Battering the AK brand

Alaska now enters the heart of the commercial salmon season with the fishing industry in chaos.

In a commentary in the trade publication Seafood Source, seafood industry consultant Joseph Sabbagh from Sax Maritime Associates in California, only days ago identified a couple of the problems:

• “…There are enough poor-quality products – especially in the retail trade of Alaska seafood products – that hurts the entire industry’s image.”
• “…A growing number of U.S. consumers are not willing to pay the higher price for wild salmon when farmed is at lower prices in both fresh and frozen,” and tastes as good or better.

Unfortunately, like so many others, Sabbagh missed the whale haunting the fishery.

Alaska’s biggest problem is that it has become a world leader in producing large volumes of what is considered low-quality salmon. As a result, the Alaska salmon fishing business of today in some ways parallels the post-war economy of Japan, which focused on selling high volumes of low-quality manufactured goods.

The Japanese, of course, didn’t have a choice. The country’s manufacturing capabilities were devastated by the unrelenting bombing that ended World War II in the Pacific. 

Most younger Americans are likely unfamiliar with the status of Japanese goods in the U.S. in the 1950s, ’60s and even into the ’70s, but suffice to say the “Made in Japan” label was at that time considered a synonym for junk.

Manly Honda in Santa Rosa, Calif. has a written history of how Lori and Bill Manly were American motorcycle and car dealers who “Risked It All to Sell America’s First Hondas” in those years.

“At the time, ‘Made in Japan” had a negative connotation for many Americans,” the history notes. “But the bikes intrigued (the Manlys), and they quickly said yes. ‘We took on the units; we got ahold of our sports-car clients’ and we arranged weekend trail rides,’ says Lori. ‘And they loved it.'”

Those Honda motorcycles weren’t all that great then, either. But they got better every year because the Japanese understood that in the long run, the money isn’t in selling large volumes of low-quality products; it’s in selling smaller volumes of high-quality products.

Today, Honda is a globally respected brand. From its 1947 start as a company building auxiliary engines to attach to bicycles, it expanded into motorized farming equipment, motorcycles, trucks, cars, auto navigation systems, compact aircraft, jet engines and robotics with its attention always focused on quality over quantity. 

Losing the way

Alaska’s political leaders, who manage what could be considered a form of state capitalism in that government agents dictate the level of salmon production in the 49th state, once understood this interplay of quality and quantity.

In the 1970s and into the 1980s, as the state set out to rebuild a salmon industry left struggling due to unusually cold and unproductive waters in the North Pacific Ocean, their focus was on producing high-value salmon. A state-run hatchery program was begun with this in mind.

“The long-term plan for salmon in Alaska calls for nearly 143 million fish for harvest annually, of which 51 million are to be produced by enhancement and rehabilitation techniques,” the Alaska Department of Fish and Game now defunct Fisheries Rehabilitation and Enhancement Division (FRED) declared in 1983. “Included within this harvest of 51 million are 25 million chum, 8 million sockeye, 1.5 million coho, and 300,000 Chinook salmon; the remainder will be made up of pink salmon.”

The “remainder” of pink salmon there would total about 16 million or about 31 percent of hatchery production.  Pinks are the smallest and least valuable of the Pacific salmon, and the harvest of wild pinks in the 1970s when the hatchery plan was being concocted averaged about 27 million per year, according to state data. 

So the plan was basically to boost pink production to somewhere around an average of 43 million per year – or about 30 percent of the annual, statewide, all-species catch of salmon – with the other 70 percent being comprised of higher-value species, Chinook or what Alaskans commonly call “king salmon” being the most valuable of these.

The hatchery addition to the average wild catch of Chinook in the 1970s should have pushed the harvest of official state fish past 1 million per year. But that didn’t happen. Instead, it was the opposite.

The total commercial harvest of Chinook last year was 243,923, according to state numbers, or more than 65,000 fewer Chinook than the hatcheries alone were supposed to provide, and less than a quarter of the hoped-for, combined harvest of wild and hatchery Chinook.

The 2023 coho harvest of 2.3 million was also well short of what was once desired, although it did – thanks to the ocean’s warming – manage to top the average harvest of 1.8 million coho per year in the 1970s. Still, the hatchery production came up significantly short of the 1983 goal of 1.5 million per year.

According to the state’s Alaska Salmon Fisheries Enhancement Annual Reports, hatcheries have churned out an average of less than 1 million of these fish per year for the past five years. The 2023 report put the number for last year at less than 972,000. 

