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Economic Analysis Of Factors Underlying Pricing In The Southern California Tuna Canning Industry

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Economic Analysis Of Factors Underlying Pricing In The Southern California Tuna Canning Industry

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Content University of Southern California, Pi, D,, 1 1 Economics, general ECONOMIC ANALYSIS OF FACTORS UNDERLYING PRICING IN THE SOUTHERN CALIFORNIA TUNA CANNING INDUSTRY by Robert Max Roesti A Dissertation Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (Economics) June 1960 UNIVERSITY O F SO U TH ERN CALIFORNIA G R AD U A T E SC H O O L U N IV ER SITY PARK LOS A N G E L E S 7 . C A L IF O R N IA This dissertation, 'written by ........ Hobert..Mx..RQ.e?j?.ti........... under the direction of Dissertation C om mittee, and approved by all its members, has been presented to and accepted by the Graduate School, in partial fulfillment of requirements for the degree of D O C T O R O F P H I L O S O P H Y ... Dean Late Juns 196Q DISSERTATION COMMITTEE TABLE OF CONTENTS CHAPTER PAGE I. THE PROBLEM AND DEFINITIONS OF TERMS USED ... 1 The problem............................. 1 Statement of the problem ......... 2 Importance of the study............. 4 Objectives of the study................ 4 Scope of the study.................... 5 Methodology ............................. 5 Library investigations ................ 5 Statistical analysis .................. 7 Interviews ........................... 7 Definitions of terms used................ 8 Organization of the following chapters ... 14 Review of the literature................ 18 II. EVOLUTION OF TUNA FISHERIES................ 35 Importance of fishing in ancient times ... 38 Economic importance of tuna fisheries in the Mediterranean.................. 39 The Greco-Roman period................ 39 Methods of catching tunas ............... 41 Forces influencing size of the tuna catch............................... 44 ii iii CHAPTER PAGE Tuna fishing in the ninteteenth and twentieth centuries ................... 46 Economic role of tuna fisheries in Japan . . 52 Importance of fishing in Japan......... 53 Japanese tuna fisheries to 1945 ......... 58 Japanese tuna fisheries--post-war....... 60 Evolution of southern California tuna fisheries.............................. 73 Abundance of tunas.................... 73 Albacore.............................. 74 Southern California tuna boats ......... 76 Tuna fisheries in other regions of the world................................. 86 Southeastern Asia...................... 88 Indian Ocean .......................... 91 Atlantic Ocean ........................ 91 Latin America.......................... 92 Economic implications.................... 94 Raw material.......................... 94 Labor................................. 95 Capital equipment ...................... 95 R is k................................. 96 Tuna price............................ 97 Gravity of economic problems........... 97 iv CHAPTER PAGE Current production of world tuna fisheries...............................100 World catch by species.................. 100 World catch by country.................. 101 Catch of tunas, bonitos, mackerel by region............................. 101 Tuna catch trends........................105 World tuna markets................. . 105 III. EVOLUTION OF TUNA CANNING.................... 107 Growth of the canning industry.............107 Appert and Durand..................... 107 Canning of fish......................... 108 Growth of the American canning industry . . 109 Public acceptance of canned goods ....... 110 Southern California tuna-canning industry . . 112 The beginnings......................... 112 Speculative ventures .................. 114 Continued development .................. 115 Second World W a r ........................117 Emergence of leading firms...............118 Northern California and Oregon canners . . . 125 F. E. Booth Company, Inc. and Washington Packing Corp........................... 125 Columbia River Packers Association, Inc................................... 126 V CHAPTER PAGE Overseas expansion ...................... 127 Van Camp Sea Food Company, Inc............. 128 Star-Kist Foods, Inc...................... 132 Westgate-Califomia Corp.................. 133 Evolution of tuna canning in Japan......... 133 Early rapid establishment of canneries . . 134 Development to 1941............ 134 Post World War II........................136 World-wide growth of tuna canning ......... 140 Statistical classifications ............. 140 Interpretation of the table...............140 Comparative rates of growth ............. 142 IV. ECONOMIC STRUCTURE AND CHARACTERISTICS .... 144 Relative size of the industry...............144 Groupings of tuna canners............ 147 Number and relative size of firms......... 147 Geographic concentration .............. 151 Economic characteristics underlying production............................. 153 Raw material orientation.................153 Consequences of mobile and migratory raw material..........................156 Tuna canning........................... 161 Types of integration......... 166 vi CHAPTER PAGE Product diversification ............... 171 By-products . . ...................... 174 The structure of competition............ 177 Major American competition............ 178 Minor American competition............ 179 Foreign competition .................. 181 V. THE STRUCTURE OF COSTS.................... 186 Canning procedure ...................... 188 Steps comprising canning procedure .... 188 Areas of potential cost reduction .... 191 Canning costs .......................... 192 Relative importance of processing costs............................. 192 Raw material of domestic origin....... 192 Imported raw material................ 195 Imported semi-processed material ....... 196 Direct labor .......................... 197 Cans, cases, labels, oil, salt......... 200 Selling costs .......................... 200 VI. FACTORS WHICH AFFECT DEMAND FOR CANNED TUNA................................... 202 Consumption of canned tuna............... 203 Relationship of meat, poultry, fish .... 204 Protein............................. 204 vii CHAPTER PAGE Preference........................... 213 Market for canned tuna.................. 214 Household market...................... 215 Institutional market .................. 216 Household market....................... 216 Market profile ....................... 217 Non-consumers....................... 232 Reasons underlying non-purchase of canned tuna....................... 235 Institutional market .................... 239 Government institutions .............. 240 Private institutions .................. 241 Demand characteristics of the institutional market ................ 242 Export market......................... 242 Conclusions........................... 243 Staple foods ......................... 243 Cross elasticity of demand for meat and for fish....................... 244 Constancy of canned fish consumption . . . 244 Emergence of canned tuna.............. 245 Limit to increasing consumption....... 247 VII. MARKETING PATTERN....................... 249 Economic characteristics underlying marketing........................... 249 viii CHAPTER PAGE Type of product...................... 249 Consumption pattern .................... 251 Consumer exposure.................... 252 Marketing functions: nationally advertised brands....................... 252 Physical handling ..... ............ 253 Negotiation of sales and collection of money............................. 258 Stimulation of flow.................... 260 Marketing functions: private brands .... 263 Physical handling ..................... 263 Negotiation of sales and collection of money............................. 265 Stimulation of flow.................. 265 Advertising and sales promotion ......... 267 Role of advertising.................. 267 Canners.............................. 268 Canners' allowances .................... 271 Trade Associations..................... 272 United States Fish and Wildlife Service............................. 273 Advertising related to seasons ........... 274 Relationship of canners to fishermen .... 275 Interests in common.................. 275 Divergent interests .................. 277 ix CHAPTER PAGE VIII. COMPETITIVE BEHAVIOR...................... 280 Fundamental considerations ............... 280 Role of price policy.............. 280 Pricing at different levels ........... 281 Price competition: tuna canners......... 282 Range of discretionary pricing......... 282 Means of accomplishing price changes . . . 284 Interrelationships: advertised label and other brands.................... 285 Effect on the industry................ 286 Price competition: retailers............. 287 Availability .......................... 287 Price leader.......................... 288 Customary mark-up.................... 289 Floor stock guarantee................ 290 Non-price competition .................. 291 Areas of non-price competition......... 291 Retailers' shelf strategy ............. 293 Fusion of price competition and non-price competition.......................... 295 Profit maximization.................. 295 Relationship: sales volume to price . . . 296 Gross margin on canned tuna........... 298 Capturing of rivals' markets........... 298 CHAPTER PAGE IX. SUMMARY AND RECOMMENDATIONS.................. 300 Summary................................ 300 The study............................ 300 The industry's principal problems .... 301 Tunas— an economic resource ............ 301 United States tuna fisheries ............ 301 Structure and economic characteristics of tuna canning..................... 303 Recommendations......................... 312 Encourage tuna fisheries ................ 313 Improve canners' position .............. 315 BIBLIOGRAPHY ................................... 320 LIST OF TABLES TABLE PAGE I. Tunas and Tunalike Fish Landed by Country . . 48 II. Growth of the Japanese Tuna Fleet 1947-1958 ............................. 63 III. Japanese Tunaboats Based in Foreign Countries 1959 68 IV. Number of Bait Boats Operating at a Profit or at a Loss, 1953-1957 ................ 84 V. Comparative Tonnages, United States and Japanese Tuna Fleets.................. 99 VI. World Catch by Groups of Species...... 102 VII. World Catch by Major Countries........ 103 VIII. Catch of Tunas and Tunalike Fish by Region............................. 104 IX. Apparent Civilian Consumption of Selected Canned Foods ......................... Ill X. Van Camp Sea Food Company, Inc., Long Beach, California, Net Sales and Net Profit . . . 121 XI. World-Wide Growth of Canning Tuna and Tunalike Fish................... 141 XII. United States Pack of Canned Fish and Shellfish for Human Consumption......... 146 xi xii TABLE FAGE XIII. American Tuna Canners..................... 148 XIV. Meat, Poultry, Fish, Annual Consumption Per Capita............................ 206 XV. Trend in Consumption Per Capita of Chicken and Turkey........................... 209 XVI. Canned Fish Consumption Per Capita 1909-1958 ............................. 211 XVII. Percentage of Households Using Canned Tuna and Other Canned Fish.................. 219 XVIII. Purchases Per Capita of Canned Tuna October 1958 - March 1959 ............... 221 XIX. Relative Importance of Regional Markets in « Consumption of Canned Tuna October 1958 - March 1959 ............... 222 XX. Canned Tuna Purchases Related to City Size October 1958 - March 1959 ............... 223 XXI. Canned Tuna Purchases Related to Income October 1958 - March 1959 ............... 225 XXII. Canned Tuna Purchases Related to Size of Household October 1958 - March 1959 ............... 226 XXIII. Canned Tuna Purchases Related to Age of Housewife October 1958 - March 1959 ............... 228 xiii TABLE PAGE XXIV. Canned Tuna Purchases Related to Years of Formal Education October 1958 - March 1959 ................. 229 XXV. Principal Reasons Given for Not Serving Canned Fish............................ 236 XXVI. Effect of Displays and Retailer Advertising on Sales of Nationally Advertised Canned Tuna............................ 297 XXVII. Effect on Gross Margin and Mark-Up of "Featuring" Canned Tuna ................... 299 LIST OF FIGURES FIGURE PAGE 1. United States Supply of Tuna, 1951-1958 .... 145 2. Regional Map of the United States........... 218 xiv CHAPTER I THE PROBLEM AND DEFINITIONS OF TERMS USED The economic growth of the southern California tuna canning industry is determined by distinctive supply phenomena and by restrictive demand conditions. Southern California tuna canners process 86 per cent of the tuna canned in the United States.^ Sales of domestic canned tuna represent 47 per cent of the value of all canned fish sold in the United States for human consumption. Conse quently, though small in output compared to gross national product or to the output of any of the large, basic indus tries, the southern California tuna canning industry is significant as the principal processor of a major marine resource, I. THE PROBLEM This is a case study of the complex of economic forces impinging upon the southern California tuna canning ■^Percentage figures derived from data in: United States Fish and Wildlife Service, Canned Fish & Bv- products— 1958 (C.F.S. No. 2021. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 3. (Dupli cated. ) 2Ibid. 1 industry. These forces underlie the pricing of canned tuna by the canner, wholesaler, and retailer. Pricing becomes the nodus around which the industry*s problems center. Statement of the Problem The southern California tuna-canning industry's basic problem is to maneuver so that it may survive and grow in the face of rising costs of raw material and restrictive demand for the finished product. In the mechanization of the canning process, the industry has been singularly successful. In contrast, there are continuing basic difficulties relative to a satisfactory supply of raw material and sufficiently strong demand for the finished product. The supply problem consists in assurance of a con tinuous flow of raw material at a reasonable price. The industry secures a smooth, reliable flow of raw material in diverse ways: by contractual arrangement with boat oper ators, by vertical integration of fishing activities, by the establishment of branch plants at locations close to the sources of raw material, and by an increasing reliance on the procurement of imported frozen tuna. In short, at least for the present, the industry's supply problems are under control. This is of particular importance since raw material constitutes two-thirds of the cost of canning operations. Canned tuna is one of several important canned fish products including salmon, sardines, and shrimp. In coping with its individualized demand problems, each of these separate fish-canning industries must take cognizance of the fact that over-all consumption of canned fish has remained stable in recent years. As a consequence, demand stimulation is of fundamental concern to the tuna-canning industry if output is to continue rising at a rate faster than that of population increase. The industry finds itself caught between unpredicta ble supply conditions and restrictive market character istics, apparently unable to increase price and retain volume of sales. As a result, in the past forty years many firms have disappeared from the roster of the in dustry. The remaining firms form a viable, but not too successful oligopoly. The effect of competition of tuna canners outside of southern California is demonstrated by the change that has taken place in concentration per centages. In the 1920's the southern California tuna canners produced practically 100 per cent of domestic canned tuna. In 1958, 14 per cent of tuna canned in the United States was packed at points in northern California and the Pacific Northwest, and at locations on the Gulf Coast $uid the Atlantic Ocean. 4 Importance of the Study The importance of this study lies in the fact that it is a comprehensive and current investigation of the tuna-canning industry of southern California. The analysis presents insights into the industry's two areas of decision-making: (1) raw material acquisition, and (2) de mand stimulation of the finished product. The importance of this study relates to the eco nomic impact on the southern California tuna-canning industry of a mobile, renewable raw material, and of the American consumers’ weak propensity to consume fish. Hence, the study delves into the reasons why the southern California tuna-canning industry, a relatively unsuccess ful oligopoly, has failed to participate fully in the economic prosperity of the nation. Objectives of the Study The objectives of the study were to assess and show the interrelationship of the forces underlying the pricing of canned tuna by the southern California tuna canners. It thus became necessary to consider in some detail the several economic forces acting on the industry. Since the demand for the finished product at the canner level ultimately is dependent upon consumption, it follows that a secondary objective was a close analysis of consumption of canned tuna. Scope of the Study This study places emphasis on the economic develop ment and characteristics of the southern California tuna- canning industry. Aspects of raw material procurement, labor, canning processes, marketing, and competitive tuna- canning groups are introduced only insofar as they apply to the survival and growth of the southern California tuna- canning industry. Little attention is devoted to canning technology because the principal economic problems lie in other areas. Excluded are many interesting but non-relevant occurrences in the development of tuna canneries and also of tuna fisheries. The scope, therefore, is limited to those elements which are deemed to have relevance to the develop ment of the southern California tuna-canning industry. II. METHODOLOGY The methodology employed in conducting this study included: 1. Library investigations 2. Statistical analysis 3. Interviews Library Investigations The economic data on tuna fisheries and canning are dispersed in several libraries in the Los Angeles area. 6 The Fish and Game Division of the State of California main tains an excellent library on Terminal Island devoted to marine biology, oceanography, and other marine studies. It is not the objective of the library to collect literature on the economic aspects of fisheries and canneries. How ever, there is some information of an economic nature scattered throughout the marine publications in the library. Further, the library is on the mailing list for the statistical publications issued by the United States Fish and Wildlife Service of the Department of the Interior. At the University of Southern California, the Edward C. Doheny, Jr. Memorial Library and the Hancock Library carry a few, but by no means all, of the pertinent publications issued by the United States Fish and Wildlife Service. The International Relations Library at the Uni versity of Southern California carries almost all of the pertinent Food and Agriculture Organization and other United Nations publications. At the University of California at Los Angeles the main library and also the Bio-Medical Library carry books and a few trade journals relating to fisheries and food canning. The Long Beach Public Library and the City of Los Angeles Public Library carry a few specialized trade journals and a few books relative to the development of the Los Angeles Harbor. In conclusion, therefore, the data in libraries in the Los Angeles area on the economic aspects of fisheries and canning are surprisingly dispersed. Statistical Analysis The analysis of pertinent statistical data, consist ing primarily of United States Federal Government compila tions, reveals insights into the progress of the tuna- canning industry. Interviews Members of the Fish and Game Division of the State of California, of the United States Fish and Wildlife Service, trade association officers, and officers and em ployees of the several canneries were very cooperative in answering questions, making useful suggestions, and fur nishing a better understanding of the complexities of the southern California tuna-canning industry. Likewise, the food brokers and retailers interviewed were very cooper ative. Of particular assistance were John Fitch, W. A. Clemens, and Mrs. P. Powell of the Fish and Game Division of the State of California; Donald R. Johnson, L. T. Brad bury, and Ross Hatton of the United States Fish and Wild life Service; E. L. Morris of the Tuna Research Foundation; 8 Frank Beesemyer of Beesemyer-Ridnour Co., food brokers; Karl Fowler of Certified Grocers of California; and Robert Alexander of Alexander*s Markets, Los Angeles. In short, the methodology employed resulted in com piling information from several sources which are outlined in Section V of this chapter under "Review of the Litera ture." III. DEFINITIONS OF TERMS USED The following definitions are basic to this study. Tuna The term "tuna" is derived from the Greek word 3 "thuno" meaning "to dart along." The word "tuna" is similar to designations used in western Europe: "tunny" in England, "thon" in France, "atun" in Spain, "atum" in Portugal, "tonno" in Italy, and "Thunfisch" in Germany. However, "tuna" does not have precisely the same meaning in all parts of the world. Fortunately, in the United States the term is clearly defined. This definition has been accepted and published by the Federal Trade Commission^ to include the - JSidney Wright, The Romance of the World*s Fisheries (Philadelphia: J. B. Lippincott Co., 1908), p. 152. ^Federal Trade Commission, "Trade Practice Rules for the Tuna Industry," Trade Practice Rules, September 1, 1935 to June 20, 1945 (Washington, D.C.: Government Printing Office,. 1946), pp. 427-36. 9 following species: 1. Albacore (Thunnus eermo) The albacore Is characterized by its extremely long pectoral fin which invariably reaches beyond the in sertion of the anal fin. The only fish with which the albacore can normally be confused is the big-eyed tuna which also has a long pectoral fin. In the latter, however, the vent is elliptical or pear-shaped, whereas in the albacore it is round. In the event that these characters fail, the appearance of the liver is spe cific. In the big-eyed tuna the ventral surface of the liver is uniform in color, with short, faint striations at the margin. In the albacore the liver is conspicu ously marked with dark striations radiating from a small central area as in the bluefin. As the bluefin can not be confused with the albacore, the liver there fore affords the most certain means of identification of the latter. 2. Skipj ack (Katsuwonus pelamis) The skipjack is quite distinct and can be separated from all other local tunas by the four or five oblique, dark stripes on the silvery belly, and the absence of stripes on the blue to violet-colored back. The color tone is similar to that of the bonito (Sarda), but in the bonito the oblique, dark stripes are absent on the silvery belly and present on the back. 3. Yellowfin (Neothunnus macropterus) The yellowfin tuna may be confused at times with the bluefin tuna and with the big-eyed tuna. When first caught there is generally a golden-yellow, iridescent band along the side of the yellowfin, separating the blue above from the silvery-grey belly. The latter is marked with transverse white bars with irregular white dots or blotches between. The fins are tinged with yellow and the finlets are frequently if not generally a lemon yellow, edged with black. The color, however, soon fades and within an hour or less ceases to be a distinguishing character. 4. Bluefin (Thunnus thynnus) The bluefin tuna resembles in general the yellowfin in shape, coloration and markings but differs from it in the absence of the golden-yellow iridescent band 10 along the side, and In the fact that the finlets, though frequently yellow, are not edged with black. 5. Big-eyed Tuna (Parathunnus mebachi) The big-eyed tuna is more difficult to identify positively. The coloration and markings are in general similar to those of the yellowfin, with which it is easily confused even by commercial fishermen. 6. Oriental Tuna (Thunnus orientalist5 Oriental tuna is not caught commercially by Ameri can fishermen. It follows, therefore, that the label "tuna" on a can clearly indicates that the contents consist of alba- core, skipjack, yellowfin, bluefin, big-eyed tuna, or oriental tuna. The foregoing tunas, with the exception of oriental tuna, are landed in southern California in commercial quantities. In the United States big-eyed tuna is usually included with yellowfin in the statistical data. Tunalike Fish Bonito, or bonita (Sarda), and yellowtail (Seriola) cannot be legally sold as tuna in the United States. They are frequently designated as tunalike fish. In a number of other countries, however, and in the compilation of the statistical data by the Food and Agriculture Organization ■*H. C. Godsil, "The Pacific Tunas," California Fish and Game, 31:185-94, October, 1945. 11 of the United Nations, bonlto and tuna fall under the same classification. Yellowtail are an important sports fish in southern California waters. Sportsmen, rather than commercial fishermen, land most of the catch.^ Fresh Tuna "Fresh tuna" refers to the tuna as it is taken from the water. Tuna in its fresh state deteriorates quickly. The body temperature of the tuna rises by almost 21 degrees F. (12 degrees C.) within fifty minutes after death.7 Fur thermore, there is no commercial market in the United States for fresh tuna. Consequently, only locally caught tuna (primarily albacore), which can be taken ashore a few hours after being caught, is landed in its fresh state. Frozen Tuna "Frozen tuna" is the term commonly used to refer to tuna which has been frozen aboard the fishing boat, and A. W. Anderson, etal., Survey of the Domestic Tuna Industry. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 104 (Washington, D.C.: United States Fish and Wildlife Service, 1953), p. 10. 7E. Hess, Current Technological Problems in Fish Canning (Fisheries Bulletin, Vol. 9, No. 4. Rome: FoocT ana Agriculture Organization of the United Nations, October-December, 1956), pp. 161-80, citing W. Schnacken- beck, "Behandlung Der Thunfische." Fischwirtschaft. 1:325. 1955. 12 is landed in a frozen or semi-frozen state for prompt processing by the cannery. If properly frozen and retained at an appropriate temperature, tuna may be preserved for months, and perhaps for years, without adversely affecting its flavor. The normal practice, therefore, is to freeze the tuna aboard the vessel and discharge it in a frozen or semi-frozen state. The frozen fish falls under the sta tistical grouping of "fresh or frozen tuna." The term "fresh or frozen," however, cannot be interpreted liter ally, inasmuch as the tuna is permitted to be in the pro cess of thawing while being discharged from the boat so that the cannery may work on the catch without delay. White Meat The designation "white meat" applies only to canned Q albacore. Light Meat In contrast to "white meat," the term "light meat" may be applied to any species of canned tuna.^ Tuna Canned in Oil The canner may pack tuna in the can in oil, which is commonly known as "tuna canned in oil." Q Federal Trade Commission, loc. cit. ^Ibid. 13 Tima Canned in Brine An alternative method is to use the natural oils of the fish as the principal canning ingredient. This is known as "tuna canned in brine." The distinction between tuna canned in oil and tuna which is not canned in oil is important because a higher tariff rate applies to tuna canned in oil. Tuna canned in oil has much greater accept** ance among housewives than does tuna canned in brine. Standard Case of Tuna A standard case of tuna consists of forty-eight No. 1/2 tuna cans to the case. Each No. 1/2 tuna can con tains 7 ounces net weight of solid pack, or 6 1/2 ounces net weight of chunks, or 6 ounces net weight of flaked or grated tuna. For statistical purposes, tuna cans and cases which do not conform to the above specifications are con verted to standard cases of forty-eight No. 1/2 tuna cans to the case. Standard Packs The three standard packs in which canners put up tuna are: 1. Solid 2. Chunk 3. Grated or flakes The listing is in order of consumer preference. 14 Tuna Cannery or Plant The function of the tuna cannery is to buy tuna in its raw state, process it, and pack canned tuna. Some canners may purchase partially processed tuna and thus avoid undertaking the complete packing cycle. The canner then disposes of his product under one of his own labels, or under a private label. Food Brokers Food brokers handle canned tuna sales for most of the canners. The food brokers' function normally consists in representing a given canner on an exclusive, long-term basis, for a given territory. IV. ORGANIZATION OF THE FOLLOWING CHAPTERS A review of the literature pertaining to tunas and fish-canning reveals the paucity of specific economic studies compared to the number of articles and other con tributions in the areas of marine biology, food technology, and biochemistry. Such a review brings out the peripheral contributions of several disciplines to the solution of problems, the outcome of which influence the price of canned tuna. Economic studies on pricing are of value and are noted in "Review of the Literature" in this chapter. Chronologically, the first step the canners must take is the acquisition of raw material. A logical 15 starting point, therefore, appears to be a review of the evolution of tuna fisheries, covered in Chapter II. There are several ways in which the evolution of tuna fisheries may be set forth. The method elected was in the main to outline the development by geographic area, bringing the analysis to the present period. Some of the earliest efforts in canning were directed toward the preservation of fish. Hence, by the early 1900's, when the southern California tuna industry came into existence, the pioneer tuna canners were able to benefit from the knowledge gained from canning other foods. The evolution of the tuna canneries, discussed in Chap ter III, proceeded at an uneven pace. In the course of the industry's history many firms failed; others consoli dated their operations. Eventually, three large firms emerged, which, together with four small firms, today com prise the southern California tuna-canning industry. Relegating the topic of tuna fisheries to one chap ter and the topic of tuna canning to another is a useful step to achieve a straightforward presentation. Yet, taking this step and thereby achieving greater clarity in volves an arbitrary decision, selecting perhaps the lesser of two evils. For this approach initially minimizes the complex and at times contradictory relationships existent between the southern California tuna canners and domestic 16 fishing fleets. In the case of Japan, Peru, Spain, France, and several other countries, a conmercially important percent age of the tuna catch eventually is canned. In the case of the United States, the situation is extreme in that the entire catch is purchased by canners, as there is no other market for fresh tuna. As a result of the fact that the canners are the only buyers of fresh tuna, there are several close economic relationships between the develop ment of tuna canning and the growth of the fishing fleets. The economic structure of the southern California tuna-canning industry, discussed in Chapter IV, reveals the existence of an oligopoly consisting of seven firms. These firms are engaged essentially in a single-product opera tion, the continued existence of which depends on an assured supply of a mobile, biological raw material. Mobility poses problems inasmuch as the canning industry has a raw material orientation. The processing costs incurred by the tuna canners, as indicated in Chapter V, are of a routine nature. As a result, there is little variation in processing costs per case of canned tuna packed by one efficient firm compared to that of another efficient firm. The degree of success of individual firms is determined in large measure by the astuteness of their decisions in the area of raw material 17 acquisition, and in the area of selling the finished prod uct. Demand analysis, therefore, is essential. Government and other surveys reveal the extent of consumption by income groups, age groups, and regions of the country— data which are of fundamental importance to the industry in the projection of future plans. The find ings center around the fact that fish does not constitute an important part of the American diet, and that over-all consumption per capita of fish has remained relatively stable. Following an analysis of demand in Chapter VI, there is a discussion (Chapters VII, VIII) of the marketing pat tern and competitive behavior manifested by the southern California tuna-canning industry. There are several facets of competition. The three major firms engage with one another in aggressive price competition and non-price com petition in promoting the three nationally advertised brands of canned tuna. A second level of competition is that demonstrated by the many private label brands under which tuna is canned. Superimposed is the competitive effect of the activities of tuna canners located in areas, both domestic and foreign, that are outside of southern California. In broad terms, therefore, these forces of demand, competition, and supply of raw material determine the economic behavior of the firms comprising the southern 18 California tuna-canning industry. Chapter IX sets forth a summary relative to factors underlying development of the southern California tuna- canning industry. V. REVIEW OF THE LITERATURE Surprisingly few publications concern themselves specifically with the economic aspects of the southern California tuna-canning industry. In contrast, there is a vast array of literature which treats peripheral subjects. Character of the Literature Books have not been published dealing specifically with the current economic problems of the southern Cali fornia tuna-canning industry. In comparison to the wealth of printed material on tuna fisheries, relatively few pub lications and articles deal specifically with the economic problems of tuna canners.^ In the following pages the literature is reviewed under the captions of: books; State of California publica tions; Federal Government publications; United Nations ^The tuna fishermen’s organizations have been vocal and persistent in stating their complaints and inviting public and legislative investigations of their plight. The tuna canners, on the other hand, generally have not initi ated such investigations, though at times they have been drawn into public discussions before legislative hearings on issues affecting tuna fisheries. 19 data; miscellaneous printed matter, including trade journals, business magazines, newspapers; and bibliogra phies . Books Books in several disciplines have a bearing on the economic problems facing southern California tuna canners. None, however, were found that specifically are devoted to an analysis of the industry's current economic problems. Economics texts and references. The theory of the firm, the characteristics, and possible patterns of be havior of oligopolies are treated by a number of standard texts, including: Joe S. Bain, Pricing, Distribution and 11 12 Employment; Kenneth E. Boulding, Economic Analysis; 1 William Fellner, Competition Among the Few; ■ LJ E. H. Chamberlin, The Theory of Monopolistic Competition;^ ^Joe S. Bain, Pricing, Distribution and Employment (revised edition; New York: Henry Holt and Company, 1953). 12 Kenneth E. Boulding, Economic Analysis (New York: Harper & Brothers, 1941). 13 William Fellner, Competition Among the Few (New York: Alfred A. Knopf, 1949). ■^Edward H. Chamberlin, The Theory of Monopolistic Competition. A Re-orientation o£ the Theory of Value (seventh edition; Cambridge: Harvard University Press, 1956). 20 E. A. G. Robinson, The Structure of Competitive Industry; ^ 1 6 and Fritz Machlup, The Economics of Sellers* Competition. Pricing in Big Business.^ by A. D. H. Kaplan, Joel B. Dirlam, and Robert F. Lanzillotti contains case materials on the pricing of selected products. There is much information that is of interest, though pricing of fishery products is not studied. Fisheries Studies. C. J. Bottemanne*s Principles of Fisheries Development,^ published in 1959, is the most recent general text. Bottemanne presents generalized back ground material relative to the development of fisheries, taking most of his examples from fisheries in the North Sea and in Indonesia, where he was head of the fisheries administration for a period of time. Unfortunately, only in a very general way are his comments applicable to exist ing conditions in southern California. 15 E. A. G. Robinson, The Structure of Competitive Industry (Chicago: The University of Chicago Press, 1958). 16 Fritz Machlup, The Economics of Sellers* Competi tion (Baltimore: The Johns Hopkins Press, 1952). ^A. D. H. Kaplan, et al., Pricing in Big Business. A Case Approach (Washington, D.C.: The Brookings Institu tion, 1958). 18 C. J. Bottemanne, Principles of Fisheries Develop ment (Amsterdam: North-Holland Publishing Company, 1959). 21 The Economics of Fisheries (1957), edited by Ralph Turvey and Jack Wiseman under the auspices of the Food and Agriculture Organization of the United Nations, contains several discerning articles on world fishery problems. The 19 scholarly article by Ralph Cassady, Jr. on the problems of marketing fresh fish in the United States is of par ticular interest. Upon completing Dr. Cassady's analysis, the reader is in a better position to appreciate the dis tinct advantage tuna canners enjoy in marketing a fish product that does not require special handling and storage. Books that take up the economic problems of fisher ies usually deal with the older fisheries of the world-- primarily with the European fisheries of the Atlantic Ocean and North Sea. Only a few paragraphs or pages are devoted to the activities and problems of the southern California tuna fisheries. Consequently, general treatises of this nature are not of use in studying conditions in southern California. Canning. Studies have been published concerning the biochemical problems involved in preserving foods. Such studies are outside the scope of this dissertation. 19 7Ralph Cassady, Jr., "The Marketing of Fishery Products in the United States," The Economics of Fisheries. Ralph Turvey and Jack Wiseman, editors (Rome: The Food and Agriculture Organization of the United Nations, 1957), pp. 180-205. 22 The regional aspects of tuna canning and its second ary importance compared to fruit and vegetable canning perhaps account for the fact that no industry studies open to the public have been published dealing specifically with the current economic problems of the southern California tuna-canning industry. Histories. A history of tuna fishing has yet to be written. In fact, a definitive history of commercial fish- 20 ing has not appeared in print. w In the aggregate, how ever, there is a wealth of material that has been published on tuna fisheries, consisting sometimes of a paragraph, a sketch, or a description in studies in the several fields of learning. In fact, the references to tunas appear in works treating the most diverse subjects. There are allusions to tunas in histories of art, of numismatics, and of nutri tion; and in general histories of the Mediterranean civili zations, and of Japan. Greek scholars, including Aristotle, Oppian, Edian, 20See Henry Gascoyen Maurice and E. A. Power, "Fisheries," Encyclopaedia Britannica (1960), IX, 294; also L. J. Lebret and J. Sauvee. Pfecherfes mondiales et ma^che du poisson. Institut National de la Statistique et des Etudes Economiques, Vol. 1 (Paris: Presses Uhiversitaires de France, 1950), p. 7; and A. Thomazi, Histoire de la pgche des ages de la pierre ' k nos lours (Paris: Payot, 1947), p. vii. 23 and others re£er to the economic importance of tunas in the Mediterranean. Likewise, several literary classics, in cluding Homer's works and Cervantes' La Ilustre Fregona, note the economic importance of tunas to their respective civilizations.^ One of the most meticulous accounts of tuna fisher ies in the Mediterranean is found in A. Thomazi, Histoire 22 de la pSche des ages de la pierre a nos lours (1947). The author demonstrates the fundamental importance of tuna through the ages as a staple food for many of the inhabit ants along the Mediterranean and in other parts of the world. Several encyclopaedias published in France, Spain, Portugal, and Italy have fruitful articles detailing the economic development of tuna fisheries in specific regions of the Mediterranean. In like manner, standard works on Japan outline in some detail the role of fish in the development of the Japanese economy. These include: ^"Thynnos," Paulvs Real-Bncvclop&dleder Classis- chen Altertumswissenschaft (Neue Bearbeitune). (Stuttgart: J. B. Metzlersche Verlagsbuchhandlung, 1937), VI, 719-34; and Miguel de Cervantes Saavedra, La Ilustre Fregona. in Novelas Eiemplares. Vol. II (Barcelona: Biblioteca Clasica Espaftola D. Cortezo y C. a., 1886), pp. 44-43. 22 Thomazi, op. cit., pp. 1-644. 24 Basil H. Chamberlin, Things Japanese (1939);2^ Jerome B. O / Cohen, Japan’s Postwar Economy (1958); and Robert Karl Reischauer, Early Japanese History (c. 40 B.C. ~ A.D. 1167), published in 1937.25 State of California Publications Starting in 1913, the Department of Fish and Game of the State of California has published more than one hundred fish bulletins to date, detailing significant biological and statistical data concerning species of fish landed by California marine fishermen. These bulletins are authori tative, and are widely quoted by marine biologists studying Pacific fishes, including pelagic species. Of particular interest in the study of tunas are: H. C. Godsil, The High Seas Tuna Fishery of California (1938),2^ Phil M. Roedel, Common Ocean Fishes of the 23 Basil H. Chamberlin, Things Japanese (sixth edi tion revised; London: Kegan Paul', Trench, Trubner & Co., Ltd., 1939). O / Jerome B. Cohen, Japan * s Pos twar Economy (Bloom ington, Indiana: Indiana University Press, 1958). 25 Robert Karl Reischauer, Early Japanese History c. 40 B.C. - A.D. 1167 (Princeton: Princeton University Press, 1937). 2^H. C. Godsil, The High Seas Tuna Fishery of Cali fornia. California Department of Fish and Game, Fish Bulletin No. 51 ([Sacramento]: California State Printing Office, 1938). California Coast (1953),^ and H. C. Godsil and Edwin K. Holmberg, A Comparison of the Bluefin Tunas. Genus Thunnus. from New England, Australia, and California (1950).^® The information in the foregoing bulletins reveals what is known of the biological characteristics of the tuna can ners * raw material. In addition, the annual California commercial fish catch is detailed periodically in the bulletins. United States Federal Government Publications The most important agencies of the Federal Govern ment in the study of tuna fisheries and tuna canning are the Fish and Wildlife Service and the Tariff Commission. Fish and Wildlife Service. The Fish and Wildlife Service of the United States Department of the Interior publishes statistical data which are of inestimable value in studying the economic facets of fisheries. The specific publications, several of which consist of only a few mimeo graphed pages, include the following: 27 Phil M. Roedel, Common Ocean Fishes of the Cali fornia Coast, California Department of Fish and Game, Fish Bulletin No. 91 ([Sacramento]: California State Print ing Office, 1953). 28 H. C. Godsil and Edwin K. Holmberg, A Comparison of the Bluefin Tunas, Genus Thunnus, from New England" Australia, and California, California Department of"Fish and Game, Fish Bulletin No. 77 ([Sacramento]: California State Printing Office, 1950). 26 20 Fishery Statistics of the United States is a substantial volume, published annually, which contains data on fish catches by species, numbers of fishing and transporting craft in vise, and other pertinent information presented for the most part in tabular form. This is the basic statistical summary of United States fisheries. United States Tuna Fishery 1911-1958.^ compiled by E. A. Power, is a tabulation in twelve mimeographed pages of tuna catch data. Commercial Fisheries Review*^ is a monthly compila tion of news of the domestic and foreign fishing industry. 30 Japanese Fisheries Based in Overseas Areas is a succinct review as of 1956 of Japanese activity in those countries where Japan has established overseas fishing ventures. 20 United States Fish and Wildlife Service, Fishery Statistics of the United States. 1957 (Statistical Digest No. 44. Washington, D.C.: United States Fish and Wild life Service, July, 1959). 30 E. A. Power (comp.), United States Tuna Fishery 1911-1958. United States Fish and Wildlife Service, Fishery Lea£let?84 (Washington, D.C.: United States Fish and Wildlife Service, 1959). 31United States Fish and Wildlife Service, Com mercial Fisheries Review (Washington, D.C.: United States Fish and wildlife Service, published monthly). ^United States Fish and Wildlife Service, Japanese Fisheries Based in Overseas Areas (Fishery Leaflet No. 485. Washington, D.C.: United States Fish and Wildlife Service, 1959). 27 33 Fishery Products Report P lists weekly receipts of tuna by southern California canneries, in addition to data on the catch of other kinds of fish. This tabulation, published daily, consists of two to four mimeographed pages. It is of local interest to fishermen and tuna canners. Canned Fish Consumer Purchases by Family Character istics (October 1958 - March 1959)^* is a forty-five page pamphlet that presents data graphically and in tabular form on the consumption of canned tuna, canned salmon, and canned sardines. The over-all picture appears clearly, but this is only a beginning of more intensive work needed in the area of consumer demand for canned tuna. The Fish and Shellfish Preferences of Household 35 Consumers, prepared by W. H. Stolting, M. J. Garfield, and D. R. Alexander of the Fish and Wildlife Service, is 33United States Fish and Wildlife Service, Fishery Products Report P (San Pedro, California: United States Fish and wildlife Service, issued daily). (Mimeographed.) ^United States Fish and Wildlife Service, Canned Fish Consumer Purchases by Family Characteristics. October 1958 - March 1959 (Fishery Leaflet 478h. Washington, D.C.: United States Fish and Wildlife Service, 1959. 35W. H. Stolting, M. J. Garfield, and D. R. Alexander, The Fish and Shellfish Preferences of Household Consumers. United States Fish and Wildlife Service, Research Report 200 (Washington, D.C.: Government Printing Office, 1956). 28 a detailed survey undertaken in 1955 to uncover the forces affecting consumption of canned tuna. Specific information as to who buys canned tuna is of vital interest to tuna canners, advertising agencies, brokers, and retail stores. This study, therefore, serves a vital function. In a dynamic economy its useful life, however, is limited, and therefore additional surveys are needed at the present time. Survey of the Domestic Tuna Industry, ° by A. W. Anderson, W. H. Stolting, and associates, published in early 1953, is a comprehensive, factual description of the tuna fisheries in the United States. The objective of the study is to present legislators with the facts concerning the long-range position of the domestic tuna fisheries. Equipped with this information, pertinent government com mittees would then be in a better position to determine the form of aid, if any, the Federal Government should render the tuna fishermen. This survey complements the studies of the United States Tariff Commission. The Survey is an excellent reference for data on the development of tuna fisheries, and on the problems facing tuna fishing boat operators and fishermen as of 1952. 