The Salmon Canning Industry BY DANIEL B. DELOACH, Ph.D. ASSOCIATE PROFESSOR OF BUSINESS ADMINISTRATION AND ECONOMICS OREGON STATE COLLEGE CORVALLIS, OREGON The Salmon Canning Industry BY DANIEL B. DELOACH, Ph.D. ASSOCIATE PROFESSOR OF BUSINESS ADMINISTRATION AND ECONOMICS OREGON STATE COLLEGE CO RVALLIS, OREGON OREGON STATE MONOGRAPHS Economic Studies Number 1, February 1939 Published by Oregon State College Oregon State System of Higher Education Corvallis, Oregon PREFACE The fisheries are one of Oregon's important natural resources. Conserva­ tive estimates place the annual value of the fisheries to the State at approxi­ mately ten million dollars, of which fully three-fourths is contributed by the salmon industry. The problem of obtaining the fullest use of this natural re­ source, and at the same time of conserving similar benefits for posterity, is now one of the major problems facing the State. Little attention has been given, thus far, to an economic survey of the Oregon fishing industry. The information acquired from such a study would be of material aid in developing a policy of conservation and in marketing Oregon's fishery products on a nation-wide scale. The present monograph, though it relates to the salmon industry in a wider area, contributes, in a measure, to the goal desired. The work of preparing the original manuscript on this study was com­ pleted at the University of California (Berkeley), where it was submitted in part fulfillment of the requirement for a degree of doctor of philosophy. Members of the staff of Oregon State College, on reading the original manu­ script, and others interested in the salmon industry, encouraged me to ex­ tend the study and to submit the manuscript for publication in the Monograph series. Professor R. E. Dimick, head of the department of Fish and Game Man­ agement, and Assistant Professor Thomas Onsdorff of the department of Food Industries, both of Oregon State College, reviewed the material and made helpful suggestions for improvement. The active interest taken in this project by Dr. E. C. Gilbert, chairman, and Mr. Edwin T. Reed, secretary, of the Publications Committee of the Oregon State Monographs, is respon­ sible, in no small measure, for the fact that this work has reached the stage of publication. February 1939 Corvallis, Oregon D. B. DeLOACH TABLE OF CONTENTS Page INTRODUCTION 7 I. THE SALMON INDUSTRY BEFORE 1864 8 II. THE SALMON INDUSTRY AFTER 1864 10 New Methods of Marketing 10 Industry Shifts to the Northwest and Alaska 12 Increasing Costs and Low Prices 15 Period of Expansion of the Salmon Fisheries 15 III. CLASSIFICATION OF SPECIES 17 Studies Made by Early Writers 17 Species of Salmon Found in Pacific Area 19 Scientific v. Trade Terminology 21 IV. STANDARDIZATION AND GRADING 21 V. ENFORCEMENT OF STANDARDS 23 Adulteration and Misbranding 23 Efforts to Eliminate Adulteration and Misbranding 24 Cooperative Effort Toward Improvement of Quality 30 The Code for the Canned-Salmon Industry 32 VI. FACTORS AFFECTING SUPPLY 32 Problems of Supply Peculiar to the Salmon Industry 32 Studies of Importance to the Industry 34 Protective Measures 38 VII. PRODUCTION-CANNING 40 Geographical Distribution of Salmon 40 Production Capacity of Canneries 47 Types of Business Organizations Operating Salmon Canneries 49 Investment in Canneries 52 Methods of Financing 53 Distribution of Production Costs 54 Labor in the Salmon Industry 56 VIII. THE MARKET FOR THE PRODUCT 61 The Domestic Market 61 Foreign Market 63 IX. MARKETING THE CANNED PRODUCT 67 Transporting and Storing 67 Methods of Distribution 69 Foreign Distribution 78 Manufacturer-Retailer Sales (Chain Stores) 79 Manufacturer-Wholesaler-Retailer Distribution 81 Cannery Sales Departments Operate as Selling Agents 83 Manufacturer to Consumer Distribution 84 The Sales Contract 84 Seasonal Variation in Shipments 87 Shipping from Primary to Secondary Markets 88 Selling Agents as Speculators 89 Buying Combinations Compete with Selling Agents 90 X. SALES PROMOTION 91 Brands and Trademarks (Packers) 91 Types of Sales Media 93 Containers 96 Nutrient Content of Salmon 97 XI. PRICING 99 Factors Affecting the Price of Canned Salmon 100 SUMMARY AND CONCLUSIONS 111 The Salmon Canning Industry INTRODUCTION The salmon industry is a regional industry. It is confined to a fairly defi­ nite geographical area bordering the Pacific Ocean on the mainlands of North America and Asia. Canneries are located in the states of Oregon and Wash­ ington, the province of British Columbia, the Territory of Alaska, and in Japan and Siberia. In the United States and Alaska, the value of the annual canned-salmon pack exceeds the combined total of all other edible canned- fishery products. In the past six years, the value of the salmon pack has varied