Hatchery sockeye production, meanwhile, is only 80 percent of 1983 goal of 8 million sockeye at 1.6 million, according to the report. And chums came closer to the goal of 25 million from the hatcheries, but there, too, fall about 5 million short, according to that report.

Meanwhile, pinks, the cheapest and easiest to produce hatchery salmon, have exploded both in terms of hatchery and wild fish.

Processors win

This was the dream of Seattle-based salmon processors who joined forces with the fishermen-run corporations that in the 1980s took over and privatized what had begun as a state-run hatchery program.

By 2007, these private, nonprofit hatcheries were dumping 1.5 billion hungry little mouths into the Pacific every year and the processors were calling for ever more.

The Pacific Seafood Processors Association, an industry trade group, and three of the biggest processors then running operations in Alaska – Trident Seafoods, Icicle Seafoods and Ocean Beauty Seafoods – approached the private, non-profit hatcheries in 2010 to ask for a greater than 60 percent increase in hatchery output.

“From 2000-2009 the average statewide hatchery pinks returns were 32.6 million in even years and 55.9 million in odd years – in both cases about 40 percent of total pink returns,” the processors said in an “Open Letter to Alaska Hatcheries.”

“We would like production to increase to 70 million in both even and odds years over the next five years, which would bring hatchery production to roughly 50 percent of that total.”

The hatcheries have now managed to come close to that goal, at least in odd-numbered years. Hatchery pink returns last year topped 64 million, according to the state’s Alaska Salmon Fisheries Enhancement Annual Report, 2023.

This was close to 50 percent above the 1983 goal for the combined catch of hatchery and wild pinks. But as this catch was going up, the value was steadily going down. The average-size Alaska pink salmon was worth less than 75 cents last year, according to state data.

That’s the whole fish, not a price per pound. And 75 cents actually overstates the value of the fish because most of the money in pink salmon is in the eggs. As the graphic at the top of this story illustrates, the flesh can be purchased very cheaply, although it’s hard to tell whether the Chinese are selling Alaska or Russian pinks.

Whichever the case, pink prices are rock-bottom low, and as a result the fish Alaskans generally call “humpies,” accounted for only 38 percent of the value for the 2023 hatchery component of the catch though they made up 74 percent of hatchery production.

And when it came to value in the fishery overall, the numbers were even worse.

Hatchery and wild pinks combined made up 66 percent of the combined harvest of 230.2 million wild and hatchery salmon in 2023, but produced only 29 percent of the harvest value, according to Fish and Game. 

To put this in perspective, the sockeye harvest was only about a third the size of the pink harvest, but almost 60 percent more valuable at $181.1 million versus $113.7 million, and this despite record low sockeye prices, according to the preliminary figures.

Alaska’s Congressional delegation has tried to blame the low value of the pink-salmon-driven Alaska salmon industry on “Russian dumping of seafood,’‘ but the reality is different and twofold:

• A.) Alaska is largely producing the wrong salmon
• B.) Russian pink harvests are far more efficient than the Alaska harvests allowing the Russians to sell pink salmon at a lower price and still turn a profit.

Looks great

None of this is meant to disparage the taste of pinks in general. Let’s not even get into that argument. A well-cared-for, ocean-bright pink salmon is a fine-tasting fish.

One issue the pinks is in the “well-cared-for” area. This is not something easy to maintain when processing loads of salmon delivered by the tens of thousands at a time. But this is not the only issue.

Farmed salmon years ago took over the salmon market, and farmed salmon now define how a high-quality filet should look – thick and meaty. You don’t get a lot of these filets off 3.1-pound fish, which is the size pinks averaged in Alaska last year.

If pink salmon were competing with walleyes in the fish mart, this wouldn’t matter. But they aren’t, which is why the Alaska salmon business is struggling despite never-imagined harvests of over 200 million fish per year thanks to those globally warmed waters in the North Pacific Ocean.

The huge volume of low-quality fish can’t make up for the loss of quality.

Quality is why Norwegian farmed salmon are today wholesaling at a little more than $5 per pound while you can walk into a Kroger in the Chicago area and buy a pound of frozen, pink salmon at retail at a price per pound slightly lower, or about half the retail price of that frozen, farmed Atlantic salmon in the same store. 

Pinks aren’t exactly the Japanese “junk” sold in the U.S. in the 1950s, but some of them sold as frozen filets in the retail markets of the U.S. are undoubtedly doing to the “Made in Alaska” brand what Japanese circuit boards did to the “Made in Japan” label in the 1950s. 

Consider the reviews for these fish on the Kroger website where the one-star ratings are nearly double the five-star ratings with some of the latter suggesting the fish are best bought for pet food.