36 A. W. Anderson, et al.. Survey of the Domestic Tuna Industry. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 104 (Washington, D.C.: United States Fish and Wildlife Service, 1953). 29 Since 1952, however, changes have occurred with such rapidity that much of the material is now out-of-date. The tuna-canning industry occupies only a very minor position in the survey. The canners are considered from the point of view of the fishermen, as the buyers of the fishermen’s production. Principles and Methods in the Canning of Fishery 07 Products by Norman D. Jarvis, published by the Fish and Wildlife Service in 1943, is still a standard reference detailing the tuna-canning procedure. OQ Canned Fish & Byproducts is an annual publication consisting of some twenty pages of tables showing the domestic output by year of canned fish and shellfish. This publication, therefore, enables the reader to refer to the annual figures of output and value of the several packs of domestic canned fish. United States Tariff Commission. Under the sponsor ship of the United States Tariff Commission two reports have been prepared in recent years on the southern 37 Norman D. Jarvis, Principles and Methods in the Canning of Fishery Products. United States Fish and Wild life Service, Research Report 7 (Washington, D.C.: Govern ment Printing Office, 1943). •^United States Fish and Wildlife Service, Canned Fish & Byproducts— 1958 (C.F.S. No. 2021. Washington, D.C.: United States Fish and Wildlife Service, 1959). (Duplicated.) 30 California tuna fisheries. These reports are factual, detailed accounts of the development of the fisheries and of the nature of their competition. The principal purpose of the studies is to provide background material for legis lators and others concerned with the imposition of tariffs on imported frozen tuna. A second objective is to review the events that led to the enactment of a tariff on tuna canned in oil and on tuna canned in brine. The first United States Tariff Commission study in recent years is entitled Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution by the Committee on Finance of the United States Senate, Dated June 26, 1952.^ The report appeared in print in March, 1953. This report sets forth an account of the development of the American tuna fisheries, noting in some detail the rise of imports of raw tuna in the 1950's. The report contains useful tabulations of fishing craft, fish land ings by species, and other data. In 1957 the United States Tariff Commission prepared a second report, entitled Tuna Fish, Report on Investiga tion Conducted Pursuant to a Resolution by the Committee 39 United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution by the Committee on Finance of the United States Senate. Dated June 2 6, 1952 (Washington. D.C.: United States Tariff Com- mission, March, 1953). 31 on Finance of the United States Senate, Dated August 20, 1957.^ and published in May, 1938. This report in a concise manner brings the development of the tuna fisheries up to the end of 1957. As is true of the first report, the data are presented in a factual, objective manner. The reader is left free to draw his own conclusions. The essential value in the Tariff Commission's reports lies in the data they collect conveniently under one cover relative to the problems facing tuna fishermen. In addition, the reports bring out the complex, economic interrelationships between the tuna fishermen and the canners. United States Department of Agriculture. The Department of Agriculture's studies of food marketing and food consumption are excellent references relative to demand problems facing tuna canners. The Department of Agriculture's publication entitled Marketing. The Yearbook of Agriculture. 1954.^ presents in succinct articles the role of brokers, retailers, and other 40 United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution bv the Committee on Finance of the United States Senate. Dated August 20, 1957 (Washington. D.C.: United States Tariff Commission, May, 1958). 41 United States Department of Agriculture, Market ing, The Yearbook of Agriculture. 1954 (Washington, D.C.: Government Printing Office, 1954). 32 institutions in the American marketing scheme. Food, the Yearbook of Agriculture. 1959.^ contains information of interest relative to the national diet. Consumption of Food in the United States 1909-52.^ published September, 1953 by the Bureau of Agricultural 44 Economics and the supplements which appeared in 1957 and 1958^ contain tables that throw light on the interrela tionships of the major protein foods in the American diet. Miscellaneous Publications The Food and Agriculture Organization of the United Nations collects statistical data which it publishes in the Yearbook of Fishery Statistics. The latest issue is 42 United States Department of Agriculture, Food. The Yearbook of Agriculture. 1959 (Washington, D.C.: Government Printing Office, 1959). ^United States Bureau of Agricultural Economics, Consumption of Food in the United States 1909-52 (Agri- cultural Handbook No. 62. Washington, D.C.: Government Printing Office, September, 1953). ^United States Bureau of Agricultural Economics, Supplement for 1957 to Consumption of Food in the United States 1909-52 (Supplement for 1957 to Agricultural Hand book No. 6 2 . Washington, D.C.: Government Printing Office, September, 1958). ^United States Bureau of Agricultural Economics, Supplement for 1958 to ConamnpfHrmof Food in the United States 1909~52 (Supplement for 1958 to Agricultural Hand book No. 6 2 . Washington, D.C.: Government Printing Office, August, 1959). 33 A.6 the Yearbook of Fishery Statistics 1958, published in 1959. The statistical data present useful comparisons of the fish landings of important commercial species in the countries of the world. Pacific Fisherman.^ a monthly publication, has reported the news and vicissitudes of Pacific Coast fisher ies since 1903. As a result, Pacific Fisherman is an excellent source of month-to-month information on major issues facing the West Coast fishing fleets. The publica tion also covers the newsworthy activities of the West Coast canners. The consumer analyses issued by leading newspapers are useful in bringing out the degree of brand stability from one year to the next in the purchase of canned tuna. The consumer analyses also reveal the surprising variations in popularity of different brands from city to city. Bibliographies A Q Genevieve A. Corwin's A Bibliography of the Tunas, ^Food and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1958. Vol. IX (Rome: Food and Agriculture Organization, 1959). ^ Pacific Fisherman, published monthly except Janu ary when publication is semi-monthly, by Miller Freeman Publications, Portland 5, Oregon. 48 Genevieve A. Corwin, A Bibliography of the Tunas (Sacramento: Fish and Game Division of the State oi Cali fornia, 1930). and Wilvan G. Van Campen and Earl E. Hoven’ s Tunas and Tima Fisheries of the World, An Annotated Bibliography. 1930- 1953,^ are useful. Both bibliographies are detailed and scholarly, in ternational in scope, covering biological, ichthyological, oceanographic, and zoological journals, and government technical publications. The usefulness of the bibliogra phies would be enhanced if articles in economic journals, business publications, and newspapers were covered. None theless, many of the references have a peripheral bearing on the economic development of tuna fisheries and can neries. ^Wilvan g. Van Campen and Earl E. Hoven, Tunas and Tuna Fisheries of the World, An Annotated Bibliography. 193Q-55T United States Fish and Wildlife Service, Fishery Bulletin No. Ill, Vol. 57 (Washington, D.C.: Government Printing Office, 1956). CHAPTER II EVOLUTION OF TUNA FISHERIES More numerous and more prolific in reproducing than animals, and inhabitants of a three-dimensional medium, fish make a strong economic contribution, furnishing a livelihood for thousands of men and women throughout the world. In fact, since time immemorial fishing has been a way of life that has provided protein food for millions of inhabitants living on or near bodies of water. Fish have always constituted the most important biological resource of the sea. Yet, of the twenty-five thousand species of marine fishes ichthyologists have collected and identified to date, only 6 per cent are used today, and only 2 per cent are known to be of economic importance. Trenchant, biological characteristics of fish, which have economic implications, are brought out in the follow ing passage: Life starts in the sea. . . . A creature which has become perfectly adapted to its environment, an animal whose whole capacity and vital force is concentrated ^Lionel A. Walford, Living Resources of the Sea. Opportunities for Research and Expansion (New York: The Ronald Company, 1958), pp. 226-29. 35 36 and expended in succeeding here and now, has nothing left over with which to respond to any radical change. Age by age it becomes more perfectly economical in the way its entire resources meet exactly its current and customary opportunities. In the end it can do all that is necessary to survive without any conscious striving or unadapted movement. It can therefore beat all competitors in the special field; but equally, on the other hand, should that field change, it must become extinct. . . .2 This analysis applies to the tunas. In their spe cific marine environment the tunas display extraordinary strength and endurance. Yet, withdrawing the tunas from their natural environment for only a few moments and then immediately returning them to the ocean so weakens the fish that the subsequent survival rate has been low. This failure to accept change poses a major problem in trying to tag the tunas and thereby uncover migration patterns.^ The tunas are omnivorous, apparently willing to feed on whatever is available. They travel in schools which consist of a single species or sometimes include a small admixture of a second species.^ They are powerful o Gerald Heard, The Source of Civilization (London: Jonathan Cape, 1935), pp. 66-67. ■^Pacific Marine Fisheries Commission, Third Annual Report of the Pacific Marine Fisheries Commission for the Year 1950 to the Congress of the United States and to the Governors and Legislatures of Washington, Oregon, and California (Portland. Oregon: Pacific Marine Fisheries Commission, 1950), p. 13. ^Inter-American Tropical Tuna Commission, Annual Report for the Year 1956 (La Jolla, California: Inter- American Tropical Tuna Commission, 1957), p. 56. 37 swimmers, maintaining at times speeds of 20 knots, and thus are able to cross an ocean in the same time as a freighter. Tunas are found in temperate, semi-tropical, and tropical waters throughout the world, and as a result almost every maritime country located in these zones has fishermen engaged to some extent in the capturing of tunas. For centuries, fishermen and others along the Mediterranean and elsewhere have observed the migrations of tunas. Yet, "present knowledge of important facts respecting age, growth, migration, aggregation habits, and other aspects of the biology and life history of the tuna species are ex tremely meager. From the earliest of times, through a process of trial and error and experimentation, generation after generation of fishermen have concentrated their efforts on capturing those kinds of fish they deemed to be of greatest economic value. The history of commercial fishing from ancient times to the modem era, and specifically the evolution of the tuna fisheries, give insights into today's current economic problems of the tuna-canning industry. * * Edouard Le Danois, Fishes of the World (London: George C. Harrap & Co., Ltd., 1957), p. 102. 6Inter-American Tropical Tuna Commission, Annual Report for the Year 1952 (La Jolla, California: Inter- American Tropical Tuna Commission, 1953), pp. 4-5. 38 I. IMPORTANCE OF FISHING IN ANCIENT TIMES The world-wide, fundamental importance of fishing in ancient times is readily apparent upon examination of diverse sources of information, including pertinent writings, records, inscriptions, implements, coins, art objects, and folklore which have survived to the present day. Some of the fish hooks and harpoons in existence today date back to the Stone Age. With the discovery and very gradual use of metals, it became possible to fashion more effective hooks and harpoons. Specific relics per taining to fishing in antiquity have been found in the Mediterranean countries, in southeastern Asia and Japan, in Oceania, North America, and South America. In ancient Egypt fishing was important, at times providing for many inhabitants almost the sole source of nourishment. Since consumption of fish was basic to the ancient Egyptian economy, fish provided a reliable source of taxation. Through the years the Egyptians improved their methods of catching fish so that during the first dynasty of the Pharaohs fishermen used nets, as revealed by pictures preserved in Egyptian tombs.^ In China, designs on bone and on fragments of wood Ja. Thomazi, Histoire de la peche des ages de la pierre a nos jours (Paris: Payot, 1947), pp. 38-40. 39 dating from 1500 B.C. and earlier depict several methods O of fishing, including the use of nets. Fishing was basic to the life of many communities in ancient Greece. Heriod, Eschyles, and Aristophanes made frequent allusions to fishing which are perfectly clear to the modem reader, since they refer to methods which have changed very little through the centuries. Aristotle classified fish into no fewer than 110 species, a signi ficant achievement when one considers that in the sixteenth century barely 150 species were known.9 II. ECONOMIC IMPORTANCE OF TUNA FISHERIES IN THE MEDITERRANEAN There is ample evidence that dating back to early antiquity inhabitants along the Mediterranean fished systematically for tunas and tunalike fish with planning and forethought.^- ® The Greco-Roman Period Aristotle, Plutarch, Edian, and Oppian wrote in considerable detail concerning the anatomy, habits, and 8Ibid.. p. 55. 9Ibid., pp. 156, 165. •*-®Albert C. L. G. Gllnther, An Introduction to the Study of Fishes (Edinburgh: Adam and Charles Black, 1880), p. 458. 40 importance of tunas.Later research has revealed Aristotle*s information on the habits of fish and their migrations to be surprisingly correct. In the Greco- Roman period, the economic importance of tuna in the Mediterranean area was greater than that of any other fish, constituting a basic, very important source of food.^ The Greeks used tuna when possible to provision their troops. The Greeks and Romans prepared tuna dishes in several ways. They fried or boiled tuna; they preserved it by salting or pickling. Gourmets esteemed certain tuna dishes. For instance, the Romans were partial to saltamentum sardicum, a salted tuna preparation. But, basically, tuna constituted a staple food in the Greco- Roman world for many of the inhabitants along the Mediter- 14 ranean. The demand for tuna was such that the yield to fishermen was at a very high rate of profit compared to 11 Thomazi, op. cit., pp. 175-76. ■^Glinther, op. cit., p. 3. •^With reference to the basic importance of tuna during the Greco-Roman period, see "Thynnos," Paulvs Real-Encyclop&die der Classischen Altertumswissenschaft (Neue Bearbeitung; Stuttgart, J. B. Metzlersche Verlagsbuchhandlung, 1937), VI, 723, which states: "Der Thynnos (Thunfisch) ist als der wirtschaftlich wichtigste Fisch des Mittelmeeres, der ftir die Volksern&hrung die grbsste Bedeutung hatte. ..." 14Ibid.. p. 731. 41 the profit derived from catching most other fish.^ During the appropriate season, year after year thousands of fishermen from the Straits of Gibraltar to the Bosporus pitted their skills against the tunas. In ancient times certain localities, including Gades (Cadiz), Sardinia, and the islands of Euboea, Samos, and Scaria became noted for their salted tuna.^ As early as the seventh and sixth centuries B.C., Cyzicus in Greece had a tuna fish imprinted on its coins, and, in recognition of its importance to the community, adopted the tuna fish as the badge of the city. About 400 B.C. the town of Solus in Sicily, and from approxi mately 250 B.C. to 206 B.C. Gades (Cadiz), used coins on which the outlines of a tuna fish appeared.^ Methods of Catching Tunas The Greeks and other fishermen in the Mediterranean developed several methods of catching tunas which have been Lafaye, Georges, "Piscatio et Piscatus," Dietion- naire des antiquites greques et romaines (Paris: Librairie Hachette et Cie., 1919), IV, 489-^4. ^See Thomazi, op. cit.. p. 209; and C. L. Cutting, Fish Saving, A History of Fish Processing from Ancient to Modem times (London: Leonard Hill Books Limited, 1955). p. 20. ^Barclay V. Head, Historia Numorium. A Manual of Greek Numismatics (second edition: Oxford: Clarendon Press. l9il), pp. I/T70-71, 522-23. 42 found so fundamentally effective that they still are practiced today in the Mediterranean and elsewhere. One method consisted in setting up nets across inlets where the schools of tunas would appear periodically. Another method consisted in having four or five boats, each with twelve oarsmen, surround a school of fish and then simultaneously actuate large nets.^® It was common to have trained lookouts standing quite still, stationed on a strategically located promon tory, gazing at the water, ready to give a signal upon 19 sighting a school of tuna. Additional ways of catching tunas, devised centuries ago and still practiced at the present time, include pole fishing with live bait, hauling seines from suitable beaches, harpooning (sometimes using torches), trolling, and the use of traps.^ In short, basic methods of catching tunas in the Mediterranean and in other parts of the world remained for the most part virtually unchanged during the periods of the Roman Empire, the Middle Ages, and through subsequent years ■^Thomazi, op. cit., pp. 175-76. ^Lafaye, loc. cit. 20 Food and Agriculture Organization of the United Nations, "General Aspects of the World's Tuna Fisheries," Fisheries Bulletin. 2:84, July-August, 1949. 43 down to the twentieth century. In a few localities, along the coasts of the Mediterranean, and off the shores of Sicily, Sardinia, the Balearic and other islands, tuna traps built in part out of rock by the Phoenicians, Greeks, and Romans, are still in use today. Many of the other permanent traps are hundreds of years old, including those 21 near Gibraltar, Marseilles, Toulon, and Bizerte. For centuries, these traps have provided fishing villages with their means of livelihood, and today continue to play an important part in the economic activities of those com- munities. Among the most significant sets of traps from the point of view of continuous yield through the centuries are those located in Spain at Conil, Zahara, and Tarifa, close to Gibraltar, formerly under the jurisdiction of the dukes of Medonia-Sidonia. For many centuries during the fishing season the traps attracted not only fishermen, but also vagabonds, scoundrels, and others interested in quick pecuniary gain. Cervantes analyzes the sociological 99 aspects of these traps in La Ilustre Freeona. It is ^•Hchomazi, op. cit.. pp. 472-86. 9 9 ^Miguel de Cervantes Saavedra, La Ilustre Fregona. in Novelas Ejemplares. Vol. II (Barcelona: Biblioteca Clasica Espaifola D. Cortezo y C. a., 1886), p. 44. Cervantes epitomizes the tuna traps at Zahara as ". . . el finibusterre de la picaresca . . . no os llameis pfcaros si no habeis cursado dos cursos en la academia de la pesca de los atunes. ..." 44 estimated that the yield in Cervantes' time came to one hundred thousand fishes a year, and that making nets, catching, curing, salting, and transporting the catch pro- 23 vided employment for several thousand men. Forces Influencing Size of the Tuna Catch The trend over the decades toward population in creases in the villages and towns along the Mediterranean, as well as the development of inland population centers, increased the demand for salted tuna. The stability of the tuna markets increased. The markets benefited from the building of better roads; the introduction of more effec tive methods of handling and preserving fish; the existence of longer periods of peace, law and order; and the greater prevalence of a money economy. At times, other forces tended to curtail the catch. Typically, tuna fishing tended to decline in the Middle Ages in areas under Moorish dominance, inasmuch as the 0 / Moors preferred other fish to tuna. Disappearance of tunas from their customary ranging areas for a period of years, or perhaps never to return, occurred at times in the Mediterranean and elsewhere, and is thought possibly to be related to temperature changes ^Thomazi, op. cit., pp. 481-82. ^Ibid.. p. 268. 45 of the water. Geological disturbances, such as the Novem ber 1, 1755 earthquake which destroyed Lisbon, resulted in the tunas' largely disappearing from the immediate Portu guese coast, and frequenting in greater numbers Italian, Sardinian, and Sicilian shores.Between 1820 and 1830 the catches off the Italian and Sicilian coasts fell to a O /T very low level for unknown reasons. The economies of the several areas obviously were affected. In the second half of the twentieth century scienti fic knowledge still has not advanced to the point at which it is possible to predict in advance with accuracy the size of catches for specific waters. Marine biologists surmise that in some situations causal factors of signi ficant fluctuations may be attributed to depletion of a given age bracket of tunas and to changes in water tempera ture.27 25 R. Demoll, FrUchte des Meeres (Berlin: Springer- Verlag, 1957), p. 93. ^^Umberto DfAncona, "Tonno," Enciclopedia Italians di Scienze (Milan: Instituto della Enciclopedia Italiana, 1937)7 XXXIII, 1032. o 7 ^ Der Fang von Thunen [1958] ging auf einen geringen Bruchteil des Vorjahres zuriick. Auch die Thunangelfischerei im eigentlichen Sinne verlor mehr als die H&lfte ihres Umfanges und 32% ihres mittleren Tagesertrages . . . Nach den laufenden Beobachtungen des Instituts fttr Kiisten- und Binnenfischerei wurde anscheinend seit 1952 der Fang bestimmt durch einen Bestand von alten, damals etwa zehnj&hrigen Thunen, der 1957 erschbpft war. JUngerer Nachwuchs, der dann auftrat, ist zudem wahrscheinlich in dem abnorm kalten Sommer 1958 nicht wie 46 Tuna Fishing in the Nineteenth and Twentieth Centuries During the nineteenth century there was a consider able increase in the tuna catches. This increase was the result of the interaction of several fundamental socio economic trends, including on the demand side population growth, higher personal income, improved methods of transportation, and better organized markets; and on the supply side, larger and better-built fishing boats, sturdier nets, more widespread dissemination of technical fishing information, and better methods of fish preserva tion. These changes, however, occurred slowly. During the period between 1930 and 1948, according to estimates of the Food and Agriculture Organization of the United Nations, between twenty thousand to forty thousand metric tons of tunas and tunalike fish were landed annually, taken from the western Mediterranean and coastal Atlantic waters off the Iberian Peninsula. These estimates may be too low, as reliable data for several of the coun tries are lacking.2* * The annual catches of tunas and tunalike fish in liblich eingewandert." See Bundesministerium fllr Ern&hrung, Landwirtschaft und Forsten, Jahresbericht Uber die Deutsche Fischwirtschaft 1958 (Berlin: Verlag Gebr. Mann, October, l9f>9), p. 149. 28 ‘ ‘ ■ ' ’Food and Agriculture Organization of the United Nations, "General Aspects of the World’s Tuna Fisheries," op. cit., pp. 84-87. 47 the Mediterranean and in the immediate Atlantic waters off Europe and West Africa have increased significantly during the 1950's. The Food and Agriculture Organization of the United Nations has reported catches of tuna and tunalike fish by country as indicated in Table I. France and Algeria. There were 829 French tuna boats operating in the Atlantic, and 4,636 in the Mediter- 29 ranean in 1956. Good fishing off the African coast and improvements in vessels resulted in an estimated 53 thous and metric ton catch in 1958. There are a number of canneries in France that pack tuna, small quantities of which are exported. Portugal. There is evidence that Genovese and Sicilian entrepreneurs in the latter Middle Ages developed the tuna fisheries of Algarve, Portugal's southernmost province. Since that period tuna fisheries have been of paramount economic importance to a number of small ports in Portugal. The first tuna canneries were started in southern 29 ✓ 1. . J. Lebret and J. Sauvee, PScheries mondiales et marche du poisson, Institut National de la Statistique et des Etudes Economiques, Vol. I (Paris: Presses Uni- versitaires de France, 1950), Table IV, p. 81. 30 Donald R. Johnson, "World Tuna Fishery" (paper read at the Industry Tuna Meeting, La Jolla, California, May 19-21, 1959), p. 20. 48 TABLE I TUNAS AND TUNALIKE FISH LANDED BY COUNTRY* (in Order of Magnitude in Thousand Metric Tons) Country 1953 1958 Asia Japan India Thailand Taiwan South Korea Turkey Philippines Ceylon Ryukyu Islands Other Total 507.3 132.4 48.0 22.4 45.7 21.8 28.3 5.1 3.4 5.6 820.0 813.0 176.3 44.3 43.8 38.5 31.0 28.7 9.7 8.9 5.8 1,200.0 Europe Spain 44.8 France (incl. Algeria) 48.6 Portugal 14.5 Norway 22.6 Netherlands 11.0 Sweden 11.2 Italy 2.6 Germany (Fed. Rep. of) 3.8 Other 30.9 Total 190.0 73.5 53.0 18.9 17.5 15.4 13.3 13.0 12.6 32.8 250.0 North America United States (excluding Hawaii) Canada Mexico Other 150.6 12.7 3.3 (est.) 3.4 172.4 9.5 5.4 2.7 Total 170.0 190.0 (est.) 49 TABLE I (continued) TUNAS AND TUNALIKE FISH LANDED BY COUNTRY* (in Order of Magnitude in Thousand Metric Tons) Country 1953 1958 South America Peru 54.8 60.0 (est.) Chile 9.0 14.7 Argentina 10.7 13.0 Venezuela 5.1 5.8 Other .4 86.5 Total 80.0 180.0 Africa . Angola 19.0 29.2 Union of South Africa 19.2 29.2 Morocco 9.8 24.0 Somalia 5.4 10.0 (est.) Other 16.6 17.6 Total 70.0 110.0 Oceania American Samoa 8.0 (est.) Hawaii 5.5 4.5 Other 1.5 3.6 Total 7.0 16.1 U.S.S.R. 20.5 10.0 (est.) Australia 3.0 (est.) 3.9 *Food and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1958, Vol. IX (Rome: Food and Agriculture Organization, 1959), Table C-6, pp. c36-c38. 50 Portugal in the latter nineteenth century. Portugal's strategic location relative to Mediterranean and Atlantic fishing grounds, the traditions of seamanship, availability of olive oil and a labor force for the canneries all are 31 conducive to future expansion. Spain. Spanish fishermen are exceptionally fortu nate in that important fishery resources in both the Mediterranean and the Atlantic are located close to Spanish shores. Locational advantage, in addition to a long fish ing tradition and the availability of tin and oil for can- 32 ning of fish, all favor future growth. Tuna fishing rights in Spain, starting in the Middle Ages, were the hereditary privilege of certain noble families. In 1817 the Spanish Crown abolished these rights, and initiated the practice of awarding the various tuna fisheries to the highest bidders for periods of twenty-five to thirty years. In 1928 the Consorcio Nacional Almadrabero, a semi-government organization in which fishery operators and canners own shares of stock, concentrated the tuna fisheries into five stations in the 91 See "Atum," Grande Enciclopedia Portuguesa e Brasileira (Lisbon; Editorial Enciclopedia, Limitada, 1935), III, 699-703. 99 Pascual Diaz de Rivera y Caseres, Politica Pesquera (Madrid: Ministerio de Trabajo, Escuela Social, 1944), pp. 9-14. 51 33 provinces of Cadiz and Huelva. J Spanish government scientific agencies have con ducted studies of tunas and other commercial fish. How ever, the extent to which some of the species enter the Mediterranean still is not known. In recent years the Spanish tuna fisheries have in creased the size of their catches, in part by fishing off the African coast as far south as Dakar.^ Exportation of canned tuna is handicapped by high production costs and by difficulties which the Consorcio Nacional Almadrabero has encountered in securing sufficient tin plate. Turkey. There are thousands of tunas that normally pass through the Dardanelles and the Bosporus every year. Turkish fishermen, therefore, are fortunate in that they need only use small boats and can travel short distances to exploit rich seasonal fishing grounds. Turkey exports tuna and also bonito in various ^ T. E. A. Classen, The Tuna Industry of Southern Spain, United States Fish and Wildlife Leaflet 188 (Chicago: United States Fish and Wildlife Service, 1946), pp. 1-4. ^A. W. Anderson, et al.. Survey of the Domestic Tuna Industry. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 104 (Washington, D.C.: United States Fish and Wildlife Service, 1953), p. 139; and Johnson, op. cit.. p. 17. 35 "'“ 'Anderson, et al.. op. cit.. p. 138. 52 preparations, including frozen, smoked, and canned. Italy and Greece are important importing countries. In recent years the Turkish bonito catch has been many times larger 36 than the tuna catch. Italy. Italian fishermen catch tunas in large nets or traps at a number of locations along the Mediterranean that the fish frequent in their migrations to the Black 07 Sea in the spring and on their return in the fall. Most of the tuna is canned; the end product is heavily salted and packed in olive oil. Consequently, the Italian type of canned tuna differs in taste from that consumed in the United States. Italy is second to the United States as an importer of canned tuna. The suppliers are Portugal, Spain, France, and Turkey.33 III. ECONOMIC ROLE OF TUNA FISHERIES IN JAPAN Fish complements rice as a source of nourishment, and is found as an essential element in the diet of rice- og eating populations. In Japan and southeastern Asia more 36 Johnson, op. cit.. pp. 18-19. 07 J'Anderson, et al.. op. cit., p. 135. 33Johnson, op. cit.. pp. 135-36. 39Henry Gascoyen Maurice and E. A. Power, "Fisher- ies," Encyclopaedia Britannica (I960), IX, 296. 53 edible fish is caught and more rice is grown than in any other region of the world. Dating back to the earliest of times, heavy reliance on fish as the staple protein food has meant close association with the sea. Reliance on fishing as a source of nourishment con tinues to be of fundamental importance to the economies of the Far East and southeastern Asia. It is estimated that there are 3.5 million full-time fishermen in the Orient, who use one million boats and produce 9.5 million tons of edible aquatic products annually. Further, there are several million part-time fishermen, whose aggregate catch obviously is significant but not tabulated.Steady growth in population in recent decades has increased the dependence on fish as a means of survival. Importance of Fishing in Japan The topography of the Japanese archipelago, con sisting of high mountain ranges, a narrow coastal plain, and then the sea, has thrust millions of Japanese through out the centuries into constant contact with marine life and maritime pursuits. The seas surrounding Japan provided a deterrent to expansion during the period of primitive navigation, and likewise afforded Japan protection against < £ h 0 Joseph E. Spencer, Asia East bv South. A Cultural Geography (New York: John Wiley & Sons, Inc., 1954), iT103. 54 attack. There is clear evidence that the courage, deter mination, and skill of Japanese mariners have been at least on a par with that displayed by other maritime nations. Early prominence. Japanese mythology and folklore give prominence to skill in fishing and to the effective ness of fishing implements. This fundamental attitude is revealed by many anecdotes. One of the better known incidents concerns the loss of his brother's fishhook by Hikohohodami-no-mikato. Early Japanese records are replete with references to fishing. The Ama-be, the fishermen's hereditary cor porations, were set up in the period of 40 B.C. to A.D. 510 in the several Kuni (provinces), and paid tribute to the imperial family. There are early records governing the use of weirs and the conducting of other fishing activities.43 Nineteenth century and twentieth century to 1941. In the second half of the nineteenth century Japan's 4^G. A. Ballard, The Influence of the Sea on the Political History of Japan (London: John Murray. 1921). pp. 1-14. 42 Robert Karl Reischauer, Early Japanese History. c. 40 B.C. - A.D. 1167 (Princeton: Princeton University Press, 193?), p. 112. 43Ibid.. pp. 124-25, 194. 55 feudalistic society disappeared in large measure, to be superseded by a new economy embodying elements of capital" ism. The changes brought about a population shift from the country to the emerging industrial centers, all of which are located directly on or close to marine waters. Fur ther, population began to increase at a rapid rate. These developments had an impact on the importance of fishing in that greater quantities of fish were needed and could be readily sold at the going price in fishing villages and metropolitan centers. By 1940 Japan's fish catch came to an impressive 4.5 million tons. The fishing fleet consisted of 354,215 boats, of which, however, only 75,197 were motor-powered.^ War damage 1941-1945. Damage inflicted on the Japanese fishing fleet in the four years between December, 1941 and 1945 was devastating. Sixty per cent of the fish ing fleet was annihilated, as was 56 per cent of ice-making capacity. The annual fish catch plummeted 49 per cent.^ Operation of the surviving boats at the end of the war presented difficult problems. The disruption of transportation facilities, destruction of key industrial ^Asia Kyokai, Japanese Fisheries, Their Development and Present Status (Tokyo: Asia Kyokai, 1957), p. 2. ^ Ibid., pp. 2-3. 56 centers, the general lack o£ fuel, supplies, and spare parts presented the Japanese with formidable obstacles. Post-war period. Following the signing of the Allied-Japanese armistice on September 2, 1945, rebuilding of the Japanese fishing fleet began. By 1955 there were 415,588 fishing vessels, consisting of 1,331,312 tons. The motor-powered vessels came to 144,421 in number, comprising 1,070,364 tons. During 1956 Japan's fisheries produced over ten billion pounds of fish and other aquatic prod ucts. This record volume was twice that of the United States for the same year. Fishery products accounted for 6 per cent of Japa nese exports in 1956, and constituted 10 per cent of Japan's dollar earnings derived from exports to the United States. Japan's marine fisheries are coping with problems of fundamental significance. Depletion of fish in coastal waters is a threat to commercial fishermen. Census figures reveal that the catch brought in by non-motor-driven boats and by boats with motors under three tons, as a percentage 46Ibid., p. 3. 4^United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress on Fresh or Frozen Yellow^in. Skipjack, and Bieeve Tuna (Washington. D.C.: United States Fish and Wildlife Service, May, 1958), pp. 67-68. 57 of total catch, fell from 28 per cent to 17 per cent between 1949 and 1954. One economic effect of the deple tion of fish in coastal waters is to force the marginal 48 fisherman out of business. ° Immediately following the termination of the Second World War, the Allied powers curtailed the areas in which Japanese fishermen were permitted to operate. In the course of the years some of the restrictions have been alleviated. However, to date Nationalist China, Communist China, South Korea, North Korea, and the U.S.S.R. have closed to the Japanese vast rich fishing grounds, not only along the coasts of the several nations, but also thousands of square miles in the Sea of Okhotsk, the North Pacific off Kamchatka, and the Arafura Sea.^ These areas for pre war Japan were the source of important quantities of fish, other marine life, and marine products including pearls. Consequently, these restrictions constitute a heavy economic burden on Japan's economy. Faced with severe restrictions limiting the areas of pre-war fishing activity, the Japanese government, trade AQ Jerome B. Cohen, Japan's Postwar Economy (Bloom ington, Indiana: Indiana University Press, 1958), pp. 40- 41. ^United States Fish and Wildlife Service, Japanese Fisheries Based in Overseas Areas (Fishery Leaflet No. 485. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 1. 58 associations, business men, fishing boat operators, and others sought a new avenue into which they could direct their efforts, experience, and skill, in order to maximize their economic gain. Such an avenue existed in meeting the continuing demand for frozen tuna by southern California canners, and in supplying the demand for canned tuna by United States importers and by importers in other coun tries. Japanese Tuna Fisheries to 1945 All available evidence indicates that through the centuries the Japanese have consumed most of the varieties of tunas found in local waters, and since ancient times have considered tunas as a staple food. Ancient times to 1941. For generations there has been a Japanese consumer market for fresh raw tuna, par ticularly for skipjack, which the Japanese esteem as a nutritive, flavorful dish in its raw state (sashimi), roasted, or dried as skipjack sticks Ckatsuobushi' ) . In Japanese classical literature there are numerous references to tunas as food, thus further substantiating the centuries old importance of tuna fish to the Japanese sociological ■^Supreme Commander Allied Powers, Natural Resources Section, The Japanese Tuna Fisheries (Tokyo: Supreme Com mander Allied Powers, 1948), p. 45. 59 environment and economy.-*^ Fishermen did not have to go many miles to sea to supply domestic needs; consequently, for centuries fishing for tunas typically was limited to offshore operations. During most of the Meiji Era (1867-1912) tuna fishing continued to be conducted on a small scale, confined to 52 local waters. During the 1930’s the Japanese military required enormous quantities of fuel to carry on the war in China and Manchuria, and to occupy several areas on the Asiatic mainland. Further, the military deemed it necessary to stockpile large reserves of fuel for future contingencies. As a consequence, the allotments of fuel to tuna fisheries ^ became so limited in the late 1930's that the scope of fishing operations had to be curtailed. The more progres sive Japanese tuna fish operators therefore drew up plans to develop mothership tuna fleets, a step intended to con serve fuel yet permit catching tunas in promising regions located many miles distant from Japan. xhe motherships were not built prior to the outbreak of war. Yet, in spite of domestic difficulties, with the exception of the years ~ ^Ibid. , p. 6. • ^Ibid. , p. 5. -^Ibid. , p. 10. of the Second World War and the inxnediate rehabilitation period, Japan has been the world's leading producer of tuna and tunalike fish.^ The economic well-being of many villages and of a significant number of towns including Makurazaki, Muroto- zaki, Katsuura, Choshi, Nakaminato, Shiogama, Onogawa, Ishinomaki, Kesenuma, Misaki, and Yaizu, depends on tuna fishing.^ War damage to tuna fleet. The war damage inflicted on the Japanese tuna fleet during 1941-1945 was exceedingly heavy. The war destroyed half the tonnage represented by long distance motor-powered vessels. By 1945 there remained only 373 tuna boats, comprising 28,226 gross tons.^ Japanese Tuna Fisheries--Post-War In 1948, the first year the occupation authorities permitted the exportation of frozen tuna, Japan shipped 2,451 pounds abroad, almost entirely to the United 57 States. In 1957 Japanese exports to the United States -^Anderson, et al.. op. cit.. pp. 118-19. ^United States Fish and Wildlife Service, Japanese Fisheries Based in Overseas Areas, op. cit.. p. 10. 56Ibid., p. 9. c 7 “ "Anderson, et al., op. cit.. p. 122. 61 of frozen tuna at $14.4 million and of canned tuna at $16.2 million came to a total of $30.6 million. In dollar volume, tuna exports accounted for approximately 44 per cent of fish and marine exports to the United States. It was obvious that Japan's exportation of tuna was an import- CO ant source of dollar exchange. Therefore, to secure significant quantities of fresh tuna, Japanese entre preneurs brought up to date and implemented some of their pre-war expansion plans. Oceanic explorations. During the 1920’s and 1930's the Japanese conducted regular and intensive investigations of oceanographic conditions and potential tuna-fishing grounds in several widely dispersed areas. These areas included Indonesian waters, the waters surrounding Palau, Saipan, and Truk, as well as other islands in the Carolines and Marshall Islands.^9 ^United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress . . . , op. cit., pp. 65-66; and United States Fish and Wildlife Service, Fishery Statistics of the United States, 1957 (Statistical Digest No. 44. Washing ton, D.C.: United States Fish and Wildlife Service, July, 1959), pp. 67-68. 5Q 7For detailed biological and other data, primarily from Japanese sources, see the following reports published in 1951 by the United States Fish and Wildlife Service, Washington, D.C.: B. M. Shimada and Wilvan G. Van CampAn (eds.), Exploratory Tuna Fishing in the Marshall Islands. Special Scientific Report: Fisheries No. 47; Fishing in Indonesian Waters. Special Scientific Report: Fisheries No. 45; and Tuna Fishing in Palau Waters. Special 62 In the years following 1948, the Japanese fishing agencies and tuna-fishing fleets have intensified their explorations and widened the scope of their operations. Japanese vessels have crossed practically all those oceanic areas in which there are few, if any, fishing restrictions set forth by individual country or international agreement. Such areas include large sections of the Pacific, the Indian Ocean, and the south Atlantic. In many of these waters temperature and other conditions are suitable for tunas. Yet exact information on the extent of the tuna reserves is not known, as adequate biological data are lacking. Growth of the tuna fleet. The growth of the Japa nese tuna fleet during the period following World War II is impressive, as evidenced by Table II. This growth is sig nificant based on the numerical increase in boats and based on the technical efficiency of the boats of different classes of tonnages. In short, the use of modem refriger ation equipment, up-to-date navigation and communication aids, including gyrocompasses, radar, loran, marine Scientific Report: Fisheries No. 42; Wilvan G. Van Campen (trans.), Exploratory Tuna Fishing in the Caroline Islands. Special Scientific Report: Fisheries No. 46; and Tuna Bait Resources at Saipan. Special Scientific Report: Fisheries No. 44. owJohnson, op. cit.. p. 23. 63 TABLE II GROWTH OF THE JAPANESE TUNA FLEET* 1947-1958 Average Number of Gross Gross Tonnage Year Vessels Tonnage Per Boat 1947 1,314 78,517 60 1948 1,811 101,008 56 1949 1,893 106,897 56 1950 1,895 108,753 57 1951 1,698 103,978 61 1952 1,590 108,319 68 1953 1,672 124,132 74 1954 1,801 154,133 86 1955 1,825 176,243 97 1956 1, 772 197,760 112 1957 1,708 212,095 124 1958 1,694 217,301 128 *For the years 1947-56 see: Donald R. Johnson, ’ ’ World Tuna Fishery" (paper read at the Industry Tuna Meeting, La Jolla, California, May 19, 20, and 21, 1959), p. 4. For the years 1957-58 see: Food and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1958, Vol. IX (Rome: Food and Agriculture Organization, 1959), Table G-4, p. gl5. 64 radiotelephones and echo depth sounders, is becoming wide spread. More efficient tuna boats. Forced by conditions beyond their control to fish in distant waters, the post war Japanese tuna boats tend to be large, modem, and efficient. Thus, they can carry a catch which warrants traveling to fishing grounds in the south Pacific, in the Indian Ocean, and elsewhere. To undertake such long trips, vessels of some 300 tons have been constructed in recent years, which go on voyages of sixty days or more, returning with 140 to 180 tons of fish.^ One of the largest tuna clippers in the Japanese tuna fleet is the No. 31 Hoko Maru. with a gross tonnage of 1,212 tons, owned by a private Japanese firm. The vessel's maiden voyage in 1957 was from Japan, via the Cape of Good Hope, to Genoa, where it was under contract to deliver two thousand tons of tuna.^ In 1957 deliveries of frozen tuna to Italy by thir teen Japanese vessels operating in the Atlantic Ocean exceeded fourteen thousand tons, a quantity sufficiently ^United States Fish and Wildlife Service, Japanese Fisheries Based in Overseas Areas, op. cit.. p. 11. 62 "Twelve Hundred Twelve-Ton Tuna Clipper Fishing for Genoa Trade," Pacific Fisherman. 55:46, June, 1957. 65 large to be of concern to other suppliers of frozen tuna, and also of concern to the Italian government.^ In 1958 approximately 180 Japanese tuna boats in the 350-ton class were operating in the Indian Ocean, exploit ing albacore grounds. Other Japanese boats were tapping rich albacore grounds off Madagascar.^ Motherships in the Pacific caught over fourteen thousand tons of tunas. Mothership operations. The first mothership tuna expedition was authorized by the Supreme Commander Allied Powers on May 11, 1950, and was a successful venture. From June, 1950 to November, 1951, nine expeditions took place which caught a variety of fish, including tunas. Construction and operation of mothership tuna fish ing boats is a bold undertaking that has attracted world wide attention. The catches have been impressive. For instance, three mothership fleets with a total of 103 catcher boats caught about 15,888,000 pounds of tuna and similar species in 1956. This came to 2 per cent of ^"Italians Find Japanese Tuna Landings Excessive," Pacific Fisherman, 56:19, March, 1958. f i l l Indian Ocean Tuna Yield from New Areas Soaring," Pacific Fisherman, 57:24, April, 1959. ^Kenji Sakai, "Japan," Pacific Fisherman, Inter national Yearbook Number, 58:119, January 25, 1960. Anderson, et al., op. cit.. p. 120. 66 67 Japan's tuna catch for that year. Japanese tuna fisheries based overseas. A major program of economic significance in the post-war period is Japan's development of overseas based tuna fisheries. The Japanese government sponsors, assists, and in a general way supervises the operation of the overseas fisheries by private Japanese fishing firms. The Japanese Fisheries Agency, the Japanese Foreign Office, the Japanese Overseas Fisheries Cooperative Society, and the Ministry of Inter national Trade and Industry, all play a part in the organ- 68 ization and supervision of overseas-based fisheries. The Japanese overseas tuna fisheries are conducted under agreements with other countries, and often in con junction with firms operating in other countries. The agreements are the basis for carrying on exploratory expeditions and for refueling ships. The agreements cover transshipments to Japan of fish from an overseas shore location, and furnishing of fish to the local foreign market. For instance, at several overseas locations jointly managed refrigeration plants and canneries are in ^United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress . . ., op. cit., pp. 72-73. 