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Pacific salmon on an abundant run; so are worldwide marketing efforts.

Pacific Salmon on an Abundant Run; So Are Worldwide Marketing Efforts

Despite large catch, end of Norwegian glut bodes well for sales in Europe. Still very much a buyer's market. Alaskan institutional promotion campaign, successful in Japan after three years, being extended to France.

It's another banner year for Pacific salmon harvests. Landings in Alaska are expected to finish the second or third highest ever, while those in British Columbia may set a new record.

But this year, abundant supplies don't necessarily mean disaster in terms of prices, although it's certainly a buyer's market out there. And after years of being virtually frozen out of the European market by farmed Atlantic salmon, Pacific species are making a comeback.

As of Aug. 25, with the salmon (especially pinks) still running, the Alaskan catch was 141,715,440 fish, or 624,999,570 tons. Last year's record catch was 153,600,000. In British Columbia, the sockeye harvest alone was expected to top 20 million, breaking a record set in 1913.

Sockeyes are the premium salmon for freezing, and the Japanese were buying aggressively as usual, said Mike Bristow, president of Ocean Premium Marketing, Inc., Seattle, Wash. Prices in Japan for premium quality four to six pound sockeyes were running at about 1,050 yen a kilogram at press time. That was equivalent to $2.90 a pound but, because of the Middle East crisis, the yen was appreciating at the time, so yen prices are more important.

Sockeye prices set the pattern for other species; coho, for example, typically runs 80 cents to $1 cheaper. Sockeye export prices in Alaska this year started at $3.25 to $3.35 with the Copper River run, but drifted downwards with the Bristol Bay and Cook Inlet runs, to $3.15 and $3.05. "Today, some companies would be willing to take $2.80 FOB Alaska," said Bristow.

As of Aug. 25, the sockeye catch in Alaska was 51,561,130 fish, or 304,250,670 pounds. Pinks, which are mostly canned instead of frozen, were at 79,489,520 and 237,268,240 pounds. Chums were at 6,767,720 and 53,017,330; cohoes at 3,326,470 and 20,792,290; and kings at 571,280 and 9,670,930. Most of the remaining catch was expected to be in pinks, and thus destined for canning.

The sockeye catch, especially at Bristol Bay, was so overwhelming that Alaska processors weren't able to grade it properly before freezing it into blocks for Japanese buyers, according to Mike Epstein, himself with J.S. McMillan Fisheries, Vancouver, British Columbia. Sockeyes of varying quality were thus mixed together, he said, and the Japanese will have to sort them out at the other end--they won't like that, he predicted, because labor costs are high and Japanese concerns are having trouble finding people who want to work in seafood plants at any price.

Canadian sockeye, Epstein argued, are prime quality and his company, at least, has sold its entire catch. There was a definite shortage this year of chinooks (red kings), and Japanese buyers snapped them all up before European and U.S. buyers got around to bidding (There had been a glut of chinooks the previous two years, largely due to competition from Norwegian farmed salmon.). In cohoes, meanwhile, the European market is "hot," Epstein said -- smokers want them regardless of the competition because of their "taste preference for fish of a wild nature," and intend to source 20-25% of their salmon from the Pacific on a continuing basis.

Pacific salmon sales in Europe have been devastated in recent years by competition from cheap Norwegian farmed salmon. But on Aug. 9, the governing body of the Norwegian salmon farming industry, Fiskeoppdretternes Salgslag A.L., announced that it had liquidated its inventory of frozen salmon, mostly to European smoke-houses. As a result, the market seems to be opening up again to Pacific salmon.

The Alaska Seafood Marketing Institute has responded with a major promotional effort aimed at France, according to Peggy Parker, export marketing director. Nelly Messon has been retained as marketing liaison there; she has 15 years experience in the food business, but was given a crash course in the salmon business this summer abroad salmon trawlers and at freezing plants in Ketchikan, Sitka and Juneau.

Under the slogan, "Salmon Sauvage d'Alaska" ("Wild Salmon from Alaska"), the Institute is organizing a major marketing effort in France aimed at home delivery services as well as retailers. The campaign will include retail ads and point-of-purchase displays, in-store demonstrations and a booth at the SIAL food show in Paris.