“My dog loves this salmon,” one of the five-star raters reports. The one-star ratings are more along these lines:

• “These are virtually tasteless, thinly-cut filleted fish with a small silver strip of skin left on the middle back of each piece. I will never again purchase, and I’m unhappy to know I can’t completely trust Kroger if they’ll sell something like this.”
• “They did not taste good at all and nothing like salmon unfortunately.”
• “While thawing it got very soft and mushy and started to fall apart. Almost looked like shredded tuna. Then we baked it & oh man It tasted horrible.”

The only upside in the reviews is that some purchasers appear to believe the salmon are from China because of federal labeling requirements.

“Under the Country of Origin Labeling program regulations – enforced by USDA’s Agricultural Marketing Service – when fish are caught in U.S. waters and then processed in a foreign country that foreign country of processing must appear on the package as the country of origin,” according to the U.S. Department of Agriculture. “However, if the fish was actually caught in Alaskan waters, retailers are also able to promote the Alaskan waters the fish was actually caught in, in addition to the country in which the processing occurred.”

Some of these fish do mention Alaska. Some don’t. It’s arguably better for Alaska when they don’t.

The federal labeling program, unfortunately, does require the packaging to also say whether the fish were “farmed” or “wild caught,” and tasteless “wild caught” salmon don’t do much for Alaska’s pitch that “wild-caught” salmon taste better.

Substandard “wild-caught” salmon could be considered to be among the “products,” Sabbagh summarized as hurting “the entire industry’s image. This includes value-added seafood that is oversalted and breaded – even plain raw seafood that is over-‘enhanced’ – to put it nicely – or not processed properly….Alaska’s finfish has its share of quality issues, especially of late. Sockeye, coho, cod, and pollock items are too often not up to the standard they should be.”

Some of this is understandable. Declines in quality are to be expected when processing record-high volumes of salmon in a very short time, something Sabbagh recognized.

“At this point, ” he wrote, “Alaska does not need more money spent on marketing. Investment is needed in new processing and culling of finfish.

“I believe the key to improving the state of Alaska’s seafood industry depends on their producers’ willingness to adapt to the new seafood consumer. The industry cannot control macroeconomics, political upheaval, or their competitors. However, it can control how much and what it puts in the box or bag.”

Salmon processors in Bristol Bay, to their credit, have tried to fix some of the problems by incentivizing “fishers to deliver higher-quality fish by paying extra for chilled and bled fish and for using methods that reduce bruising of fish tissue. These practices result in higher-quality fish, which has allowed processors to shift away from selling canned salmon and instead sell fresh or frozen fillets at a higher price point,” according to analysis of food loss and waste (FLW) published at Nature Food in December. 

But this only helps solve part of the problem in dealing with one of the world’s most perishable food commodities. Once the fish leave processing plants in Alaska, there are supply chain issues.

As the Nature Food analysis noted, “these shifts also have an unintended consequence (in) that FLW is shifted towards the consumer, because fresh products have higher rates of FLW than canned products at the retail and consumer levels. One strategy to focus on quality while maintaining lower rates of FLW is to sell frozen fish,” preferably once frozen fish.

As Sabbagh noted, however, Alaska has in recent times created an issue with “once-frozen versus overseas twice-frozen fish.” Freezing, thawing and refreezing diminishes the quality of any animal protein, but large volumes of Alaska salmon are handled in this way.

Headed, gutted and frozen in-state, the fish are shipped to Asia for cheap processing. There they are fileted and deboned, and then refrozen and shipped back to the U.S. or Europe often to again be thawed and offered for sale as if they were fresh.

In the worst case scenario, as reported in Englands Daily Mail in 2017, this journey from Alaska to China to consumers in the United Kingdom can take as long as 18 months, which causes further product degradation, which only increases if the fish are thawed before sale to be placed on ice and passed off as “fresh.”

“Temperature can be your friend or enemy,” the Alaska Seafood Marketing Institute (ASMI) warns. “The optimum holding temperatures for maintaining product quality are 30 to 34 F.”

Depending on how the fish were caught and handled, researchers at Oregon State University have calculated that a fish put on ice to be sold fresh might have a “high-quality” shelf-life measured in a matter of hours.

“Seafood shelf life relates directly to storage time and temperature,” they warn. “Your supplier cannot guarantee a shelf life for a seafood product without knowing the catch date and the temperature history. Ideally, time temperature monitors should accompany seafood from the fishing vessel to the retail store, but this is rarely feasible.”