68Uhited States Fish and Wildlife Service, Japanese Fisheries Based in Overseas Areas, op. cit., pp. 1-7; and Johnson, op. cit., p. S. 67 operation. The economic importance in having transshipment points located in other countries, and in having access to efficient refrigeration plants and canning plants, lies in the resultant increase in output at appreciably lower costs than otherwise would be the case. Inherent in the thinking underlying the establishment of overseas fish transshipment and processing bases is the resultant possibility of using hundreds of smaller, somewhat outdated fishing boats which can economically undertake only short fishing voyages. The Japanese Tunaboat Owners Association envisions the possibility of doubling the number of trips smaller long line boats could make in a year by opening operating bases in southeastern Asia. They estimate this would re duce costs sufficiently to enable the boats to fish profitably at the lowest foreseeable tuna price.^ As of 1959 there were approximately 130 Japanese tuna boats based overseas,^ most of which were operating out of Asian and South American countries, listed in Table III. Indicative of the aggressive competitive actions of the Japanese overseas operations are the number and content 69 Johnson, op. cit., p. 7. ■^According to data gathered by the United States Fish and Wildlife Service. See United States Fish and Wildlife Service, Japanese Fisheries Based in Overseas Areas, op. cit.. p. 6. 68 TABLE III JAPANESE TUNABQATS BASED IN FOREIGN COUNTRIES 1959* Country Number of Boats Asia Cambodia 2 Ceylon 2 India 1 Indonesia 2 Iran 1 Malaya 10 Philippines 6 Sarawak 2 Taiwan 4 Mediterranean Countries Israel 3 Italy 16 Morocco 1 The Americas Argentina 4 Brazil 9 Chile 2 Colombia 1 Cuba 1 Haiti 3 Panama 1 Trinidad 1 Venezuela 2 Oceania Samoa 56 New Hebrides 2 *Uhited States Fish and Wildlife Service, Japanese Fisheries Based in Overseas Areas (Fishery Leaflet No. 485. Washington, D.C.: United States Fish and Wildlife Service, 1959), Table 2. 69 of news releases concerning these ventures. In 1955 the Boso Maru explored potential tuna areas In the Caribbean for a Venezuelan firm.71 In 1959 the Else! Maru fished successfully for tuna In the area off St. Helena Island for 72 an Argentinian concern. Late In the autumn of 1957 the first one thousand-ton all-purpose tuna vessel sailed from Mlsakl to the Indian Ocean with a crew of sixty-four, with normal trips anticipated as taking one hundred days.73 Japanese exports of frozen tuna are taking place to Greece, Yugoslavia, and West Germany. The Japanese are reported to be enthusiastic about these new outlets since the Italian government restricted the landings of Japanese Atlantic tuna clippers in Italy in 1959 to twice a year.7^ Importance of albacore to Japan’s economy. The effect that contrasting national tastes has had on the development of the albacore fishery is of economic signi ficance. Since the Japanese public considers albacore Japanese Clipper Tests Caribbean Tuna Resources,” Pacific Fisherman. 53:51, November, 1955. 72 "Japanese Tunaman Lands Second Argentine Trip," Pacific Fisherman. 57:21, April, 1959. 73"One Thousand-Ton Tuna Vessel on Maiden Voyage," Pacific Fisherman. 55:41, January, 1957. 7^United States Fish and Wildlife Service, "Exports of Frozen Tuna to Europe Expanding," Commercial Fisheries Review, 21:68, June, 1959. 70 unpalatable as aaahlmi. the traditional manner in which tuna is eaten, Japanese fishermen found no market for the fish. There are records indicating that as early as the beginning of the nineteenth century Japanese fishermen caught albacore only incidentally and unintentionally. In fact, since the albacore normally were found to be closer to the surface than the other varieties of tunas, the Japanese developed effective long lines which penetrated to great depths, and thus were more likely to hook the non* albacore species.^5 Obliged to export to survive in the modem world, aggressive, determined Japanese trade groups intensively sought new products which would yield foreign exchange. As a source of foreign exchange, Japanese entrepreneurs recog nized albacore as an ideal product to export. Shipments abroad of albacore did not mean diverting needed, saleable products from the domestic market, and furthermore the exportation of albacore did not deplete Japan's precious land resources. In addition, the steady, increasing demand for albacore by southern California tuna canners and the major disappearance of albacore from North American coastal waters in 1926 offered Japanese exporters exceptional 75 Supreme Commander Allied Powers, Natural Resources Section, op. cit.. p. 24. 71 opportunities to sell large quantities of frozen albacore profitably. Finally, exportation of albacore earned United States dollars, the foreign exchange most in demand by the Japanese. Consequently, for these reasons, there were in the 1920*s and 1930's, as there are today, compel ling forces behind Japan's large exportations of frozen albacore. There are two major commercial fishing grounds for albacore in the northwestern Pacific Ocean. The summer fishing grounds are situated near the Japanese coast; the winter grounds are situated in the mid-Pacific region. To fish the tunas in the mid-Pacific, it is necessary to have vessels which are sufficiently sturdy to be safe, and sufficiently large and well-equipped to justify on an economic basis the long voyages to and from Japan. The seas often are rough, therefore the costs of fuel, repairs, 7 f i and maintenance are relatively high. Since, by and large, the unfished fisheries have the maximum number of tunas the environment will support, and since many of the fish are old, hence big, the initial fishing period is likely to yield high returns. In time, the proportion of old fish decline, and concurrently the 76Ibid., pp. 25-28. 72 catch per day will decrease.77 it follows, therefore, that present yields are higher than will probably be true at a later date for a given area assuming the same type of equipment is in use. In recent years the Japanese have been increasing their catch of albacore in the Indian Ocean and the south Atlantic. In terms of geographical expansion, the Japanese will reach a point where there are few rich tuna fishing areas they have not touched, unless they move into the eastern tropical fisheries.78 Economic implications. The determination, concen trated planning, and government-supported exploitation by Japanese fishermen of world tuna fisheries result in signi ficant economic implications. Japanese exporters of frozen tuna seem assured of a continuous supply of raw material. Consequently, in the over-all picture tuna canners in southern California and elsewhere are assured of a bounti ful supply of raw material. The necessity to export in order to survive has forced down Japanese quotations so that they are almost always as competitive, and often are more attractive to the buyer, than are quotations of other suppliers. 77Johnson, op. cit., p. 23. 78Ibid.. p. 6. 73 The efforts of the Japanese tuna fishing fleets also assure Japanese canners of an ample supply of raw material at a reasonable price. As a consequence, Japanese canners are in a position to export their finished product at a competitive price to all areas of the world where a market exists. This affects southern California tuna canners in two ways. First, most of the American institutional market buys imported Japanese canned tuna. Second, exportation of American canned tuna becomes much more difficult than otherwise would be the case. XV. EVOLUTION OF SOUTHERN CALIFORNIA TUNA FISHERIES The southern California tuna fisheries are of very recent origin compared to the number of centuries during which tuna fisheries off Europe and Asia have been con ducted. Abundance of Tunas There are interesting accounts detailing the great abundance of tunas, principally albacore, along the shores, coves, and harbors of southern California during the 1890's and the early 1900's. Fishermen unintentionally caught quantities of albacore while attempting to capture other species. 74 For a number of years albacore continued to be available in large schools close to shore during the fishing season. Thus, during the summer of 1914 fishermen using boats carrying only two men brought in as high as 10 tons of fish in two-day periods. Then, on September 18, 1914, the albacore disappeared for reasons that are unex- 79 plained. In general, during the early 1900's it was possible to catch a boatload of albacore within fifty miles of San Pedro, thereby allowing short trips to sea in small boats, resulting in low operating costs and enabling fishermen to live at home.^0 Albacore Of the different species of tunas, the albacore typically are found closest to shore. For years, however, the albacore were not considered a desirable food. There was no commercial market for albacore in San Pedro, San Q "I Diego, or elsewhere in California. 70 ^California Fish and Game Commission, "Tuna Disappear," California Fish and Game, 1:72, January, 1915. ^Anderson, et al., op. cit.. p. 13. 81 OAEven so famous a naturalist as David Starr Jordan, in speaking of albacore, stated, "As a food fish it is of little value, its flesh being coarse and oily. ..." David Starr Jordan and Barton Warren Evermann, American Food and Game Fishes (New York: Doubleday, Page & Co., 1902), p.2&2. 75 The following year the sardines failed to appear off the coast of southern California, and thereby brought about a crisis for San Pedro fishermen and canners. This crisis led to experiments in the canning of albacore, and the Q O development of a market for canned tuna. The fact that albacore was the first type of tuna promoted commercially in this country led to a predilection on the part of many consumers for white rather than dark meat tuna. Albacore remained the dominant species canned through 1925, when the catch came to 22.2 million pounds. In the following year the albacore catch declined drasti cally to only 2.5 million pounds, presumably because of a 83 change in oceanographic conditions. Meanwhile, yellowfin and skipjack had been canned in increasing quantities. Thirteen million pounds of the former and fourteen million pounds of the latter were canned in 1925. With the disappearance of albacore, yellowfin and skipjack became respectively, the first and second most important types of tunas from the point of view of quantity landed. In taste and appearance there was 82 See discussion in Chapter III. 83 Anderson, et al.. loc. cit.; and Milner B. Schaefer, "Scientific Investigation of the Tropical Tuna Resources of the Eastern Pacific," p. 195 (excerpted from papers presented at the International Technical Conference on the Conservation of the Living Resources of the Sea, The United Nations, Rome, April 18 to May 10, 1955). 76 sufficient similarity between the different types of canned tuna so that the southern California tuna-canning industry could maintain, and ultimately vastly increase, its pro duction prior to the outbreak of the Second World War. Following an absence of thirteen years, the albacore again appeared in volume off the coast of southern Cali fornia in 1938. Biological research organizations are taking deter mined, painstaking steps to uncover additional data rela tive to the habits and migrations of albacore. The Pacific Oceanic Fishery Investigations have attempted to uncover the boundaries within which albacore roam. Tem perature of the water, depth of the temperature layers, and the availability of food for the albacore are known to be important factors. Water colder than 57 degrees fahrenheit has little appeal to the albacore, as does water in which exist relatively few microscopic animals.®^ Southern California Tuna Boats The southern California tuna boats fall into three groups: the albacore fleet; the bait boat or clipper fleet; and the purse seine fleet. 86 "Three Phase Boundary Traced for Albacore," Pacific Fisherman, 55:33, May, 1957. The albacore fleet. The albacore fleet consists of small craft, ranging in size from 25 to 60 feet, forty tons or less in gross weight, manned at times by as few as one or two men. The fishing season for albacore varies from year to year, but generally falls in the period from July to October. There is wide variation in abundance of albacore from year to year in the waters off the southern California coast to about four hundred miles to sea. In view of the uncertainty of the catch and the relatively short length of the season, many boats in the albacore fleet are also used for other types of fishing in the non- albacore season. Further, many albacore fishermen are only part-time fishermen, an activity which supplements their regular source of income. Albacore are caught either by trolling or through the use of bait lures. The number of albacore craft has ranged from a high of 3,583 in 1950 to approximately 1,583 in 1957.85 It is apparent that the albacore fishery offers fishermen the opportunity to exercise much individual initiative and small-scale entrepreneurship. Since fishing 8^United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution by the~ Committee on Finance o f : the United States Senate, Dated August 20, 1957 (Washington. D.C.: United States Tariff Commission, May, 1958), pp. 34-35. 78 is close to shore, the albacore fishery requires less initial capital outlay and less working capital than is true of fishing for the other varieties of tunas. The bait boat fleet. The bait boats or tuna clip pers are the largest of the three types of craft used in tuna fishing. The average carrying capacity of the tuna clippers is 230 tons, ranging from approximately 50 tons to more than 400 tons. The length of the tuna clippers ranges from 65 feet to 170 feet. Manned by ten to fourteen men, the boats today have a cruising range of ten thousand miles or more, with a cruising speed of 8 to 12 knots. The hold is divided into wells suitable for carrying bait on the outward voyage, and for the storage of tuna on the return voyage. This means that the clipper boat must be sufficiently large and well designed to have a large hold and accommodate the freezing machinery and pipes needed to maintain subfreezing storage temperatures. Fur ther, there are evaporator installations aboard to convert salt water to fresh water. The design and construction of today's bait boat is the outcome of a gradual evolution which has been going on 86 Ibid.. Table 5; Anderson, et al., op. cit.. pp. 30-31; and United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress .... op. cit.. p. 36^ 79 for many years, using the very small local bait boat as a starting point. Fishermen and commercial boat builders are strongly influenced by tradition, and therefore do not experiment in radical departures from conservative, accepted practices. Undoubtedly this attitude of caution is the result in part of conservatism, and in part of inadequate accumulations of working capital to support drawn-out experiments, the outcome of which is uncertain. Consequently, the design of the southern California bait boats, including the positioning of deck equipment and bait storage facilities has been developed largely through a process of trial and error rather than redesign of the entire vessel. The errors at times have been unfortunate, 87 resulting in loss of life. Certain species of tunas gather in compact schools and feed voraciously on small fish such as sardines and anchovies. In so doing, the tunas become so greedy that they attempt to capture any object which appears to be a small fish. Consequently, at a promising moment, the bait boat fishermen cast live bait over the side to keep a school of tunas near the vessel. The fishermen continue fishing with pole and line so long as the school remains in the vicinity of the vessel, or until it becomes necessary ®^Walford, op. cit.. p. 198. 80 to care for the fish already caught. To carry out the above process, it is necessary to have ample supplies of bait available, since about two hundred pounds of bait are required for each ton of tuna QQ caught. The fishing can be very fast; a tuna clipper manned by twelve fishermen may land as much as sixty tons of fish during a 5- to 6-hour period. At the rate of two hundred pounds of bait per ton of tuna caught, this would mean using six tons of bait to capture sixty tons of tuna. A large bait boat may carry several thousand scoops (approximately eight pounds per scoop) of bait.®^ It is necessary to spend considerable effort and time in obtain ing the bait, which comes from the bays and immediate coastal region between southern California and Peru, and which is also caught in significant quantities around the Galapagos Islands. To fish legally in territorial waters, the operators of the fishing craft must abide by the applicable regulations of the country and must acquire a fishing license. Generally, through the years, in the over-all picture there have been few difficulties in The Story of Tuna" (Terminal Island, California: The Tuna Research Foundation, [n.d.]), p. 4. (Mimeo graphed. ) ^United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress . . ., op. cit., pi 39. ~ 81 obtaining permits to fish off Latin American shores. How ever, Ecuador on several occasions has closed its waters to American bait boats.^ Such action, and the uncertainty as to whether similar action will take place in the future, is an inconvenience to bait boat operators which should not be minimized. During the Second World War fishing was sharply curtailed; the Armed Services requisitioned several of the tuna clippers for military use. In 1946, with the return of these vessels and new acquisitions and conversions, the number of bait boats increased to 140. In the year 1951 the number of boats, gross tonnage, and carrying capacity in short tons reached their peak. By then many of the older vessels had been replaced. In fact, by December, 1951, more than half of the fleet consisted of vessels built after 1946.^ The newer craft were larger, hence had a greater carrying capacity than did the older boats. Since the 1951-1952 period there has been a continuous decline in the number of bait boats in service and in the aggregate carrying capacity. However, since the old, smaller boats were being retired, and since the additions to the fleet were larger vessels, the average carrying ^Ibid., pp. 38-40. 91 United States Tariff Commission, Tuna Fish, Report on Investigation . . ., op. cit., p. 10. 82 capacity per vessel rose from 174 tons on January 1, 1947, Q2 to 237 tons as of January 1, 1958. The American Tunaboat Association reports that between 1952 and the end of 1957 only nine new boats were built, and of these only two were built by fishermen. This is irrefutable evidence of the general pessimism regarding q3 future investment prospects in tuna boats. In September, 1959, the president of the American Tunaboat Association reported that the Association had only thirty to forty member boats, whereas in 1949 there were two hundred.^ The economic usefulness of tunaboats is relatively short-lived. Dry rot and sea life in time damage the hulls. Long trips and tropical storms place so great a strain on the hull and machinery that even in the 1930’s overhauling a vessel cost the owners from twenty thousand to thirty thousand dollars.Consequently, the tuna boat owners are faced with a continuing problem, at times 92Ibid. ^American Tunaboat Association, "The Effect of Imports on the Domestic Tuna Industries" (statement made before the United States Tariff Commission, Washington, D.C., December 11, 1957), p. 15. (Mimeographed.) 94 News item in the Los Angeles Times. Part I, September 13, 1959, p. 6. 9%. C. Godsil, The High Seas Tuna Fishery of Cali fornia, California Department of Fish and Game, Fish Bulletin No. 51 (Sacramento: California State Printing Office, 1938), p. 17. 83 of such magnitude that tuna canners have aided in financing fishing vessels. Table IV shows that many bait boat operators have reported an operating loss in recent years. There is a wide range between the maximum rate of profit and the maximum rate of loss in any year. For instance, in 1956 the greatest net profit reported came to 19.9 per cent of net sales, and the greatest loss came to 96 29 per cent of net sales. The American Tunaboat Association has computed that from 1953 to 1957 the net profit on a fleet basis came to 6/10 of 1 per cent, or $441,000, a sum which is not suf- 97 ficient to buy a new 350-ton boat. The purse seine fleet. The purse seiners usually are much smaller in size than bait boats. Ranging in length from about 90 to 120 feet, the large purse seiners travel hundreds of miles from their home port. Once a school of fish is located, an enormous net, weighing several tons and extending some 2,400 feet in length, is released. A skiff or row boat is lowered to which one end of the net is secured; the purse seiner then circles ^^United States Tariff Commission, Tuna Fish. Report on Investigation . . .. op. cit.. Table 17. 97««The Effect of Imports on the Domestic Tuna Industries," op. cit.. p. 26. 84 TABLE IV NUMBER OF BAIT BOATS OPERATING AT A PROFIT OR AT A LOSS* 1953-1957 Year Number of Bait Boats Reporting a Loss Number of Bait Boats Reporting a Profit 1953 64 51 1954 41 80 1955 66 60 1956 54 77 1957 24 11 *United States Tariff Commission, on Investigation Conducted Pursuant to a Tuna Fish. Report Resolution bv the Committee on Finance of the United States Senate. Dated August 20, 1957 (Washington, D.C.: United States Tariff Commission, May, 1958), Table 15. 85 the school of fish. At the appropriate time, the bottom of the net is closed, thus resembling a purse, and the fish 98 are caught by hauling in the purse-line on a power winch. The average age at present of purse seiners is twenty years; the average capacity ranges from 100 to 150 tons. Most of the purse seiners have wooden hulls which are out-dated, as steel hulls require much less mainten- 99 ance. Voyages last from thirty to ninety days. 7 There is one 300-ton purse seiner in the southern California fleet. Although equipped with a wooden hull, the vessel has consistently operated at a profit, fishing in the same tuna grounds as the average size boats. The large vessel is manned by the same size crew as the 100- to 150-ton boats, and returns to port with double or triple the catch of the smaller boats. The purse seine operation is an effective method of 9®United States Tariff Commission, Tuna Fish, Report on Investigation . . ., op. cit., pp. 28-29. 9^See statement of John Royal, Fisherman's Local Union No. 33, San Pedro, California, relative to S. 3229 in: United States Congress, Senate, Committee on Interstate and Foreign Commerce, Fisheries Legislation. Hearings before Committee, 85th Congress, 2a Session, on S. 237, S. 2719, S. 2973, S. 3229, S. 3530, July 15-17, 1958 (Washington: Government Printing Office, 1958), p. 153. 3 - 00Refer to statements of John Royal, and Charles Carry, California Fish Canners' Association, Terminal Island, California, relative to S. 3229, ibid., d d . 145- 48. --- 86 catching several species of commercially important fish, including tunas and sardines. Purse seiners, therefore, in contrast to bait boats, have the striking advantage of versatility of use. The southern California purse seine fleet that is engaged at least part of the year in the landing of tunas consisted of 163 boats in 1947. By 1956 the number had declined to 69. Only 15 of the boats in 1955 limited their activity to the fishing of tunas. In 1959 a marked trend was underway to convert a number of bait boats to purse seine operation. Thirty- seven boats were in the process of conversion in late 1959 and early 1960.^^ A revival of interest in purse seining appears to be in progress. V. TUNA FISHERIES IN OTHER REGIONS OF THE WORLD One or more species of tunas are found in temperate, semi-tropical, and tropical waters throughout the world in varying quantities. The catches in given waters often are sufficiently large to be of economic interest. The established tuna fisheries include those in the ■^^United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress . . ., op. cit.. p p . 37-41. — 2"Conversions,* » Pacific Fisherman, 58:11. March. I960. 87 Mediterranean and along the Atlantic coasts of France, Spain, Portugal, and North Africa as far south as Dakar. The established Japanese tuna fisheries extend from the southern coast of Japan, east to the mid-Pacific, and south to the Indo-Pacific region. The American fisheries cover a large area the length of the Pacific Coast of the United 103 States, as far south as northern Chile. In addition, there are newer tuna fisheries which were not developed commercially prior to the Second World War. These fisheries include tuna resources which are known to be important off the northern and eastern coasts of Australia, resources in the Indian Ocean, others along the east coast of Africa, and still others along the west coast of Africa."^4 In the Pacific, tunas (yellowfin and skipjack) are found along an extensive band extending across the ocean on either side of the equator. The approximate limits are formed by the surface isotherms of 20 degrees centi grade. The abundance of tunas in several parts of the world 103 United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress . . ., op. cit., p^ i5. ~ 1Q4Ibid. ■^■^^Schaefer, op. cit., p. 201. 88 has economic implications for southern California tuna canners. Such geographic dispersion complicates the efforts of groups, foreign or domestic, that might try to control the flow of raw material to tuna canners. Southeastern Asia In recent years the rising wave of nationalism in southeastern Asia has been directed against locally prominent members of the fishery entrepreneurial group because the more successful merchants often are Chinese immigrants. In order to avoid dealing with entrepreneurs of Chinese extraction, and to try to improve their economic position, fishermen and others are forming co-operatives. It is too early to judge whether these co-operatives will increase output. The Philippines. The Filipinos have caught tunas for hundreds of years in merely modest quantities. The waters surrounding the islands of the Philippines, however, are rich in marine life and support large numbers of tunas. The areas of greatest abundance of tunas are located some distance from shore, hence cannot be effectively reached and exploited by the small fishing craft in common use.^^ The Japanese, however, recognized the economic 1 06 Anderson, et al.. op. cit.. pp. 126-27. 89 potentialities of establishing commercial fisheries in the Philippines. In the 1930's Japanese commercial interests organized a fishing and canning company at Zamboanga, and also conducted smaller fishing activities at Davao, Bangui, and Aparri. These enterprises were successful. In 1934 the Philippine Packing Corporation, the Philippine subsi diary of the California Packing Corporation, also conducted exploratory fishing activities. ^®7 At the conclusion of the Second World War, the Philippine Government expelled all Japanese from the Philippines. For a two-year period, from 1948 to 1950, the Philippine Bureau of Fisheries and the United States Fish and Wildlife Service conducted explorations and inten- loft sive studies of the Philippine tuna grounds. For half a century, with the notable exception of the 1941-1945 war period, there have been close trade relations between the United States and the Philippines. The possibility of obtaining raw material in commercial quantities from a Far Eastern country other than Japan has economic implications for southern California tuna canners. Thus, data on the Philippine tuna fisheries and potential 107Ibid. , p. 127. ^^Porfirio R. Manacop, "The Principal Marine Fisheries," Philippine Fisheries. A Handbook Prepared by the Technical Staff of the Bureau of Fisheries (Manila: Philippine Bureau of Fisheries, 1953), p. 112. 90 fisheries are particularly pertinent to the long-term supply problems facing American canners. The Philippine catch of tunas, bonitos, and mackerel in 1958 was sub- i nQ stantially the same as that for 1953. The obvious conclusion is that the fishing potential exists, awaiting entrepreneurial action. In turn, entre preneurial initiative is dependent upon assurance of a reasonable degree of political stability. Indonesia. Tuna resources in the waters surrounding the Indonesian and other islands in southeastern Asiatic waters are known to be of economic importance. As is true of the Filipinos, the Indonesian fishermen have not caught tunas on a commercial basis. The Japanese, however, out fitted with relatively large and modem boats, have been the principal entrepreneurs in the commercial tuna fisher ies of Indonesia, both before and after the Second World War. Much exploratory work remains to be done.H® 1091953; 28.3 thousand metric tons; 1958: 28.7 thousand metric tons. See Food and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1958, Vol. IX (Rome: Food and Agriculture Organization, 1959), Table C-6, p. c35. H^See "Fishing Facts from Indonesia," Pacific Fisherman, 51:59, February, 1953; and Soepanto Koesoemowinoto, "Indonesia," Pacific Fisherman, Inter national Yearbook Number, 58:153-54, January 25, 1960. 91 Indian Ocean Tunas are known to be present in the Indian Ocean in interesting quantities. Indicative of the quantities fished with primitive equipment in relatively small areas is the fact that the Maldive Islands export in the order of four thousand metric tons of dried and salted tuna to Ceylon annually. Likewise, Muscat and Oman export dried and salted tuna to India regularly. Atlantic Ocean Tunas are found in undetermined quantities in the vastness that constitutes the Atlantic Ocean. Data are lacking concerning the extent of the population and the life history of the several species. This is true of the fish found several hundred miles to sea, and also is true of the smaller schools of tunas that annually frequent the 112 shores off Cape Cod and the Maine coast. Since the 1880's, New England entrepreneurs have occasionally attempted to fish tunas commercially. These attempts have been disappointing in most instances. Yet, during better years, such as 1950, 1.5 million pounds of 111 Food and Agriculture Organization of the United Nations, "General Aspects of the World's Tima Fisheries," op. cit., p. 85. 112 Anderson, et al., op. cit.. p. 247. 92 tuna were landed.^3 There are many other parts of the Atlantic where tunas are found and caught commercially, often by fishermen using primitive craft and equipment. These areas include the waters off the coasts of Brazil, Argentina, Ghana, 114 Angola, Southwest Africa, and the Union of South Africa. Latin America Several of the richest tuna and bonito fishing grounds in the world are located off the shores of Lower California, Central America, Ecuador, Peru, northern Chile, and the Galapagos Islands. In the years since the Second World War the development of these fisheries progressed so rapidly that between 1948 and 1958 the catch landed in South American countries more than doubled, reaching 180 thousand metric tons in 1958. Generally, the bonito catch is several times the size of the tuna catch. The proximity to Peruvian shores of abundant sup plies of tunas places that country in an almost unique position. Fishermen need only use small boats and 113Ibid. ■^^United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress . . ., op. cit.. ppl 15-19. llSpood and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1958. op. cit.. Table A-6, pp. a21-a29. 93 elementary equipment. They are able to catch a boatload of fish and return to shore and home within a 24-hour period. Hence, fishery operating costs are low. In general, Peruvian fisheries have experienced a very rapid rate of growth during the past decade. The greatest increase has occurred in the production of fish meal, rising from 16.5 thousand metric tons in 1954 to 126.9 thousand metric tons in 1958. In early 1960 pro duction was estimated to be at an annual rate in excess of 200 thousand metric tons, a major influence contributing to 1 1 the weakness of the United States fishmeal market. This weakness has a direct impact on southern California tuna canners, since fish meal is one of their principal by products. Starting about 1926, when albacore failed to appear in large numbers off the California coast, American fisher men found an increasingly large percentage of their catch in Latin American waters. In 1958, 86 per cent of the American tuna catch originated in Latin American waters. In particular, the yield from tuna grounds off Peruvian shores has been so rewarding that American fishermen have 116Ibid., Table F-19, pp. f43-f47; , , Peru,M Pacific Fisherman, International Yearbook Number, 58:185-87, January 25, 1960; and "South Africa Seeks Deal with Peru on Fish Meal," Pacific Fisherman, 58:14, March, 1960. 94 fished those waters since 1938, in spite of necessitating a round trip of approximately nine thousand miles. VI. ECONOMIC IMPLICATIONS The purpose of this section is to summarize the principal economic forces acting on the southern Cali fornia tuna fisheries. This step is necessary in order to evaluate the economic behavior of the tuna canners in Chapter VIII, bearing in mind that at present raw material constitutes 60 per cent of the southern California tuna 1 1 Q canners1 plant costs. Raw Material The tunas constitute a biological, mobile, renewable resource, of unknown enormity, found throughout the world in temperate, semi-tropical, and tropical marine waters. This vast resource is held in common. Accurate data regarding the habits, migration pat terns, and life cycle of tunas still are largely lack- 119 ing. 7 Consequently, statistical projections of future ■^^E. A. Power (comp.), United States Tuna Fishery 1911-1958, United States Fish and Wildlife Service, Fishery Leaflet 484 (Washington, D.C.: United States Fish and Wild life Service, 1959), p. 5. ■^^United States Tariff Commission, Tuna Fish. Report on Investigation . . ., op. cit.. p. 57. ■^Inter-American Tropical Tuna Commission, op. cit., pp. 4-5. 95 catches In a given region are subject to significant error. It is known that commercial fishermen until now have fished only the more accessible and richer tuna-fishing grounds off Latin America, in the Central Pacific, in the Atlantic, and in other regions of the world. Marine biologists are of the opinion that in the over-all picture "... world tuna fisheries can produce much more heavily."120 Labor When they engage fishermen, the southern California boat operators compete on the labor market with aircraft firms, with other land-based industries and commercial establishments. To lure the fishermen from home and family for a period of several weeks, the fishing boat operators 121 must offer a wage differential. The conventional fish ing share system is in use, modified in that the fisherman does receive a guaranteed, minimum wage. Consequently, at the outset the fishing boat operators assume a fixed labor cost regardless of the size of the forthcoming catch. Capital Equipment American fishermen by law must purchase their vessels from an American boat yard. The fishing boat 120johnson, op. cit., p. 30. 1 21 ■ ‘ • ‘ ‘ ■ ■ ‘ 'Interview with E. L. Morris, Research Director, Tuna Research Foundation, Terminal Island, California, June 10, 1959. 96 entrepreneurs are forced thereby to assume a financial burden because they are prevented from having an equally efficient or better boat built in any of several foreign countries at a cost less than the prevailing American price. Today the larger vessels comprising the southern California tuna fleets are almost all tending toward technological obsolescence. Continued utilization of such vessels results in high operating costs. Risk The fishing boat operators cope with risks over which they have little or no control. These risks include damage to vessels and equipment, delays resulting from severe tropical storms, and uncertainty as to size of catch. Fishing boat operators assume a risk relative to the welfare and ability of the crew. Lack of cooperative effort, lack of endurance, ill health, and accidents can make a pronounced difference in the financial return of a fishing trip. To maximize profit it is essential that performance of equipment and crew be at maximum efficiency during the critical hours when schools of tunas are being caught. Upon return to port, it is possible that none of the canners wishes to buy the catch at that particular time. 97 If this occurs, or if the canners* storage facilities are filled to capacity, the frozen fish are kept at the fishing boat operators* expense aboard their vessels until a buyer can be found. Tuna Price Several economic forces influence arrival at the price for tuna. Members of the three domestic fleets, particularly the bait boat and purse seine fleets, are in direct competition with one another. Further, the price asked by Peruvian and Japanese suppliers places a ceiling 122 on the figure American fishermen can hope to obtain. Also, the size catch of canner-operated boats will affect the canners* requirements for additional raw material. Inventories of frozen tuna and canned tuna held by canners, and inventories of canned tuna at the wholesale and retail levels affect sales outlook. Prospective sales, in turn, influence the canners* demand for raw material. Gravity of Economic Problems The gravity of the economic problems with which tuna boat operators must cope are such that few individuals are willing to risk venture capital in the acquisition of new 122 Fresh or frozen tuna is not subject to the United States tariff. 98 123 tuna boats. The average annual profit for the period 1952-1957 per member boat of the American Tunaboat Associ ation came to 4/10 of 1 per cent on invested capital, which 124 was equivalent to 6/10 of 1 per cent on net sales. The economic decline of the American bait boat and purse seine fleets in recent years is in sharp contrast to the continuing post-war development of the Japanese tuna fleet as noted in Table V. The foregoing tonnage figures reveal that as early as 1940 the Japanese tuna fleet was 2.8 times as large as the American tuna fleet. During the 1950's the tonnage differential increased. In 1958 the Japanese tuna fleet was 4.3 times as large as the American tuna fleet. During the 1950's the Japanese fleet increased steadily. In contrast, the American fleet has decreased in tonnage since 1951. Furthermore, the decline in tonnage is of greater gravity than the figures indicate because an overwhelming number of American tuna boats lack important 125 attributes of modern vessels. The deterioration of ■^•^Between 1952 and the end of 1957 only 9 bait boats were built. Of the 9, fishermen built 2. See "The Effect of Imports on the Domestic Tuna Industries," op. cit.. p. 15. 124Ibid.. p. 26. 125operating costs are reduced by modem ship design; steel versus wooden hulls; efficient engines; refrigeration equipment; and up-to-date, reliable nautical aides (automatic pilot devices, radiotelephones, direction finders, loran, and fathometers). 99 TABLE V COMPARATIVE TONNAGES, UNITED STATES AND JAPANESE TUNA FLEETS* Year United States Tuna Fleet Japanese Tuna Fleet** 1940 19,000 53,000 1947 46,000 79,000 1951 58,000 104,000 1957 45,000 212,000 *For the years 1940 and 1947 see: Donald R. Johnson, "World Tuna Fishery" (paper read at the Industry Tuna Meeting, La Jolla, California, May 19, 20, and 21, 1959), p. 4. For the year 1957 see: Food and Agriculture Organ ization of the United Nations, Yearbook of Fishery Statistics 1958, Vol. IX (Rome: Food and Agriculture Organization, 1959), Table g-4, p. gl5. **American fishing interests estimate that since the Second World War the United States has granted: (1) $60 million to Japan by Congressional appropriation for Japanese fisheries development, (2) $19 million to UNRRA for world fisheries, and (3) $2 million to the FAO. From comments by Mason Case, Fisheries Cooperative Association, San Pedro, California, in favor of Bill S. 2719. See United States Congress, Senate, Committee on Interstate and Foreign Commerce, Fisheries Legislation. Hearings before Committee, 85th Congress, 2d Session, on S. 237, S. 2719, S. 2973, S. 3229, S. 3530, July 15-17, 1958 (Washington, D.C.: Government Printing Office, 1958), p. 142. 100 the domestic fishing fleet is of direct concern to the large canners, since they receive the bulk of their raw material from that source. VII. CURRENT PRODUCTION OF WORLD TUNA FISHERIES The Food and Agriculture Organization of the United Nations has compiled data on world fisheries production. These data are useful in presenting an over-all picture of the status of commercially important fisheries throughout the world. Tunas and similar fishes are included tinder the broad heading of tunas, bonitos, mackerels, etc. These 1 ? catch figures indicate the extent to which fishermen and fishing facilities are available at present to capture and market tunas and similar fish. World Catch by Species Using the yardstick of weight, the 1958 catch of tunas, bonitos, and mackerel is estimated at 1.96 million metric tons, which is 6 per cent of the aggregate world catch of all species of fish. The 1958 catch, using the 1953 catch as a base, shows a 44 per cent increase of tunas, bonitos, and mackerel against a 35 per cent increase 19 f i Since many countries in their statistical tabula tions do not distinguish between tunas and tunalike fishes, and other countries do not collect statistical information on fisheries, these are difficulties to overcome in esti mating world catch. 101 for the world aggregate of all species. These figures indicate the demand for, and availability of, tunas, bonitos, and mackerel. Table VI shows the relative posi tion by weight of the principal species of marine life. World Catch by Country In 1958 the United States stood third in listing countries in order of the size of their fish catch. In the period 1953 to 1957 the average United States catch of all species was 2.7 million metric tons; in 1958 the catch also came to 2.7 million metric tons, as indicated in Table VII. In contrast, China in particular, Japan, and the U.S.S.R. showed an increase in their respective 1958 catches. In 1958 the U.S.S.R. had a catch practically equal to that of the United States. China’s catch is the largest in the world, with 6 million metric tons, followed by that of Japan with 5.5 million metric tons. The United States catch is half that of Japan. These vast tonnages are an indication of the relative interest, effort, equip ment, and manpower displayed in fisheries of the respective countries. Catch of Tunas, Bonitos, Mackerel by Region On the basis of weight, tunas, bonitos and mackerel account for 6 per cent of the world catch of all fish, as indicated in Table VIII. The United States tuna catch 102 TABLE VI WORLD CATCH BY GROUPS OF SPECIES* (in Million Metric Tons) Species 1953 1958 Percentage Increase 1953-1958 Percentage of 1958 World Catch Herrings, Sardines, Anchovies Unsorted and Unidentified Freshwater Fishes Cods, Hakes, Haddocks Mullets, Jacks, Seabasses Tunas, Bonitos, Mackerels Molluscs Salmon, Trouts, Smelts Flounders, Halibuts, Soles Crustaceans Sharks, Rays Aquatic Plants Aquatic Animals World Catch Grand Total 6.25 7.10 4.41 2.57 3.78 2.35 1.36 1.71 0.54 0.68 0.30 0.36 0.06 6.51 5.28 4.33 3.49 1.96 2.01 0.59 0.70 0.76 0.75 0.32 0.44 0.07 24.96 33.72 14 48 5 15 49 44 18 19 41 10 7 22 17 35 21 20 16 13 10 6 6 2 2 1 1 0 100 SB *Food and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1958. Vol. IX (Rome: Food and Agriculture Organization, 1959), Table A-2, p. a6. 103 TABLE VII WORLD CATCH BY MAJOR COUNTRIES* (in Million Metric Tons) Country Percentage of World Catch 1953-1957 1953-1957 Average 1958 Japan 17.2 4.8 5.5 United States 9.7 2.7 2.7 China (Mainland) 8.8 2.5 6.0 U.S.S.R. 8.4 2.4 2.6 Norway 6.7 1.9 1.4 United Kingdom 3.8 1.1 1.0 Canada 3.6 1.0 1.0 India 3.4 .9 1.1 West Germany 2.6 .7 .7 Spain 2.5 .7 .8 Indonesia 2.4 .7 .7 Union of South Africa and Southwest Africa 2.1 .6 .7 France (including Algeria) 1.9 .5 .5 Iceland 1.7 .5 .6 Portugal 1.6 .4 .5 Other Countries 23.6 6.7 7.9 World Total 100.0 28.1 33.7 *Food and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1958. Vol. IX (Rome: Food and Agriculture Organization, 1959), Table A-7, pp. a30~a33. 104 TABLE VIII CATCH OF TUNAS AND TUNALIKE FISH BY REGION* (Including Bonitos, Mackerels, etc.) (in Million Metric Tons) Region 1953 1958 Percentage of Tunas and Tunalike Fish to Catch of All Species (1958) Asia .82 1.20 7 Europe .19 .25 3 North America .17 .19 5 South America .08 .18 1 Africa .07 .11 6 Oceania .01 .02 15 U.S.S.R. .02 .01 .4 Total 1.36 1.96 6 *Food and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1958, Vol. IX (Rome: Food and Agriculture Organization, 1959), Table A-6, pp. a21-a29. 105 in 1958 was 326 million pounds valued at $44.6 million. In terms of weight, this is 7 per cent, and in terms of value is 12 per cent of the 1958 United States catch of all fish, 127 edible and non-edible. ' Tuna Catch Trends North America is the only region of the world that since 1948 has not shown an increase in tuna catch. Between 1948 and 1957 the European catch, including that of Asiatic Turkey, tripled. The catch off South America more than doubled, and there were substantial percentage in creases in the catch in other parts of the world. Tuna fisheries offer great promise to areas of the world in which the inhabitants suffer from protein defi ciency in their diet. The world catch will tend to in crease with advances in biological, ichthyological, oceanographic, and related studies, provided a favorable economic setting exists. World Tuna Markets The character of regional tuna markets throughout the world has been changing since the middle 1920*s. Today the regional markets still exist and are of paramount 127 United States Bureau of the Census, Statistical Abstract of the United States: 1959 (Washington, D.C.: United States Bureau of the Census, June, 1959), p. 705. importance to the given area. In addition, however, a world market is beginning to manifest itself, so that the price of raw, frozen tuna at San Pedro is influenced by the economic behavior of suppliers in Japan, Peru, and else where. In short, regional economic isolation barriers are diminishing. This is of fundamental importance to the firms located in the principal exporting countries (Japan, Peru, Spain, Turkey), and to firms located in the principal buying countries (the United States and Italy). Today the f.o.b. Tokyo or Yokohama frozen tuna quotations for alba- core, yellowfin, and skipjack set a ceiling on the price American, Peruvian, and other fishermen can hope to receive for their catch of tunas destined for shipment to American TOO tuna canners. 128 For a discussion of the adverse effects of this interplay of forces on American and Peruvian fishermen in 1957, see M. Machado Medina's letter of March 4, 1958, to President Eisenhower. Refer to United States Congress, Senate, Committee on Interstate and Foreign Commerce, Fisheries Legislation, op. cit., Appendix 5, p. 181. CHAPTER III EVOLUTION OF TUNA CANNING The development of canning gave commercial fishing its greatest impetus in the leading countries of the world. For with the practicability of commercial canning, scien tists and technologists finally overcame the age-old problem of fish preservation. Today canning is our most important method of food preservation, and it is the only method which had been originated in modem times. I. GROWTH OF THE CANNING INDUSTRY The purpose in the food canning process is to bring about a set of conditions within the food to be preserved which will prevent the growth of spoilage organisms.'*' Appert and Durand It is generally agreed that Nicolas Appert, French confectioner, brewer, and distiller was the inventor of the art of canning. In 1809 Appert perfected his process, and ^George Watson Cobb, Jr., and John Kerr Rose, "Canning,1 ' Encyclopaedia Britannica (1960), IV, 748-50. 