It's all very much like what the Institute has been doing in Japan for three years, according to Bristow, who wears a second hat as the group's co-chairman of export promotions. Bristow was scheduled to be part of a salmon trade mission to Japan in September, calling on importers, primary and secondary wholesalers, distributors and retailers. A local Institute liaison office, like that just established for France, has been working with advertising and public relations agencies as well as the U.S. Department of Agriculture trade office.

One of the goals of the program is to build consumer identification of Alaskan salmon. In the past, it has been repackaged -- especially by smokers in Hokkaido -- as a "domestic" product, Bristow said. But it is now increasingly labeled and promoted as a product of Alaska. Consumer polls show the increasing awareness of Alaska salmon, he said. Japanese respond well to the theme that Alaska salmon is "wild and natural," as opposed to fatty farmed salmon, and videos trade on the image of "the Great Nature" in Alaska, with shots of leaping salmon, the wilderness of Alaska and crusty old fishermen.

Such videos are shown right in retail stores, which are also the scene of in-store demonstrations. Bristow can't say for sure whether all this is increasing sales in any immediate sense, but it is building long-term consumer loyalty in face of competition from farmed cohoes from Chile and farmed kings from New Zealand, perhaps even Japan's own farmed cohoes and chums. Now that Japanese are beginning to suffer Western-style heart disease and the like from eating fatty foods, a reaction is setting in that should benefit wild salmon.

Japanese buyers have to make decisions just about now on purchases for the New Year's season, and that will be the next big influence on prices. Alaskan processors still have large sockeye inventories, some at home and some on consignment or on account at Japanese cold stores. A lot of politics is involved at both ends -- rival importers have to decide whether to hold out for lower prices, while exporters have to decide how much to sell and how much to hold for inventory in case catches are bad next year.

Next to sockeyes, cohoes are the favorite type of salmon in Japan. Although they're cheaper, they have a decent color that makes for eye appeal (very important in Japan), and can thus go into a lot of the same markets. Cohoes are also the favorite salmon species in France -- "What sockeye is to Japan, coho is to France," Bristow said. Chums, which are a hard sell in Japan due to the abundant domestic catch there the last couple of years, are the traditional favorite in Scandinavia -- and are finding markets there once more now that the Norwegian glut has eased.

One new development may be the acceptance of frozen salmon on the U.S. domestic market. Salmon steaks are part of a new frozen fish program at Super Valu Stores, Minneapolis, Minn., and are said to be doing well there. "Up to now, a lot of people in the Midwest and the East haven't been aware that salmon is available outside of a can," Bristow said. But availability of microwaveable steaks, sides, roasts, cuts, and so on may change all that. "We see frozen steaks as the easiest way for the consumer to take salmon home," he said. "It's the wave of the future."

As for the market generally, Bristow characterized it as having "adjusted to a moderate, almost modest global price level." Some buyers are holding out for even lower prices than now prevail, and the long-term outlook is for "relatively affordable global levels." The impact of farmed salmon will keep prices more stable on a long-term basis, and the frozen market -- once the stepchild of the industry -- appears destined to take on greater importance.

Changing Times

The Pacific salmon industry isn't what it used to be, back when cannery barons ruled Bristol Bay and fishermen weren't even allowed to have motorized boats. Nowadays, up to 90% of the sockeye catch is frozen for export to Japan, and the canneries boom only when the catch is huge, as it has been for the last two years. Larger catches don't mean smaller prices: $2.90 a pound compares to $2.10 in 1988, when the catch was only 80 million pounds, vs. 165 million in 1989 and over 142 million this year.

The picture isn't as clear in British Columbia, where the pinks are running late. So are the Adams River sockeyes, but those aren't prime quality, so they'll be going into the can anyway. Chinook and coho were both down from last year in the Fraser and Skeen rivers, said Christina Burridge of the British Columbia Fisheries Council in mid-August. Those are prime species for the freezer, Burridge noted, and are in such great demand that some customers are being put in allocation: "Some companies are deliberately selling coho at a lower price in Europe to maintain their markets there, even though the Japanese are willing to pay a premium."