Market realities

In general, the seafood industry would probably be better served if all seafood was sold frozen, but fresh fish is what the market wants.

Seventy-three percent of salmon sales in the U.S. are made up of fresh fish, according to an Overview Of Retail Sales Of Seafood In The United States, 2017-2019 published in the journal Reviews in Fisheries Science and Aquaculture.

Alaska is handicapped there in that it can only provide fresh salmon in volume for two or three months per year, which costs the industry tens of millions of dollars in potential revenue.

“The fresh category was generally more expensive than frozen or shelf-stable categories,” the report added. “For example, there was a $5.70/kilogram (about $2.60/pound) premium for fresh salmon compared to frozen salmon.”

Sabbagh suggested ASMI needs to “bring back the ‘Sell it Frozen’ promotion in a big way,” but it is hard to predict how consumers now conditioned to fresh salmon would respond unless the frozen Alaska product could be shown to taste better.

And that circles back to all the sub-standard Alaska fish on the market, starting with those humpies that once went into cans but have been pushed into the frozen food aisle by processors trying to increase the value of the fish.

This might help the people selling humpies make a few more dollars, but it doesn’t help the industry overall.

Any reasonable business model is going to show that selling 150 million salmon at $398.6 million is a way better deal than selling 230.2 million salmon for the same price given the reductions in operational costs that favor the former.

Unfortunately, the state of Alaska doesn’t manage its fishery resources for value. It manages its fishery resources purely for volume. And, in this case, it has shot itself in the foot by managing wild pink salmon for maximum sustained yield (MSY) when all indications are that managing them for something less might well help boost the number and size of more valuable sockeye, coho and Chinook.

Researchers reporting in the peer-reviewed ICES Journal of Marine Science earlier this year said they can document that  “peak pink salmon abundances reduced growth of sockeye salmon from seven to 14 percent during the second year in the ocean compared with growth when pink salmon abundance was low, while third-year growth was reduced up to 17 percent.” 

This comes in the wake of a 2020 report in the peer-reviewed Canadian Journal of Fisheries and Aquatic Science four years ago that found pink abundance associated with a nine percent decline in sockeye productivity in the Gulf of Alaska and the Bering Sea and a 21 percent decline in British Columbia after accounting for sea surface temperatures.

This is the perfect storm that has Alaska’s most valuable salmon shrinking in size while they shrink in number because the state has devoted itself to producing huge numbers of pink salmon that might have more value in the dog dish than on the dinner table.

The state can’t easily ratchet back hatchery production of these fish, either. That is sure to cause a political firestorm given the investment the fishermen’s associations have made in hatcheries. But there is no requirement state biologists manage all Alaska salmon resources for maximum sustained yield (MSY) rather than maximum economic yield (MEY).

The Alaska Board of Fisheries – the governor-appointed, legislature-approved entity that oversees fishery management in the 49th state – should have been pushing for the state to hire a few fishery economists and start managing for MEY decades ago. But the members of the Board have for decades overlooked the fact salmon harvesting in Alaska is a business and needs to be dealt with as such.

And when managing a business, the first thing you want to do is maximize profits, not minimize them. Businesses have actually been known to grow themselves into bankruptcy by focusing on volume instead of profit.

That Alaska’s focus has long been on volume is understandable as well. Huge volumes of returning salmon make state fisheries biologists look good, and their success is measured in volume.

This provides no incentives for them to worry about the steadily declining value of the harvest due to the product mix. Along these lines, the scariest words in Sabbagh’s op-ed might have been these: “Alaskan salmon has had a great run.”

The key words there are “has had.” Alaska is losing in the marketplace, and it could continue losing. It’s hard to argue with Sabbagh’s observations as to how he arrived at the “has had” conclusion.

“From my view, a growing number of U.S. consumers are not willing to pay the higher price for wild salmon when farmed is at lower prices in both fresh and frozen,” he wrote. “In 2013, Costco did a taste test on farmed versus wild salmon with farmed coming out on top according to the panelists.”

Nothing has changed since then. No matter how much Alaskans think “wild caught” salmon – whether it is truly wild or not – tastes better, it doesn’t matter. Alaska’s population is so small it doesn’t qualify as a freckle on the butt of the seafood market, and industries live or die on how the masses in the market respond to their product.

“As an industry,” Sabbagh wrote, “we must focus on consumer trends and not our wish list.”

Alaska’s wish list has too long been focused on evermore salmon when it should be focused on ever better salmon not just in the mix of species produced under state guidance but in the methods of harvest and processing that ensure higher quality.