107 108 the French government awarded him a prize (twelve thousand francs) in recognition of the practical implications of his invention. The Napoleonic Wars, including the British blockade, forced a very restricted diet on many French soldiers and sailors, resulting in the spread of scurvy and other diseases. Napoleon recognized Appert's discovery as an effective means of minimizing the threat of malnutrition among the military, and thus improving the fighting quali- ties of his forces. Meanwhile, in England, Peter Durand was conducting experiments relative to canning foods, and in 1810 he invented and patented the "tin cannister."4 Durand's method came into extensive use after the invention in 1820 by Pierre Antoine Anguilbert of a more practical tin con tainer which had the advantage over earlier containers of not leaking readily and of being easier to manufacture.-* Canning of Fish It is interesting to note in the history of canning 2 Norman D. Jarvis, Principles and Methods in the Canning of Fishery Products. United States Fish and Wild life Service, Research Report 7 (Washington, D.C.: Govern ment Printing Office, 1943), p. 1. ^National Canners Association, The Canning Industry (third edition; Washington, D.C.: The National Canners Association, 1957), p. 5. 4Ibid. ■\jarvis, op. cit.. pp. 1-2. that fish products were canned at a very early date. Oysters probably were canned as early as 1819 in the Chesa peake Bay area; the oyster-canning industry was well estab lished by 1844.6 Salmon were first canned at Aberdeen, Scotland, in 1824, and about five years later the first salmon on the American continent were canned at St. Johns, New Brunswick. Sardines were first canned at Nantes, France, in 1834, and were packed commercially in 1877 at Eastport, Maine. In addition to the fish mentioned, shrimp, clams, crabs, fish cakes, and smoked haddock were all canned on a commercial scale in the United States prior to 1900.^ This development later was of significance to the early southern California tuna canners in that they could benefit from the experience of the pioneers in fish canning. Further, the first fish canners had overcome to some extent prejudices on the part of many housewives against the purchase and consumption of canned fish. Growth of the American Canning Industry Intensive research to improve the technology of canning has led to a very high degree of mechanization and to a remarkable 50 per cent increase in productivity per man since 1946. There are canning plants in forty-nine 6Ibid., p. 2. ^Ibid., pp. 3-6. 110 states, In Puerto Rico, and in American Samoa. Peak employment comes to 350,000. The canning industry is the third largest buyer of America's steel output.® Public Acceptance of Canned Goods Many in the Armed Forces in the Civil War, Spanish- American War, and the First and Second World Wars sampled canned foods which they liked. In later years they bought those items that had appealed to them. Higher personal disposal income, the tempo of present day living, ease of storage and preparation, and the relatively low price of most canned foods are important factors underlying in creased consumption. Per capita consumption through the years has increased steadily since 1920. The rate of increase in per capita consumption differs rather sharply between the several categories of canned foods. Thus, in comparing the year 1920 to 1958 it is evident that great increases in per capita consumption of canned fruits, canned juices, canned vegetables, canned soups, canned meat, and canned milk have occurred. In contrast, the increase in per capita consumption of canned fish has been slight, as revealed by Table IX. Q °National Canners Association, op. cit.. pp. 10-11. Ill TABLE IX APPARENT CIVILIAN CONSUMPTION OF SELECTED CANNED FOODS* (in Pounds Per Capita) Year Canned Fruit Canned Juices Canned Vegetables Condensed and Evaporated Milk Canned Fish 1920 9.4 0.6 18.9 8.6 3.2** 1930 12.8 0.3 28.2 13.6 3.4 1940 19.1 7.2 36.4 19.3 4.2 1950 22.0 13.4 42.1 20.1 4.5 1955 22.6 12.9 43.5 16.2 3.7 1956 21.8 13.1 44.0 15.9 3.9 1957 22.4 12.2 44.0 15.5 3.8 1958 22.4 12.1 44.2 14.9 4.2** *United States Department of Commerce, Statistical Abstract of the United States 1959 (Washington, D.C.: Government Printing Office, 1960), Table No. 105, p. 85. **These figures were taken from: United States Bureau of Agricultural Economics, Supplement for 1958 and Consumption of Food in the United States 1909~52 (Supple ment for 1958 and Agricultural Handbook No. 62. Washing ton, D.C.: Government Printing Office, August, 1959), Table 29, p. 11. 112 II. SOUTHERN CALIFORNIA TUNA CANNING INDUSTRY Tuna canning started at the beginning of this cen tury largely by chance in southern California. The Beginnings In the 1890*s much of the area that today comprises San Pedro consisted of mud flats, and Terminal Island, located across the harbor channel from San Pedro, was con sidered an attractive beach. In these non-industrial surroundings, the California Fish Company started opera tions in 1893, engaging in the canning of sardines. In 1911 the company’s title was changed to Southern California Fish Company. In 1903 the annual, hitherto abundant sardine run failed to appear. This unexpected development created a crisis for the San Pedro fishermen and for the California Fish Company. In order to remain in business the Cali fornia Fish Company attempted to find other fish suitable for canning. In their experimentations, A. P. Halfhill, a leading member of the firm, succeeded in working out a steam process under compression that effectively changed the color of albacore meat from its natural reddish flesh color to creamy white. This was a major accomplishment because the process improved the appearance of the final canned product, thus stimulating its acceptance by the public. 113 A. P. Halfhill was the pioneer in the canning of tuna in the United States. The California Fish Company was an innovator, believed to be the first corporation to can fish in California, and certainly was the first firm to can tuna in the United States.^ In 1903 the California Fish Company packed seven hundred cases of albacore, which Seaman Brothers, well- known food wholesalers in Hew York, sold to a few retailers in the New York metropolitan area. The principal buyers were among Italian residents.^ others also started buying the product. Eventually, it was so well liked that Seaman Brothers promoted canned tuna in their marketing area. With the development of the New York market, the sale of canned tuna increased steadily.^ The canning company initiated sales promotions in San Pedro by offering free samples in local stores.^ By 1914 other firms (including The California Tunny Canning Company, Pacific Tuna Canning Company, California & Mexico Fishing Company, South Coast Canning Company, 9"Here Tuna Canning Began," Pacific Fisherman, 51:15, December, 1953. ^"Foundations First, 1903-1912," Pacific Fisherman. 50:5-16, August, 1952. 'Decade of Emergence 1913-1922," Pacific Fisherman. 50:20, 22, 25, August, 1952. 12"Foundations First, 1903-1912," op. cit.. p. 8. 114 White Star Canning Company, Avalon Canning Company, Los Angeles Tuna Company, South Coast Canning Company, Pacific Tuna Canning Company) were packing tuna. Several firms by 1914 equipped their plants with facilities which enabled them to increase production significantly. One firm (The California Tunny Canning Company) put up 701 cases of one-pound cans in a day; another firm (White Star Canning Company) had a capacity of fifty thousand cases in its Los 13 Angeles plant. Speculative Ventures The increasing demand for canned tuna during the First World War, anticipation of a high rate of growth, and ease of entry into the business of tuna canning encouraged entrepreneurs to establish new firms. A number of firms lacked qualified management and adequate working capital. The situation was sufficiently critical in 1914 that the recently formed Tuna Canners Association publicly warned against the excesses and financially unsound undertakings apparent in the industry at that time. The following year at least two plants were put up for sale as victims of a price war.^ ^Ibid., pp. 8-9; "Decade of Emergence 1913-1922," op. cit., p. 20. ^"Decade of Emergence 1913-1922," op. cit.. p. 22. 115 The sharp though short recession o£ 1920-1921 was sufficiently long and decisive to cause the collapse of IS several firms. During that period the condition of the industry went from bad to worse; price-cutting became commonplace; fishermen abrogated contracts; and other 16 unsavory business practices occurred. Continued Development By and large, the tuna-canning industry shared in the general prosperity of the 1920's. Average annual production and canners' sales figures for 1921-1930 came to 1.0 million cases and $7.1 million, respectively.^ Canners assisted a number of fishing boat operators in financing their vessels, and thus were in a position to have the first opportunity to buy the catch of those vessels. The leading canners also recognized the necessity of adhering to quality standards and of advertising the end product. In 1924 the first of several hundred tuna clippers ■^"The ranks [of tuna canners] were decimated. . . .” Ibid., p. 25. I6Ibid. ^United States Fish and Wildlife Service, Canned Fish & Byproducts--1958 (C.F.S. No. 2021. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 17. (Duplicated.) 116 was built in San Pedro. Equipped with live bait tanks, a reliable refrigeration system, an engine and fuel capacity to cruise several thousand miles, it was now possible to exploit the rich tuna resources off the Central American 18 and South American coasts. In 1926 the albacore failed to appear off the shores of California, thus underlining the need for large, modern vessels to tap the more distant tuna fisheries. From 1925 to 1941 raw material for the tuna canners was almost always available in quantities sufficient to take care of the industry's current needs. The major canners relied heavily on raw tuna delivered by domestic fishermen, in many of whose vessels they had a financial interest. Practically all canners also imported fresh or frozen tuna from Japan. Therefore, growth of the industry was not impeded by lack of raw material; to the contrary, there were periods of surplus frozen tuna, kept in storage on the fishing boats in San Pedro and San Diego until canners would accept the catch. The canners* principal problems related to the demand picture for the finished product. Depressed eco nomic conditions in 1930 did not immediately affect the 18"Decade of Drama and Development 1923-1932," Pacific Fisherman. 50:39, 41, August, 1952. 117 tuna canning industry.1^ Average annual pack declined, but In a few years Increased In quantity. Whereas the average pack In number of cases per annum in round numbers was one million for 1921-1930, the figure rose to 1.6 million for 1931-1935, and to 2.4 million for 1936, almost reaching four million for 1940.^® Federal Government sources estimate that consumption of canned tuna doubled between 1931 and 1935; by 1947 con sumption was twice that of 1935.^ The years between 1931 and the end of the Second World War represent a period of significant growth in consumption of canned tuna. Second World War Wartime conditions brought about felicitous demand conditions for the canners. The importation of canned tuna ceased and meat was rationed, a development that directed the housewives* attention to the possibility of greater fish consumption. Most important, from the point of view of the •^Ibid., p. 4 5. ^United States Fish and Wildlife Service, Canned Fish . . ., op. cit., p. 17. 21United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution bv the Committee on Finance of the United States Senate. Dated June 26, 1952 ^Washington. D.C.: United States Tariff Commission, March, 1953), pp. 137-38. 118 canners, the Armed Forces promoted tuna dishes in a manner and on a scale that no private industry could rival. Of the thousands of men and women in the Armed Services, an unknown number sampled tuna for the first time. Many were introduced to ways of serving tuna they had not hitherto tried. By and large, the absence of choice, or the narrow ness of choice of menus, obliged the patrons of messes, cafeterias, and dining halls to sample the plat du jour or forego the main ingredient of the meal. Obviously, this set of conditions had certain implications over the long run favorably influencing the demand picture for canned tuna in the post-war era. Mechanization of tuna canning proceeded rapidly during the ten years between 1942 and 1952. The most sig nificant development was the introduction and use of mechanical fillers, including the widely used MPak-Shaper." As a result, by 1952 only a very small percentage of tuna 22 was still packed by hand. Emergence of Leading Firms The emergence of a few leading firms characterizes the post-war era. 22t*Decade 1943-52, Shaping the Course for the Years to Come," Pacific Fisherman. 50:75, August, 1952. 119 Van Camp Sea Food Company, Inc. The Van Camp family became active in food preservation and canning during the early Civil War period. Members of the family founded and successfully managed the Van Camp Packing Company of Indianapolis. Then, in 1914, Frank Van Camp disposed of his holdings in the Middle West, and, together with his son, Gilbert C. Van Camp, Sr., purchased the California Tuna Canning Company. They changed the name to the Van O "J Camp Sea Food Company. The Van Camp Sea Food Company, therefore, began its existence under exceptionally competent management, ex perienced in canning techniques. Further, the Van Camp family had the working capital necessary to buy and install the best fish-packing equipment available in 1914. They took this step and also modernized the plant in other 24 respects. At the outset difficulties occurred in getting an assured flow of raw material to be packed. The firm, therefore, set up a small fleet in 1915, consisting of 'History of Van Camp Sea Food Company, Inc." (Long Beach, California: Van Camp Sea Food Company, Inc., [n.d.]), pp. 1-4 (typewritten); and "Brief History of Van Camp Sea Food Company" (Long Beach, California: Van Camp Sea Food Company, Inc., [n.d.]), pp. 1-2 (dittoed). 24Ibid. 120 25 45-foot boats with gasoline engines. The short but severe 1920-1921 recession found the company in a rela tively favorable position. As a consequence, in 1921 the firm undertook mergers with three other canners, including the White Star Canning Company. The White Star Canning Company's "White Star" label had sufficient prestige, particularly in the San Francisco area, in the estimation of the Van Camp Sea Food Company's management, that they have retained and advertised the "White Star" label through the years. "White Star," to gether with "Chicken of the Sea" are Van Camp Sea Food Company's two top quality advertised brands. In the period following the Second World War Van Camp Sea Food Company has continued to grow. In September, 1959, the Van Camp family for the first time offered stock 26 in the corporation to the public. Sales volume increased from $32.9 million for 1950 to $56.7 million for 1959. Profits, however, as indicated by Table X, have fluctuated sharply. These fluctuations are indicative of the unpredictable, competitive nature of tuna canning. Nonetheless, in spite of the competitive 25 ■'"History of Van Camp Sea Food Company, Inc.," p. 2. 26 Van Camp Sea Food Company, Annual Report. Year Ended May 31, 1953 (Terminal Island, California: Van Camp Sea Food Company, Inc., 1953), p. 1. 121 TABLE X VAN CAMP SEA FOOD COMPANY, INC., LONG BEACH, CALIFORNIA NET SALES AND NET PROFIT* (in Thousands of Dollars) Fiscal Year Ended on or About May 31 Net Sales Profit Before Taxes Profit as a Percentage of Sales 1950 $32,908 $2,204 6.7 1951 44,594 2,052 4.6 1952 37,638 645 1.7 1953 44,885 1,540 3.4 1954 47,841 1,215 2.5 1955 46,226 (661) (.1) 1956 50,183 1,800 3.5 1957 45,675 1,401 3.1 1958 48,460 2,258 4.7 1959 56,667 2,667 4.7 *Van Camp Sea Food Company, Inc., Annual Report. Year Ended May 30, 1959 (Long Beach, California: Van Camp Sea Food Company, Inc., 1959). characteristics of the market for canned tuna, the Van Camp Sea Food Company has emerged as a leader, whose management by and large has been ready to investigate new sources of raw material and new methods of marketing canned tuna. Star-Kist Foods. Inc. Martin Bogdanovich founded the French-Sardine Company in 1917, ten years after his 27 arrival in this country from Dalmatia. As was natural, the Bogdanovich family had close ties with many of the Yugoslavian fishermen in San Pedro, and worked closely with them in the early 1920's, packing sardines, tuna, and other fish. Through the years the firm prospered and grew in size. Control and management of the organization still reside securely with the Bogdanovich family. Upon the death of Martin Bogdanovich in 1944, his son Joseph J. Bogdanovich became the head of the firm at a young age. Star-Kist Foods, Inc., therefore, is a family organization in a very real sense. In contrast to most prosperous com panies, a surprising number of relatives are working in the 28 organization. Several occupy key positions. 27»»xhe Tuna Titan," Pacific Fisherman, 54:45, Mav. 1956. no *°For instance, at the opening of the Star-Kist No. 4 Cannery in 1952 on Terminal Island, Joe M. Bogdano vich was general manager, Louis Bogdanovich was superin tendent, Nick Bogdanovich, fish room foreman. "Star-Kist No. 4," Pacific Fisherman. 50:13, November, 1952. 123 Of sociological interest is the fact that in an era of great job mobility, a number of the employees have known one another since childhood and high school days. The president is known as "Big Joe" to distinguish him from the many "Little Joes" in the firm. Since it is a closed corporation, there is no neces sity for Star-Kist to divulge its sales or profit figures. In fact, the organization, engaged in a competitive struggle with the Van Camp Sea Food Company for first place in the industry, is reticent, as are most of the tuna canners, to divulge any data which may even verge on being of a confidential nature. Of all the firms on Terminal Island, Star-Kist has built the largest, as well as the most up-to-date, attrac tive, cannery. Completed in 1952, the Star-Kist No. 4 Plant was heralded in the trade publications with detailed articles extolling the modern equipment, well laid-out assembly lines, and high degree of mechanization. In con trast to several tuna plants that are converted sardine canneries, Star-Kist No. 4 was built for the specific pur pose of canning tuna in the most efficient manner pos- 29 sible. The cannery's reported output is 1,800 cases an hour, or about 14,000 cases per eight-hour day. If the ^ Ibid., p. 11. 124 plant operates close to capacity only two hundred working days a year, sixty million pounds of tuna would be packed. This comes to 18 per cent of the domestic annual output for 1958. The opening of the Star-Kist No. 4 Plant was the most important development in the tuna canning industry in 1952. Westgate-Califomia Corp. Westgate-Califomia Corp. of San Diego is the third largest tuna-canning firm in the United States, accounting for approximately 20 per cent of 31 the domestic canned tuna market. Westgate-Califomia Corp., part of a closely held industrial complex, is under the guidance of C. Amholt Smith, who also holds a major interest in other San Diego enterprises, including the United States Bank, and National Marine Terminals Co.3^ National Marine Terminals Co. operates tuna boats, and also purchased a large vessel to ship frozen tuna from Peru to the Westgate-Califomia OO cannery in San Diego. ■^United States Fish and Wildlife Service, Canned Fish . . ., loc. cit. 31See Table XIII, Chapter IV. 32 Poor*s Register of Directors and Executives. United States and Canada 1959 (New York: Standard & Poor's Corporation, 1959), p. 2^28. 33 "San Diego Shipper Acquires Big Frozen-Tuna Transport," Pacific Fisherman. 56:22, December, 1958. 125 III. NORTHERN CALIFORNIA AND OREGON CANNERS The major domestic competition with which the south ern California tuna canners must cope arises from the activities of three firms packing tuna in northern Cali fornia and Oregon. F. E. Booth Company. Inc. and Washington Packing Corp. F. E. Booth Company operates a small fish canning plant in San Francisco, concentrating on the packing of tuna. The firm also owns and operates fruit and vegetable packing plants at Centerville, California. In 1958 the firm had $7.5 million net sales on which there was a net loss of $35,055. R. J. Roesling, chairman of the corpora tion, holds 70 per cent of both the common and preferred stock.^ The Washington Packing Corp., located on Pier 92 in San Francisco, is a small firm specializing in tuna can ning. The firm packed only an average of 150 cases a day in 1950. In 1955 the figure increased to 800 to 1,500 cases per day, resulting from greater efficiency. The overwhelming percentage (90 or 95 per cent) of output ^^Walker* s Manual of Pacific Coast Securities (San Francisco: Walker* s Manual, Incorporated, 1959), p. 1275. 126 35 Is marketed under private labels. Columbia River Packers Association. Inc. Columbia River Packers Association was organized at Astoria in 1887 as an amalgamation of eight packers. The Association's principal activity has been the canning of salmon, which is marketed under the "Bumble Bee" label. In 1937 Columbia River Packers Association added facilities, including a plant and large storage warehouses, to participate actively in the canned tuna market on a year-round basis.^ The bulk of the tuna cannery's raw material consists of imported Japanese frozen tuna, including frozen loins. The finished product is sold under the "Bumble Bee" label, particularly in metropolitan centers in the Northeast. In the immediate post-war period Transamerica Cor poration acquired a controlling interest in Columbia River Packers Association. For the subsequent twelve years 35 "How Radical Surgery Saved an Ailing Cannery," Pacific Fisherman, 53:43-44, July, 1955; and interview with Ross Hatton, Marketing Specialist, United States Fish and Wildlife Division Office, Terminal Island, California, December 29, 1959. 36 "'Bumble Bee' Tuna--The Story of a Business of Three-Score Years and Ten," Pacific Fisherman. 56:12 ff., May, 1958. 37Interview with Tom Virgil, Sales Representative, Star-Kist Foods, Inc., Terminal Island, California, January 5, 1960. 127 the cannery "... experienced one of the most successful periods in its history."^® In 1956 Columbia River Packers Association took over the Hawaiian Tuna Packers, Ltd. of Honolulu. Two years later, Castle and Cooke, Inc., Honolulu, acquired a controlling interest in Columbia River Packers Association. As was true during its associ ation with Transamerica Corporation, Columbia River Packers Association continues to be controlled by an organization that is in a position to provide substantial financial and other support. IV. OVERSEAS EXPANSION In order to meet the needs of southern California tuna canners, American fishermen during the 1930's found it necessary to secure an increasingly large percentage of their catch from Latin American waters. In 1940 approxi mately two-thirds of the domestic catch came from waters off Central America and South America. As a consequence, the progressive tuna canners formulated plans to establish freezing plants and canning plants at overseas locations. In the early 1940's and in the period subsequent to the Second World War, the canners found Peru to be of O Q J "Castle and Cooke Increases CRPA Holding to Con trol," Pacific Fisherman, 57:19, March, 1959. 128 particular interest. Peru is adjacent to one of the world's richest known tuna grounds; its government en courages the development of free enterprise; and there is a growing, competent middle class. The advantages of investing in fisheries and in canneries in Peru so out weigh the drawbacks that in 1956 capital investment, exclusive of fishing boats, came to fifteen million dol lars, of which four million dollars was of United States origin.^ Van Camp Sea Food Company. Inc. As early as 1941 the Van Camp Sea Food Company took steps to establish a freezing plant in Peru, and then cancelled the project with the outbreak of war.^ In 1953 the company leased a cannery at Pago Pago, American Samoa, from the United States Government. The company took this step only after the United States Commissioner of Customs had ruled that fish caught by foreign vessels could be landed in American Samoa and pro cessed there. Further, the finished product, canned tuna, ^United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress on Fresh or Frozen Yellowfin. Skipjack. an<f~Bigeve Tuna (Washington. D.C.: United States Fish and Wildlife Service, May, 1958), p. 79. ^"Peruvian Fishing," Pacific Fisherman. 55:24, November, 1957. 129 may be shipped to the continental United States without payment of import duties.^ In the summer of 1955 the Van Camp Sea Food Company entered into an agreement with Nippon Reizo Kusen Kaisha, by the terms of which the Japanese firm was to have a fleet of fair-sized boats, each over 150 tons, deliver fish to the cannery at Pago Pago.^ The Van Camp Sea Food Company, therefore, is able to buy its raw material at a low price. Local labor is com pensated at a lower rate than is cannery labor in southern California. The company estimates, however, that average productivity of Samoan cannery workers in 1957 was one- half that in the Terminal Island plants.^ Further, the torrential rains, heat, and high humidity have posed unexpected equipment maintenance problems and health prob lems for American supervisors. The Samoan operation freezes tuna which is shipped United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution by the Committee on Finance o£ the United States Senate. Dated August 20, 1957 (Washington. D.C.: United States Tariff Commission, May, 1958), p. 41. 42 "Big Samoan Tuna Deal Reported in Japan," Pacific Fisherman, 53:23, June, 1955. / 1 United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution . . . Dated August 20, 1957. p. 52. citing United States Depart ment of Labor, Wage and Hour and Public Contracts Divi sions, Economic Report on American Samoa, 1958, p. 36. . 130 to Japan, and also cans tuna which is shipped to the United States. Approximately four hundred workers are employed in the cannery.^ At present the operation has pioneering aspects; its total output to date has not been an important influence on the canned tuna market. However, being in a position to have Japanese vessels discharge fresh or frozen tuna at the cannery, and employing labor at low rates, the Van Camp Sea Food Company's Samoan operation enjoys dis tinct cost advantages. Van Camp Sea Food Company's second major post-war overseas investment took place in Puerto Rico. In 1936 the firm purchased a recently built cannery at Playa Ponce. The company enlarged the plant and installed up-to-date equipment where needed. As a result, the facilities are modem and effective.^ The cannery employs approximately three hundred workers.^ The sources of raw material are varied. Approxi mately ten tuna clippers, some of them owned by the Van Camp Sea Food Company, deliver frozen tuna. Further, ^United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution . . . Dated August 20. 1957. pp. 42. 49. ^"Tuna Packing at Ponce— Van Camp's Easternmost Outpost in Puerto Rico," Pacific Fisherman. 55:8 ff.. July, 1957. United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution . . . Dated August 20. 1957. p. 49. 131 frozen loins, prepared in Japan, also are used as raw material.^ A cost-saving procedure relative to the procurement of raw material exists in the possibility of operating vessels with only three men--the American master, navi gator and engineer--from Puerto Rico to Panama. At Panama the vessel picks up a Panamanian crew, and continues its journey to the fishing grounds off Peru or off the Galapa gos Islands.^8 In 1959 the Van Camp Sea Food Company undertook the complete reorganization of a small tuna cannery it had acquired at Manta, Ecuador. The firm, Industria Ecua- toriana Productora de Alimentos, Compania Anonima, known as Inepaca, purchases its raw material from operators of some twenty-two bait boats. The boats measure only thirty to fifty feet in length, so close are the tuna resources to the village of Manta. Part of the output, canned tuna, is sold locally 49 under the brand name of "Monte Cristi." ^"Tuna Packing at Ponce . . ., ” op. cit., p. 15. ^8United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress . . ., op. cit., p. 43. ^^"Magic in Ecuador," Pacific Fisherman. 57:10 ff., July, 1959. 132 Star-Kist Foods. Inc. Perhaps somewhat belatedly, Star-Kist in late 1938 undertook the building of a tuna plant at Mayaguez, Puerto Rico. The capacity of the plant is about one hundred tons a day. Located on a three-acre site, the buildings are modem, designed specifically for the canning of tuna and other fish.-*® In the post-war period Star-Kist also had been con ducting a Peruvian operation that has interesting economic implications. Fishing costs are low because the fish are close to shore, and because it is possible to use American flag ships with foreign crews. Product diversification is feasible. Anchovies are used as the raw product to pro cess oil and meal; bonito is canned locally; frozen tuna is shipped to Terminal Island.^ Interview with Tom Virgil, Sales Representative, Star-Kist Foods, Inc., Terminal Island, California, January 5, 1960. See, also, "Star-Kist Builds Tuna Cannery in Puerto Rico," Pacific Fisherman. 57:4, January, 1959. -*^For further details, see letter from W. M. Chapman, Director of Research, American Tunaboat Associ ation, to Hon. Henry Kearns, Assistant Secretary for International Affairs, Department of Commerce, in: United States Congress, Senate, Committee on Interstate and Foreign Commerce, Fisheries Legislation. Hearings before Committee, 85th Congress, 2d Session, on S. 237, S. 2719, S. 2973, S. 3229, S. 3530, July 15-17, 1958 (Washington, D.C.: Government Printing Office, 1958), Appendix 6, p. 204. Westgate-Califomia Corp. Westgate-Califomia Corp., San Diego, operate two enterprises (Norpac, and Frigorificos Paita) that freeze 52 and pack tuna at Mancora and at Paita, Pern. Interesting steps undertaken by the Westgate- Califomia Corp. include the acquisition by an affiliated firm (National Marine Terminals Company) of a refrigerated freighter with a capacity of 1,800 tons to ply between 53 Paita and San Diego, location of the home cannery. V. EVOLUTION OF TUNA CANNING IN JAPAN In 1869, the second year of the Meiji Era, a Japa nese technologist preserved sardines in oil. In the fol lowing decade Japanese students and technologists visited Europe and the United States to assimilate and transfer to Japan the latest canning techniques. Experimentation at various Japanese institutions continued, leading to the preserving on a very small scale of fruits, various fish, and other foods.^ These initial activities provided 52"Paita--Peru's Ancient Port Finds New Prosperity in Fisheries," Pacific Fisheries. 57:10-13, October, 1959; and United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution . . . Dated August 20, 1957. p. 88. -^"Paita— Peru's Ancient Port . . .," op. cit.. p. 10. 54 Saki Hoshino, The Canning Industry of Japan 1940 (Tokyo: The Foreign Relations Council. The Japan F.rnnnmiT Federation, July, 1940), pp. 1-3. 134 the technical foundation for later development of the canning industry. Early Rapid Establishment of Canneries The economic impetus needed to build and catapult the Japanese canning industry to a position of prominence arose from wartime logistic needs. The Sino-Japanese War (1894-1895), the Russo-Japanese War (1904-1905), and the First World War (1914-1918) had a tremendous impact on the Japanese canning industry. Although canning on a com mercial scale was practically unknown in Japan in the early 1880's, 87 canneries were operating in 1894, and 197, in 1897.55 After each war a period of consolidation ensued, during which weaker firms withdrew from the industry. The Japanese canning industry today packs a great variety of foods. The most important on a quantity basis are tuna, 57 salmon, trout, and mandarin oranges. Development to 1941 In 1906 tuna was canned in oil in Japan. Subsequent development of tuna canning, however, was intermittent for 55Ibid., p. 3. ^ Ibid., Table I, p. 4, and p. 6. 57The Oriental Economist, "Canned Goods," Japan Economic Yearbook 1957 (Tokyo: The Oriental Economist, 1957), p. 89. 135 the next quarter century. By 1919 the canned tuna pack approximated three thousand to £our thousand cases. Then, in the ensuing ten years, practically no tuna was packed on a commercial 58 scale. The reason for this unimpressive record lies in the greater profitability Japanese canners uncovered in the exportation to Asia, Europe, and the Americas of canned goods other than tuna. The disappearance of albacore off the Pacific coast 59 of North America in 1928 belatedly awakened Japanese canners in 1930 to the possibility of shipping canned alba core to the United States. In that year the first real tuna cannery was established, at Shimizu, and within the next two years fifteen additional tuna canneries were operating. Production increased eightfold during a ten- year period, starting with 128.5 thousand cases in 1931, 60 and attaining 967.0 thousand cases in 1940. Of the total 58 °A. W. Anderson, et al., Survey of the Domestic Tuna Industry, United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 104 (Washington, D.C.: United States Fish and Wildlife Service, 1953), pp. 120-21. 59 California Bureau of Marine Fisheries, The Com mercial Fish Catch of California for the Year 194? With an Historical Review 1916-1947 (Fish Bulletin No. 74. Sacramento: California State Printing Office, 1949), p. 24. ^®Anderson, et al.. op. cit.. p. 127. 136 production, the United States market took approximately two-thirds. The remaining third was shipped to Canada, China, and various European countries.^ Post World War II The devastating effect of the war oh the Japanese economy is reflected by the 1946 canned tuna output which (s') came to only 1,299 cases, one-tenth of 1 per cent of the 1940 production. Dramatic recovery. In spite of many difficulties, and eventually aided by the occupation authorities, the Japanese tuna canners were able to increase their produc tion spectacularly during the years following 1946, reach- 21 o ing a peak of 2.6 million cases in 1950. This record output, approximately 95 per cent of which was shipped to the United States,was in part stimulated by the advance knowledge that the United States duty on tuna canned in oil would be increased in January, 1951, from an ad valorem rate of 22.5 per cent to an ad valorem rate of 45 per cent. Subsequently, on September 10, 1955, the rate was reduced 61Ibid., p. 122. 62Ibid. 63Ibid.. p. 123. 64Ibid. 137 to 35 per cent.^^ Indicative of the sharp fluctuations in the Japanese tuna-canning industry is the fact that during most of 1951, fifty-nine canneries were operating, with an annual produc tion capacity of 2.2 million cases. With the passage of the United States tariff increasing the duty initially to 45 per cent ad valorem rate, the number of canneries pack ing tuna plummeted from fifty-nine to ten; exports of canned tuna dropped more than 60 per cent, to 719,120 cases.^ Effect of United States tariff. Faced with the resultant virtual loss of the share of the American market they had enjoyed prior to 1951, Japanese trading firms attempted more intensive development of other export markets. These included Switzerland (attractive to Japa nese exporters during the early 1950's as payment was in a "hard" currency), Germany, Italy, Netherlands, and Bel- , 67 gium. ^United States Tariff Commission, Tuna Fish, Report on Investigation Conducted Pursuant to a Resolution . . . Dated August 20. 1937, p. 59. 66 Anderson, et al., op. cit.. pp. 122-24. ^Food and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1957. Vol. VIII (Rome: Food and Agriculture Organization, 1958), Table 4-B3, page 4-20. 138 Japanese trading firms also sought a substitute prod uct that could be exported in quantity to the United States under tariff provisions that would permit the imported product from being competitive. Such a product was found in tuna canned in brine* which was subject to only a 12.3 per cent ad valorem duty. A limiting provision became effective in April, 1956, to the effect that imports in ex cess of 20 per cent of the previous year's domestic pack of fLQ tuna would be dutiable at a 25 per cent rate ad valorem. A quirk in the United States tariff regulations, therefore, presented the Japanese canners with the possi bility of shifting their production to tuna canned in brine and again supplying United States importers with a canned tuna product. ^®United States Tariff Commission, Tuna Fish, Report on Investigation Conducted Pursuant to a Resolution . . . Dated August 20, 1937, p. 60. 69 The use of brine to preserve tuna is of ancient origin. The British essayist and poet, Matthew Arnold, in "The Scholar-Gypsy" refers to one who, "As some grave Tyrian trader, from the sea, Descried at sunrise an emerging prow Lifting the cool-hair'd creepers stealthily, The fringes of a southward-facing brow Among the Aegaean Isles; "And saw the merry Grecian coaster come, Freighted with amber grapes, and Chian wine, Green, bursting figs, and tunnies steep'd in brine And knew the intruders on his ancient home. ..." See John Bryson (ed.), "The Scholar-Gypsy," Matthew Arnold. Poetry and Prose (Cambridge, Massachusetts: Harvard Uni- versity Press, 1954), pp. 180-81. 139 Current production* In 1958 Japanese firms exported 2.0 million cases of tuna canned in brine, almost all of which were shipped to the United States. In the same year Japanese firms also exported 1.3 million cases of tuna canned in oil, very little of which reached the United States. Canned tuna in its several forms comprised on a quantity basis approximately 40 per cent of all Japanese canned fishery exports.7^ The paramount importance of fishery products to the Japanese canning industry is indicated by the fact that in 1958, 73 per cent of all canned food exports consisted of fishery products.7^ Difficulties. The post-war development of the Japanese fish-canning industry has not proceeded smoothly. In 1954 large inventories of frozen and canned tuna were in existence in Japan and in this country. In 1955 some Japanese fish canners suffered severe losses; several firms went into bankruptcy.7^ ^United States Fish and Wildlife Service, Com mercial Fisheries Review. 21:67-68, June, 1959. 71Ibid. 7^United States Congress, op. cit.. Appendix 5, p. 170. 140 VI. WORLD-WIDE GROWTH OF TUNA CANNING The statistical data assembled by the Food and Agri culture Organization of the United Nations are valuable for comparison purposes. They are indicative of possible future impacts on the southern California tuna canning market. The significant considerations in reviewing Table XI, World-Wide Growth of Canning Tuna and Tunalike Fish, relate to: (1) the rate of growth in canning activity by country; (2) the relative standing of the output in 1958 of the canneries of one country compared to those of another; and (3) the comparison of canning with catch data in Table I, page 48. Statistical Classifications A number of countries do not make the clear distinc tion for statistical purposes between tunas and bonitos found in the United States data. In interpreting the data compiled by the Food and Agriculture Organization of the United Nations it is necessary to bear in mind the fact that the totals include canning of bonito, tuna, and mackerel. Interpretation of the Table As background in analyzing the statistical data, it is well to remember that: (1) tuna resources are widely 141 TABLE XI WORLD-WIDE GROWTH OF CANNING TUNA AND TUNALIKE FISH* (in Thousand Metric Tons) Country 1953 1956 1958 Percentage of 1958 World Pack United States 97.0 126.9 134.0 42.8 Japan 37.0 61.2 66.7 21.3 France (including Algeria) 29.0 29.4 34.2 10.9 Spain 15.5 21.6 25.0(est.) 8.0 Peru 12.7 22.8 12.5 4.0 Portugal 4.2 9.7 6. 6 2.1 Morocco 1.9 1.8 5.6 1.8 Argentina 5.4 4.1 5.0 1.6 Other 17.3 26.5 23.4 7.5 Total 220.0 304.0 313.0 100.0 *Food and Agriculture Organization of the United Nations, Yearbook of Fishery Statistics 1958, Vol. IX (Rome: Food and Agriculture Organization, T§59), Table F-12, pp. f29-f31. 142 distributed, available to canneries in all the countries listed; and (2) if the management of a cannery has the knowledge and equipment to pack bonito or mackerel, it can shift its emphasis to tuna at any time the canned tuna market is sufficiently attractive to take this step. Comparative Rates of Growth The United States is the leading canner of tuna and tunalike fish in the world, supplying 43 per cent of the total in 1958. Japan stands in second place, packing half the quantity put up in the United States. The quantity of tuna and tunalike fish canned in the United States increased by 38 per cent between 1953 and 1958. This increase is attributable to larger consumption in the domestic market, resulting from an increase in population and from greater consumption per capita. (Table XVI, page 211, shows consumption per capita by year.) Japan's output between 1953 and 1958 increased 80 per cent, resulting from the development of export mar kets. Considering the aggregate world figures, output of canned tuna and tunalike fish increased between 1953 and 1958 by 42 per cent. The United States purchased 53 per cent of Japan's exports of canned tuna and tunalike fish in 1957, and 143 7 ' I approximately the same percentage in 1958. J Japanese exports to the United States, Great Britain, and other countries of the world adversely affected the exportation of Peruvian canned tuna and bonito. This in large measure explains the failure of Peruvian firms to retain increases in exports achieved in 1956. Production in 1958 fell from the 1956 peak to the 1953 level. In 1958 tuna and tunalike fish were canned by firms in approximately thirty countries on five continents. This is indicative of the raw material orientation and ease of entry, characteristic of canning of tuna and tunalike fish. 70 JFood and Agriculture Organization of the United Nations, op. cit.. Table 4-C3, pp. 4-33 to 4-36. CHAPTER IV ECONOMIC STRUCTURE AND CHARACTERISTICS The objective of this chapter is to set forth and analyze the economic structure and characteristics of the different groups of canners. The United States supply of tuna for 1951-1958 is presented in Figure 1. I. RELATIVE SIZE OF THE INDUSTRY Fish and shellfish canned in the United States for human consumption in 1958 were valued to packers at $344.7 million. This figure excludes animal food. It includes all varieties of fish and shellfish (tuna, salmon, sar dines, mackerel, anchovies, oysters, shrimp, clams, etc.). Of these varieties, canned tuna stands in first place, valued at $161.8 million for 1958 as noted in Table XII. In terms of value at the canner level, the United States tuna pack is 47 per cent of the total pack of all varieties of fish and shellfish put up for human consump tion. Southern California canners supply 86 per cent of domestically canned tuna.-*- Consequently, in dollar value, ^United States Tariff Commission, Tuna Fish, Report on Investigation Conducted Pursuant to a Resolution by the Committee on Finance of the United States Senate, Dated August 20, 1957 (Washington, D.C.: United States Tariff Commission, May, 1958), p. 40. 144 145 □ Imported Canned Imported Frozen Domestic Catch 1951 1952 1953 1954 1955 1956 1957 1958 FIGURE 1 UNITED STATES SUPPLY OF TUNA, 1951-1958 (BASED ON DATA FROM UNITED STATES FISH AND WILDLIFE SERVICE FISHERY LEAFLET 484) 146 TABLE XII UNITED STATES PACK OF CANNED FISH AND SHELLFISH FOR HUMAN CONSUMPTION* 1958 Pack Million Pounds Value to Packer in Millions of Dollars Percentage of Total Pack by Value Tuna 277 $161.8 47 Salmon 178 92.2 26 Sardines 149 32.3 9 Shrimp and Shrimp Specialties 14 21.0 6 Miscellaneous 119 37.4 12 Total 737 344.7 100 *United States Fish and Wildlife Service, Canned Fish & Byproducts--1958 (C.F.S. No. 2021. Washington, D.C.: United States Fish and Wildlife Service, 1959), pp. 2, 3, 17, 18. (Duplicated.) 147 southern California tuna canners account for 40 per cent of the United States aggregate canned fish and shellfish pack destined for human consumption. II. GROUPINGS OF TUNA CANNERS For purposes of analysis, it is desirable to group American tuna canners by: (1) output or share of the market they enjoy, and (2) geographic location. The usefulness of these groupings arises from the fact that in addition to common problems facing all tuna canners, the large canners operate in a framework that is distinct from the one in which the small canners pursue their immediate goals. Fur ther, the geographic location of the canning plants has a direct bearing on how certain economic and political developments will affect the firms. Geographic location, therefore, is instrumental in determining the moves and counter-moves of firms in the industry. Table XIII groups firms by market share and geographic location. Number and Relative Size of Firms Tuna canners, classified by size, fall into two categories: large producers and small producers. Large producers. The three large southern Cali fornia tuna canners (Van Camp Sea Food Company, Inc., Star-Kist Foods, Inc., and Westgate-Califomia Corp.) 148 TABLE XIII AMERICAN TUNA CANNERS* Estimated Market Share Category of Firm Percentage Large Canners 70 Van Camp Sea Food Company, Inc., Terminal Island 25 Star-Kist Foods, Inc., Terminal Island 25 Westgate-Califomia Corp., San Diego 20 Small Canners 30 At Terminal Island: 16 California Marine Curing and Packing Co. Franco-Italian Packing Co. Pan Pacific Fisheries, Inc. American Tuna Cannery In Northern California, Oregon, Washington, Hawaii: 12 F. E. Booth Company, Inc., San Francisco Washington Packing Corporation, San Francisco 149 TABLE XIII (continued) AMERICAN TUNA CANNERS* Estimated Market Share Category of Firm Percentage Small Canners (continued) Columbia River Packers Association, Inc., Astoria, Oregon Plus approximately 6 packers that occasionally can tuna in small amounts East Coast and Gulf Coast: 2 Approximately 3 firms *United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution by the Committee on Finance of the United States Senate, Dated August 20, 1957 (Washington, D.C.: United States Tariff Commission, May, 1958), p. 40; and interview with L. T. Bradbury, United States Fish and Wildlife Service, Terminal Island, September 24, 1959. NOTE: The data relative to sales, costs, and profits of the tuna canners are classified as confidential. Hence, the precise sales figures of individual firms are not readily available, except in the case of the Van Camp Seafood Company, which includes the firm*s net sales in its annual reports. Yet, those in the industry who ventured an opinion when contacted by the writer, were in substantial agreement concerning the approximate percentages of the market supplied by the several firms. 150 account for 70 per cent of the tuna canned in the United States.^ Van Camp Sea Food Company and Star-Kist are the two giants in the American tuna canning industry. They have approximately equal sales volume, each accounting for approximately 25 to 27 per cent of tuna canned domesti cally.