By David Arnsdorf
For the Journal of Commerce

There is no question that the market for Alaska wild salmon has been damaged greatly in the last 10 years. But there is disagreement over the why this has occurred and what can be done about it.

One school of thought holds that the switch to farmed salmon has been based strictly on price. This group believes that Alaska salmon is renowned for its quality and if people are switching to farmed salmon, that must mean that they don't care about quality, only price. This is a commodity view of salmon. Salmon is salmon, whether it is farmed or caught wild.

In this view, volume can be increased by promotional marketing, but as soon as the promotional marketing ends, the market switches back to the cheapest product. If this view is correct we are doomed. It is only a matter of time.

We cannot beat the fish farmers on price and they will solve any other problems such as PCB contamination that is reducing demand at the moment. We should start looking for ways to wind down commercial fishing, because soon all that will be left is sport fishing.

There is an alternate view, however. This view says that Alaska salmon has many unique properties that make it valuable. But that value has been reduced in the market by poor and inconsistent quality. In this view, wild salmon is viewed by buyers as a similar, but not identical product. It is a substitute product. The market research we and others have done has convinced me that this is the correct alternative.

All wild seafood everywhere is experiencing growing competition from farmed seafood. The price for wild shrimp from the southeast United States has dropped by about two thirds due to competition from farmed shrimp from Asia. The farmers will solve various contamination problems and will steadily drive down the cost of producing seafood.

We will lose a battle centered around cost. The farmers will be able to consistently produce salmon (and other seafood) at a lower cost than we can. Our only hope is to reposition wild salmon so that it is viewed by buyers and consumers as a similar but different product. This is not a hard task since as I noted above, many people already believe this. But, the often poor handling practices lower quality greatly and reduce the value.

The market for seafood has changed in the last 15 years. There are many more relatively small fish markets, restaurants, and supermarkets who use or sell premium priced seafood. They are often looking for something different. Wild Alaska salmon should be a natural fit for this growing market. And it is a market which is very willing to pay a premium for premium quality.

Unfortunately, many smaller buyers simply don't buy wild Alaska salmon. Why? They have had too many bad experiences with it. We are selling the intrinsic qualities of the salmon, its taste, color, and texture, but we are also selling shelf life. The longer the shelf life, the more valuable the product is. Shelf life, taste, texture and color can all be adversely affected by bad handling practices. These buyers want a premium product to sell to their clients; their reputation depends on it. They don't have the time or the money to come to Alaska to work with producers to ensure they get what they want. If it is too hard to get, they just go elsewhere.

One of the key problems is the lack of consistent grading standards and the abuse of even those standards that do exist. One fisherman told me a story about a small processor who had been selling to a small grocery chain for several years. They wanted only top grade fish, but the processor often mixed in lower grade fish. This grocery chain generally liked dealing with one supplier, but they had no use for the lower grade salmon that was sent along. These were given or thrown away.

The net result was that they were not willing to pay as high a price for this fish they got since they were not able to use all the fish. This is a consistent pattern. Many buyers are only set up to handle one or two grades. Getting product that does not conform to the grade they want is a problem. They may struggle to just get rid of it.

The processor did not see that he was lowering the value of his product by having more variable grades included. So having standard grades that are consistently followed results in a product that is more valuable to customers and it reduces their effort required to buy because they can simply specify a standard grade and know what they are getting. They don't have to worry about defining a specification.

Our studies have clearly shown that there is a premium market we can tap, and this is a very opportune time to do it. Consumers are interested. But we must have a product of excellent quality, and we must reduce the variation, and thus the risk for buyers.

We should also be developing brands to build on this premium image. Brands help consumers identify products they like. It is an assurance that you are getting what you expect. One key to building a successful brand is consistency. You should never surprise your customer. So, to create a successful brand, we need good quality and consistent grading.

As I noted earlier, this is not just a salmon problem. Farmed seafood will continue to grow. Farmed halibut and black cod are now starting to appear. As Marketing Guru Michael Porter has noted, there are only two marketing strategies - a commodity strategy and a unique strategy.

A company using the commodity strategy says, "Our product is just as good as the competition's but is cheaper." Price is what differentiates. A unique strategy says our product is different from apparent competitors and cannot be directly compared to it, and thus deserves a higher price.

We are using a commodity strategy with salmon at the moment. That is a losing strategy. The farmers will steadily undercut our prices and take markets away from us. The only way to have long-term success is to position our wild seafood as a different and better product than farmed seafood. To do that we will need to develop brands and quality programs that ensure that only very consistent and high quality product reaches consumers. We can keep a successful and lucrative commercial salmon industry in Alaska, but only by maintaining high quality and consistency, along with building brands that take advantage of the high quality and wild attributes.

David Arnsdorf is president of the Alaska Manufacturers' Association in Anchorage. He can be reached via e-mail at arnsdorf@alaskamfg.com.