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Supreme Alaska Seafoods: in a hurry to take a little fish to a big market.

In the world of production automobiles, 0 to 60 in seven seconds is pretty good time. In Alaska business, $0 to $2.5 million is pretty good for first year revenue numbers, right? Especially if you were in business only about half of the year. Well, how about from $2.5 million in your first year to $32.5 million in your second?

You couldn't blame somebody with those kinds of numbers for being just a bit boastful; but, to hear president Jim Salisbury do the revenue numbers for his Supreme Alaska Seafoods, you'd think he almost had something for which to apologize. "Well, it's a little difficult to compare your success to anything when you're starting from nothing, so you have to keep the figures in perspective."

Perhaps that's just modesty, but you can't argue with those numbers that rank the fledgling Anchorage-based company in the state's business league with some pretty high-profile members including Reeve Aleutian Airways, Usibelli Coal Mine and Hickel Investment Co. Salisbury has taken the company through the turbulent waters of high-seas fishing to become one of the key players in the international surimi market. Like most success stories, it was a combination of skill, timing and politics that made this fish story come up roses. First it was politics.

Political events, which gave rise to the national Magnuson Fishery Conservation and Management Act in 1977, set the stage for some new American entrepreneurialism while reshaping Alaska's offshore fleet. Gradually, foreign fishing fleets and offshore processors were excluded from water 3 to 200 miles offshore. By the late 1980s foreign ships participated only as minority partners in processing operations. For the Japanese, long a force in the Dutch Harbor-based Bering Sea bottom fishery, the new alliances offered continued financial rewards as well as secure sources of Alaskan pollock. The Japanese had come to depend on that pollock for the manufacture of the protein-rich fish paste, known as surimi, which frequently ends up as little processed fish cakes and imitation crab legs in a billion-dollar industry.

International Partnership

One of those new Japanese-American pollock partnerships spawned Supreme Alaska Seafoods with former Homer resident Bill Phillips, once an aide to Sen. Ted Stevens, and now an attorney in Washington, D.C., as one of the three founders. Credited by Salisbury as the "concept man," Phillips wanted to make the new company as Alaskan as possible, with operations, purchasing and management based in Anchorage.

Hugh Riley, an established businessman with fishing interests and boats in Seattle and Alaska, joined the venture. The third partner was Taiyo Fisheries of Japan, which also shares another seafood partnership with Riley in Dutch Harbor. Although Supreme Alaska officials are reluctant to discuss the partners' shares, by law the foreign Taiyo Fisheries could hold no more than a 49 percent share of the company.

While some companies were investing in onshore processing plants in Dutch Harbor, others were taking to the seas with huge catcher/freezer ships that could remain on station in the rich fishing grounds for extended periods. Numerous smaller trawlers, such as those operated by partner Riley to serve foreign offshore processors, were caught in the squeeze. Supreme Alaska Seafoods saw an opportunity to buy and operate an offshore processing ship, which the Japanese could no longer use in U.S. waters. That processor could then serve independent trawlers struggling to survive.

Enter "Excellence"

The partners began with the purchase in 1990 of their offshore processor -- a foreign-flagged, 367-foot ship designed and built in the early 1970s for pollock and the manufacture and storage of frozen surimi. Refitted, upgraded and reflagged to U.S. standards, the nearly 5,000-ton Excellence in 1990 became Supreme Alaska's mother ship. And battle ship. The battleground was capital intensive and competitive. To the victor would go the spoils of a seemingly insatiable Japanese surimi market that constitutes about 80 percent of global demand. Because partner Taiyo Fisheries would be acting as both a customer and marketing agent, Supreme Alaska is well positioned in the Japanese market.

The Excellence worked for two months in the Bering Sea that first year until the pollock season closed. To keep the ship busy, the company entered a brief joint venture with the Soviets to provide raw fish from their territorial waters. "That ended in failure," recalls Salisbury. "Our Soviet partner couldn't deliver the fish."

Supreme Alaska Seafoods generated revenues of about $2.5 million in 1990, a figure that didn't surprise Salisbury. "Because of our late start in the season, we didn't anticipate a very high revenue that first year."