^ Small producers. The small producers of canned tuna may be segregated into: (1) firms that devote their efforts primarily or almost exclusively to the packing of canned tuna; (2) firms that pack tuna in a substantial quantity and also pack another fish or groups of fish in similar quantities; and (3) firms that pack tuna as supplementary to their principal activity during slow seasons. The small canners located on Terminal Island, Cali fornia (California Marine Curing and Packing Co., Franco- Italian Packing Co., American Tuna Cannery, and Pan-Pacific Fisheries, Inc.) specialize in the packing of canned tuna. This also is true of two firms in San Francisco (Washington Packing Corporation and F. E. Booth Company, Inc.). ^Ibid., p. 41. 3 Van Camp Sea Food Company's total net sales for year ending May 30, 1959, were $56.7 million. See Van Camp Sea Food Company, Inc., Annual Report. Year Ended May 30. 1959 (Long Beach, California: Van Camp Sea Food Company? Inc., 1959). 151 California Marine Curing and Packing Co. is the strongest of the small canners on Terminal Island, supply ing approximately 4 to 5 per cent of the market for domes tic canned tuna. The Columbia River Packers Association of Astoria, Oregon, is small only with reference to its share of the canned tuna market. The Association has achieved sub stantial product diversification by canning both salmon and tuna. The firm enjoys approximately 5.5 per cent of the canned tuna market supplied by domestic canners. The few firms ^ along the Gulf Coast and Atlantic Coast that pack tuna do so during the off season for the principal products (shrimp, oysters, sardines) they pro cess. In past years a number of salmon, sardine, and other fish canners in northern California, Oregon, and Washington occasionally have packed tuna on a small scale. Geographic Concentration Since its inception in 1903, the American tuna- canning industry has been centered in southern Cali fornia at San Pedro and San Diego.^ Today, geographic ^See United States Tariff Commission, loc. cit., which states that three small firms pack tuna in the eastern United States. ^In the early 1900's albacore appeared in large numbers off the coasts of California and Oregon. It was by historical accident that tuna canning started in southern California rather than in a relatively populous center such as San Francisco. 152 concentration in tuna canning Is higher than that In any other major fish-canning Industry. In 1957 southern Cali fornia plant8 accounted for 86 per cent of domestic tuna canning and Terminal Island accounted for approximately 66 per cent.^ There were no radical changes in concentra tion in 1958 and 1959. Geographic concentration over a period of years has created a market in southern California for raw and frozen tuna supplied by commercial fishermen and by importers, has been a factor leading to the erection in southern Cali fornia of plants producing tuna containers, and has pro vided employment for more than five thousand cannery workers. Geographic concentration also has benefitted carriers operating in southern California. In 1958 rail roads transported 179 million pounds of canned tuna; truck ing firms, 31 million pounds; and coastal vessels, 29 mil lion pounds.^ ^Refer to Table XIII. ^Derived from data in: A. W. Anderson, et al.. Survey of the Domestic Tuna Industry. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 104 (Washington, D.C.: United States Fish and Wildlife Service, 1953), p. 372. 153 111. ECONOMIC CHARACTERISTICS UNDERLYING PRODUCTION Economic growth of the southern California tuna- canning industry is based on availability of raw material and adequate labor, and on markets for the finished prod uct. Supply of the raw material has been available to the canners in quantities sufficient to meet their needs, except during periods of war. Through the years, though there have been many difficulties to overcome relative to supply, the dominant problems have been related to demand for the finished product. Raw Material Orientation The canning of fish in the United States has a pro- O nounced raw material orientation. Raw material, in the case of tuna canning, is 60 per cent of all processing g costs. Only one-half of the fish can be used for human consumption, and that half loses as much as 30 per cent of its original weight in the cooking process at the cannery.^ Transportation of the raw material is aboard boats ®P. Sargant Florence, The Logic of British and American Industry (London: Routledge and Kegan Paul, Ltd., 1953), p. 83. ^United States Tariff Commission, op. cit., p. 57. ^Anderson, et al.. op. cit.. p. 292. 154 that travel at slow rates of speed, usually with a normal crew complement, carrying the tuna under refrigeration. As a consequence of the above factors, the costs of trans portation, storing, and handling of the raw material are higher than are the corresponding costs relating to trans porting, storing, and handling of the finished product. The tuna-canning industry originated in an area (Long Beach-Terminal Island-San Pedro) adjacent to waters which offered fishermen an abundance of tunas close to shore, especially in the early years of the industry. San Diego, the second area of development, enjoyed similar advantages relative to supply. In view of the good record of abundant seasonal albacore runs along the entire Pacific Coast of the United States, canners in Northern California, Oregon, and even in Washington, prior to the Second World War also found their sites advantageous with reference to the packing of tuna. Raw material orientation, therefore, was inherent in the locating of the tuna canneries along the Pacific Coast. Mobile and migratory raw material. A processor derives distinct advantages from knowing with reasonable certainty that his raw material is available in the fore seeable future in commercial quantities at given locations. The processor of a mineral, copper for instance, knows within a fair degree of accuracy the location of the ore 155 deposits, the reserves In those areas, and the average richness of the ore. Further, in a given time period the raw material reserves are not likely to diminish drasti- cally or disappear almost completely. In sharp contrast, the canner relying on marine fish must cope with the risk of mobility and migration of his 11 raw material. This risk is aggravated by the fact that in the present state of science much has yet to be dis covered about the migration of tunas. Hence, predictions, though based on a wealth of meticulously accumulated scien tific data, are helpful, but nonetheless have limitations. Further, and most important, man has no effective way of directing tunas to return to waters which they once popu lated close to shore locations where canneries are located. As a consequence, mobility of raw material presents the tuna canner with certain uninsurable risks that have the gravest economic implications. Potentiality of tuna resources. The danger of depleting tuna resources in the Pacific appears very remote. On the contrary, the abundance of tunas in the vastness of the equatorial belt crossing the Pacific has •^The extent of the risk is illustrated by the failure of sardines to appear off the Pacific Coast. In 1951 the pack of Pacific sardines came to 2,864,984 cases, valued at $19,362,744. The following year the pack dropped to 106,746 cases, valued at $918,072. 156 been judged to constitute one of the largest potential 12 fishery resources known to man. Consequences of Mobile and Migratory Raw Material The mobile and migratory habits of tunas have signi ficant economic consequences for the southern California tuna canners. Uncertainty of catch. The unpredictability of the season's catch has the gravest economic implications for both fishermen and fish canners. This unpredictability increases the importance of the raw fish storage function at or in the vicinity of the plants. Inadequate supply of raw material means that for temporary or prolonged periods plants operate at less than optimum capacity, a development that increases operating costs. It may be necessary to drop experienced workers, giving rise to employment and training problems when oper ations are resumed. Further, low levels of inventories of canned tuna in general will tend to reduce sales and increase price. If a particular canner's supply of raw material is inadequate compared to that of other tuna ■^Statement by Dr. D. B. Finn at the Indo-Pacific Fisheries Council Conference in Manila in 1952, cited by Botteman, C. J., Principles of Fisheries Development (Amsterdam: North-Holland Publishing Company, 1959), p. 34. 157 canners, then his competitive position is adversely affected. Seasonality of supply. The migratory habits of tunas also result in a seasonal pattern which may obtain for many years. Then, for reasons that still are not fully understood, the fish may fail to appear one year during the erstwhile abundant season. Such absences may last for a number of consecutive years, as occurred in the case of albacore off the Pacific Coast of the United States between 1926 and 1938. The economic effects of these migrations are signi ficant for both fishing fleets and tuna canners. During periods when tunas are in great abundance, many fishing vessels participate in the fishing and reach port at about the same time with their catch. The canners are interested only in a given quantity at a given time. Knowledge that an excess is available has a depressing effect on price. The fishing boat operator has practically no choice except to keep the fish under refrigeration on his vessel until 13 such time as he can sell the catch. An abundance of 13 Failure of the Terminal Island canners to increase cold storage warehouse capacity places the storage burden on the fishing fleets. Cold storage capacity in warehouses available to canners on Terminal Island is less than two thousand tons. This is one**third the aggregate capacity of the cold storage warehouses maintained by the Columbia River Packers Association. See United States Tariff Commission, op. cit.. p. 43. 158 catch delivered by many boats at about the same time, therefore, brings about a glut of frozen tuna. The failure of the domestic tuna fleets to catch appreciable quantities of tunas tends to increase the raw tuna prices in southern California. The possibility of eventually (approximately three months after opening a letter of credit) securing imported raw, frozen tuna from Japanese sources acts as a deterrent to excessive price increases. Uncertainty of price. In general, fishing boat operators do not know what price they will be able to get for their catch when they return to port several weeks hence. Likewise, tuna canners do not know what price they will have to pay for much of their raw material several months in the future. Price uncertainty derives in part from the risk inherent in the fishing operation. The longer it takes the fishing boat operators to locate schools of tunas, the higher is the cost to them to get boatloads of fish, and the higher is the price they may be determined to obtain for their catch. The mobile, migratory habits of tunas, therefore, have a direct impact on the price per pound tuna canners pay. The price canners pay also is influenced by the pricing policies pursued by 159 14 Japanese and Peruvian suppliers of frozen tuna. Exploration. Several groups throughout the world are exploring potential tuna grounds. From the point of view of numbers, fishermen stand in first place among the exploratory groups. Their activities center on the known tuna grounds, and they also explore peripheral and other potential tuna regions. In southern California several scientific insti tutes, government agencies, and government-sponsored organ izations are engaged in marine research dealing directly or indirectly with tunas. ^ The growing body of knowledge The Japanese albacore season starts approximately two weeks before the American albacore season. Hence, Japanese firms are in a position to submit quotations on fresh, frozen albacore before the American season really is in progress. As a result, Japanese quotations act as a price ceiling beyond which the American albacore fishermen know they cannot go and still sell their product. ^The organizations include the Fish and Game Divi sion of the State of California; the Bureau of Commercial Fisheries under the United States Fish and Wildlife Service; the Inter-American Tropical Tuna Commission, La Jolla, California. These organizations operate research vessels, and coordinate a number of activities relative to bio logical research relating to the Pacific tunas. The leading canners engage in marine research. Examples include a five-month voyage in the south Pacific by Star-Kist Foods* purse seiner Star-Kist in 1953. (See "Star-Kist Dispatches Fishermen on a Five-Month Explora tion," Pacific Fisherman. 51:67, December, 1953.) During 1959-19o0 the same company dispatched a tuna clipper to west African waters, where it was working in conjunction with the Ghana Fisheries Department. (See "Ghana," Pacific Fisherman. International Yearbook Number, 58:202-203, January 25, 1960.) 160 concerning marine conditions and marine life eventually will permit more accurate catch predictions. In order to be assured of the best possible supply of raw material relative to quantity and price in the foreseeable future, the southern California tuna canners also undertake exploratory fishing trips to new tuna grounds. This is a costly activity, indicative of the importance the canners attach to having a competitive, reliable supply of raw material available. Selection of new canning sites. Requirements for a tuna cannery include availability of fresh water, cans, oil, adequate means of transportation, and reasonably com petent labor. The increasing cost in securing raw ma terial, using San Pedro and San Diego as bases of oper ation, compared to the attractive possibilities of setting up plants closer to rich tuna grounds, underlies post-war branch plant expansion. The migratory nature of tunas, therefore, underlies the erection in recent years by California firms of tuna canneries at locations other than southern California. Since the Second World War, only one canner, Star-Kist Foods, Inc., has built a large-scale, modern plant on Terminal Island. The major canners have opened branch plants at the following locations: 161 Van Camp Sea Food Company, Inc. American Samoa Ecuador Puerto Rico Star-Kist Foods, Inc. Puerto Rico Peru Westgate-Califomia Corp. Peru Tuna Canning The southern California tuna canners essentially are single-line producers, with highly mechanized plants, tapping a common labor market. Production specialization. All southern California tuna canners devote by far their major effort toward the canning of tuna and processing of tuna by-products. Canned tuna accounts for 90 per cent of total output by value, and by-products account for 5 per cent.^ None of the plants pack non-fish products on a regular basis. In short, spe cialization is intense. The obvious advantage in specializing so intensively is that the management knows the tuna canning business ■^United States Tariff Commission, op. cit.. p. 40. 1 162 thoroughly and should be in a position, therefore, to minimize costs and maximize sales opportunities. However, the potential danger in relying on a single product for a firm's economic existence is pronounced. This danger is enhanced by the fact that the raw material is biological, mobile, and migrates over wide areas. Mechanization. The American canning industry has achieved a high degree of mechanization in its several branches. Technical advances in fruit and vegetable can ning have been a factor in improving tuna canning equip ment. Achievement of a higher degree of mechanization has resulted in reduction by 27 per cent between 1953 and 1957 of the number of hours of direct labor required to process a standard case of canned tuna.^ Mechanization characterizes the operation of both the large scale and small scale tuna canners. The large operators expend an average of .50 man-hours per standard case, against an average of .54 man-hours expended by the 1 A small operators. ■^Derived from ibid., p. 52. Ibid. However, an executive of one of the large canners pointed out that certain of the smaller canners on the West Coast unquestionably expended less direct labor per case than the large canners in view of their greater flexibility and a high degree of efficiency. 163 As a consequence of efficient mechanization, un skilled and semi-skilled labor may be employed in tuna canning. This is significant because over-all labor costs are thereby reduced, and because it is possible to operate plants in areas, such as American Samoa, where there is a shortage of skilled and semi-skilled labor. Common labor pool. The geographic concentration of the southern California tuna canners on Terminal Island means that the several canners draw on a common labor pool. This situation has several important economic implications. Many of the older employees have worked in more than one tuna cannery over the years. There is an interchange of information at the tuna cannery worker level between the various canneries. This is enhanced by the fact that different members of the same family may work in different canneries. Changes in the labor market affect not only one canner, but all the tuna canners in the area. It is true, of course, that some canners are better equipped to absorb the impact of higher wages and other forces acting on the labor market than are other canners. The common labor pool is also tapped by non-fishing industries that are in a position to offer the prospective worker certain benefits some of the canners have difficulty in matching. The principal firms competing with the tuna 164 canning industry for workers in recent years have been companies building aircraft. During periods of expansion, the aircraft industry is in a position to offer attractive wages, including overtime work. Further, since most of the aircraft plants were built in recent years, whereas most of the tuna canneries were constructed twenty or more years ago, the physical surroundings tend to be considered by workers as more pleasant and less odoriferous than those in a tuna cannery. Also, working in an aircraft plant holds the allure of participating in an industry of the future. Electronics firms, automobile assembly plants, and the large number of retail stores in the general area also draw upon the same labor pool. Consequently, the employ ment practices in these industries and in retail establish ments have an impact on the tuna-canning industry. Ease of entry. The canning process, whether the product be a fruit, vegetable, or fish, as a general rule lends itself to small-scale operations. There is rela tively little advantage in constructing extremely large plants and equipment.^ Canning equipment applicable to the tuna industry is available to all entrepreneurs. There are no patents or 19 Stanley Vance, American Industries (Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1955), pp. 538-39. other restrictions preventing or allocating the use of canning equipment. Some of the key equipment may be leased. The man-hours of work expended per case of tuna are approximately the same for large and for small firms.2® Manual labor is carried on primarily by housewives who desire or are inured to seasonal employment in canneries. Large sums of working capital are not needed to start a tuna cannery. Ease of entry exists, therefore, in the tuna-canning industry. 21 Optimum utilization of plant. Optimum utilization of plant capacity by a canner calls for as close to year- round activity as possible at a substantial level of oper ation. The southern California tuna packers are handi capped in this regard because they do not have at present a second product which may be substituted on a major scale for tuna during slack periods. On occasion, southern California tuna canners pack anchovies, mackerel, squid, and sardines. But in recent 20Supra, p. 162. 2^"By the optimum firm we must mean a firm operating at that scale at which in existing conditions of technique and organising ability it has the lowest average cost of production per unit, when all those costs which must be covered in the long run are included." E. A. G. Robinson, The Structure of Competitive Industry (Chicago: The Uni versity of Chicago Press, 1956), p. 11. 166 years none o£ these fish have constituted a satisfactory product to keep the plants operating consistently at a high level during seasons when tuna Is not being canned. This situation contrasts most unfavorably with that of a number of California fruit canners, organizations that start In June with cherries and progressively undertake the canning o o of apricots, peaches, pears, tomatoes, and other Items.^ Survival. Ease of entry into an industry invites the interest of entrepreneurs who possess limited working capital. Firms recently established by such entrepreneurs often enjoy the advantage of greater flexibility over older, larger enterprises. However, the entrepreneurs with limited working capital lack a cushion to absorb the shock of unexpected, untoward events. Thus, interruptions in the supply of raw material, in the supply of containers, or in the supply of labor can have devastating effects on the enterprise, as may unanticipated price declines for the finished product. Therefore, many of the firms have had a short life. Types of Integration Integration of economic activities may proceed along vertical lines or horizontal lines. The larger southern 22 Donald Y. Aska, "Marketing Canned Tuna" (paper read at the Industry Tuna Meeting, La Jolla, California, May 19-21, 1959), p. 3. 167 California canners have engaged in both types of integra tion. Vertical. The concept of vertical integration has been clearly set forth as follows: Vertical integration is normally understood to refer to an organization of production under which a single business unit carries on successive stages in the pro cessing or distribution of a product which is sold by other firms without further processing. Vertical integration results in by-passing a market or having a position on both sides of the market: making a product instead of buying it, carrying it to a later stage instead of selling it. Thus, bringing together under one managerial direction a raw material producer and the manufacturer using that raw material, a producer of an intermediate product and a manufacturer using that intermediate product, or a manufacturer of the finished product and a distributor of that product, are examples of vertical integration. In a practical sense, inte gration must be examined with respect to the particular product or products which a firm manufactures, not with respect to products generally; full integration with respect to all products which a manufacturer fabricates probably exists nowhere in the real economy. 23 The successive steps in getting canned tuna to con sumers include: fishing, canning, wholesaling, retailing. Since they are in an intermediate position with reference to the successive steps, canners may integrate vertically either backward or forward. 23 Comment by Irston R. Barnes, Federal Trade Com mission, in: M. A. Adelman, "Concept and Statistical Measurement of Vertical Integration," Business Concentra tion and Price Policy. A Report of the National Bureau of Economic Research, New York (Princeton: Princeton Univer sity Press, 1955), pp. 322-23. 168 From the vantage point of the canner, backward integration implies control of the raw material supply function. This means participation by canners in fishing for tuna. Ever since the early 1900's, southern California tuna canners have been active in operating a few tuna boats. The name of the boat, or the flag it flies, clearly indicates that the vessel is a company-operated boat. Complete forward integration would include taking over the wholesale function and the retail function. A few canners warehouse their finished product at strategic metropolitan centers throughout the country. Therefore, tuna canners engage in one aspect of the wholesaling function. The next step in forward integration is control of the retail function. Although not totally unknown, inte gration of retailing has not developed in the tuna-canning industry. Quasi-vertical. There are degrees of backward vertical integration in the tuna-canning industry, ranging the gamut from complete ownership and operation of fishing vessels to a number of examples of peripheral or quasi integration. A frequent example of a high degree of vertical integration is the ownership by a southern California tuna canner of 51 per cent or more of the stock (shares) of 169 a tuna boat. Other examples of control include the owner ship of a substantial minority share in tuna boats. Other arrangements, which are more difficult to trace, include majority or minority ownership of shares in a tuna boat held by executives or directors of canning companies. Still other alliances which are potentially influential include loans by canning companies to fishing boat oper ators. Such loans may develop cumulative overtones if they continue season after season for particular boats. A given agreement may be temporary in nature, applying to a single trip, or may cover a much longer period of time. The prevalence of the above arrangements appears to be common knowledge.^ The United States Tariff Commission ^The United States Tariff Commission has commented on the financial relationships between the tuna packers and some fishing boat operators, as follows: "The tie-up between canners and the tuna fishery is manifested in several ways. The most common forms are: (1) partial or complete direct ownership of fishing vessels by the packing company; (2) partial ownership of fishing vessels by packing company directors or officials, or by members of their families; (3) advancement of funds by tuna packers for vessel construction, generally secured by mortgages; (4) advancement of funds by tuna packers for vessel repairs, supplies, fuel, equipment, etc. which may or may not be secured by maritime liens; and (5) guarantee by tuna packers of mortgages, notes, etc. These various types of financial interests held by tuna packers in fish ing vessels--particularly in bait boats— are quite sub stantial." See United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution bv the Committee on Finance of the United States Senate. Dated June 26. 1952 ^Washington. D.C.: United States Tariff Commission, March, 1953), p. 71. 170 reported that as of May 31, 1952, one of the leading pro ducers of tuna had made "... loans to fishermen and investments in jointly owned fishing boats amounting to 25 almost 15 per cent of the total assets of the company." In 1958-59, Van Camp Sea Food Company's loans to boat 2 f i owners and suppliers exceeded $1 million. ° Since the spring of 1957 the Van Camp Sea Food Company has increased its fleet from ten to fifteen boats; Star-Kist Foods, Inc., from seven or eight to fifteen boats; Westgate-Califomia 27 Corp., from six to thirty boats. Even the smaller firms are engaging in a mild degree of vertical integration. Six of the seven southern California tuna canners have a con- 28 trolling interest in one or more tuna bait boats. Horizontal. The large tuna packers have elected to expand along horizontal lines. They have built new plants; 25Ibid. 2 fi ^°Van Camp Sea Food Company, Inc., loc. cit. ^"Tuna's Troubles," The Wall Street Journal, West ern edition, March 10, 1959, pp. 1, 14. 28Refer to letter dated July 1, 1958, from W. M. Chapman, Director of Research, American Tunaboat Associ ation, to Hon. Henry Kearns, Assistant Secretary for Inter national Affairs, Department of Commerce, in: United States Congress, Senate, Committee on Interstate and Foreign Commerce, Fisheries Legislation. Hearings before Committee, 85th Congress, 2d Session, on S. 237, S. 2719, S. 2973, S. 3229, S. 3530, July 15-17, 1958 (Washington, D.C.: Government Printing Office, 1958), Appendix 6, p. 192. 171 they have acquired existing facilities through outright purchase or merger with other firms. The principal motive underlying horizontal expansion appears to be reduction of raw material costs by locating closer to the sources of supply. Product Diversification Product diversification by the southern California tuna canners includes: (1) modifications of, or additions to, the standard product; (2) tuna by-products; (3) prod ucts that are not based on tuna as the raw material. Tuna-based products other than the standard packs of canned tuna account for approximately 5 per cent of the OQ industry's annual sales. Only the larger canners attain sufficient volume to engage in a consistent way in the development of tuna by-products. Modifications of canned tuna. The modifications of canned tuna comprise a long list of products, no one of which has achieved a substantial sales volume. The list includes: tuna and noodles, tuna spreads, smoked tuna, creamed tuna, tuna frankfurters, TV tuna dinners, strained tuna for baby foods, dietetic tuna, tuna packed in brine, and tonno. ^Anderson, et al.. op. cit.. pp. 33-34. 172 Tonno Is a blend of dark and light meat tuna, heavily salted and packed in olive oil. Tonno originated in Italy and is preferred by some of the older Italian in families living in the United States. u The market, there fore, is limited in this country, inasmuch as the younger generation generally shows little interest in the prod- The use of canned tuna in the preparation of frozen tuna pies and TV dinners is being pioneered by Van Camp Sea 32 Food Company. To date, sales volume is small compared to 30 that of the standard packs of canned tuna. Non-tuna products. Southern California tuna canners process anchovies, mackerel, and sardines to the extent •^United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution . . . Dated August 20. 1957, p. 47~ •^Interview with E. L. Morris, Research Director, Tuna Research Foundation, Terminal Island, California, May 28, 1959. 32 The original plans to undertake the production of frozen tuna pies and TV dinners were formulated in 1954. C. A. Swanson & Sons of Omaha, Nebraska, process and dis tribute the frozen pies and TV dinners under the brand "Chicken of the Sea." See Van Camp Sea Food Company, Inc., Annual Report. Year Ended May 31. 1954 (Terminal Island, California: Van Camp Sea Food Company, Inc., 1954), p. 7. 33 -"^Interview with Jay Harris, Merchandise Manager, Van Camp Sea Food Company, Inc., Long Beach, California, December 21, 1959. 173 these fish are available. In 1958, however, the lack of anchovies caused the anchovy pack to drop in quantity by 88 per cent from the previous year’s figure. The 1958 pack was valued at only 34 $309 thousand. In the same year, the disappointing mackerel catch caused the mackerel pack to drop in quantity by 70 per cent below the 1957 pack.3- * Wide fluctuations of the Pacific sardine catch have resulted in correspondingly large fluctuations in the sardine pack. In 1958 the Pacific sardine pack increased in quantity by 446 per cent over that of the previous year. The 1958 pack was valued at $16.5 million.3^ The Van Camp Sea Food Company has the exclusive right, acquired in 1953 from the Coast Oyster Company of Seattle, to market their "Willapoint" brand of oysters and oyster stew. A provision of the agreement permits the marketing of the oyster products under the "Chicken of the Sea" label, if the Van Camp Sea Food Company wishes to do so.^ ^United States Fish and Wildlife Service, op. cit.. pp. 2, 17-18. 35Ibid. 36Ibid. 37 J Van Camp Sea Food Company, Inc., Annual Report. Year Ended May 31, 1954, pp. 6-7. 174 By-Products The heads, tails, fins, dark meat, bones, skin, and other parts of the tuna that are not used in canning con stitute about one-half the weight of the raw fish. These parts of the fish are used in the processing of by products, which are: (1) animal foods; and (2) meal, oil solubles, and similar items. The market for by-products constitutes 5 per cent of 38 the sales volume of canned tuna. ° Pet food. T h e pet food market has undergone great growth in recent years. This trend is confirmed by several developments, though statistical data are lacking to verify the extent of the growth. Pet food manufacturers estimate there are "... about 22 million to 24 million dogs and perhaps 25 million cats, plus assorted millions of rabbits, 38 Anderson, et al., loc. cit. ^ The Oxford Universal Dictionary defines a by product as, "a secondary product; a substance obtained in the course of a specific process, but not its primary object." For the tuna-canning industry, therefore, pet food is a by-product and is so designated by members of the industry contacted by the writer, and by Donald Y. Aska, Chief Branch of Market Development, Division of Industrial Research and Services, Bureau of Commercial Fisheries. See transcript of his talk, "Marketing Canned Tuna," op. cit.: also C. T. Onions (ed.), The Oxford Universal Dictionary on Historical Principles (third edition; Oxford: The Clarendon Press, 1944), p. 243. 175 turtles, birds, and other pets."^® Pet foods constitute a growing, profitable market for shrimp, salmon, tuna, and other fish canners. In 1958 animal foods with a canned fish base constituted a pack of 7.5 million cases (362 million pounds). This represents a 4 per cent increase in volume over the previous year's pack.^ Tuna canners have responded to the growing demand for animal foods by providing approximately 9 per cent of 42 the fish used in fish-based pet foods. In 1958 animal foods represented 2 to 3 per cent of the sales volume of canned tuna.^ ^Indications of the size of the pet food market include: (1) the American Veterinary Medical Association's estimate that there are twenty thousand veterinaries in the country (about 540 graduates enter the field each year); (2) about 45 per cent of income earned by veterinarians comes from pet animal practice; (3) in California a 20 per cent increase in veterinarians and small animal hospitals has occurred in five years. Today there are six hundred small animal hospitals and 1,200 veterinarians practicing in the state. See Jonathan Spivak, "Pet Population's Rise Spurs Increase in Vets, Alters Their Practices," The Wall Street Journal, Western edition, December 31, 1959, p. 1. ^United States Fish and Wildlife Service, Canned Fish & Byproducts--1958 (C.F.S. No. 2021. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 2. (Duplicated.) ^Aska, op. cit., p. 4. ^United States Fish and Wildlife Service, op. cit.. pp. 17-18; Anderson, et al., loc. cit. 176 The importance attributed to the market of fish- based pet food by two of the leading tuna canners is indi cated in part by their newspaper advertising expenditures. In 1958 Star-Kist Foods, Inc. allocated 11 per cent ($92,072) of its newspaper advertising expenditure to the promotion of its "Nine Lives Pet Food." In the same year Westgate-California Corp. spent 12 per cent ($17,625) of its newspaper advertising budget on "Purr Cat Food" and "Purr Pet."HH The pet food market shows signs of increasing steadily as a result of: (1) a rising human population with significant numbers of children; (2) the increase in the number of families living in suburbs; and (3) relatively high levels of personal income. The demand for pet food constitutes, therefore, a market with a steadily increas ing, long-range growth potential. Meal, oil solubles. Meal and tuna oil solubles are processed by the larger southern California tuna canners. Meal and oil processed by tuna canners come to perhaps 2 per cent of the sales volume of canned tuna.^ In sharp contrast to the market for pet foods, the ^"Advertisers' Expenditures in Newspapers 1958," Advertising Age. 30:66, 84, May 4, 1959. ^Anderson, et al., loc. cit. 177 recent market for fish meal and oil has been very weak. This is in part the result of greater activity by canners of herring and other fishes, and in part is the result of the rapid industrial development of fish meal and oil reduction plants in Peru, Norway, Iceland, and Southwest Africa. In spite of the weak market for fish by-products, the southern California tuna-canning industry endeavors to utilize the raw tuna in its entirety. The raw product is the source of human food, animal food, and chemical products. IV. THE STRUCTURE OF COMPETITION The emergence of competition and threatened emer gence of new competition with which the southern California tuna canners must cope are the result, in some measure, of the mobile, migratory characteristics of tunas. Formerly, the southern California tuna canners enjoyed a distinct advantage in having large quantities of tunas available in off-shore waters. This comparative advantage today is much less pronounced, in that the fish are no longer present in large numbers close to shore, partly owing to migrations ^"By-Products," Pacific Fisherman, International Yearbook Number, 58:245-47, January 25, i960. 178 and also probably partly owing to the intensive fishing which took place in the past in waters immediately adjacent to shore.^7 Canned tuna competition with which southern Cali fornia packers cope may be classified as: (1) major Ameri can competition; (2) minor American competition; and (3) foreign competition. Major American Competition Columbia River Packers Association, Inc., of Astoria, Oregon, offers the southern California tuna canners their greatest competition in terms of sales volume. The Associ ation is the only firm located outside of southern Cali fornia that has attempted to build a widely advertised brand, "Bumble Bee." The name is used in the promotion of both canned salmon and canned tuna. The addition of canned tuna to its other products has enabled Columbia River Packers Association to increase output and keep its plants operating on a year-round basis A Q at a relatively high level. The poor salmon fishing 47The common property nature of fishing areas leads to heavy fishing in waters close to shore. This practice is accentuated by the concentration of older and smaller boats and less enterprising fishermen in these waters. See Bottemanne, op. cit.. p. 139. ^Founded in 1899, specializing in the packing of salmon, Columbia River Packers Association added canned tuna to its products in 1937, and has stressed its sale in recent years. '"Bumble Bee* Tuna--The Story of a Business of Three-Score Years and Ten," Pacific Fisherman. 56:12-15. 17-18, May, 1958. 179 seasons in recent years probably have accentuated the firm's participation in the canned tuna market. Columbia River Packers Association is well managed, as evidenced by its reputation among competitors and by its earnings record. The firm has excellent financial backing through its relationship with Castle and Cooke, Inc., which holds approximately 60 per cent of Columbia River Packers Association's common stock.^ As a consequence, Columbia River Packers Association is in a position to purchase new equipment and undertake extensive plant expansion at such time as these steps are deemed desirable. Minor American Competition Minor competition in the sale of canned tuna emanates from a few firms scattered along the Pacific, Gulf, and Atlantic coasts. Pacific Coast. On the Pacific Coast there are only two firms located outside of southern California that specialize in the canning of tuna. Both firms (F. E. Booth Company, Inc. and Washington Packing Corporation) are ^Sales of tuna products showed continued growth during 1958 and early 1959, whereas the disappointing Alaskan salmon season adversely affected the volume of salmon packed. Castle and Cooke, Inc. purchased approxi mately 60 per cent of Columbia River Packers Association's common stock in 1958 and early 1959. Castle and Cooke, Inc., Annual Report 1958 (Honolulu: Castle and Cooke, Inc., 1959). 180 situated in San Francisco proper. This is advantageous in that San Francisco is the location of the western buying offices of the principal grocery chain stores, voluntary chains, and food wholesalers in the United States. The output of both firms is sold almost entirely under private label.50 There are five or six salmon canners in the Pacific Northwest that on occasion have packed tuna in small quantities. Their output of canned tuna is small and intermittent. The competition they afford the southern California tuna canning industry is extremely slight. The significance of their activity in canning tuna lies, there fore, not in the volume or continuity of production, but in verification of the fact that many fish canners have the know-how to pack tuna, and would do so if the incentives were sufficiently interesting. Gulf Coast and Atlantic Coast. The firms along the Gulf Coast and the Atlantic Coast that pack canned tuna, even intermittently, are few in number and account for only 2 per cent of the market shared by American pro ducers."^ Yet, these firms, or firms operating in like 50Interview with Ross Hatton, Marketing Specialist, United States Fish and Wildlife Service, Terminal Island, California, January 5, 1960. 51Refer to Table XIII. 181 manner at similar locations, could pose a competitive threat to the southern California tuna-canning industry in the foreseeable future. Two of these firms are located in Mississippi (The Bluff Creek Canning Company at Vaneleave and The DeJean Packing Co. at Biloxi). It is noteworthy that they have the facilities to increase their output of canned tuna 52 should they wish to do so. On the Atlantic Coast a sardine canner at Eastport, Maine, and a fruit and vegetable canner in Maryland have 5*3 canned tuna in recent years. Foreign Competition In several respects imported canned tuna constitutes the most significant segment of competition for the south ern California tuna-canning industry. Almost all imported c o J,tThe Bluff Creek Canning Company at Vane leave, Mississippi, fifteen miles northwest of Pascagoula, could process five tons of tuna a day in 1957 and is prepared to expand operations to thirty tons a day if conditions warrant taking the step. The controlling interest in the firm is held by John Morrell and Co., the first meat packer to go into the business of canning tuna. The DeJean Pack ing Co., Biloxi, Mississippi, can pack twenty tons of tuna a day. See "The Fishing is Fine," The Canner and Freezer, 124:13-15, January 7, 1957. 53 See letter from W. M. Chapman to Hon. Henry Kearns, op. cit., p. 197. 182 54 canned tuna is packed in brine. Therefore, tuna packed in brine is the product that competes with tuna in oil packed by American canners. The number of pounds of canned tuna imported in any given year is most unlikely to exceed 20 per cent of the volume of the United States pack for the previous year. The reason is that under existing regulations and agreements it is possible to increase the rate of duty on the excess exceeding 20 per cent of the physical volume of the preceding calendar year's United States pack. Tariff regulations, therefore, effectively determine: (1) the type of product that is imported; and (2) the maximum quantity that will be imported in a calen dar year. Tuna packed in brine is a potential threat to the southern California tuna canning industry. Tuna sandwiches and dishes utilizing tuna packed in brine are accepted by -^Importation of tuna canned in brine rather than tuna canned in oil is the direct result of a higher United States tariff applicable to the latter product. In Janu ary, 1951, the effective tariff rate on tuna canned in oil became 45 per cent ad valorem, and was reduced on Septem ber 10, 1955, to 35 per cent. The applicable rate as of November, 1943, to tuna canned not in oil became 12.5 per cent. As of September 10, 1955, the rate of 12.5 per cent ad valorem applies in any given year to imports that are not in excess of 20 per cent of the United States pack of canned tuna during the preceding year. Refer to United States Tariff Commission, Tuna Fish. Report on Investiga- tion Conducted Pursuant to a Resolution . . . Dated August 20, 1$$7, pp. 59-60. 183 patrons of restaurants, cafes, and drive-ins. If found acceptable when eating away from home, the next step is to buy the product for home use. This threat to the southern California tuna-canning industry, however, is held in check by the Japanese govern ment, which is aware of the fact that United States trade restrictions in the form of smaller quotas and higher tariff rates would follow any concerted attempt on the part of foreign canners to obtain a significant share of the American household market. To the present, imported canned tuna, consisting almost entirely of tuna canned in brine, has been channeled primarily to institutional buyers rather than to house holds. Quantity limitation. The quantity of canned tuna imported since 1957 has been the maximum allowable under the present 12.5 per cent rate.^ It is therefore possible for the southern California tuna-canning industry to gauge rather accurately the maximum amount of canned tuna that will be imported in any given year by taking 20 per cent of the quantity of the previous year's United States pack. ■^See discussion in Chapter VI. •^United States Tariff Commission, Tuna Fish, Report on Investigation Conducted Pursuant to a Resolution . . . Dated August 20, 1957, p. 73. 184 Institutional market. The institutional market may be divided into: (1) federal, state, and local government institutions; and (2) private organizations operating restaurants, cafeterias, mess halls, lunch counters, snack bars, etc. Private organizations include hotels, clubs, single-unit restaurants and restaurant chains, drug stores, cafeterias open to the public, and cafeterias operated by thousands of business firms throughout the country. Approximately one-half of imported canned tuna is packed in fairly large cans (66 1/2-ounce and 13-ounce cans);^ the remainder, with few exceptions, is packed in 7-ounce cans. Over three-quarters of the imported canned tuna is landed in Boston, New York, Philadelphia, and ports in Maryland. The remainder is imported at ports along the Pacific and Gulf coasts."*8 This shipping pattern is logical because it conforms roughly to the location of centers of population and to the prevalence of importers and wholesalers at the principal ports on the East Coast. The rapidity with which importers captured, and domestic packers relinquished, the institutional market in the post-war years is demonstrated by the fact that in 1951 only 1 per cent of domestic output was packed in the large ^7Ibid., p. 73 and Table 57. 58Ibid., Table 58. 185 Institutional containers (sixty-four ounces net weight, twelve cans to a case); and only 2 per cent of domestic output was packed in the small institutional cans (thirteen 59 ounces net weight, forty-eight cans to a case). The reasons for the relative disinterest by domestic producers in the institutional market lie in: (1) the necessity for considerably more hand labor in packing large cans, whereas packing of small cans has been mechanized; (2) lower price per pound of tuna is expected by the cus tomer in buying in bulk; (3) marketing problems are some what distinct from the problems in placing family-size cans on grocers' shelves. Consequently, selling intensively in the institutional market would tend to increase the canners' selling costs. 