 25 percent on March 1, 2019,
but that date has been pushed back.
10:52:06 AM
REPRESENTATIVE VANCE asked whether there is a concern that
Russia will fill the gaps left by Alaska in Chinese markets.
MR. WOODROW said China does not have a free trade agreement with
Russia. He said it is unknown how much seafood is shipped from
Russia to China though he suspected it is a lot. He added that
Russia is known to ship sizeable amounts of seafood for
processing in North Korea where it is then moved to China.
10:52:54 AM
CHAIR STUTES requested Mr. Woodrow to speak to the [National
School Lunch Program] in relation to fish.
MR. WOODROW said that ASMI worked with Alaska's congressional
delegation in Washington, D.C., to ensure the [National School
Lunch Program] buys American seafood products and especially
Alaska Seafood products. He said the program had previously
been purchasing Russian pollock for school lunches. He said the
change has been a major lift for the Alaska pollock industry
resulting in $30 million in sales.
10:54:20 AM
REPRESENTATIVE TARR asked whether there were other efforts to
allow or expand the purchase of Alaska Seafood by federal food
programs such as the Supplemental Nutrition Assistance Program
(SNAP) and the Special Supplemental Nutrition Program for Women,
Infants, and Children (WIC).
MR. WOODROW said he would have to research that information and
get back to the committee. He said he believed Alaska Seafood
was available through one or both of SNAP and WIC. Mr. Woodrow
also highlighted ASMI's work with SeaShare, an organization that
donates seafood to food banks.
10:55:55 AM
REPRESENTATIVE PRUITT noted that ASMI has been running a deficit
for several years. He asked what ASMI's plans were to ensure it
does not run out of money in a few years.
MR. WOODROW said ASMI is trying to reduce its spend plan. He
said ASMI should be operating at $13 to 13.5 million per year,
but they are spending more than that. He said the ASMI board of
directors is working with staff to identify new funding sources
through grants or additional federal monies. He reiterated the
importance of sustainable budgeting but expressed apprehension
to commit to cuts. "In marketing you get what you pay for," he
said.
REPRESENTATIVE PRUITT asked at what point ASMI would decide to
take preventative measures to ensure it does not hit a financial
wall.
MR. WOODROW said that ASMI's internal budgeting projections have
it drawing down its spending in the fiscal years following 2020,
assuming no new funding sources are identified.
10:59:12 AM
REPRESENTATIVE EDGMON asked what impacts could result from a
reduced ASMI spend plan.
MR. WOODROW said that ASMI's spend plan was considerably higher
in previous fiscal years when it received general funds. When
state funding was reduced, the ASMI board and staff decided to
cut the advertising program for the domestic market. He said
that Alaska Seafood currently enjoys a strong place in the
market, but that will be impacted in the future if more funding
cannot be identified.
MR. WOODROW offered Norway as a comparable competitor to Alaska
Seafood. He said Norway's seafood marketing spend plan is $50
million compared to ASMI's $16 million. He reiterated that "you
get what you pay for.
11:01:51 AM
REPRESENTATIVE TARR asked who has the authority to increase the
industry's 0.5 percent tax to ASMI. She asked if that power
belongs to ASMI's board or if there is a process for including
all stakeholders.
MR. WOODROW cited current statute and explained that this power
lies with the stakeholders who control 51 percent of the value
in the industry. He clarified that this is seafood processors,
not seafood harvesters. He said the ASMI tax can be changed
through a vote by these stakeholders.
11:02:54 AM
CHAIR STUTES thanked Mr. Woodrow for his presentation.
11:03:26 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Fisheries meeting was adjourned at 11:03
a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| ASMI House Fisheries- 2-26-19.pdf |
HFSH 2/26/2019 10:00:00 AM |
ASMI Presentation 02/26 |