Operating with two rotating 100-person crews (two months on, two months off), the Excellence has continued to operate in the Bering Sea as well as out of Seward and in Pacific Northwest waters where hake and Pacific whiting provide the raw ingredients for surimi production. In 1992, the company purchased two catcher boats, the 85-foot Alaskan Star and the 105-foot Alliance, to augment the four or five fishing boats supplying the processor under seasonal contract.

Early Successes

"The company's $32 million in revenues in 1991 were a little better than what we thought we would do, especially in our first full year of operation," concedes Salisbury. "Our operation as an offshore processor is about equal in surimi output capacity to one of the large onshore plants in Dutch Harbor." But the company president, never seeming to boast of recent achievements, is quick to qualify his success: "Our plant does not have the versatility of some of the shore-based plants -- they can shift their processing to crab or salmon or codfish and have four or five processing lines running at the same time. They have boats bring the fish to them. We go to the boats where the fish are, limiting us to pretty much one operation at a time."

Offsetting what may be a limitation -- the company's highly specialized processing capacity -- is the degree to which it does the job well. The Excellence was built with one goal: to serve as a computerized, highly automated surimi production system providing extremely high yields using every bit of fish.

"One of the big misconceptions about this industry is how much waste there is -- people talk about a 15 or 20 percent yield," states Salisbury as if answering his industry's critics. "Well, what we are doing in the processing is removing the head, the tail, the bones, the skin and the guts. We take virtually every scrap off the fish, wash it, purify it and remove the water from it to produce a sticky, thick paste of pure fish. The rest ends up in fish oil and in fish meal used in such things as animal feed. The one ingredient that we discard is water. Some offshore processors can't process the fish meal. They have a lot of discard over the side, but we use 100 percent of the fish."

Supreme Alaska Seafoods is not the only American offshore processor working Alaska waters. Salisbury figures there are about 60 factory trawler/processors. Directly competing with the Excellence are two other ships working, like the Excellence, exclusively as processors. Because of the high yield allowed by the technology aboard the Supreme Alaska ship, its production outpaces not only a smaller competitor, but almost equals that of another ship nearly twice its size. In 1991, that meant processing 60,000 tons of raw fish.

With pride in his employees and equipment, Salisbury figures Supreme Alaska Seafoods has the highest recovery rate in the industry. "Everybody here is dedicated to high production in a time of limited resources and increasing costs. That means squeezing every ounce you can get; to get every dime there is to get. We don't tolerate waste. If it's caught we use it, and if we use it we get everything we can out of it."

The Quota Question

While Salisbury and company work to control and enhance efficiency, there is a growing aspect of commercial fishing that is beyond their control: harvest and distribution quotas. Effective this past summer, the legal pollock catch is divided according to a formula allowing 35 percent to a handful of onshore processors and 65 percent to offshore processors like Supreme Alaska and the some 60 factory trawler/processors. The specter of this distribution has sent two messages to company executives: Expect slightly lower revenues in 1992 and investigate ways to broaden and diversify the company.

On the administrative side, officials are looking at reclassification of the operation that would place the company in competition with the smaller circle of onshore processors for its share of the quota. On the production side, expanding operations could mean taking the company's surimi paste to value-added finished products such as imitation crab legs.

Chairman of the board Bill Phillips notes that taking the plunge from being a processor to becoming a producer and marketer of finished products would be a major step. "Fishermen tend to view the 'next step' in the value-added line as the spot where the money is being made." But, Phillips cautions, that golden next step can be very elusive. "We haven't completely fallen into that spell. We are interested but the idea needs to be studied further."

Goal: A Tight Ship

Whatever the near term holds for Supreme Alaska Seafoods, the course will probably continue to reflect the realities of the international industry and the personalities of its management. President Jim Salisbury will run a fiscally tight ship with his advice, "Watch the pennies and the dollars will take care of themselves." Meanwhile, concept man and chairman Bill Phillips remains confident that the company's "objective is to grow on a fairly steep curve. We will continue to be very aggressive."

And if two short years of numbers are any indication, that's a fish story you can take to the bank.
COPYRIGHT 1992 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:The New 49ers
Author:Reid, Sean
Publication:Alaska Business Monthly
Article Type:Company Profile
Date:Oct 1, 1992
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