They say to recover you have to hit rock bottom.
Well, the Alaska processing sector on Tuesday may have hit rock bottom with the news that industry leader and shining star of the sector, Trident Seafoods, is selling off a third of its Alaska plants and laying off staff at its Seattle headquarters.
It's no secret the sector has been under extreme duress much of the last 16 months or more.
Across many species, the combination of inflation, declining demand, excess supply, and foreign competition has driven down prices, squeezed margins and displaced US producers from markets they developed over decades.
The immediate question is who would even be interested in buying the plants Trident has put up for sale in Kodiak, Ketchikan, Petersburg, and False Pass?
The short answer at the moment seems to be no one, at least according to rival Alaska processors I have spoken with.
And even if one of the rivals wanted to buy one or more of the plants, where would they get the money to do so?
All of Alaska's processors are in the same boat -- they are extremely cash strapped, they are carrying too much inventory, their markets have crumbled, their banks have turned cold to them and are giving them very little wiggle room to dig themselves out of the holes they are in.
Most Japanese companies, which at one time owned a good chunk of the Alaska's salmon processing sector, are long gone and are unlikely to jump back in given the sector's current condition.
Maybe buyers from China? That seems unlikely because China's processing sector is enduring its own struggles at the moment.
Canada-based Canfisco, which is owned by the Jim Pattison Group, a diversified holding company operating primarily in the United States and Canada with over $15 billion in sales, is probably the most capable of raising the money to swing such a deal, but why would it? It already owns Alaska processors North Pacific Seafoods, Leader Creek Fisheries, E&E Foods, and Alaska General Seafoods, giving it plenty of processing power in the state.
But the likelihood of any of the current Alaska processors buying the plants seems remote.
There is a deal in the works for Alaska processors Peter Pan Seafood and Silver Bay Seafoods that could potentially lead to a merger of those companies' assets. Silver Bay Seafood reportedly has an agreement to buy Peter Pan Seafood's Valdez, Alaska, plant -- and maybe other facilities.
Silver Bay and Peter Pan declined to comment on the potential deal, and the agreement has yet to be finalized and announced.
So what happens if the plants don't sell?
Given the depth of Trident's restructuring, it seems unlikely it would operate the plants next year, although the company did not say what it would do if the plants are not sold.
The optics of just shutting them down now are horrible, which may explain in part why the company is attempting to sell them. Certainly any cash they might get from a sale wouldn't hurt either.
And what about the fishing communities in the towns where the for-sale plants are located? These are small rural towns where seafood processing is usually the dominant employer.
Trident prides itself on its Alaska roots and the good it does in Alaska communities, but its relationship with communities in Southeast Alaska and other areas where it is selling its plants will undoubtedly be strained.
More than one Alaska processor is teetering on the edge of collapse, and many in the sector expect to see more bad news coming in 2024.
Boiled down to its simplest explanation, there is too much processing capacity and extreme consolidation is likely the only path to recovery.
