SeafoodSource: Big changes are afoot in Alaska’s seafood processing sector

Northline's Hannah processing barge will be at Bristol Bay this summer; Circle Seafoods' barge at Southeast.

by | March 13, 2024

Filed Under Markets | Processors | Salmon

SeafoodSource reports that six more barges are being built “as quickly as possible”

Northline Seafoods processing barge, Hannah. Image credit: Northline Seafoods

By Cliff White/SeafoodSource
March 11, 2024

In December 2023, Trident Seafoods announced it planned to sell its Alaskan assets in Kodiak, Ketchikan, Petersburg, and False Pass, as well as its South Naknek cannery and its support facilities in Chignik. Trident Seafoods CEO Joe Bundrant said the moves were being made to “position the company to fund the reinvestments necessary to continue to lead in the Alaska seafood industry.”

The announcement came just a few months after Trident – a vertically integrated seafood harvesting and processing company whose motto is “Anchored in Alaska” – announced it was delaying the development and construction of a processing plant in Unalaska, Alaska, that was supposed to replace an aging plant in Akutan, citing an overall collapse of the seafood market as the reason for the delay.

Bundrant said Trident’s strategy “reflects the realities facing U.S. seafood producers in global markets.”

“Across many species, the combination of declining demand, excess supply, and foreign competition has driven prices down, squeezed margins, and displaced U.S. producers from markets that they developed over decades,” he said. “In this global business environment, Trident is betting that it can remain competitive by attracting customers who value the sustainability, quality, and integrity of wild Alaska seafood while also aggressively reducing costs and improving productivity.”

Alaska Seafood Marketing Institute Food Aid Program and Development Director Bruce Schactler said Trident’s announcement heralded a crisis “years in the making.” He called Trident’s announcement “a wake-up call” for the state.

Larsen Mettler – who currently serves as the managing director of S2G Ventures’ oceans and seafood investments and was previously CFO of Alaska processor Silver Bay Seafoods, among other seafood industry roles – pushed back against labeling the current situation facing the sector as a “crisis,” saying Trident’s move is not necessarily indicative of larger trends in Alaska’s processing sector.

“No, I would not describe the sector as in crisis mode for processors,” he said. “2023 certainly wasn’t the best financial year for processors, but they are all coming off of several years of record profitability and extremely high-end market prices.”

Processors got themselves into trouble for three reasons in 2023

“Holding onto their 2022 sockeye pack too long, likely believing they could find increased end market pricing, went the wrong way because that level of demand for the product wasn’t there; putting up poor-quality fish, something that happens when you are processing extremely large volumes; and not managing their balance sheets well, spending large sums of money or making distributions to owners in prior record years,” he listed as the reasons for last year’s slowdown. “They were not ready to buy large quantities of fish in 2023 in a falling pricing environment.”ggg

Meanwhile, two other major players in Alaska’s salmon-processing sector, Silver Bay Seafoods and Peter Pan Seafood, have discussed a joint venture involving their neighboring plants in Valdez, Alaska, and even a full-scale merger. Without confirming those discussions have taken place, Mettler said the rumors align with a larger push for consolidation across Alaska’s processing industry.

“It’s clear there is overcapacity in the sector. These companies do have synergies, particularly in Valdez, where the combination would enable canning and freezing for the combined entities. Additionally, consolidating the assets would not only provide operational efficiencies within plants, but also with logistics (tenders, shipping, etc.). There would also be increased pricing power with fishermen,” Mettler said. “Unfortunately for the fishermen, I expect continued downward pressure on the ground prices as consolidation occurs and plants close.”

Though he is not sounding the alarm as much as Schactler, Mettler said he believes Alaska’s seafood industry is struggling through a market downturn that is temporary, but that may have lasting repercussions.

“We may have found the price ceiling for these products where, without improved product quality and product forms, the companies are going to continue having inflationary pressures squeeze margins because they cannot control their end market pricing in the global market; Russia and aquaculture control it,” he said.

There are also fundamental shifts underway in the sector as a result of climate change and global geopolitical challenges that will likely result in further consolidation of Alaska’s processing sector, according to Mettler.

“Processors and fishermen will need to find business models to deal with increased supply volatility and ultimately lower stocks,” he said.

One innovative business model coming to Alaska in 2024 that aims to reverse downward trends is being introduced by Northline Seafoods and Circle Seafoods. Each plans to launch a floating processor capable of processing, storing, and shipping huge quantities of salmon, with Northline aiming to station its 14-million-pound capacity Hannah vessel in Bristol Bay, and Circle posting its Circle vessel in southeast Alaska.

“Our plan is to keep the pace of reprocessing more controlled, completing it throughout the course of the year and aiming for 50,000 pounds a day instead of trying to fillet a million pounds a day. That way, it’s far easier to control our costs and our timing and improve our yields so we end up with a higher percentage of usable product that’s better created and easier to meet the specs the customer has asked for,” Northline Seafoods CEO Ben Blakey said.

“Beyond there being a need for it, we are simplifying and making the supply chain more efficient. One major part of that will be our use of integrated ultralow temperature facilities, freezing and storing all of our products at 25 degrees below zero Fahrenheit, which allows it to be extremely fresh when it’s thawed out and reprocessed in the lower 48 [U.S. states].”

Blakey said the company’s leadership remains convinced of the need for an innovative solution like the Hannah in Bristol Bay.

“The idea is to cut a lot of costs and make it far more efficient to operate than the existing supply chain coming out of Alaska,” he said.

The difficult 2023 salmon season, marred by low prices and cratering markets, did not deter Blakey; rather, it convinced him of the need for innovation.

“The [2023] season was not just hard on fishermen; it was hard on processors. We’re hoping that we can kind of give an example of what can be done to improve things. Honestly, what happened this past summer reinforces the need for change. The fishermen know that and the processors know that, and we hope to be that change.”

ben blakey, northline seafoods ceo

Circle Seafoods Co-Founder and Finance, Operations, and Fleet Manager Charlie Campbell said the company’s long-term vision is to “increase the value of the fishery by deploying innovative barges where we freeze salmon right on the water hours after they’re caught.”

“We freeze them round, fill up our cold storage – which can hold 10 to 12 million pounds of salmon – store them at 40 degrees below zero, and then tug it all down to the lower 48, where we can process it on demand,” he said. “Our model is to freeze round first and then combine the primary and secondary processing later. So, if you’re Whole Foods, you can ask for 100,000 pounds delivered every single week, and we can manufacture it to the specs you want over the course of the year – similar to how other goods are manufactured.”

Campbell said Circle Seafoods’ leadership team is confident enough in their model that it plans to build six barges as quickly as possible, each eventually handling 1.5 million pounds of daily freezing capacity, to bring the solution to market at scale. This business model is sound enough to be successful in any economic climate, according to Campbell – even if it faced a repeat scenario of the catastrophic 2023 season. Using a floating processor can save up to USD 0.28 (EUR 0.26) per pound of salmon on shipping and can reduce the number of tenders needed, he said.

“We think more competition is a healthy thing for the industry and maximizes the value of the resource; it pushes people to innovate and to improve. It forces everybody to be better,” he said. “At the end of the day, [wild Alaska salmon] is a limited resource. So, to some degree, it is a zero-sum game in processing, and ultimately, we’re in the business of throughput – that’s our key metric to success.”

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About Laine

Laine Welch has covered the Alaska fish beat for print and radio since 1988. She also has worked “behind the counter” at retail and wholesale seafood companies in Kodiak and on Cape Cod.

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