59 United States Tariff Commission, Tuna Fish, Report on Investigation Conducted Pursuant to a Resolution . . . Dated June 26, 1952, p. 83. CHAPTER V THE STRUCTURE OF COSTS The purpose of this chapter is to review the cost structure of the southern California tuna-canning industry, to note the relative importance of the cost elements, and to explore possible areas of cost reduction. Average cost data are available for 1953-1956, pub lished by the United States Tariff Commission, relative to the operations of tuna canners. The data refer to the average cost experience required to carry out a given pro cess based on reports submitted by the tuna canners. These average costs conceal as much as they reveal. A figure representing the average cost of nine or more canners to undertake a specific processing step can hide a wide disparity of individual costs between different can neries. It follows, therefore, that valuable as they are, judgment must be exercised in using the United States Tariff Commission's average cost figures. It is necessary to extract additional information from other sources, including industry spokesmen, Congressional hearings, and trade journals, in order to obtain a clearer, complete picture. The fact that there are differences in costs 186 187 between plants performing the same routine processing oper ations demonstrates the tangible benefits of superior management, stronger worker morale, and better equipment maintenance and replacement policies. It is more difficult to conceal from one's com petitors the processing costs in a southern California tuna cannery than is true in many other industries. Each firm procures its equipment, labor force, raw material, oil, containers, labels, and other supplies from common sources, hence purchase prices are known. The basic steps a cannery must perform have reached the point at which they are standard, almost routine in nature. The end product is relatively uniform. The fact that the workers in one firm have relatives and friends they have known for years work ing in the firm across the street leads to considerable infiltration of information from one plant to another through unofficial channels.^ ^In talking to those in the industry, it is clear that there is a strong tradition of taciturnity in most firms concerning costs and sales data. A few firms have a long-standing policy of revealing an absolute minimum of information to any outsider, be it the Federal Government, State of California inspector, trade association, or their own advertising agency, concerning their business activi ties and plans. This approach is facilitated because all southern California tuna-canning firms are privately owned, except the Van Camp Sea Food Company. With that exception, apparently no firm circulates an annual financial report. This void is deplored by fishermen's organizations such as the American Tunaboat Association. Refer to letter dated July 1, 1958, from W. M. Chapman, Director of Research, I. CANNING PROCEDURE 188 The canning procedure has remained through the years essentially the same as that devised by the pioneer south ern California tuna canners in 1903.^ The significant changes relate to an increasing degree of mechanization. Since the obvious steps in mechanizing operations already have been taken, further mechanization is difficult. Steps Comprising Canning Procedure A listing of the operations comprising the canning procedure facilitates visualizing those areas in which further mechanization is possible. The essential steps in the canning procedure are: 1. Thaw the frozen tuna. 2. Dress, that is, eviscerate and wash, the tuna. This also is known as the butchering operation. 3. Place the tuna in wire baskets or on racks on wheeled trucks, and sort according to size. Segregation American Tunaboat Association, to Hon. Henry Kearns, Assistant Secretary for International Affairs, Department of Commerce, in: United States Congress, Senate, Committee on Interstate and Foreign Commerce, Fisheries Legislation. Hearings before Committee, 85th Congress, 2d Session, on S. 237, S. 2719, S. 2973, S. 3229, S. 3530, July 15-17, 1958 {Washington, D.C.: Government Printing Office, 1958), Appendix 6, pp. 194-95. o *A. W. Anderson, etal., Survey of the Domestic Tuna Industry. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 104 (Washington, D.C.: United States Fish and Wildlife Service, 1953), p. 31. 189 by size avoids subsequent overcooking of the smaller fish, which would occur if all sizes were cooked together. 4. Roll the filled racks into the precookers (steam retorts), where the fish are cooked. The precooking chamber is brought gradually up to the cooking temperature. The fish are cooked from one and one-half to eight or even nine hours, depending upon the size of the tunas. This causes an average loss of weight of approximately 25 to 30 per cent. 5. Cool the precooked tunas. The average cooling period is twelve hours or even twenty-four hours. 6. Clean the tuna. The cleaning process is the most costly of the canning operations, inasmuch as mechani zation has not yet been realized. The following quotation is a succinct description of the cleaning process: Cleaning methods do not vary between canneries or with different species of tuna. The heads are broken off, tails and fins are removed and the skin is scraped away, after which the body is separated into two halves, exposing the backbone, which is removed, to gether with the adhering rib bones. The halves are split longitudinally and the dark meat, which is located in a V-shaped layer along the lateral line is scraped away quickly and thoroughly with the blade of a small paring knife.3 The cleaning process exposes the four large longitudinal muscles, called loins, which are prepared for canning. ■'Norman D. Jarvis, Principles and Methods in the Canning of Fishery Products. United States Fish and Wild life Service, Research Report 7 (Washington, D.C.: Govern ment Printing Office, 1943), p. 189. 190 7. Cut the loins to the desired size. This is accomplished with an automatic type of guillotine knife. 8. Pack the tuna into cans. This includes several steps. The pieces of tuna are placed in cans either by hand or by machine. Automatic dispensing equipment adds salt and oil. Other automatic equipment may compress the contents of the cans to break down air pockets. The presence of airpockets makes it difficult later to secure a vacuum prior to sealing the cans. 9. Close the cans. This is done by vacuum closing machines or by the older method calling for initial pro cessing through an exhaust box. 10. Thoroughly wash the cans in a cleansing bath. 11. The processing step now takes place. Heat the cans to a temperature exceeding 230 degrees Fahrenheit, depending on the size of the cans and the length of the heating period. 12. Label the cans and store them; or, store the cans and affix labels upon receipt of orders.^ The end-product normally will consist of any one of the three standard tuna packs: the solid pack, the chunk pack, or flakes (grated tuna), depending upon the type of raw material used and the refinements in processing. It is ^Tbid., pp. 183-98; Anderson, et al., op. cit., pp. 291-92. 191 evident that the processing of tuna is sufficiently intri cate to be a study in itself. Areas of Potential Cost Reduction The stages in the canning process where significant cost savings may be feasible include: (1) the possibility of reducing shrinkage of the fish in the precooking stage; and (2) mechanization of the cleaning process. The raw material constitutes 60 per cent of the processing cost. In the precooking stage in the neighbor hood of 30 per cent of the raw material is lost through shrinkage. Consequently, precooking is a stage where even a 2 or 3 per cent reduction of shrinkage would be of signi ficance in view of the tons of tuna processed per annum. Plant superintendents have estimated for the United States Fish and Wildlife Service that cleaning costs range from thirty-three cents to as high as fifty-five cents per case in the less efficient plants. The Fish and Wildlife Service suggests forty-five cents as possibly the typical cost per case for yellowfin tuna. For tuna prepared from skipjack, the costs would be considerably higher, as the fish are smaller than yellowfin."* In view of the extensive reliance on manual labor throughout the cleaning operation, 5Anderson, et al.. op. cit.. p. 296. 192 even partial mechanization of the process would result in a significant cost reduction per case of canned tuna. II. CANNING COSTS The cost of canning tuna has a strong influence on pricing of the finished product. Relative Importance of Processing Costs One logical division of costs distinguishes between those pertaining to the purchase of raw material, those covering direct labor, and those involving overhead or burden. During 1956-1958, expressed as a percentage of plant costs, raw material came to 60 per cent; labor, to 13 per cent; cans, labels, cases, to 15 per cent; oil, salt, and other sundry items, to 12 per cent; making a total of 100 per cent.k Raw Material of Domestic Origin Southern California tuna canners utilize several types of tunas as appropriate raw material. The principal species are yellowfin, skipjack, bluefin, and albacore. ^United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution bv the Committee on Finance of the United States Senate, Dated August 20, 1957 ^Washington, D.C.: United States Tariff Commission, May, 1958), p. 57. 193 Yellowfin. American fishermen deliver to canners more yellowfin than any other variety of tunas in terms of quantity and dollar volume. The average weight of yellow fin offered to southern California canners is thirty pounds, although occasionally three hundred- to four hundred-pound yellowfin tunas occur.^ Since yellowfin grow to larger sizes than do skipjack, yellowfin are more de sirable for canning, and consequently generally command a higher price than do skipjack. Both yellowfin and skip jack are delivered as "run-of-the-catch" to the canner. This means that the catch has not been sorted according to size, a task the canner must undertake. Canners reject approximately 4 per cent of the "run-of-the-catch" tunas received because of damage the fish have suffered in handling prior to initial inspection at the cannery, or for other appropriate reasons.^ Skipjack. Skipjack probably are the most abundant of commercial tunas. They are found at times at consider able distances from shore, whereas yellowfin are confined ^Jarvis, op. cit.. p. 175. ^United States Fish and Wildlife Service, Report of the Secretary of the Interior to the President and the Congress on Fresh or Frozen Yellowfin. Skipjack, and Bigeye Tuna ('Washington. D.C.: United States Fish and Wildlife Service, May, 1958), p. 25. ^Ibid., pp. 35-36; Jarvis, loc. cit. 194 to the coastal shelf and to outlying islands. Skipjack, the smallest of the commercial tunas, vary in size from approximately three to twenty pounds. Both yellowfin and skipjack are found in greatest abundance in the warm waters of tropical latitudes.^® Bluefin. Bluefin can attain enormous sizes, par ticularly in the Atlantic where they sometimes are 1,500 pounds. In the Pacific four hundred-pound bluefin are common. The average size delivered to southern California canners is thirty pounds. ^ Albacore. Albacore, the only species of tuna that may be labeled "white meat," have an average weight of twenty-five pounds, and a maximum weight of approximately 12 eighty pounds. Canners normally pay a premium price for albacore, about 10 to 35 per cent above the price for yellowfin, because the yield from albacore is greater in the canning process, and because the finished product commands a higher Refer to: Anderson, etal., op. cit., pp. 8-9; Jarvis, op. cit.. p. 176; and United States Fish and Wildlife Service, op. cit., p. 16. ■^See Anderson, et al.. op. cit., p. 8; and Jarvis, op. cit., p. 175. 12 Jarvis, op. cit., p. 176. 195 price. If the price of albacore declines to less than a 10 per cent differential, canners may elect to use albacore 13 rather than yellowfin for light meat tuna. Imported Raw Material In addition to the fresh or frozen tuna delivered by the domestic fishing fleets, southern California tuna canners are relying to an increasing extent on imported raw material. The percentage of imported raw tuna to total raw tuna purchased by American canneries has increased in recent years. Thus, in 1952 the figure was 17 per cent; by 1957 the figure had risen to 30 per cent.^ During some years, imports of raw tuna seem to vary inversely with the plentifulness of the domestic catch. In other years no correlation exists. Of the total quantity of raw tuna that is imported, approximately two-thirds is 1 s shipped to southern California tuna packers. J Pre-delivery preparations. In the handling and preparation of raw tuna for exportation, Japanese suppliers take certain steps that are of direct benefit to the Ameri can canner in reducing processing costs. ■^"Markets," Pacific Fisherman. International Year book Number, 58:129, January 25, 1960. •^United States Tariff Commission, op. cit.. p. 64. 15Ibid. 196 The Japanese suppliers separate the £ish by species and by size. They deliver yellowfin that has been gilled and gutted. The American canner, therefore, avoids the necessity of processing tunas of different sizes and species in the haphazard state in which they happen to be discharged from a fishing boat. As a consequence, the recovery from imported gilled and gutted yellowfin is 50 per cent versus 45 per cent for yellowfin delivered by domestic fishermen. The recovery of imported albacore is 55 per cent versus 50 per cent for albacore delivered by domestic fishermen.^ Timing of deliveries. The American canner receives delivery of frozen tuna from Japan about three months after opening a letter of credit. Consequently, by importing frozen tuna, the canner is in a somewhat better position to plan production schedules in advance than if sole reliance is placed on domestic tuna boat operators, whose catch sizes and delivery dates cannot be predicted with accuracy. Imported Semi-Processed Material Two types of semi-*processed tuna are imported: (1) loins, and (2) discs. Both types are prepared in Japan and shipped in a frozen state. 16Ibid., pp. 67-68. 197 Loins consist of pieces of raw tuna from which bones, skin, and dark meat have been removed. Upon receiv ing a shipment of loins, the American tuna canner thaws the loins and feeds them into the conventional tuna processing machines. The advantage in packing loins lies in the fact that the canner need not undertake the initial handling and cleaning operations. Discs consist of cleaned, cooked pieces of tuna, coated with oil, shaped to fit the cans in which they ultimately will be packed. Upon delivery of discs to his plant, the American canner thaws them, places them in the cans, adds oil, and seals the cans. The importation of discs, therefore, relieves the canner of several steps in the packing process. ^ Direct Labor Over four-fifths of the approximate five thousand tuna cannery employees in southern California are engaged 1 O in direct labor in canning tuna. ° Labor recruitment. The cannery workers are local residents of San Pedro and San Diego. In San Pedro the majority are middle-aged housewives, many of Portuguese, •^Ibid., pp. 81-82; and United States Fish and Wild life Service, op. cit., p. 63. ■^United States Tariff Commission, op. cit.. p. 49. Yugoslavian, or Japanese extraction. A fair number have never learned to speak English fluently. As a result, though proficient in their jobs, they do not have a high degree of job mobility. Wage scales. Wage scales in the several southern California tuna canneries are very similar, or identical, to one another. This is the outcome of several forces. Geographic concentration, unionization of most of the tuna cannery workers, a high degree of similarity of work in the different canneries, and recognition of these facts by the employers, have brought about a uniform wage for a given type of work. There has been a gradual, consistent increase in the hourly wage rates of approximately five cents an hour each year since 1952. In 1958 the following hourly rates were agreed upon: minimum for women, $1.84; minimum for men, $2.03; foreman, packing room, $2.36; head scaling operator, $2.58.19 In addition to the wage scale, the number of hours per week of available work obviously Is of real concern to workers in the tuna canneries. In the past, tuna canners have not always received their raw material continuously throughout the year. Occasionally, therefore, periods 19Ibid., Table 32. occur when a cannery does not offer employment. Over the period of a year, the average number of hours worked per week per worker ranges between twenty-eight and thirty- Man-hours of labor per case. The man-hours of direct labor in a tuna cannery needed to process a standard 21 case of canned tuna has tended to decrease year by year 22 between 1953 and 1958 by approximately 8 per cent. This trend is the result of more efficient canning practices, including reliance on a higher degree of mechanization. Labor cost per case. The impact of improvements in canning technology have been sufficient, in spite of rising wages, to decrease the cost of direct labor (including supervision) per case from approximately $1.42 in 1953 to $1.25 in 1956.23 The difference in direct labor cost per case between small canners and large canners has been rapidly closing 20Ibid., p. 51. 21 The cost picture for 1955 was distorted by a pro longed cannery workers’ strike and by inclusion of the initial output of the newly acquired Van Camp Sea Food Company’s cannery in Pago Pago. 22See data, United States Tariff Commission, op. cit., p. 52. 23Ibid., Table 38. 200 year by year. Whereas in 1953 the average cost of direct labor for small canners to pack a standard case of tuna exceeded the cost for the three big canners by twenty cents, in the January-September, 1957, period the differ- r \ # ence had dropped to five cents. The reasons are to be found in the mergers among tuna canneries in the 1953-1957 period, and in the economic necessity of the smaller canners to bring their plants up to date in order to sur vive. Cans, Cases, Labels, Oil, Salt Cans, cases, labels, oil, salt, and other sundry items account for 27 per cent of total plant cost. The procurement of these goods is routine; price variations are slight. Consequently, it is very difficult for a canner to achieve a cost advantage over his rivals in the purchase of these items. III. SELLING COSTS The average selling cost per case of canned tuna came to $1.12 in 1956 for the large canners, and to $.63 2 S for the small canners. 24Ibid., p. 52. 2^Ibid., Table 39. These figures hide greater variations than indi cated, because a few of the small canners have succeeded in curtailing their selling expenses to a minimum by selling direct in large lots to prominent chain stores, without any need to advertise, prepare point-of-purchase-displays, or incur traveling expenses. Conversely, Star-Kist Foods, Inc. have increased their advertising and other selling expenditures in recent years, thus apparently increasing sales volume to the point at which it is equal to that of Van Camp Sea Food Company. The general practice of selling through food brokers has linked selling costs to sales volume, since brokers are compensated for their services by a 2.5 to 3 per cent com mission on the canners’ invoice figure. CHAPTER VI FACTORS WHICH AFFECT DEMAND FOR CANNED TUNA In order to study the nature of demand for canned tuna, it is necessary to note a few facts concerning the American diet. In sheer physical bulk, annual per capita consumption of food is impressive, averaging 1,500 pounds a year.^ The national diet shows a long-term trend of im provement . For more than a century, what evidence we have . . . points toward declining dependence upon cheap starchy staples, and conversely toward increasing consumption of a range of more expensive foods. . . . From 1909 we know that the general trends have been upward in the commodity groups of fats and oils, meats and poultry and fish, milk and its products, eggs, and vegetables and fruits and pulses and nuts, though not persistently upward for each group or each commodity within each group.2 This favorable trend is the outgrowth of several favorable influences, important among which are an amply supply of Consumption includes not only ingestion, but also loss and waste. As a result, estimates concerning the national diet are subject to a higher degree of statistical error than otherwise would be the case. See M. K. Bennett, The World's Food. A Study of the Interrelations of World Populations. National plats and Food Potentials (New York: Harper & Brothers, 1954), p. 70. 2Ibid.. p. 167. 202 203 food and a relatively high level of disposable income. Yet, today approximately 10 per cent of families in the United States have poor diets, and nearly half of the families in the country lack one or more of the important nutrients in recommended amounts. These nutrients include protein, calcium, ascorbic acid, vitamin A, and thiamine.** I. CONSUMPTION OF CANNED TUNA Tuna is the most popular canned fish sold in the United States today, served by families in all income brackets, residing in every region of the country. In 1958, 323.3 million pounds of canned tuna were available for sale, comprising the domestic pack and imports of the finished product.^ In terms of volume, consumption per capita of canned tuna has increased through the years. In the early 1920's consumption per capita of canned tuna was approximately 0.1 pounds. By 1929 the per capita figure stood at 0.3 pounds, fluctuating but rising during the next decade to 0.7 pounds in 1939. ^Corine Le Bovit and Faith Clark, "Are We Well Fed?" Food, The Yearbook of Agriculture 1959. Yearbook of the United States Department of Agriculture (Washington, D.C.: Government Printing Office, 1959), p. 622. ^E. A. Power (comp.), United States Tuna Fishery 1911-1958, United States Fish and Wildlife Service, Fishery Leaflet 484 (Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 8. 204 During the Second World War consumption dropped as a result of shortages o£ raw material. In 1947 consumption per capita had risen again to the 1939 level. In 1930, an excellent fishing year for both American and Japanese fishermen, abundant raw material played its part in in creasing the annual quantity of canned tuna available for consumption in the United States by 46 per cent over the preceding year. Consumption per capita stood at 1.2 pounds in 1950, rose to 1.7 pounds in 1956, and reached 1.8 pounds in 1958. In recent years, however, consumption per capita has tended to rise at a somewhat slower rate as an increasingly large proportion of American families in all parts of the country serve canned tuna. The increase in consumption per capita appears to be the outcome of more people serving tuna occasionally, rather than a significant increase in quantity consumed per family. II. RELATIONSHIP OF MEAT, POULTRY, FISH Meat, poultry, and fish are the principal contribu tors of protein in the American diet. Protein Essential to health, protein is one of the more important elements in the American diet, contributing 205 11 per cent of total calories.^ The recommended amount of protein per person per day In the United States Is in the neighborhood of sixty'four grams. The average amount that is present in food available for use comes to 103 grams per person.^ There are, of course, family diets that are defi cient in protein. Yet, only about S per cent of families have diets which do not meet recommended National Research Council allowances of protein. Seven-eighths of the families with deficient protein diets meet at least two- thirds of the recommended allowances. This contrasts with 15 to 20 per cent of families with diet deficiencies of vitamins, and 20 per cent of families with deficiencies of calcium. Likewise, deficiencies of several other nutrients exceed the deficiencies of protein.7 In short, as a nation, our protein requirements are met. There is no compulsion, therefore, to turn to fish to obtain protein, as may be noted from the annual consumption per capita data in Table XIV. Hazel K. Stiebeling and Faith Clark, "Our National Diet." Marketing. The Yearbook of Agriculture 1954. Year book of the United States Department of Agriculture (Washington, D.C.: Government Printing Ofrice, 1954), p. 203. g Le Bovit and Clark, op. cit.. p. 626. 7Ibid.. pp. 621-23. 206 TABLE XIV MEAT, POULTRY, FISH, ANNUAL CONSUMPTION PER CAPITA* (Measured in Pounds) 1938 1950 1958 Meat 125.4 142.4 152.0 Chicken 12.5 20.3 28.3 Turkey 2.2 4.0 5.8 Fresh and Frozen Fish 5.3 6.6 5.6 Canned Fish 4.8 4.3 4.2 *United States Bureau of Agricultural Economics, Consumption of Food in the United States 1909-52 (Agri- culture Handbook No. 62. Washington, D.C.: Government Printing Office, September, 1953), Tables 54, 56, 57, 58; and United States Bureau of Agricultural Economics, Supple ment for 1958 to Consumption of Food in the United States 1909-52 (Supplement (or 1958 to Agricultural Handbook No. 62. Washington, D.C.: Government Printing Office, August, 1959), Tables 54, 56, 57, 58. 207 Meat* The intensity of demand for meat by American families is of long standing and prevails in all parts of the country. Expenditures for meat make up 25 per cent or more of the family food budget, thus constituting the largest component of that budget.® The prevalence of meat consumption can hardly be disputed. For instance, during a given week between April and June of 1955, 99.5 per cent of all families in the United States ate meat.^ Households In all income brackets serve meat. The quantity of meat consumed by a family during a week is an indication of the number of times meat dishes are served. Households of two or more persons used on the average 10.62 pounds of meat during the week of the 1955 survey, evidence that meat was served at several meals. The number of pounds of meat purchased per capita has ranged between 135 and 167 pounds in the years ^Charles A. Burmeister and Harold F. Breimyer, "Livestock," Marketing. The Yearbook of Agriculture 1954. Yearbook of the Unitea States Department of Agriculture (Washington, D.C.: Government Printing Office, 1954), p. 485. ^Iftiited States Department of Agriculture, Food Consumption of Households in the United States (Household Food Consumption Survey 1955, Report No. 1. Washington, D.C.: Government Printing Office, December, 1956), p. 71. 10Ibid.. p. 66. 208 since 1946. In 1956 the peak was reached, declining to 159 pounds in 1957, and 152 pounds in 1958. During the same period, canned fish consumption remained stable. In general, there has been a steady, though very slight, increase in meat consumption per capita since the Second World War.^ Consumption of beef, poultry, butter, frozen foods, citrus fruits, salad vegetables, and ice cream tend to increase along with increases in income. ^ Poultry. The trend in per capita consumption of chicken and of turkey has advanced steadily, as indicated by Table XV. In a given week between April and June of 1955, 56.4 per cent of households of two or more members in the United States used poultry (chicken or turkey). The average quantity consumed per household during that week 13 came to 2.36 pounds. The breeding and sale of smaller birds has been a factor in increasing purchases of poultry. ^See United States Bureau of Agricultural Eco nomics, Consumption of Food in the United States 1909-52 (Agriculture Handbook No. 62. Washington, D.C.: Government Printing Office, September, 1953), Table 8; and Marguerite C. Burk, "Pounds and Percentages," Food. The Yearbook of Agriculture 1959. Yearbook of the United States Department or Agriculture (Washington, D.C.: Government Printing Office, 1959), p. 593. ^2Burk, op. cit.. p. 598. 13United States Department of Agriculture, loc. cit. 209 TREND TABLE XV IN CONSUMPTION PER CAPITA OF CHICKEN AND TURKEY* Chicken Turkey Eviscerated Eviscerated Year Weight Weight (Pounds) (Pounds) 1909 14.5 1.0 1920 13.5 1.3 1929 14.1 1.4 1931 13.9 1.7 1952 23.0 4.4 1956 24.6 5.2 1958 28.3 5.8 *United States Bureau of Agricultural Economics, Consumption of Food in the United States 1909-52 (Agri culture Handbook No. 62. Washington, D.C.: Government Printing Office, September, 1953), Table 30; and United States Bureau of Agricultural Economics, Supplement for 1958 to Consumption of Food in the United States l909~52 (Supplement for 1958 to Agricultural Handbook No. 62. Washington, D.C.: Government Printing Office, August, 1959), Table 30. 210 Fish. Between 1909 and 1929 consumption per capita of all fish and shellfish fell in the range of 10.5 to 12.1 pounds. Included are fresh, frozen, canned, and cured fish. In most years consumption was slightly more than 11 pounds. During the early 1930's fish consumption declined temporarily, rising in 1936 to 11.7 pounds per capita, subsequently dropping to 10.5 pounds in 1940. In the period following the Second World War con sumption per capita of fish reached a peak in 1950 of 11.5 pounds. In subsequent years consumption declined to 10.1 pounds in 1957 and was 10.4 pounds in 1958.^ In short, fish consumption per capita is low and does fluctuate some what from year to year. Canned fish. Considering all canned fish as a unit, consumption per capita over the years in broad outline has been stable, as indicated by Table XVI. In 1914 consump tion per capita was 3.0 pounds; forty-four years later, in 1958, consumption was 4.2 pounds. In 1958, consumption per capita of canned fish was only 3 per cent of consumption 1 c per capita of meat. J •^United States Bureau of Agricultural Economics, Consumption of Food in the United States 1909-52. Table 29; and Supplement for I$*>8 to Consumption of FotxfTn the UnitedStates 1$69*$2. Table 297 15Ibid. 211 TABLE XVI CANNED FISH CONSUMPTION PER CAPITA* 1909-1958 (in Pounds) Year Tuna Salmon Sardines Pilchards and Herring Shell fish Other Total 1909 — - - - - (2.7) 1914 - - - - - (3.0) 1921 0.1 1.1 0.7 0.2 0.1 2.2 1929 .3 2.1 1.0 .3 .2 3.9 1933 .3 2.2 .7 .2 .4 3.8 1935 .5 2.2 1.0 .2 .8 4.7 1937 .5 1.9 1.0 .3 .5 4.2 1939 .7 2.0 1.2 .2 .5 4.6 1946 .7 1.1 1.1 .2 .7 3.8 1949 1.0 1.5 1.0 .2 .4 4.1 1950 1.2 1.4 1.1 .2 .4 4.3 1951 1.1 1.4 .8 .3 .4 4.0 1952 1.5 1.4 .5 .2 .5 4.1 1953 1.5 1.3 .5 .2 .7 4.2 1954 1.5 1.3 .7 .3 .4 4.2 1955 1.5 .9 . 6 .3 .4 3.7 1956 1.7 1.0 .4 .3 .5 3.9 1957 1.6 1.0 .5 .2 .5 3.8 1958 1.8 1.1 . 6 .3 .4 4.2 *United States Bureau of Agricultural Economics, Consumption of Food in the United States 1909-52 (Agri culture Handbook No. 62. Washington, D.C.: Government Printing Office, September, 1953), Table 29; and United States Bureau of Agricultural Economics, Supplement for 1958 to Consumption of Food in the United~States 1909-52 (Supplement for 1958 to Agricultural Handbook No. 62. Washington, D.C.: Government Printing Office, August, 1959), Table 29. 212 The three most popular types of canned fish in ascending order are sardines, salmon, and tuna. In every year between 1921 and 1940 consumption per capita of canned sardines exceeded that of canned tuna. Since 1952 con* sumption per capita of canned sardines has dropped so sharply that sardine consumption today is only one-third that of canned tuna.^ Since 1950, consumption of canned salmon has dropped so that at present on a per capita basis only two-thirds as much salmon is consumed as canned tuna. In approximate figures, therefore, on a per capita basis twice as much canned salmon is consumed as canned sardines, and three times as much canned tuna as canned sardines. Canned salmon. Annual consumption per capita of canned salmon by 1922 attained 2.1 pounds. Highest con sumption per capita took place in 1936 with 3.4 pounds, more them one pound higher than had occurred in any year up to that time. During the 1930's, depending on the year selected, consumption of canned salmon was from three to ten times greater than that of canned tuna. Since 1950 consumption of canned salmon has declined from 1.5 pounds 16Ibid. 17Ibid. 213 to 1.0 pound in 1957, rising to 1.1 pounds in 1958.18 Canned salmon consumption is greatest in the Middle- West and the South. These are the very areas where con sumption of canned tuna is lower than in any other section of the country.^ There are other contrasts in the consumption pattern of canned salmon as compared to that of canned tuna. Con sumption of canned salmon is greatest: (1) by families whose head has a grade school education; (2) by families whose income falls under four thousand dollars per annum; and (3) by families in rural areas and in towns under on fifty thousand inhabitants. In short, consumption of canned salmon is strong among groups whose consumption of canned tuna is lower than the national average Preference There are certain contrasting preferences for spe cific foods and beverages. Thus, the French penchant for 18Ibid. ■^United states Fish and Wildlife Service, Fish and Shellfish Preferences of Household Consumers 1956 (Special Scientific Report, Fisheries No. 200. Washington, D.C.: United States Fish and Wildlife Service, February, 1957), p. 39. ^United States Fish and Wildlife Service, Canned Fish Consumer Purchases fry Fam-My Characteristics. October 195>S - March 1$59 (Fishery Leaflet 478h. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 16. 214 wines with meals, the German and Irish monotonous consump tion of potatoes, the British emphasis on beef, the Mexican desire for spiced dishes, the Japanese predilection for Sashimi, the Hawaiian yen for pol, all are related to geo graphic, climatic, and other Influences. The end effect, however, is to constitute a preference which has signi ficant economic implications. Bennett states in this regard: Any traveler in the United States eating his meals in restaurants and homes in our far-flung cities is likely to feel sure that he can identify certain regional differences in food consumption. He usually encounters fish more frequently in seaports than in inland cities, more corn bread and sweet potatoes and rice in New Orleans than in Chicago; more baked beans and codfish cakes, perhaps, in Boston than in Kansas City; more rye bread in Milwaukee and St. Louis than in Denver or Los Angeles; more tamales and enchiladas in San Antonio than in Buffalo; and so on.21 He adds: "It'seems safe to conclude that regional differ ences in food-comoodity consumption exist and have to some extent a basis in 'preference.' Preference is real."^^ This concept of preference applies to canned tuna consumption, and manifests itself in regional consumption variations and differences in frequency of servings. III. MARKET FOR CANNED TUNA The market for canned tuna is logically divided ^Bennett, op. cit.. p. 143. 22Ibid.. p. 146. 215 into: (1) the household market, and (2) the institutional market.^ The canned tuna available for consumption is made up of the domestic pack and imported canned tuna. In 1958 the domestic pack of canned tuna consisted of 277 million pounds (fourteen million cases), valued at $162 million at the canner level. In addition, 50 million pounds of canned tuna were imported, bringing the combined totals of domes tic pack and imported canned tuna to 327 million pounds, valued in round figures at $190 million at the canner and importer leve1.^ Household Market The greatest demand for canned tuna is found in purchases by households. These purchases, which are made at retail stores, account for approximately 78 per cent of total demand for canned tuna. 23 In addition to the market for canned tuna, there are markets for tuna by-products, utilizing parts of the tuna that are not in demand for human consumption. The sale of pet food constitutes the fastest growing by-product market. The 1958 pack of animal food using a tuna base is estimated at thirty-three million pounds, valued at $3 million at the canner level. 2^See Power, loc. cit.; and United States Fish and Wildlife Service, Canned Fish & Byproducts— 1958 (C.F.S. No. 2021. Washington, D.C.: United States Fish and Wild life Service, 1959), pp. 2, 17-18. (Duplicated.) 216 Institutional Market Hotels, restaurants, and other institutions account for approximately 16 per cent of total demand for canned tuna. As popularity of canned tuna in the home continues at a high level, there is a favorable influence on the demand for the product in the institutional market. Tuna sandwiches and tuna salads have become standard items on the menus of many drive**ins, cafes, restaurants, and cafe* terias. The fact that the institutional market, excluding the military, accounts for approximately 16 per cent of total demand reveals that tuna, though available, is not consumed in startling quantities in public eating estab lishments. The possibility of keeping canned tuna from one day to the next, even in open cans if they are properly stored, and the ease and speed with which tuna dishes may be pre pared, makes the sale of tuna items appealing to the managers and personnel of commercial eating establishments. IV. HOUSEHOLD MARKET Constituting approximately 78 per cent of the national market, the household market is of fundamental importance. The forces underlying the household market may be related to geographical areas and to family character istics. In the following pages a distinction is drawn in between occasional serving of canned tuna, once or twice a year, and intensity of use as indicated by quantity pur chased or frequency of servings according to United States Government sponsored surveys. Market Profile In the following paragraphs the market profile is developed with respect to the following considerations: 1. Region of the country 2. Size of the community 3. Family income 4. Number of persons in the household 5. Age of the homemaker 6. Educational level 7. Frequency of servings 8. Brand preference Region of the country. Over 75 per cent of house holds throughout the country serve canned tuna one or more times in a twelve-month period. However, the percentages of total households by region (see Figure 2) serving canned tuna differ, as indicated in Table XVII. Canned fish, including canned tuna, is more gener ally accepted in the Northeast and in the West than in the other sections of the country. It is also clear that in every part of the country there are many families that buy I. II. III. IV. V. Pacific States Mountain & Southwest Northcentral South Northeast FIGURE 2 REGIONAL MAP OF THE UNITED STATES 218 219 TABLE XVII PERCENTAGE OF HOUSEHOLDS USING CANNED TUNA AND OTHER CANNED FISH* (in a Twelve Month Period) Region Percentage of Households Using Canned Tuna Percentage of Households Using All Types of Canned Fish Pacific, Mountain, and Southwest 87.7 95.3 Northeast 83.4 91.7 Northcentral 71.7 90.3 South 68.9 90.4 *United States Fish and Wildlife Service, Fish and Shellfish Preferences of Household Consumers 1956 (Special Scientific Report, Fisheries No. 200. Washington, D.C.: United States Fish and Wildlife Service, February, 1957), pp. 31, 35. 220 canned fish but do not select canned tuna. This is par ticularly true of the Northcentral states and of the South. Regional differences set forth in Table XV11I are manifested in the quantity of canned tuna consumed per capita. Table XIX brings out the relative importance of the several regional markets for canned tuna. Size of the community. On a percentage basis, more households in metropolitan areas serve canned tuna than do households in rural areas, even though a high percentage of families in rural areas consume some kind of canned fish. The greater popularity of canned tuna in metropolitan areas is borne out by Table XX relative to the number of cases purchased per one thousand families during a six-month period. Family income. There are several relationships between family income and canned tuna consumption. Three of the more important relationships refer to: 1. The percentage of families in different income brackets that use canned tuna. 2. The number of cases of canned tuna families in different income brackets purchase in a speci fied period. 3. The number of times families in different income brackets serve canned tuna in a specified period. 221 TABLE XVIII PURCHASES PER CAPITA OF CANNED TUNA* OCTOBER 1958 - MARCH 1959 Region Cans Purchased Pacific States 2.32 Northeast 2.00 Mountain States and Southwest 1.47 Northcentral States 1.32 Southern States .90 *United States Fish and Wildlife Service, Canned Fish Consumer Purchases bv Family Characteristics, October 1958 ~ March 1959 (Fishery Leaflet 47&h. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 8 (converted to per capita basis, considering average family as 3.35 persons). TABLE XIX RELATIVE IMPORTANCE OF REGIONAL MARKETS IN CONSUMPTION OF CANNED TUNA OCTOBER 1958 - MARCH 1959 Region Population (in Millions) Percentage of Population* Cases Purchased** Percentage of Total Northeast 47,276 26 1,971,456 35 Northcentral States 51,009 30 1,399,330 25 Southern States 37,940 22 713,500 13 Mountain States and Southwest 18,156 11 556,064 10 Pacific States 18,879 11 910,704 17 United States 173,260 100 5,551,054 100 *United States Bureau of the Census, Statistical Abstract of the United States: 1959 (Eightieth Annual Edition; Washington, D.C.: United States Bureau of the Census, June, 1959), p. 10. **Derived from per capita purchases in: United States Fish and Wildlife Service, Canned Fish Consumer Purchases by Family Characteristics, October 1958 - March 1959 (Fishery Leaflet 478h. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 2. 222 223 TABLE XX CANNED TUNA PURCHASES RELATED TO CITY SIZE* OCTOBER 1958 - MARCH 1959 City Size Cases Purchased Per 1,000 Families Under 2,500 population 71.2 2,500 to 50,000 population 91.4 50,000 to 500,000 population 115.5 Over 500,000 population 140.2 *United States Fish and Wildlife Service. Canned Fish Consumer Purchases by Family Characteristics, October 1958 - March 1959 (Fishery Leaflet 478h. United States Fish and Wildlife Service, Washington, D.C.: 1959), p. 15. 224 As income Increases, more families out of the total number in that income group tend to eat canned tuna. Thus, starting at the low end of the income scale, only 52.6 per cent of families with incomes of $1,000 or less a year, eat canned tuna. In the $3,000 to $3,999 bracket, 74.5 per cent of families consume canned tuna; and in the $7,000 to $9,999 bracket, 87.4 per cent of families eat canned 25 tuna. J As income increases, not only do more families of a given group serve canned tuna, but also the quantity pur chased per given period increases, as confirmed by Table XXI. Number of persons in household. Members of large families consume canned tuna more frequently than do mem bers of small families. This is brought out in Table XXII. Age of the homemaker. Considering the homemakers, normally housewives, by age group, it is possible to set up meaningful percentages of the families Which serve canned tuna. The following picture emerges. Of total families in the country, 76.1 per cent serve canned tuna. The percent age of families using canned tuna exceeds 76.1 per cent ^United States Fish and Wildlife Service, Fish and Shellfish Preferences of Household Consumers 1956. p. 36. 225 TABLE XXI CANNED TUNA PURCHASES RELATED TO INCOME* OCTOBER 1958 - MARCH 1959 Cases Purchased Family Income Per Annum Per 1,000 Families Less than $4,000 69.7 $4,000 to $6,999 122.1 $ 7,000 and above 144.5 *United States Fish and Wildlife Service, Canned Fish Consumer Purchases by Family Characteristics. October 1958 - March 1959 (Fishery Leaflet 478h. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 11. 226 TABLE XXII CANNED TUNA PURCHASES RELATED TO SIZE OF HOUSEHOLD* OCTOBER 1958 - MARCH 1959 Cases Purchased Household Size Per 1,000 Families 1 or 2 members 63.6 3 members 113.4 4 or 5 members 155.9 6 or more members 164.2 *United States Fish and Wildlife Service, Canned Fish Consumer Purchases by Family Characteristics, October 1958 - March 1959 (Fishery Leaflet 47&h. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 11. 227 if the age of the homemaker falls between fifteen and forty-four. The highest percentage of families using canned tuna occurs if the age of the homemaker is between thirty and thirty-nine.^ The quantity of canned tuna a family consumes, related to the age of the housewife, presents the picture presented in Table XXIII. Educational level. Consumption of canned tuna tends to vary directly with the level of formal education of the head of the household. Thus, if the head of the household has a grammar school education, the family is disposed toward consumption of less tuna than if he has a high school education. In continuance of this trend, if the head of the household has a college education, the family's tendency is to consume the greatest amount of canned tuna. The above generalizations are confirmed by Table XXIV, showing quantity of canned tuna purchased in a six- month period. 27 Frequency of servings. Frequency of use is a sig nificant indication of the nature of demand for a product. The following facts refer to consumption of canned tuna by 26Ibid.. p. 38. 27Ibid., pp. 76-77. 228 TABLE XXIII CANNED TUNA PURCHASES RELATED TO AGE OF HOUSEWIFE* OCTOBER 1958 - MARCH 1959 Age of Housewife Cases Purchased Per 1,000 Families Under 35 140.3 35 to 45 149.3 45 to 54 104.4 55 and over 61.1 *United States Fish and Wildlife Service, Canned Fish Consumer Purchases by Family Characteristics, October 1958 - March 1959 (Fishery Leaflet 47fih. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 14. 229 TABLE XXIV CANNED TUNA PURCHASES RELATED TO YEARS OF FORMAL EDUCATION* OCTOBER 1958 - MARCH 1959 Formal Education of Cases Purchased Head of the Household Per 1,000 Families Grade School 75.9 High School 125.1 College 135.1 *United States Fish and Wildlife Service, Canned Fish Consumer Purchases by Family Characteristics. October 195$ - March 1959 (Fishery Leaflet 478h. Washington, D.C.: United States Fish and Wildlife Service, 1959), p. 9. 230 tuna-consuming families in a twelve-month period. In a four-week period, approximately 20 per cent of these families do not serve tuna; 20 per cent serve tuna once; 9 per cent serve tuna three times; 17 per cent serve tuna four times; and only 8 per cent serve tuna five or more times. It is noteworthy, therefore, that there is con siderable variation in the frequency with which families serve tuna dishes in a four-week period. Family income is an influence in increasing the fre quency of servings. As income per annum increases above three thousand dollars, more families tend to serve canned tuna twice in a four-week period. In fact, one-third of tuna-consuming families with incomes of ten thousand dollars per annum and higher serve the product twice in a four-week period. It is interesting to note that 21.5 per cent of Catholic, 14.5 per cent of Protestant, and 16.4 per cent of Jewish households serve tuna dishes four times in a four- week period. The American palate does not appear to relish canned tuna more than four times in a four-week period. Only 7.7 per cent of families serve canned tuna five or more times in a four-week period. Brand preference. Preference for a specific brand on the part of household buyers of canned tuna is not 231 exceptionally strong, according to the conclusions to be derived from several surveys conducted in recent years. In the over-all picture, 58.5 per cent of household 28 shoppers look for a particular brand. If, however, in their estimation they find their favorite brand two cents higher compared to other brands, they probably will not remain loyal to that brand. The relative popularity of different brands in im portant consumer markets throughout the country is revealed in some measure by consumer surveys undertaken by local 20 newspapers* Examination of these surveys fails to bring to light a clear-cut national pattern.^0 Comparisons of such preferences by years indicate that the situation in past decades was fluid; but now, with certain exceptions, preferences by region are tending toward greater stability so far as the nationally advertised brands are concerned. Bearing this in mind, it is possible to generalize along 28Ibid., p. 126. 2^See Dan E. Clark & Associates, Inc., Top Ten Brands Across the Nation, Combined Consumer Inventory for 1958 (Personal Interview Survey of Ten Mai lor Home Markets. Portland, Oregon: Dan E. Clark & Associates, Inc., 1958), pp. 36-37. 