Mike Hunter, head of the Council, earlier stressed the basic unpredictability of salmon runs, and therefore the salmon market. "There's this big black box in the Central Pacific," he explained. "The relation between what goes out into it and what comes back is vague." Salmon can run late, as they have this year, and still be abundant -- or they can run late and run short as well.

That "black box," of course, is the Pacific Ocean itself, where salmon spend most of their lives. Their foraging areas in the Pacific overlap considerably, although nobody is sure exactly how much. At any rate, the four largest groups are Alaskan reds (sockeye), Soviet pinks and Japanese chum. Pinks are also the most important Canadian salmon, but the Canadian catch is relatively small.

The United States, which can take advantage of the vast Alaskan exclusive economic zone, had the largest salmon catch by far last year -- 255,413 metric tons, some 40% of that sockeye and about a third pinks, with smaller amounts of chum, coho and chinook. Japan, at 169,995, was second -- its catch of 169,995 tons, nearly 90% chum, was virtually all for the domestic market.

At 138,249 metric tons, the Soviet catch was third. It was more than two thirds pinks and, like Japan's, destined almost entirely for domestic consumption. Canada registered a total catch of only 65,112 tons, with more than 40% of that in pinks. But if Canada can make a go of salmon farming on the scale of Norway, it could become a factor in the export market belying its short Pacific coastline.

"We don't hunt pigs any more," observes Roger Engeset, who has a salmon farm in British Columbia. "We farm them. It will be the same with salmon." Engeset's farm has 16 pens that can hold up to 25,000 salmon. Smolts are dumped in by helicopter, 10,000 to 15,000 a load -- and there they stay. They never go to sea, they never have to swim upriver to spawn. They spend up to two years doing nothing but eat and, at about five pounds, are netted for market.

By the standards of the Pacific salmon business, farmed output is still (excuse the pun!) small fry. But it's ordered and predictable, unlike natural salmon runs. "We're wrong more than 50% of the time," said Herman Savikko, a biologist for the Alaska Department of Fish and Game. "We predicted 16.1 million sockeye for Bristol Bay in 1989. There were 29.3 million. Once salmon reach the ocean, it's a black hole. Are the drift nets taking them? Is there increased predation? Warmer current? A cold snap? Mother Nature decides."

Farmed salmon production for Canada totaled less than 5,000 tons in 1984, with only 500 tons of that on the Pacific coast, according to Ron Ginetz, chief of the Pacific Aquaculture Division of the Department of Fisheries and Oceans. This year, output will be about 20,000 tons, with about 13,000 of that on the Pacific coast. By the turn of the century, he predicts, it will reach 50,000 tons, and some time in the early 21st century farmed Pacific salmon output is bound to surpass the volume of the traditional capture fishery.

Will that revolutionize the market? "Absolutely," said Ginetz. Thus far, chinook dominates the farmed salmon industry in British Columbia because it is the largest and fastest-growing species. "In two and a half years, they can be grown out to four to six kilograms (about nine to 13 pounds)," he noted. Contrary to Engeset, he added, that is the prevailing growth schedule and market weight in the industry. Besides chinook, coho salmon are farmed, but that species "hasn't been as productive as we'd like it to be."

The capture fishery in British Columbia consists of pinks, chum and sockeyes, which have much shorter runs than chinook or coho salmon, and which traditionally serve the canned market. But with competition from farmed chinook and coho, even though those species are targeted at the fresh and frozen markets, there will be intense downward pressure on prices for cannery-bound species. Nobody's going to be paying $6 a fish for them again, and processing costs will have to be reduced. There may be more consolidation in the industry, with the same firms having stakes in salmon farms, trawlers and processing operations.

