Thursday, May 12, 2005

Fisheries Associations: Part II

When I started work at CFAB in 1984 as the Collateral Control Officer, we were financing 14 processing plants. That dropped to less than a half dozen by the time I left five years later. The CFAB board and management wasn't into letting a processor lose money even one year. There were a lot of mistakes made by processors, but some, like Kodiak Alaska Seafoods operated flawlessly. But being the new kid on the block with canned salmon, they had to send a lot of it overseas and an exchange rate fluxuation killed them. KASI also didn't get the fish from a lot of the fishermen that pledged their assets to make the plant work.

The prior CFAB president and then Ed Crane attempted to approach the problem of marketing the fishermen's catch by suggesting fishermen become better businessmen. The hunter-gatherer mentality runs deep in the Alaska fishing industry. The plant owners and operators largely came from the harvesting sector too. Hence the competition among processors and not the collaboration. Of course by law they couldn't collude on prices paid the fishermen, but they could collaborate on processing technology and marketing innovation. But as my father, a life-time fish buyer and industry kingpin said, "we were doing just fine so we didn't need to do anything different."

The competitive nature of current day processing is no different, and maybe even more entrenched. There are only a couple of large processors now to buy the huge majority of the catch of all species. Some of these I know to be real shrewd operators. Currently, the relationship between processor and fisherman is really slightly acidic and has been for a long time. There was more peace back in the days when the cannery superintendent was reverenced more than in Sunday worship services. This power and prestige is tough to give up for those operators who have their roots in that mentality. But the fishermen own the fish first and they are really the head and not the tail.

The processors in Alaska established a system a long time ago in which they gain title to the fish and then can control the marketing. The end price is not a great concern as they make their money out of the middle. If the fisherman gets a low price for the fish, they still make their margin. If the consumer gets stiffed on quality, they still make their margin. The way I see it, the processors love to see the fishermen all divided into about fifty factions, all fighting among themselves. Then the attention is off the real problem of control of the product.

After all, the processors have consistently coughed up about three million dollars a year to make sure there are no cracks in the status quo. Ever wonder why the boards of ASMI, CFAB and others are made up mostly of seafood company owners, and in ASMIs case they weren't even Alaska residents. The processors are better businessmen, no doubt about that. This $3 million a year went a long way to help lay a mine field of regulations to deter fishermen from vertically integrating and others from getting a foothold in the processing arena. Harold Kalve in Anchorage had to get eighteen permits before he could process and market his own fish.

The point is that fishermen in Alaska need to get together to take back control of their own product. Most of the Lower 48 has already gone this route. Tree Top, which is a brand for over 1,700 apple growers just got a contract to provide McDonalds with 57 million pounds of apples a year. This would never have happened sans their association. It would be interesting to know what the critical mass should be for an association. I suspect it is larger than the regions that the State of Alaska promoted and passed a law for. What they did this spring is a great start though. Now an association can form, with the blessings of the State and some seed money, in the major regions. Their rationalle was a comparison of salmon flavors to the different flavors of wine in France. I think that's a stretch. Time will tell. After all, these regional associations can always get together at any time for their mutual benefit.


Post a Comment

<< Home