30 The above comments were confirmed by David Hauser, Assistant Manager, Market Research, Van Camp Sea Food Company, Inc., per interview June 6, 1959. Figures of specific market share enjoyed by the major canners in dif ferent sections of the country are confidential and were not revealed to the writer. 232 the following lines. The Van Camp Sea Food Company's advertised brands are strongest along the Pacific, Gulf, and Atlantic coasts, while the "Star-Kist" brand is more prominent in the Middle West and in some inland metropolitan centers located in 31 other parts of the country. x Competition between the two organizations is very keen in important sales areas. "Breast-O-Chicken," the third important national brand, ranks in third or fourth place in several important buying areas, including Chicago and Indianapolis. A fundamental finding in reviewing available consumer preference sta tistical data is that a national brand may capture one-half or more of the canned tuna market in one city and then account for less than 10 per cent of the market in neigh boring cities of the same size. In short, a systematic consumption pattern does not exist. Non-Consumers It is important for an industry to know the reasons why its products are not purchased. The reasons or emo tional feeling may range from indifference to active dis like of the products. 31 The Van Camp Sea Food Company, Inc., was the first to expand on a national scale, concentrating on those markets where sales were easiest to make. 233 Families which do not serve fresh or cured fish. Of the total families in the United States, 16 per cent do not serve fresh, frozen, or cured fish in a year's time. This group of abstainers is fairly evenly distributed throughout the country, living in rural areas, small towns, and large cities. They have incomes which range from the lowest to the high brackets; they include a large percentage of older people, and smaller percentages of younger and middle-aged 32 people. Families which do not serve canned fish. Approxi mately one-half of the group of abstainers relative to consumption of fresh or frozen or cured fish do eat canned fish, inasmuch as only 9 per cent of all families in the continental United States do not serve any type of canned fish.33 Large households serve more canned fish than small households. Only 3.6 per cent of families with six or more r \ f members do not serve canned fish. A larger percentage of Protestant families (10 per cent) than Catholic families (3 per cent) do not serve 3^Derived from United States Fish and Wildlife Service, Fish and Shellfish Preferences of Household Con signers 1956. pp. 27-30. 33Ibid.. p. 31. 34lbid.t p. 32. 234 canned fish. Further, 12 per cent of non-white families, compared to 8 per cent of white families, do not serve canned fish.33 Yet those non-white families which do serve canned fish do so more often than do white families.3^ The above data clearly indicate the presence in small numbers of non-consumers of canned fish in several sociological groupings. The actual data conform to logical deductions which might be made, and hence do not result in startling revelations. Families which do not serve canned tuna. Approxi mately 24 per cent of the families in the United States do not serve canned tuna; 31 per cent do not serve canned salmon; 30 per cent do not serve canned sardines; and 9 per cent do not serve any kind of canned fish. These percent ages apply to non-consumption over a twelve-month period. The non-consumers of canned tuna include the follow ing percentages of families in each of the following rural areas: 18 per cent of families in non-metropolitan communi ties of 2,500 to 50,000 inhabitants; 41 per cent of families in non-metropolitan rural farm areas; 33 per cent of families in non-metropolitan non-farm areas.3^ 35Ibid.. p. 33. 36Ibid.. p. 8. 3^Derived from ibid.. p. 35. 235 Non-users of canned tuna comprise 28 per cent of families in the North Central States and 31 per cent of families in the South, the two sections of the country where the percentages of non-consuming families are highest.'*8 Since the price range of canned tuna is higher than that of many foods, it follows that 47 per cent of families with an income of less than one thousand dollars per annum, and 41 per cent of families with an income of less than two thousand dollars do not use canned tuna.39 Reasons Underlying Non-Purchase of Canned Tuna A single reason, or a combination of reasons may underly the fact that a family does not buy and consume canned tuna. The answers stated on questionnaires and the replies given to interviewers do not always measure up to the highest standards of accuracy. Nonetheless, tabula tions of reasons given for non-consumption can and do provide useful information on patterns of consumption. The reasons given by housewives are listed in Table XXV. Dislike of the taste. The most frequently cited reason for non-consumption is to the effect that the family does not like tuna; in short, that to them canned tuna 38Ibid. 3^Ibid., p. 36. 236 TABLE XXV PRINCIPAL REASONS GIVEN FOR NOT SERVING CANNED FISH* Percentage Reasons Canned Tuna Canned Salmon Canned Sardines Canned Shrimp Don't like, family dislikes 46 47 67 43 Dislike canned fish, prefer fresh, frozen 10 14 5 26 Dislike all fish 10 9 6 4 Flavor strong, oily, salty, fishy 7 8 10 5 Dietary reasons 9 7 7 4 Too expensive 8 10 2 11 Habit, never used, no particular reason, never tasted 11 6 6 12 Other reasons 12 15 9 11 *United States Fish and Wildlife Service, Fish and Shellfish Preferences of Household Consumers 1956 ('Special Scientific Report, Fisheries No. 200. Washington, D.C.: United States Fish and Wildlife Service, February, 1957), p. 16. NOTE: Some respondents gave several reasons, there fore percentages do not necessarily add to 100. 237 is not appealing, is not appetizing. Among any large group there are those who do not like a given food or dish. Undoubtedly, fish, fresh or canned, has a distinctive taste. In contrast to several countries or geographic regions in Europe and Asia, as a nation Americans do not have a strong tradition of being fish eaters. Further, there is a wide choice of fish other than canned tuna, and of non-fish protein foods readily available to those who do not care for canned tuna or are indifferent to it. For these reasons, therefore, the fact that 46 per cent of the families which do not use canned tuna give dislike of the taste as their reason does not seem unduly high. Finally, it is interesting to note that similar percentages obtain with respect to the number of families which dislike the taste, hence do not consume canned salmon (47 per cent), canned shrimp (43 per cent), and canned sardines (67 per cent) In short, dislike of the taste of canned tuna, and outright aversion to the taste appear to be the principal reasons non-users of canned tuna do not buy the item. As a consequence, it would seem difficult to convert a sub stantial portion of non-purchasers into consumers of canned tuna. A program designed to change such food tastes, 40Ibid.. p. 16. 238 therefore, is of doubtful value. Dietary and similar cautions. Fear of the after effects of eating canned tuna underlies the reason some families do not buy the product. For instance, objection to salt flavors, aversion to oily flavors, and special diet requirements may preclude eating of canned tuna. Further, scepticism of canning methods, particularly concerning the proper handling and preservation of so perishable a product as fish, undoubtedly tends to deter some families from using canned tuna. High purchase price. Only 8 per cent of the fami lies interviewed gave high price as the reason for not buying canned tuna. The directors of the survey believe this figure is too low because it is felt that an unknown percentage of families for reasons of prestige declined to indicate their inability to afford canned tuna. This trend of thought is corroborated by the finding that those fami lies with low incomes, three thousand dollars and under per annum, serve canned fish much less frequently than do those families with higher incomes. The above data indicate that whereas on the one hand canned tuna is not consumed to a great extent by families 41lbid.. p. 17. 239 in the low income brackets, on the other hand it is not a luxury food. Failure of retail stores to carry canned tuna. Canned tuna is available throughout the country, as are the other major types of canned fish (salmon, sardines). Only 3.2 per cent of all households indicated that they could not purchase a desired canned fish item at their usual shopping place. Inasmuch as the 3.2 per cent figure is made up of households located primarily in metropolitan areas, and inasmuch as many of the families cited rather unusual canned fish products as unavailable, the distribu tion of canned tuna is somewhat more general than the 3.2 per cent of all households would indicate.42 V. INSTITUTIONAL MARKET The institutional market for canned tuna may be divided into two major segments. The first segment in cludes hundreds of municipal, county, state, and Federal Government entities that buy food for the cafeterias, restaurants, and mess halls they operate. Thus, each branch of the Armed Forces, the several prison systems, government-operated hospitals, mental institutions, 42Ibid.. pp. 14-15. 240 schools, colleges, and other government activities make up one major segment o£ the institutional market. The second segment of the institutional market con sists of private institutions and businesses. Thus, non government cafeterias, restaurants, schools, colleges, passenger ships, and other activities are included in the second division of the institutional market. The cafe terias and restaurants include those patronized by the general public and also those operated primarily for the employees of a business enterprise or non-profit organiza tion. Government Institutions Existing regulations require most government insti tutions to buy goods from American processors, whenever possible. As a result, the domestic packers supply the needs of most government institutions and agencies, includ ing the military. Between 1950 and 1957 the Armed Forces purchased fifty-eight million pounds of canned fish, of which 43 per cent, or twenty-five million pounds, were canned tuna. In 1958 military purchases of canned fish came to nine million pounds. Approximately two-thirds consisted of canned tuna. Government agencies, including the military, pur chase an estimated 5 per cent of the total supply of 241 domestic and foreign canned tuna available on the United States market.^ Effjyte Institutions Private institutions purchased approximately 16 per 44 cent of the canned tuna available in 1958. Volume of purchases, consequently, is significant, and with the opening of new cafeterias and restaurants will tend to increase. The institutional market is dominated by im ported canned tuna. In contrast to United States Govern ment institutions, private institutions are not operating under regulations obliging them to buy canned tuna packed domestically. Consequently, if it is to their advantage to do so, private institutions purchase imported canned tuna. Of some significance in the institutional market is the fact that, in general, cafeteria and restaurant patrons are not concerned by the possibility that the tuna sandwiches, tuna salads, and other tuna dishes they order consist of tuna canned in a foreign country. In fact, many, if not most of the people ordering tuna dishes probably are not aware of this fact. ^Military purchases were six out of 323 million pounds (domestic and foreign) available in 1958, or 2 per cent of the total. See Donald Y. Aska, "Marketing Canned Tuna" (paper read at the Industry Tuna Meeting, La Jolla, California, May 19-21, 1959), p. 9. ^The writer's conclusion, based on discussion with those contacted. 242 Demand Characteristics of the Institutional Market Price and quality are the determining factors in increasing sales in the institutional market. The United States Tariff Commission reports: Distributors of imported tuna packed in institutional- size cans contend that it would have been virtually impossible to build up an institutional market for tuna were it not for the attractive prices at which they could offer the imported product.^ The prestige of a national brand name, a reputation which has cost the leading firms several million dollars over the years to build, will not, of itself, increase sales. However, once having found that a specific, com petitively priced brand is satisfactory, institutional buyers will tend to continue with that brand of canned tuna until an equivalent product is available at a lower price. VI. EXPORT MARKET The possibility of United States canners shipping canned tuna from the continental United States to foreign countries in other than insignificant quantities appears very remote. The principal reason lies in the fact that raw material and canning costs are higher in this country ^United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution by the Committee on Finance of the United States Senate. Date? June 26, 1952 ("Washington. D.C.: United States Tariff Commission, March, 1953), pp. 142-43. 243 than in Japan and a few other countries.^ In order to complete the picture, it is necessary to add that there is a very slight demand abroad for better American canned tuna, a demand that originates among gour mets and others interested in sampling foods from far-off lands. VII. CONCLUSIONS The foregoing data lead to certain conclusions concerning the demand for canned tuna. Some of the conclu sions are obvious; some are not so readily apparent. Staple Foods The term "staple” is defined in part as "the com ponent element, the substance, the bulk."^ In the Ameri can diet staples include meat, consumed by 99.3 per cent of A ft all families, ° fresh vegetables, dairy products, and a few other foods. There are several sources of protein. Meat, canned fish, fresh vegetables, dairy products, and other foods ^The writer did not find anyone in the industry whose views differed from those expressed. ^C. T. Onions (ed.), The Oxford Universal Diction ary on Historical PrJjiciples (third edition; Oxford: The Clarendon Press, 1944), p. 2002. 48 United States Department of Agriculture, loc. cit. 244 contribute protein in the American diet. Cross Elasticity of Demand for Meat and for Fish Observation and common knowledge of eating habits leads to the assumption that there is cross elasticity between meat and fish. Yet, the extent to which this cross elasticity exists at present is difficult to gauge accu rately. Through the years there has been a low ceiling on per capita consumption of fish in the United States. Some segments of the population consider fish as a second-class food; other groups are influenced by the fact that people with whom they are acquainted look down on fish. If the prevailing prices of meat decline relative to the prices of fish, then there may be a shift by many fish-buyers toward greater purchase of meat. If, however, the prices of fish decline relative to meat, the shift by meat-eaters to an increase in fish purchases would not be so pronounced. Constancy of Canned Fish Consumption The relative constancy of canned fish consumption per capita through the years is a cause of concern to the tuna-canning industry.^9 This constancy is evidence of AQ ^7In the years prior to 1929, consumption per capita gradually reached 3.9 pounds. Large fluctuations in the supply of salmon during the 1930's played a role in 245 the American consumers’ low propensity to consume fish; it is evidence of the inability of fish canners to influence consumption trends so that aggregate consumption of canned fish will be increased. In short, for fish canners as a group, this stable consumption trend is a formidable obstacle. Emergence of Canned Tuna Canned tuna enjoys certain advantages in its rela tionship to other canned fish. The first advantage refers to the apparent relation ship between years of formal education of the head of the household and varieties of canned fish consumed. Those families in which the head of the household has a grade school education tend to consume more salmon and sardines than do other families.The reverse relationship holds true in the case of canned tuna. Consequently, the in crease in the national average of the number of years of increasing consumption per capita of canned fish to an all-time high of 5.8 pounds in 1936. In the post-World-War-II years consumption per capita has fluctuated between 3.8 pounds, the figure for 1957, to 4.2 pounds, representing consumption per capita for 1958. United States Bureau of Agricultural Economics, Consumption of Food in the United States 1909-52. Table 29; and Supplement for 1958 to Consumption of Food in the United States 1909-52. Table 29. ^United States Fish and Wildlife Service, Canned Fish Consumer Purchases bv Familv Characteristics. October 1955 - March 1959. pp. 16. 31. --------------- -------- 246 formal education at present and in the foreseeable future will probably help, rather than impede, greater canned tuna consumption. The existing price relationship between canned tuna and canned salmon strongly favors canned tuna. During most years of the 1930's a case of canned tuna was approxi mately 80 to 95 per cent as high in price as a case of canned salmon. In the period since 1950 the price of a case of canned tuna has been in the neighborhood of 50 per cent as high as that of canned salmon. The versatility in use of canned tuna is far superior to that of canned salmon or canned sardines. This attribute, enabling the housewife to use canned tuna in salads, sandwiches, casseroles, and other dishes tends to increase consumption. Families with incomes of seven thousand dollars and over buy approximately the same quantity of salmon as those with smaller incomes.^ Families with incomes of seven thousand dollars or over tend to buy a smaller quantity of canned sardines than do families with a lower income. ^ The opposite relationship holds true with reference to canned tuna. Consequently, if increases in personal 51Ibld., p. 25. - ^Ibld.. see Table, p. 40. 247 disposable income occur in the foreseeable future, con sumption per capita of canned tuna probably will tend to gain more than per capita consumption of canned salmon and canned sardines. Limit to Increasing Consumption The gain in per capita consumption of canned tuna has occurred concurrently with the decline in consumption per capita of sardines and salmon. A point will be reached at which a further decline in per capita consumption of canned salmon and canned sardines will not be likely to occur. At this point, if canned tuna consumption is to continue to rise at a rate higher than the rate of popula tion growth, it will be necessary to realize an increase in over-all canned fish consumption. Aggregate canned fish consumption per capita, however, has remained stable at best, and during 1955-1957 tended to decline slightly. The fact that the American palate to date has not accepted fish as a staple item of the national diet obviously is of fundamental economic significance to every segment of the several fish-canning enterprises which make up aggregate output. In the over-all picture there is an effective ceiling, therefore, on the demand for any one canned fish product, regardless of how important that prod uct is in the complex of all canned fish items, inasmuch 248 as there is a ceiling on demand for aggregate output of all varieties of canned fish. CHAPTER VII MARKETING PATTERN Canned tuna is marketed through the same food chan* nels and in the same manner as are hundreds of other canned food products. I. ECONOMIC CHARACTERISTICS UNDERLYING MARKETING The present marketing pattern of canned tuna is the outgrowth of several influences. The more important of these include the characteristics of the product, the ex tended geographic market, and the fact that the canners essentially are producers of a single line. Type of Product Canned tuna is a highly standardized product in the United States. The range in quality, as determined by chemical analysis and such subjective yardsticks as taste, is narrow. This quality range is less than that of most meats, yet is greater than that of common grocery items such as table salt and white granulated sugar. Standard packs. The three packs in order of prefer ence in which canners put up tuna are: solid pack; chunk 249 250 pack; grated pack or flakes. 'j Non-perishable. A distinct advantage canned fish affords over fresh fish, fresh meats, and poultry is the non-perishable nature of the product. As a consequence, canned tuna may be stored for indefinite periods in all climates under varying humidity conditions. Ease of preparation. The ease and short time required to prepare canned tuna dishes is a distinct advan tage that the product enjoys in today's American civiliza tion. The busy housewife is likely to accept a nourishing food that is simple to prepare. The tuna may be trans ferred directly from the can for use in a sandwich, or salad. If it is to be used as a hot dish, for instance in a casserole, the tuna can be quickly heated. Compact, durable containers. The cans in which tuna is packed are compact and durable. There is a minimum of unused space in the cans. This contrasts favorably with the conditions surrounding the packing of such items as peaches, pineapple chunks, and figs. The tuna cans are flat on top and at the bottom. ^ Htost tuna for household use is packed in the stand ard No. 1/2 can, 1-13/16 inches high, containing seven ounces of solid pack tuna. See Chapter I, p. 13. 251 As a result, it is simple to place the cans compactly in cases. It is easy to store the cans in warehouses, retail stores, and in homes. They may be readily stacked on shelves for display purposes. The cans may be easily transported in wooden cases or cardboard cartons. Product differentiation difficulties. The major areas of product differentiation are in the product itself; the container; the label; and the selling environment, 9 including services offered. Similarity of product and container, therefore, pose a problem for the seller who wishes to differentiate his product in the minds of consumers. Product differentiation is difficult; radical product differentiation becomes im possible in the selling of canned tuna. Consumption Pattern The consumption pattern of canned tuna in the United States may be delineated along relatively clear lines. o Chamberlin states: "A general class of product is differentiated if any significant basis exists for dis tinguishing the goods (or services) of one seller from those of another. Such basis may be real or fancied, so long as it is of any importance whatever to buyers, and leads to a preference for one variety of the product over another. Where such differentiation exists, even though it be slight, buyers will be paired with sellers, not by chance and at random (as under pure competition) but according to their preferences." See Edward H. Chamberlin, The Theory of Monopolistic Competition. A Re-orientation of the Theory of Value (seventh edition: Cambridge: Harvard University Press, 1956), p. 56. 252 Canned tuna is consumed throughout the year. Sales in crease somewhat during Lent and summer; they decrease during the Christmas season. Widespread demand. Tuna is the most popular canned fish served in the United States, used by families in all income brackets, residing in all regions of the country. The canned tuna market, therefore, encompasses an enormous geographic area. Consumption per capita. Consumption per capita of canned tuna is small, 1.8 pounds per annum. This means that the average family consumes about six pounds a year, or about 1-1/6 cans a month. Consumer Exposure The characteristics of canned tuna, the universality of use, the ready availability of substitute products (other canned fish, fresh fish, meats, poultry), make it imperative that the canners secure maximum consumer expo sure of their products in food stores. II. MARKETING FUNCTIONS: NATIONALLY ADVERTISED BRANDS In discussing marketing functions, it is appropriate to distinguish between canned tuna sold under nationally advertised brands and canned tuna sold under unadvertised labels. The three nationally advertised brands are: 253 "Chicken of the Sea" (Van Camp Sea Food Company, Inc.); "Star-Kist" (Star-Kist Foods, Inc.); and "Breast-O-Chicken" (Westgate-California Corp. ). These are all canner- sponsored brands. Physical Handling The physical handling of canned tuna does not pre sent unusual problems. Packed in compact, sturdy, durable, standard-size containers, canned tuna is handled in the same way as dozens of other canned food items. The tuna cans are simple to transport and keep in warehouses, as special temperature and humidity requirements are not applicable. Stacking of both cases and cans is simple. In the light of the above characteristics, the handling cost of canned tuna may be kept to a minimum. Canners. The three large canners maintain inven tories of canned tuna at the canning sites and also in key metropolitan centers throughout the country, thus being in a position to make prompt deliveries to wholesalers and retailers. 3"Chicken of the Sea" canned tuna is stored at approximately 150 locations throughout the country. (Per interview with Jay Harris, Merchandise Manager, Van Camp Sea Food Company, Long Beach, California, December 16, 1959.) "Star-Kist" canned tuna is stored at considerably more than one hundred locations throughout the country. (Per interview with Tom Virgil, Sales Representative, Star- Kist Foods, Inc., Terminal Island, California, January 5, 1960.) 254 Warehousing of canned tuna at points throughout the country presents the canners with a stock-control problem and a traffic-management problem. Costs are unnecessarily increased by keeping a larger stock than required at field locations; on the other hand, if the stock at field loca tions falls below the minimum needed to fill orders, the advantage of warehousing in the field is diminished. Closely connected with this problem is that of the traffic manager, who weighs the advantage of shipping carload lots of cases to a given location, or of shipping smaller quantities on which a higher transportation rate applies. Obviously, judgment must be exercised, based on such con siderations as the rate differential, additional cost of maintaining a larger field inventory, and anticipated sales in the area. Transportation. The transportation cost for the quantity to be shipped is the basis for determining the method of transportation used between the cannery and the intended destination. Since canned tuna is a non- perishable product in demand throughout the year, the num ber of days a shipment is in transit from cannery to destination is not critical. The canneries in the Terminal Island - Long Beach area and at San Diego enjoy an exceptionally favorable location with reference to having a selection of trans portation facilities available to them. All the tuna canners in southern California are located in harbor areas. In fact, Terminal Island is part of the Los Angeles Harbor, with major docks within a few minutes truck**haul of the cannery sites.^ Railroad sidings run adjacent to most canneries. Ample loading platforms and freeway networks leading out of San Pedro and Long Beach, and to a lesser extent out of San Diego, provide easy access by truck to Western markets. There are ample parking facilities at the cannery sites. The availability of more than one type of carrier is particularly advantageous during periods of transportation emergencies, the result of natural causes, labor relations, or other conditions.-* Transportation costs to move canned tuna from Terminal Island to cities on the East Coast are in the order of $198 per hundredweight, or approximately 2.1 cents per can of tuna. (Per interview with Dan Simonds, Traffic Manager, Franco-Italian Packing Co., December 21, 1959.) See also United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution by the Committee on Finance of the United States Senate. Dated August 20, 1957 (Washington. D.C.: United States Tariff Commission, May, 1958), p. 72. ~*In 1952 Pacific Coast tuna canners shipped 12 per cent of their output by truck, 13 per cent by coastal vessel, and 75 per cent by rail. Shipments to points in the Pacific Coast states are carried out primarily by truck. Shipments to coastal metropolitan centers, includ ing Philadelphia, New York, and Boston, are forwarded by 256 Warehousing. Storage of canned tuna is carried out by the canners, wholesalers, retailers, and housewives. It is the reluctance of retailers to have more than the absolute minimum stock of advertised brands of canned tuna on hand that has obliged canners to undertake ware housing at strategic points throughout the country. From the point of view of storage, canned tuna has the advantage of a relatively high value per cubic volume occupied. This is in contrast to such products as soap flakes, paper napkins, salt, and other items. Wholesalers. The customary wholesalers' function is to buy in large lots and sell in small lots. Efficient materials-handling, therefore, is basic to the wholesaling activity. This is particularly true since the wholesalers' customers consist in large measure of small retailers who buy in very small quantities. Further, the food whole salers' margin is so small that it is essential to keep costs to a minimum in order to survive. To most wholesalers canned tuna is merely one of several hundred products which must be handled in order to have a well-rounded line. Any improvements in the physical freighter. Railroad shipments go to hundreds of urban centers throughout the country. See Donald Y. Aska, "Marketing Canned Tuna" (paper read at the Industry Tuna Meeting, La Jolla, California, May 19-21, 1959), p. 5. 257 handling of food products in stock almost inevitably will improve the handling of cases of canned tuna. Thus, reduction of time in loading and unloading trucks, reduc tion in time in storing goods, positioning of goods so that they are readily accessible, improvements in the efficiency of fork lift trucks and other equipment, and maintaining better stock control all tend to reduce physical handling of goods and reduce warehousing costs. Retailers. The large retailers, including chain stores such as the A. & P., Safeway Stores, etc., and regional chains of supermarkets, usually have central ware housing facilities. The canners ship large quantities of canned tuna to these warehouses. At the warehouses the cases of canned tuna are stored temporarily, or the ship ment is broken up and small lots are loaded on company trucks and transported to the firm*s stores in that area. The small-scale retailers generally buy canned tuna in small lots from food wholesalers. As a result, the man hours devoted to the handling of canned tuna and other products is likely to be higher than is true in a large- scale operation. Efficient retailers give the most careful considera tion to the location and amount of shelf space assigned to various canned goods. The efficient retailers* physical handling of canned tuna, therefore, is coordinated with special sales, advertising, and price concessions. 258 Negotiation of Sales and Collection of Money The pattern o£ sales negotiations and collection of money in the tuna-canning industry is similar to that followed in other food processing industries. Sales representatives. Each of the three large canners has a sales organization consisting in essence of a sales manager and several regional sales managers responsible for sales in their respective sales territory. In the tuna-canning industry the regional sales managers are called sales representatives. The sales representatives are not involved in the day-to-day, routine booking of orders and payment of in voices by their customers unless an exceptional occurrence takes place. They then may act as "trouble shooters," investigating the difficulty together with the pertinent food broker. Food brokers. Food brokers are independent middle men who represent a manufacturer or canner in a specified territory on an exclusive basis. The representation does not extend necessarily to the canner's different lines of products. Food brokers' organizations may be small or large, depending on several considerations, including the number of lines handled. 259 Food brokers do not take title to the goods they sell. They receive a commission of 2.5 to 3 per cent on the face value of the canner*s invoice.^ The principal and obvious way for food brokers to increase their profits is to stimulate the demand for their principals' products in the territory they service. It is, therefore, to the direct interest of food brokers: (1) to handle products that are readily accepted by the public; (2) to secure as much assistance as possible from their principals in promoting the sale of those products; and (3) to represent sufficient lines or products so that their salesmen will book an order each time they make a sales call.7 Wholesalers. The wholesalers' salesmen negotiate the sale of canned tuna and of many other products with the retail stores that are the wholesalers' customers. This negotiation in many instances is perfunctory. The manager of the retail store sends in a listing every few days of the items and quantities he wishes to receive at the next delivery date. £ L Interview with Frank Beesemyer, partner in Beesemyer-Ridnour Co. (food brokers), Los Angeles, Cali fornia, December 16, 1959. 7Prominent food brokers have twenty-five or more salesmen covering an area the size of greater Los Angeles. 260 The periodic invoices which the wholesalers mail to the retailers include the billings for canned tuna. The retailers make payment in the usual manner. No particular problems are involved. Retailers. As indicated in previous sections, the negotiation of sales with retailers and payment of invoices by them follows routine procedures covering a multitude of products, including canned tuna. Retailers sell canned tuna and collect from their customers in the same manner as they do for other goods. Stimulation of Flow Steps to stimulate the flow of canned tuna between canner and consumer occur at several points in the market ing process. Sales representatives. A principal function of the sales representatives is to stimulate sales in their assigned territory. The competitive situation, consumption potential, eagerness of the brokers to increase canned tuna sales, and the canner*s ingenuity in devising canner- sponsored merchandising displays play a role in determining the emphasis which the sales representatives will give to sales-promotion activities. The sales representative keeps in close contact with the firm*8 brokers in his territory in order to increase 261 the brokers' sales of canned tuna, and to correct weak** nesses which may develop in any of the brokers' sales programs. The sales representative, therefore, must keep the brokers and the brokers' salesmen well informed con cerning canner-sponsored sales promotions. The sales representative processes requests for sales-promotional material, relays and works up enthusiasm for the canner's cooperative advertising allowances and other inducements to the retailers to promote the sale of canned tuna. The sales representative investigates com plaints relative to delays in deliveries of canned tuna to the retail stores, and assists the brokers in rectifying errors which may have occurred in the filling of orders. Food brokers handle several non-competing products or lines of products. In their attempt to maximize their margins, food brokers devote the greatest amount of their time and effort to those lines that are most rewarding to them. Hence, tuna canners' sales representatives vie with the regional sales managers of other food producers for a greater percentage of the food brokers' services. Food brokers. The income of food brokers consists of a percentage of sales, and therefore tends to increase in direct proportion to increases in sales. This relation ship is a powerful motivating factor for food brokers to cooperate with their principal in maximizing the flow of 262 canned tuna. Retail price cuts work to the distinct advantage of food brokers, since price reductions lead to an increase in the quantity moved. The decline in cents commission per unit is very slight, and is more than compensated by the increase in volume. Food brokers therefore look with con siderable favor on the various factors which permit or encourage price reductions of the products they represent. These factors may originate at the canner level or at the retail level. Food brokers may exhort their salesmen to increase the flow of canned tuna through better utilization of time, more calls per day, assisting the managers of retail stores in rearranging shelves so that the right brand of canned tuna is the most prominent, and helping the managers set up special canned tuna displays. Retailers. There are many kinds of retail food outlets in the United States, ranging from marginal units to very successful organizations. There are small stores and large stores; there are single units and chains of regional supermarkets, and national chains such as Safeway Stores and the A. & P. Usually, the most feasible method for these stores to increase their operating profit is to increase unit sales. Increasing volume of sales, there fore, is a common objective and requires a coordinated 263 program in which canned tuna is frequently featured at a price advantage. III. MARKETING FUNCTIONS: PRIVATE BRANDS There are usually fewer steps in the physical hand ling of canned tuna sold under private labels than is true of that sold under nationally advertised labels. Physical handling is simplified. Physical Handling Canners process the tuna which goes into the cans eventually to be sold under private label in the same manner as that sold under nationally advertised labels. Canners. Upon receipt of orders and labels for canned tuna, the canners affix the buyer's label to the cans before the cans are shipped. This is a routine, mechanized step. The canners then segregate the cases of labeled tuna so that they are ready for shipment, to go forward per method of transportation designated by the buyer. Transportation. The buyers normally select the cheapest method of transportation between the cannery and the point of delivery.® This may be by rail, truck, or Q °Canners normally pay the transportation charges, adding the amount to the customer's invoice. Refer to A. W. Anderson, et al.. Survey of the Domestic Tuna Industry. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 104 (Washington, D.C.: United States Fish and Wildlife Service, 1953), p. 389. 264 vessel, depending upon the destination. If the buyer is in Los Angeles or vicinity, or San Diego or vicinity, the buyer*s own delivery trucks may be sent to the cannery to pick up the shipment. This is a fairly common practice in Q the case of several supermarkets in Los Angeles. The quantity purchased almost always is sufficient to qualify the shipment to go forward under the lowest applicable rate.'1 '® Buyers. Buyers of canned tuna packed under private label may be wholesalers or retailers. In either case, the organization in all probability has ample storage space available for the cases of canned tuna that are delivered. Receipt of the shipment and physical movement of the cases in the warehouses are routine, handled in the same manner as are the dozens of other shipments received each week. 9 Interview with Robert Alexander of Alexander's Markets, Los Angeles, California, January 9, 1960. ^®Since sale under a private label necessitates rela tively long-range planning on the part of buyers, the precise number of days the shipment is in transit is not critical, hence, lowest cost is the governing factor of the method of transportation to be used. The minimum weight for a carload lot (shipment by rail) is sixty thousand pounds. The rate break for shipment by vessel is approxi mately twenty thousand pounds. Most truck shipments leaving Terminal Island have a minimum of thirtv thousand pounds. One thousand cases of canned tuna weigh approxi mately thirty thousand pounds. Anderson, et al.. o p . cit.. pp. 375-77. ----- : '^$0 ^ 265 Negotiation of Sales and Collection of Money There are two customary ways in which canners may negotiate the sale of canned tuna packed under private label. The first is for a member of the packing firm to negotiate directly with the prospective buyer at plant headquarters or elsewhere. The second possibility is to carry on negotiations through the intermediary of a food broker. The smaller firms tend to negotiate directly with the potential buyers more frequently than do the larger firms, which generally handle sales of private label ship ments through a broker. Negotiations often take place in San Francisco since the western buying offices of the major chain stores and grocery buying groups are located in San Francisco on lower California Street. In this geographi cally confined area it is simple for the canners' sales representatives, food brokers, and chain store buyers to contact one another personally or by telephone. It is customary for the buyers to shop around to see where they can get the best offer from the point of view of price and also delivery for specified quantities and grades of canned tuna. Stimulation of Flow The canners, food brokers, and the buyers (whole salers or retailers) take steps to stimulate the flow of 266 canned tuna sold under private labels. Canners. The buyer (wholesaler or retailer) who is shopping for several hundred cases of canned tuna to be sold under a private label is interested primarily in price and quality of the product. As a result, other considera tions such as canners' national advertising, and ware housing of nationally advertised canned tuna by the canners at strategic marketing centers do not induce the buyer to increase the price he is willing to pay for lots of canned tuna to be sold under private label. Rather, price com petition prevails. Therefore, reducing price while main taining quality of product and reasonable delivery dates is the effective way for the canners to increase the flow of canned goods sold under private label. Food brokers. The food brokers' function in in creasing the flow of private label canned tuna is to con tact all potential quantity buyers in his territory, both wholesalers and retailers. If a broker's quotation is somewhat lower than that of his competitors for a given quality and quantity of canned tuna to be furnished, then in all probability his organization will receive the order. If there is no price differential, then the delivery date, and the myriad considerations that enter into the relationship between the broker and his potential customer 267 may sway the buyer's decision one way or the other. Buyers. Wholesalers or retailers who have pur chased canned tuna packed under a private label enjoy a cost advantage compared to the canned tuna purchased under nationally advertised labels. To promote the sale of the product to their customers, the buyers, however, are obliged to quote a favorable sales price compared to the going price per can of nationally advertised brands. Further, retailers usually must engage in local advertising and sales promotions to make known to cus tomers and potential customers the advantages accruing to them in the purchase of a particular private label canned tuna. The retailers' role in stimulating sales of private label canned tuna consists, therefore, in grant ing well-advertised price concessions and in setting up strategically-located store displays. IV. ADVERTISING AND SALES PROMOTION The principal sponsors of advertising and sales pro motions of canned tuna are the canners and the retailers. Role of Advertising The objective of the seller is to shift the demand curve for his product upward and to the right. In general, advertising and selling costs enable the seller to increase 268 the demand for his product at a given price.^ Advertising may have any of several specific pur poses. In the advertising of canned tuna, the seller (either the canner or the retailer) often will direct his advertisements and sales promotions toward increasing the quantity of canned tuna which households use. This objec tive may be carried out by urging more frequent consump tion, adding to the variety of uses to which tuna may be put, buying in larger units, or lengthening the duration of the buying season. Other advertisements may have such specific objectives as an appeal to the new generation, presentation of a special merchandising offer, publicizing the reputation of the organization behind the product, or, 12 finally, promoting the reputation of the entire industry. Canners Each of the three large southern California tuna canners has promoted a label of canned tuna that is adver tised in the several regions of the country. Nationally advertised labels. Producers' brands that are advertised and sold on a national scale are few * ■ ' ^-Chamberlin, op. cit.. p. 130. ^For a listing of objectives see Otto Kleppner, Advertising Procedure (fourth edition; New York: Prentice- Hail, Inc., 1950), pp. 31-32. 269 in number. By a very wide margin, the most important are: "Chicken of the Sea" Van Camp Sea Food Company, Inc. Long Beach, California "Star-Kist" Star-Kist Foods, Inc. Terminal Island, California "Breast-O-Chicken" Westgate-California Corp. San Diego, California These brands achieved prominence and are maintaining their position by dint of their sponsors' years of con centrated effort, backed by aggregate expenditures on 13 advertising totalling several million dollars. The so-called national canned tuna brands are not available throughout the nation to the same extent that is true of several other nationally advertised canned foods, such as "Del Monte" fruits and vegetables, "Dole" pine apple, "Campbell" soups, "Heinz" products, etc. Each of the three national brands of canned tuna is predominant in particular metropolitan areas in several regions of the country. But no single brand has achieved a significant percentage of the market in all sections of the country. A brand that sells well in one town may be very difficult to find on the shelves of retail stores in a near-by town. The three large tuna canners spend in the order of 13 Industry advertising expenditures are reported in millions of dollars as $8.5 per annum for the 1953-55 period; $9.9 for 1956; $7.9 for 1957, per United States Tariff Commission, op. cit.. p. 5. 270 $125 thousand to $680 thousand a year on newspaper adver tisements.^ In mid-1955 the California Packing Corporation for the first time since the Second World War launched the "Del Monte" brand of canned tuna on the market. ^ "Del Monte" canned tuna has scarcely been advertised; its relative position in many metropolitan centers in the United States is so insignificant that it commands only 1 to 5 per cent of sales in those markets.^ This is an anomalous situ ation in that the advertised "Del Monte" canned fruits and vegetables are among the most popular in the country. Other producers* labels. The "Bumble Bee" brand of canned tuna is advertised primarily in the Northwest and in New England. Both canned salmon and canned tuna are sold under the "Bumble Bee" brand.