Japanese Investment

Japan is already taking an interest in the Canadian salmon industry, and has investments in salmon farming operations -- even though none of those produce chum, the dominant Japanese species. What the Japanese really want, Ginetz said, is technology for farming sockeye -- if they knew how to raise that species, they'd forget about chum. Research into sockeye farming is in its early stages, he said. "We're trying to develop the technology here," he explained. "We don't know yet what the problems will be. But if we can make sockeye farming practical, it's obviously going to have a tremendous impact on Alaska, let alone Japan.

Canada already raises Atlantic salmon on its East coast, and has had some success within on the Pacific coast as well. But with the growth of chinook and coho, and the possibility of a breakthrough in sockeye, farming could come to dominate the Canadian industry as much as it already dominates Norway's. Japan would develop its own sockeye farming industry, and who knows but that the Soviet Union might follow suit -- it could have its cake (pinks) and eat it (chinook or sockeye) too.

Wild Harvesters Not Worried

It sounds like disaster for the traditional salmon industry, but not necessarily. More salmon at lower prices means more demand, noted Mark Sandvik, president of Icicle Seafoods, Seattle, Wash. "Just in general, we're seeing a resurgence of salmon sales throughout the world market," he told Quick Frozen Foods International in mid-August. France is an example of a market where salmon consumption has grown by leaps and bounds, and where Pacific salmon is assured of greater sales.

Not long ago, he said, a French importer came to Canada to deliver what he considered a pessimistic assessment. France imported 18,000 tons of Pacific salmon in 1988, the importer said, only 18% more than in 1980. In the same period, imports of farmed Norwegian salmon were up 1,800%. But to Sandvik, it was an optimistic message: France is so eager for salmon that even the mushrooming output of Norwegian farms can't meet demand. Despite the negative impacts of high prices on 1989 Pacific salmon exports to Europe, Sandvik said, the long-term outlook looks bright.

"Sales to Europe have been very positive this year," Sandvik said. "All our major customers are back." Moreover, he added, Pacific salmon exporters have a built-in advantage. "We have five species to sell, each a little different from the others. All they have is Atlantic salmon, which is just one more species." Furthermore, he said, farmed Atlantic salmon tends to have a "soft, fat, bland taste." Pacific salmon (most of it, at any rate) is "natural, real, wild salmon." Could wild salmon become an upscale product, with farmed salmon a commodity? "I don't see that yet," he admitted. "But I'd like to dream about it."

"Most people here feel good about the European market," confirmed Burridge at the British Columbia Fisheries Council. "The price is right on Pacific fish at the moment, and we probably don't have enough coho to sell them." As for canned vs. fresh vs. frozen, she said, "I think that those who are most flexible will do the best" -- in other words, companies with both freezing and canning capacity.

Still, it's a buyer's market, and that's what counts, said Kim Elton of the Alaska Seafood Marketing Institute. "The salmon market used to be production driven; you could sell all you caught," he told QFFI. "But with farmed salmon now 24% of the world market, with Chile as well as Norway making tremendous advances, it's much more of a buyer's market." The Institute, he said, has a study under way. "We're at work quantifying what's happened in the last 10 years, and trying to predict what will happen next."

All sorts of unpredictables come into play, he noted. "What if they develop special feeds to change the color of Atlantic salmon?" he asked as one example. "Who knows what the Japanese market would be like in the future if that happened?" More than a year after that notorious Prince William oil spill, its impact is still unclear. "People will be studying that oil spill for years," he predicted. So far, it doesn't seem to have impacted Prince William Sound itself--but drifting oil could create problems elsewhere, at Kodiak Bay and Cook Inlet.

Chum runs were just beginning at Hokkaido in Japan as well as British Columbia as QFFI went to press, and the market could not be forecast. But McMillan's Epstein foresaw strong sales in Europe, where chum is best for value-added products because it isn't too fat or oily like Norwegian farmed salmon and doesn't lose color in further processing. As for Japan, he predicted, it will be busy with domestic chums until January, and thus be distracted from sockeyes and their problems.

J.J. PIERCE QFFI Assistant Editor
COPYRIGHT 1990 E.W. Williams Publications, Inc.
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Author:Pierce, J.J.
Publication:Quick Frozen Foods International
Date:Oct 1, 1990
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