between 56 million dollars in 1929 and 26 million dollars in 1932. In 1934, the pack was estimated at approximately 50 million dollars.' Alaska produces be­ tween 75 and 85 per cent of the annual output. The number of salmon can­ neries operated on the Pacific Coast has varied between 164 and 290, while the number of persons employed has sometimes equalled 20,000. In physical volume, the annual salmon pack has fluctuated between 250 million and 600 million pounds annually since 1929. This study of the salmon-canning industry has particularly emphasized the evolution of the present marketing structure and contemporary market­ ing problems, principally in North America. The primary purpose of the study is to analyze the present marketing structure in the canned-salmon industry in light of those factors which predominantly influence the methods of market­ ing the commodity. In the first place, the physical characteristics of the salmon are examined to determine its adaptability to various methods of marketing. The conditions under which production is carried on ; i.e., the location of canneries with re­ spect to the supply of raw material and the markets, the size of the salmon pack, the size of the canneries, the number of canneries, the production tech­ nique, production costs, capacity in relation to output, methods of financing, types of business organizations, the relation of the salmon-packing industry to the canned-foods industry generally, and the extent of concentration of ownership are examined with respect to their influence on the manner of marketing the commodity. The second step is to investigate the conditions of demand. This entails a study of the market for the commodity, the buying habits of the consumers, and the place of canned salmon in the diet. The third phase of the study is concerned with the marketing methods adopted as a re- I Based on the opening-price quotations of the packers. 7 8 OREGON STATE COLLEGEECONOMIC STUDIES suit of conditions existing in the system of production and in the market. Such problems as selling commissions, sales promotion, trade cooperation, trade controversies, and pricing comprise an integral part of this section. The "Code of Fair Competition for the Canned Salmon Industry" provides a focal point for a survey of the efforts within the industry to control production and marketing policies. Throughout the entire study, consideration is given to the historical and traditional influences which have tended to affect the present-day trade practices. Though the salmon-canning industry has long been of interest to the public as well as members of the trade, no systematic study of the marketing structure in the industry has been made. The available historical material lacks continuity, while the Bureau of Fisheries has confined its activities to prob­ lems pertaining to the maintenance of the supply of salmon. The Bureau of Fisheries has done excellent work in collecting and publishing data relating to the production of salmon, and the reports on the biological investigations sponsored by this agency are valuable contributions to the field of aquatic biology. On the subject of canned-salmon marketing, the report of the Federal Trade Commission on Canned Salmon (1918) was the only study available. This report gives a brief statement of specific aspects of canned-salmon mar­ keting; however, the general purpose of the report necessarily limited the scope of the investigation. In gathering material for this study, contacts with members of the in­ dustry were of primary importance. Interviews were secured with numerous officials of sales agencies and salmon-canning companies, as well as with can­ nery workers and fishermen. Wherever possible, the historical material was taken from original manuscripts in the Bancroft collection on western history.' For statistical data, the Pacific Fisherman, the Western Canner and Packer, and the Bureau of Fisheries documents proved valuable. I. THE SALMON INDUSTRY BEFORE 1864 TRADING COMPANY ACTIVITIES Although Indian folklore is replete with tales of the salmon, our concern is largely with the development of the salmon fisheries after the coming of the white man. The story of the salmon industry during the first half of the nineteenth century is bound very closely to the history of the territorial expansion of the ' Bancroft Library, University of California, Berkeley. DeLOACH: SALMON CANNING INDUSTRY 9 United States and England. The commercial exploitation of the Oregon country and Canada during this early period was confined largely to the Hudson's Bay Company and the Northwest Company. These two trading concerns,' primarily engaged in fur-trading, were forced to supplement their food supply at the trading posts with smoked and dried