^ ^1958 calendar expenditures on newspaper advertise ments: "Star-Kist," $686,346; "Chicken of the Sea," $370,588; "White Star," $55,419; "Breast-O-Chicken," $128,643. See "Advertisers* Expenditures in Newspapers 1958," Advertising Age. 30:66, 84-85, May 4, 1959. ^News item in Pacific Fisherman, 53:40, July, 1955. ^See Dan E. Clark & Associates, Inc., Top Ten Brands Across the Nation. Combined Consumer Inventory for 1958 (Personal Interview Survey of Ten Maior Home Markets. Portland, Oregon: Dan E. Clark & Associates, Inc., 1958), pp. 36-37. ^ E x p e n d i t u r e s by Columbia River Packers Association on "Bumble Bee" canned tuna advertisements in 1958 came to $57,931. See "Advertisers' Expenditures in Newspapers 1958," o p . cit.. p. 85. 271 Canners1 Allowances Allowances canners grant retailers are an effective way of coping with special, localized sales problems. Advertising allowances. The three large tuna canners grant their customers a cooperative advertising allowance which requires placement of advertisements in local newspapers two to three times minimum per three-month period. Advertising allowances apply to the canners' first name brand; they normally do not apply to any of the private brands. There is general uniformity in regard to the cooperative advertising allowance arrangements of the three major firms in the tuna-canning industry. Display allowances. A canner will grant a buyer a forty cents to fifty cents allowance per case of canned tuna if the retailer undertakes to display that particular advertised brand of canned tuna in a prominent manner for a stipulated number of days--usually less than a week. Such displays include window displays, stacking of dozens of cans in the shape of a tower or pyramid adjacent to a well-traveled aisle, and other arrangements which are mutually agreeable and conducive to increasing sales volume. Promotional allowances. A promotional allowance is a comprehensive term used to cover any of several 272 arrangements. The allowance granted by the canner pre sumably Is in return £or some action to be performed by the buyer. The allowance may range from fifty cents to $2.50 per case. If it is understood that the buyer need not perform his side of the original agreement, then the pro motional allowance becomes a somewhat non-overt price reduction. Trade Associations The Pacific Coast trade associations are staffed by officials aware of the benefits the groups they represent may derive from well-planned, energetically conducted advertising campaigns. The Southern California Fisheries Association has advocated "... an advertising program on 18 a really big scale, fifty-two weeks a year. . . .»,xo The Tuna Research Foundation, a division of the California Fish Canners Association, has been active for several years in sponsoring, preparing, and coordinating advertising campaigns for the tuna-canning industry. For instance, in anticipation of the 1957 Lenten season, the Tuna Research Foundation directed an advertising campaign undertaken by J. Walter Thompson Company. Media employed included magazines, newspapers, television, and radio.19 1 A Powerful Advertising Push Builds Behind Fish in L. A.," Pacific Fisherman. 55:39, March, 1957. 19,1 Tuna Foundation Marshalls Drive for Lenten Selling," Pacific Fisherman. 55:37, March, 1957. 273 In some years a few organizations outside of the tuna-canning industry also participate in the advertising campaigns. Thus, in 1957, the Carnation Milk Company and the Macaroni Institute were participants in the canned tuna Lenten advertising program.^ United States Fish and Wildlife Service The Fish and Wildlife Service of the Department of the Interior aids significantly in the publicizing of canned tuna. In their kitchens at College Park, Maryland, and in Seattle and Pascagoula the Fish and Wildlife Service develop canned tuna recipes for households and quantity recipes for schools, cafeterias, and other institutions.2* The Fish and Wildlife Service to date has given some 2,500 demonstrations in almost every state in the union for schools, restaurant associations, agricultural extension divisions, and others interested in mass feeding. Further, the Fish and Wildlife Service releases publicity material on canned tuna and other canned fish approximately bi weekly to some two thousand home economists, dietitians, and food editors of newspapers and periodicals.22 20Ibid. 21 Aska, op. cit.. pp. 13-14. 22Ibid., p. 14. 274 Advertising Related to Seasons The two seasons when consumption of canned tuna is heaviest are the Lenten period and the summer months, and it is during these seasons that canned tuna is most heavily advertised. The degree to which canned tuna is promoted and the price concessions granted to the consumer may vary markedly in a given period in a given geographic region, or even from one large metropolitan area to another. For instance, at the outset of the 1959 Lenten period ". . .in San Pedro it was hard to pick up a paper without being made 23 aware of the merits of canned tuna." In San Diego there was less enthusiasm among retailers in the promotion of canned tuna and still less among Los Angeles retailers. The above differences are differences of degree. Sales prices were advertised during the period by a number of prominent supermarkets and other retail outlets in Los Angeles featuring not only canned tuna but also tuna pies and tuna-and-noodles. There is usually a slowing-down in the sales of canned tuna during the Christmas holiday season.^ Turkey, 23 Supers Give Super-Push to Tuna in Lenten Adver tisements," Pacific Fisherman. 57:48, March, 1959. 24Ibid. 25"Winter Tuna Sales Ease From ’57 Holiday Trade," Pacific Fisherman. 57:35, January, 1959. 275 chicken, cranberry sauce, pumpkin and mince pies, and other foods associated with the Christmas season reduce the space allocated to canned tuna advertisements and sales promo tions. V. RELATIONSHIP OF CANNERS TO FISHERMEN The unique relationship between the southern Cali fornia tuna canners and the tuna fishermen has several diverse aspects. Interests in Common Tuna fishing in southern California owes its very raison d*etre and prosperity to the development of tuna canners. The canners through the years have been the only buyers of raw tuna. The more tuna the firms pack, the greater is the demand for raw tuna. The prosperity of the southern California tuna canners is based on a reliable and continuous supply of raw tuna. This, in turn, is closely related to the existence of a healthy, economically sound fishing fleet. Industry spokesmen acknowledge the complementary characteristics of American tuna fisheries and tuna canning by word and deed. Packers advance funds, underwrite notes, guarantee mortgages, and in other ways assist specific boat owners, thus assuring themselves of having the first opportunity to buy the catch which that particular boat 276 later lands.2* * When the livelihood and future existence of the southern California tuna fisheries appear threatened, industry spokesmen add their voices to legislative bills calling for subsidies, government loans, and other relief measures.2^ The large canners have a special interest in being assured of a continuation of a local supply of raw material. They have spent millions of dollars to estab lish nationally advertised brand names, the economic On July 24, 1957, the Federal Trade Commission entered its opinion and final order relative to hearings held without transcript concerning the legality of certain provisions in agreements between tunaboat operators, fishermen's unions, and canners. One result of the hear ings was to caution the parties against entering into agreements which could be construed as price-fixing. (According to a letter to the writer from Earl J. Kolb, Acting Director, Hearing Examiners, Federal Trade Commis sion, Washington, D.C., December 7, 1959, enclosing copy of the final order and opinion of the Commission, Docket No. 6623.) 2^See statement of Charles Carry, California Fish Canners' Association, Terminal Island, California, relative to S. 3229, in: United States Congress, Senate, Committee on Interstate and Foreign Commerce, Fisheries Legislation. Hearings before Committee, 85th Congress, 2d Session, on S. 237, S. 2719, S. 2973, S. 3229, S. 3530, July 15-17, 1958 (Washington, D.C.: Government Printing Office, 1958), pp. 145-48. "But it is the primary purpose of the Cali fornia Fish Canners' Association at this time to recommend measures which will restore to our domestic fishing fleet some measure of the prosperity to which we feel they are entitled. Although we as canners have problems, our prob lems presently at least are not so serious as those of our suppliers, the boat owners and fishermen." usefulness of which would be jeopardized if control of raw material should pass to a group, possibly in Japan or else where, that could intentionally obstruct the supply of raw material required by the three large domestic canners. The sociological framework tends to create a special bond of sympathy for fishermen's problems in southern California. Members of families owning fishing boats work in the canneries. Further, executives of canneries own shares in fishing boats and therefore for personal reasons are interested in the passage of legislation that will aid the plight of the local fishing fleets. Research into more efficient and hence less costly methods of catching tunas benefits both fishermen and canners. As a consequence, the activities of the Fish and Game Division of the State of California, of the United States Fish and Wildlife Service, and of other organiza tions conducting tuna research are given moral support by both fishing groups and canners. Divergent Interests The harmony of goals of raw material suppliers and processors predominates over a maze of strong divergent interests of the two groups. The divergent interests relate to price, to accept ance of raw material when ready to be landed, to proposed tariff legislation, and to canners' vertical integration, 278 including establishment of refrigeration and processing 28 plants in areas other than southern California. Price movements of raw material affect the fishermen and canners in diametrically opposite ways. Another development that affects the two parties in divergent ways has to do with storage of frozen tuna. Upon return to port, the tuna boats frequently cannot unload their catch because the canners are not interested in accepting the fish until they are ready to process it. Thus, the fishing boat operators must bear the refrigeration cost during the waiting period, and also are unable to set out as promptly on the next trip as otherwise would be possible and desirable during the fishing season. In general, tuna canners and tuna fishing groups take diametrically opposite points of view regarding proposals for a tariff on the importation of raw, frozen 2®The American Tunaboat Association opposes legis lation which permits or encourages the use of aliens as crew members, and opposes legislation which allows delivery of tuna to points outside the continental United States. See letter of August 7, 1958, from M. Machado Medina, President of American Tunaboat Association, San Diego, California, to Congressman John J. Allen, Jr., Washington, D.C., in: United States Congress, House of Representatives, Committee on Merchant Marine and Fisheries, New England Fisheries Subsidies. Hearings before Conmittee, 85th Congress, 2d Session, on H.R. 10529, May 27-28 and June 10, 1958 (Washington, D.C.: Government Printing Office, 1958), p. 53. 279 29 tuna. Should such a tariff be enacted, the small canners In southern California, the canners in San Francisco, Astoria, and elsewhere could be very seriously penalized, since they rely almost entirely on imported raw material. The schemes which the large canners have undertaken to acquire raw material at overseas bases through the use of only skeleton American fishing boat crews, supplemented by local manpower, have aroused the indignation of southern California fishing groups. Such arrangements diminish the reliance of the canners on the local southern California fishermen. 29 7See letter from W. M. Chapman, Director of Research, American Tunaboat Association, San Diego, Call" fomia, to the Hon. Henry Kearns, dated July 1, 1958, in: United States Congress, Senate, Committee on Interstate and Foreign Commerce, op. cit.. Appendix 6, p. 194. Chapman states, "It is necessary to clearly differentiate these two entities (tuna fishing industry versus the tuna canning industry) for the reason that the two industries have, up to this time, been affected in diametrically opposite manners by the importation of tuna into the United States and, as a consequence, their views with respect to the King Bill, and other measures, legislative or administrative, dealing with the same problem, are equally different." The fact that there is as yet no duty on Japanese fresh or frozen tuna aids all canners in getting their raw material at a lower figure than otherwise would obtain. See Van Camp Sea Food Company, Inc., Annual Report. Year Ended May 31, 1952 (Terminal Island, California: Van Camp Sea Food Company, Inc., 1952). CHAPTER VIII COMPETITIVE BEHAVIOR Competitive behavior may be conveniently divided into price competition and non-price competition. I. FUNDAMENTAL CONSIDERATIONS Price strategy constitutes one of the most obvious and significant manifestations of competitive behavior. Role of Price Policy The firm's objective, fundamentally, is to maximize profit, an objective that applies to the long run.'*’ In striving toward this objective, having elected one of several possible routes, the management of the firm must reach decisions concerning the pricing of its products. From such decisions a price policy or lack of price policy evolves. Policies--and this is true of price policies--are related to the thinking and activities at the various 1mA firm may be defined as an institution which buys things, transforms them in some way, and then sells them with the purpose of making a profit." See Kenneth E. Boulding, Economic Analysis (New York: Harper & Brothers, 1941), p. T & T . 280 281 levels and in the several departments of the organization.2 Price policies must be coordinated with over-all company planning; hence, price policies are truly a manifestation of the firm's economic behavior. Pricing at Different Levels Pricing takes place at several levels between the catching of the fish and the consumption of canned tuna. The first level at which pricing of tuna occurs is that at which the fisherman sells his catch to the canner. The canner prices his finished product, canned tuna, and sells it, normally through a broker, to the wholesalers or retailers. The broker sets a price on his services. The wholesalers price the product to retailers; finally, retailers price the product to the consumers. All told, therefore, in the foregoing process, depending on whether a wholesaler is involved, there are four or five separate but related pricing decisions. A modification of the foregoing steps is introduced if the American tuna canner buys imported frozen tuna. In that case, the foreign exporting firm is the institution which prices the frozen tuna to the American canner. 2 A policy may be considered a plan, general state ment, understanding, or course of action followed by a firm in order to guide the thinking of the members of the organ ization. 282 The following discussion concerns: (1) pricing by canners and (2) pricing by retailers, since brokerage fees and wholesale pricing of canned tuna are rather routine in nature. II. PRICE COMPETITION: TUNA CANNERS Stark price competition, or the threat of such com petition, exists in the pricing of canned tuna by the canner, and also frequently is found in the pricing prac tices of retailers. Range of Discretionary Pricing It is convenient to consider the range of discre tionary pricing, first, with reference to nationally advertised canned tuna and, secondly, with reference to private label canned tuna. Nationally advertised canned tuna. The three brands of nationally advertised canned tuna are not perfect sub stitutes. The labels differ; there possibly are very slight differences in quality of brand A versus brand B for a given pack; the conditions of sale and environment of the sale are not identical. The three brands of canned tuna, however, are very close substitutes. In the mind of the consumer, one nationally advertised brand tends to be as good as either 283 of the other two brands. If canner A reduces the list price for name brand A, then canners B and C promptly reduce their quotations by a like amount. As a result, based on past experience and knowledge of the industry, each of the three canners knows that: (1) a reduction in price of one nationally advertised brand will be followed by a like reduction in price of the other two brands; (2) the initiator of the price reduction has anticipated his competitors' reactions; and (3) the competitors are cognizant of the initiator's awareness of the predictable price moves. The preceding established pattern of action means that the individual canner of advertised label canned tuna is uncertain as to the price or prices at which he will have to sell his product in the forthcoming months. The individual canner's pricing is strongly influenced by the action of competitors and by his estimate of their counter- 3 moves to his pricing actions. Private label canned tuna. In the sale of private label canned tuna the emphasis is on price. At the canner 3 The Van Camp Sea Food Company reported that com petitors' special advertising allowances, regional dis counts and allowances, and ultimate price reductions ranging from small amounts to $2.00 per case obliged Van Camp Sea Food Company to meet these moves. Van Camp Sea Food Company, Inc., Annual Report. Year Ended May 31. 1951 (Terminal Island, California: Van Camp Sea Fooa Company, Inc., 1951), p. 2. 284 level, quantities sold are in the order o£ carload lots, hence are large. Canners' selling costs are at a minimum. The buyers (large grocery chains and wholesalers) secure quotations from several canners, usually ordering from the canner with the lowest quotation. In turn, the retailers, therefore, are in a position to price tuna sold under private label at several cents per can (three to six cents) lower than the price at which the nationally adver tised brands generally are sold. Means of Accomplishing Price Changes The canners' most direct method of varying price is to issue a revised price list, thus stating in an unmis takable way that a change in price has occurred. Such a change tends to be emphatic, clear-cut, decisive. There are alternative, subtle methods of carrying out a price change. Some of these methods fall in a gray area, incorporating elements of both price and non-price competition, emphasizing either one or the other. For instance, special conditions in a given region may result in canners* offers of regional discounts or special price allowances to meet existing competition. Other means of reducing price include granting of generous advertising allowances, promotional allowances, display allowances, or a combination of such allowances. By increasing the amounts of these allowances, it is possible for the canners 285 to take such measures ef£ect±vely out of the area of non price competition and make them instruments of price competition. The reason for this is that the respective caimer's brokers may reach an understanding with the retailer to the effect that he need only perform the given, stipulated action in a minor way. For instance, an under standing may be reached that the retailer need only show canner-supplied posters over a given weekend to be entitled to a promotional allowance on the cases last purchased. Such an arrangement in essence is a convenient way of bringing about a price reduction, easily changed from week to week, or month to month, and less overt than outright price reduction or price increase. Interrelationships: Advertised Label and Other Brands The price differential at the canner level between advertised brands and private label brands of canned tuna of a given pack may be as high as $2.25 per case. Factors which influence this differential on the supply side in clude the volume and cost of the canners' inventories. If the inventories of advertised label canned tuna at the cannery and at distribution points have a high cost per case to the canners (because the cost of the raw material was high), then the canners are inclined to price the retail product at a correspondingly high figure until the cases in stock have been sold. If, in the interim the 286 price o£ the raw product has dropped, then it is possible for canners to book orders for future delivery under private label at a relatively low price, thus resulting in a large price differential between advertised and private label canned tuna. Effect on the Industry Price competition exists: (1) between the several domestic canners; and (2) between domestic canners and suppliers of imported canned tuna. Of these two competi tive forces, it is the competition between domestic canners 4 that has had a serious effect on canners' profits. Price competition accounts in large measure for the reduction of the number of firms engaged in tuna canning. In 1951 there were approximately forty firms packing tuna, operating forty-seven plants in seven states.In 1959 there were fewer than half that number engaged in packing tuna.^ The disappearance of these firms from the scene of active tuna canning occurred during a period of increases ^Van Camp Sea Food Company, Inc., Annual Report. Year Ended May 31, 1953 (Terminal Island, California:Van Camp Sea Food Company^ Inc., 1953), p. 6. •^United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution bv the Committee on Finance of the United States Senate. Dated June 26. 1952 (Washington. D.C.: United States Tariff Commission, March, 1953), page 1-36. 6See Table XIII. 287 in domestic canned tuna production and sales. However, as price competition remained intense, the profit picture of individual firms suffered. A small, unidentified canner in southern California incurred the largest percentage losses (49 per cent of sales in 1954; 6 per cent in 1956, and almost 18 per cent for part of 1957).^ A few firms increased sales, resulting in a token increase in net profit. This was the experience of the Van Camp Sea Food Company, which achieved a $10.5 million increase in sales for the year ended May 31, 1951, result- O ing in only a $52 thousand increase in net profit. III. PRICE COMPETITION: RETAILERS The successful retail operation is oriented to the needs, predilections, and income bracket of customers and potential customers. In general, the assignment and loca tion of shelf space to a given item is based on potential sales volume and applicable mark-up. Availability Practically every grocery store, large and small, ^United States Tariff Commission, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution bv the Committee on Finance of the United States Senate. Dated August 20, 1957 (Washington. D.C.: United States Tariff Commission, May, 1958), p. 55. fi Van Camp Sea Food Company, Inc., Annual Report. Year Ended May 31. 1951, pp. 2-3. 288 carries canned tuna. Such widespread availability of a product accentuates an element of price competition, making it necessary for grocers to keep abreast of the pricing of other retailers in the area. Price Leader The American chain store and supermarket managers are attempting to maximize income based on their entire operation. To do this, it is desirable to "feature" certain items, that is, to reduce the price of those items and advertise the price reduction in order to lure prospec tive customers into the store. Canned tuna is one of the five most frequently "featured" items in food stores today because retailers have found that doing so attracts large Q numbers of people into the store. Once in a modem supermarket, customers can choose from three thousand to four thousand items. They buy approximately one-third of their food purchases planned down to the specific item. One-quarter of the food pur chases are planned in a general way. The remaining five- twelfths or 42 per cent of food purchases ". . . don't enter the customer's mind until he or she goes into 9Interview with Frank Beesemyer, partner in Beesemyer-Ridnour Co. (food brokers), Los Angeles, Cali fornia, December 16, 1959. The other four items are coffee, detergents, sugar, and chicken. 289 the store."It Is essential, therefore, even at con siderable cost to the retailer, to lure people into the store. The cost to do this may take the form of foregoing a mark-up sufficient to cover the handling cost to the retailer of that particular line of goods. Retailers vie with one another to offer the lowest price to the public for the "featured" item. The mark-up on canned tuna advertised and displayed as a "featured" item has reached the point of insignificance in the attempt to give the public the lowest possible price. As a result, retailers make special efforts to extract price concessions from their suppliers. Customary Mark-Up There is evidence, based on a number of surveys, that the mark-up on canned tuna frequently is less than the average mark-up on other canned fish handled, even when it is not sold as a special "featured" item. In short, in selling canned tuna the retailer stresses price.^ By so ^"The Supermarket: Revolution in Retailing," Business Week, June 28, 1952, p. 45. ■^Under Office of Price Stabilization regulations the maximum permissible mark-up on cost for the retailer was 21 to 25 per cent. Retailers rarely marked up their canned tuna 25 per cent. A study in Providence, Rhode Island, in October-December, 1950, revealed that canned tuna was marked up on the average of 13.30 per cent on resale (15.34 per cent on cost). Studies by the Progres sive Grocer revealed a 13.30 per cent mark-up on resale doing, people are attracted to the store, and a much higher quantity of canned tuna is sold than otherwise would be Floor Stock Guarantee Under the terms of a floor stock guarantee, the canner agrees to credit the accounts of his buyers with the dollar amount of the difference between the old price and new price applicable to the quantity the buyer has pur chased for a given period, usually thirty to sixty days. The floor stock guarantee applies to nationally advertised brands and sometimes to purchases of brands sold under private label. The canners* granting of a floor stock guarantee encourages retailers and wholesalers to keep adequate for canned tuna versus 26.57 per cent mark-up for canned sardines and 27.71 per cent mark-up for canned herring. See discussion in A. W. Anderson, et al., Survey of the Domestic Tuna Industry. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 104 (Washington, D.C.: United States Fish and Wildlife Service, 1953), pp. 344-66. 12 In the analysis of the experience of Alexander's Markets, consisting of ten supermarket-type stores in the Los Angeles area, ranging in location from wealthy neigh borhoods to poor neighborhoods, for the period February 1 to December 31, 1959, featuring nationally advertised brands of canned tuna increased unit sales by 10 1/2 to 14 times the regular weekly movement. The mark-up on the featured tuna ("Chicken of the Sea" and "Star-Kist") was only 1.6 per cent. See Table XXVII. 291 stocks of canned tuna on hand. As a consequence, retailers are inclined to keep their shelves better stocked than they otherwise would. IV. NON-PRICE COMPETITION The objective, in general, of non-price competition is to shift to the right the demand curve facing the seller. Each of the major southern California tuna canners has attempted to foster the impression among the buying public that its particular product is distinct from other brands of canned tuna. Areas of Non-Price Competition Areas of non-price competition from the point of view of the canner include differentiation of product, technical assistance, prompt deliveries, courteous service, supplying of sales-promotion displays, follow-up calls to be sure all is well, and favorable credit terms. Nationally advertised labels. The finished product under each of the three nationally advertised labels is of like quality. In the mind of the consumer one brand tends to be of as high quality as the other two. 13This is considering quality in an economic con text. In the processing of a biological resource, there inevitably are slight differences in the canned product, particularly since quality of the raw material is influ enced by the treatment accorded the fish from the time it is caught. 292 In an attempt to provide better service than competitors, each of the major canners has expedited deliveries to retailers by establishing a network of stor age facilities throughout the country. Each provides comparable advertising allowances, displays, and special promotional allowances.1^ In the short run there may be an advantage to retailers in buying from the canner that at the moment has the most attractive or most recent displays, or that perhaps has just initiated a special regional pro motional allowance. In the long run the advantage in buy ing from one major canner rather than another is slight, since each of the three firms matches the advantages offered by the other two. Private labels. There is a narrow range in quality between canned tuna sold under different private labels. The quality differences relate to taste and appearance of 15 the finished product. An element of non-price competition exists in the ^The cost of these concessions and allowances obviously must be deducted by the canner from his quoted price in order to ascertain the net amount he receives per case sold. ^The range in quality, converted to a price basis, is only about seventy-five cents per case extending from the highest to the lowest quality of domestic canned tuna. Per interview with Karl Fowler, Buyer, Certified Grocers of California, Ltd., Los Angeles, California, December 14, 1959. 293 rapidity and care with which a packer delivers canned tuna to his customers.^ Further, the speed and courtesy in making adjustments for bulging or broken cans is a mani festation of non-price competition. Imported canned tuna. In general, consumers do not know the brand names of imported canned tuna. There is skepticism and reluctance on the part of some groups to buy a canned food, possibly prepared a long time ago by an unknown cannery under unknown sanitation conditions, out side the surveillance of United States health inspection agencies. In addition, the imported product is canned in brine, a preparation that to date is not as well accepted by the public as is tuna canned in oil. For these reasons, therefore, retailers find that promoting imported canned tuna on bases other than price is difficult. Retailers* Shelf Strategy Retailers must plan carefully in order to derive the greatest advantage from canner-sponsored sales promotions and thereby maximize over-all sales volume. Attractively designed posters and displays can be of real value to ^The delivery of carload lots of canned tuna requires advance planning on the part of the packer rela tive to the acquisition of raw material. Delivery to the plant of imported frozen tuna takes place approximately ninety days after the canner opens a letter of credit. 294 retailers in focusing their customers1 attention on certain products. Multi-brand selection. By having two nationally advertised brands available on the shelves, supermarket retailers are in a position to participate in the displays, advertising allowances, seasonal and special "deals" initi ated by two canners. Selling two nationally advertised brands usually precludes having either one stacked in depth. Retailers also may carry one or more unadvertised brands. The possibilities include carrying: (1) a pro ducer's second brand, and/or ( 2) canned tuna packed under private label, possibly the retailer's own label. By stocking a private brand, the retailer gives his customers a wider choice and wider price range from which to make their selections. Grouping of items. Successful retail practice calls for careful grouping together of related goods. Thus, a display of canned tuna may be the focal point for mayon naise, noodles, cottage cheese, picnic supplies, and other items. Shelf location. The retailer can influence in some measure the traffic flow in a supermarket by carefully selecting the location for a display, be it the front of the store, half-way back, or the back of the store. The attractiveness of a genuine sales price on a nationally advertised brand of canned tuna is such that in the Los Angeles area it is feasible to place the canned tuna at many locations in supermarkets, even in the rear, and still have a successful sales event.^ This "pulling power" is sufficient to have customers traverse the entire length of the aisles, walking past many other items on their way to the tuna display. An effective inducement which will make customers walk through a fairly large area of the store is of vital importance to the operators of self-service stores, and thus justifies significant price reductions. V. FUSION OF PRICE AND NON-PRICE COMPETITION Fusion of price competition and non-price competi tion characterizes the sale of canned tuna by canners and retailers. Profit Maximization The southern California tuna canners maximize profit by increasing sales of canned tuna. To accomplish this goal, all packers, and particularly those selling canned tuna under a nationally advertised label, must engage in ^Interview with Robert Alexander, of Alexander's Markets, Los Angeles, California, January 4, 1960. certain strategies which constitute a fusion of price and non-price competition. An objective of these moves is to increase the flow of canned tuna by improving the sala bility of the product at the retail level. Consequently, canners are vitally concerned with the specific role canned tuna plays in the retailers' over-all operation. In their strategic moves to increase sales, canners are concerned with the price at which retailers sell the product and with the resultant gross margin the retailer receives from handling canned tuna. If retailers increase the profit ability of their operation by selling canned tuna, many are likely to increase purchases. If, on the other hand, retailers find the handling of canned tuna to be only a mediocre way of increasing the profitability of their operation, canners' sales will tend to decline. Relationship; Sales Volume to Price The principal determinants of unit sales volume at the retail level of nationally advertised canned tuna are: (1) price, (2) displays, and (3) retailers' advertisements. The data in Table XXVI reveal that putting canned tuna on display and retaining the shelf price increases sales by 100 per cent. A combination of display, adver tisements, and a significant price reduction increases unit sales by 1,050 per cent. 297 TABLE XXVI EFFECT OF DISPLAYS AND RETAILER ADVERTISING ON SALES OF NATIONALLY ADVERTISED CANNED TUNA* Price Per Can Display Retailer Advertised Cases Moved Per Week Regular Shelf $.33 Display .33 Advertisement, Display, and Price Reduction .25 No Yes Yes No No Yes 2 4 21 *Experience of Alexander's chain of ten supermarkets in the Los Angeles area, February 1 to December 31, 1959, in selling "Star-Kist" and "Chicken of the Sea" canned tuna. 298 Gross Margin on Canned Tuna The difference between resale price and cost multi plied by the unit volume sold reveals the picture presented in Table XXVII. The increase in unit volume achieved by a drastic price cut to twenty-five cents per can, as noted in the foregoing table, yields only an insignificant margin, 18 expressed in dollars, of $4.03. Canned tuna, therefore, clearly falls in the category of a "price leader." Capturing of Rivals' Markets In the past three years there have been few signi ficant changes in the relative popularity in key cities of the advertised brands of canned tuna. This condition of relative stability is frequently threatened, however, by the actions of one firm or another that wishes to increase its share of a given market. The characteristic behavior of the threatened firms is to meet the challenge rather than lose their position.^ ^The rental applicable to the floor space occupied by the display, the cost in labor of erecting the display, maintaining an adequate stock of cans on hand, and alloca tion of overhead expenses exceed the margin realized. IQ 7Van Camp Sea Food Company reported their apparent reluctant move to meet a national competitive situation. "On April 9 competition dropped prices by $2.00 a case on all light meat tuna. We, of course, were compelled to fol low. Profit margins were accordingly reduced." See Van Camp Sea Food Company, Inc., Annual Report. Year Ended June 2. 1956 (Terminal Island, California: Van Camp Sea Food Company, Inc., 1956), p. 1. 299 TABLE XXVII EFFECT ON GROSS MARGIN AND MARK-UP OF "FEATURING” CANNED TUNA* - - - I--- L -- - - - 1 1 — JL'-i— L ---1 ± ■ . i I I i ! ■ J-i. Resale Price Cost Cans Gross Per Can Per Can Sold Margin $.33 $.246 96 $ 8.06 25.4 .33 .246 192 16.12 25.4 .25 .246 1,008 4.03 1.6 Regular Shelf Display Display, Advert i sement, and Price Reduction Mark-Up on Resale *Experience of Alexander’s chain of ten supermarkets in the Los Angeles area, February 1 to December 31, 1959. CHAPTER IX SUMMARY AND RECOMMENDATIONS The purpose of this chapter is, first, to present a summary of the foregoing chapters, and, secondly, to set forth recommendations. I. SUMMARY The summary is brief, stressing the major factors pertaining to the current problems of the southern Cali fornia tuna-canning industry. The Study This is the study of an oligopoly, which, function ing within an unusual framework of interacting economic forces, has achieved a measure of precarious prominence. The southern California tuna canners, located in the Terminal Island-Long Beach area and in San Diego, (1) pro cess a larger pack by value than any other fish canning group; (2) supply 86 per cent of the household market for domestic canned tuna; (3) give employment to more than five thousand cannery workers in southern California; and (5) provide the raison d'etre of the American tuna fishing fleets. 300 301 The Industry’s Principal Problems The industry's principal problems focus on (1) the acquisition of raw material; (2) the American consumers' low propensity to consume canned fish; (3) concentration (90 per cent of output) on a single product (canned tuna), and on tuna by-products (5 per cent of output); and (4) intense competition among canners. Tunas--an Economic Resource Consisting of different species, apparently omni vorous, ranging in weight from a few pounds to several hundred pounds, and inhabitants of the tropical and semi- tropical waters of the world, the tunas constitute a renewable, biological, pelagic marine resource. For more than twenty-five centuries tuna fisheries have been of basic economic importance in the Mediterranean and off the coasts of Japan, providing a staple protein food for thous ands of inhabitants in those regions. In spite of this long history, and in spite of the intensive work which marine biologists have carried on in recent years, the extent of the resource and much biological data concerning tunas are not known. Strong indications, however, point to the possibility of fishing tunas much more intensively than is being practiced at present. United States Tuna Fisheries Commercial tuna fishing in United States waters 302 began in 1903 in response to the demand by a small canner in San Pedro for raw albacore. As other southern Cali fornia firms began packing tuna, demand for the fishermen's product increased. However, the fishermen's commercial market has always been limited to tuna canners, thus form ing one basis for the unique relationship between tuna fishermen and the firms purchasing their product. The technological advances during the past decade in boat design, boat building, development of navigational aids, and improvements of fishing equipment have been of the most profound economic significance. Larger, faster boats which are manned by the same size crews as older, slower boats, and the use of up-to-date automatic pilots, radar, sonar, radiotelephones, nylon nets, and modem refrigeration plants underlie a reduction in over-all operating costs. These advances, occurring with great swiftness, have relegated many American tunaboats to a class of picturesque, inefficient antiques by modem standards. The American tunaboat operators, caught between steeply rising construction and operating costs, and a stable price for their product, lack the incentive and often the working capital to have up-to-date boats built. As a consequence, the tunaboat operators' plight is severe. Southern California tuna canners are sufficiently concerned 303 about their supply of raw material that they are willing to spend working capital to extend loans to fishing boat operators and increase the number of company-operated boats. Compounding the American tunaboat operators' diffi culties is the fact that progressive Japanese tunaboat operators at present have modem boats and sell their catch, duty free, to southern California tuna canners. This, therefore, is a case study of the divergent behavior of two competing fishing groups during a period of very rapid change. In broad terms, one group initiated innova tions, whereas the other group failed to respond to change. The United States grant of sixty million dollars to Japan for the purpose of rebuilding its fisheries in the immedi ate period following the Second World War undoubtedly stimulated the construction of modem tuna vessels in that country. In contrast, the inability to secure loans has prevented many American fishermen from having new boats built. Structure and Economic Characteristics of Tuna Canning The Southern California tuna-canning industry is an oligopoly consisting of three firms (Van Camp Sea Food Company, Inc., Star-Kist Foods, Inc., Westgate-Califoraia Corp.), generally known as the large tuna canners, and various small firms. The three large firms account for 304 70 per cent o£ the market £or domestically canned tuna; the small firms account for 16 per cent. Canners along the Pacific Coast at points north of southern California (San Francisco, Astoria, etc.) account for 12 per cent of the market for domestic canned tuna, and firms along the Gulf and Atlantic Coasts account for the remaining 2 per cent. Single line producers. Southern California tuna canners are essentially producers of a single line of products. Canned tuna accounts for more than 90 per cent of the firms' sales; tuna by-products account for an addi tional 5 per cent. Raw material orientation. Raw material constitutes 60 per cent of the canners* plant costs. The relatively high cost of transporting fish under refrigeration aboard fishing boats from point of capture to the cannery dock, the possibility of utilizing only one-half of the fish by weight for canning purposes, and the loss up to 30 per cent by weight of the edible portions of the tuna in the cannery cooking process underlie the strong raw material orienta tion of the industry. In sharp contrast to conditions existent during the first quarter of this century, tunas no longer appear in abundance along the coastal waters of the Pacific Coast States. In 1958 American tuna fishermen found only 305 14 per cent of their tuna catch in waters off the Pacific Coast States; the balance came from Latin American waters. These developments underlie the operation of branch plants by the large canners in locations (American Samoa, Puerto Rico, Ecuador, Peru) that are close to rich tuna grdunds. Sources of raw material open to American tuna canners include deliveries by (1) independent American fishermen, (2) company-owned or company-controlled boats, (3) company facilities at overseas locations, and (4) im porters. In addition to importing raw frozen tuna, canners may import semi-processed tuna (loins or discs), thus eliminating one-half of the canning process in this country. The large tuna canners have attempted to maintain a balance between deliveries from the above sources. In this way, the existence of the domestic fishing fleet is moder ately supported. Ease of entry. It is simple for an experienced fish, vegetable, or fruit canner to pack tuna. The process is highly mechanized; reliance is primarily on unskilled labor; the procedure is routine. Consequently, the possi bility of setting up a small tuna-canning plant has inter ested entrepreneurs with limited working capital. Since the early 1900's many firms have entered the industry, and 306 subsequently have found the competition to be too severe for survival. Firms in southern California purchase their cans, labels, cases, oil, salt, and other supplies from common suppliers. Direct labor is paid at a standard rate for the job that is being performed. Therefore, it is possible for a we 11-managed new firm to operate with the same production costs per case of finished product as the older firms. Since canners derive their raw material, supplies, and labor from common sources, and since the canning pro cess is highly mechanized and routine, it requires astute management for one firm to achieve even a small cost advantage over its competitors. Economies of scale are present at a very low volume of output. Cost analysis. The processing of tuna is a highly mechanized, routine operation. If plant costs are con sidered as 100 per cent, then raw material comes to 60 per cent; labor, to 13 per cent; cans, labels, cases, oil, salt, and other sundry items to 27 per cent. This cost structure reveals the importance to the canner of obtaining raw material at the lowest possible price and of reducing shrinkage of raw material to a minimum in the cooking pro cess. The effect of efficient industrial management prac tices and of mechanization is reflected in the reduction 307 of man hours required to process a case of canned tuna. The figure declined 27 per cent between 1953 and 1957. The fact that average operating costs of the large canners and of the small canners are within a few cents of one another relative to production cost per case indicates that as a group small canners have achieved economies of scale. Average figures hide as much as they reveal; none** theless, they are useful as a yardstick against which individual firms may gauge their performance. Competition at canner level. There are several segments of the tuna-canning industry that compete with one another. These are: 1. Large firms competing on the level of nationally advertised brands. 2. Firms competing on the level of regionally advertised brands. 3. All firms competing on the level of private brands. 4. Foreign canners competing by offering tuna packed in brine. The degree of market stability enjoyed by American tuna canners is in part contingent on the fact that (1) foreign canners do not ship large quantities of tuna canned in oil to this country in view of a 35 per cent ad valorem tariff; and (2) foreign canners ship tuna canned 308 in brine in limited quantities. This occurs because a 12.5 per cent ad valorem tariff applies to shipments up to 20 per cent of the previous year's domestic pack. After that point the rate may be increased. Competition at retail level. Canned tuna is import ant to retail stores because they can use it successfully as a "price leader." Retailers have found that a special price reduction of a nationally advertised canned tuna brand, so advertised in local media, will lure housewives into the store. Price competition of this nature is so sharp and so prevalent in several sections of the country that the effects are noteworthy. The retailers press the brokers, who in turn urge the canners to grant special price concessions, promotion allowances, and display allow ances to increase sales of the canners' respective nation ally advertised brands. As soon as one canner weakens and in any direct or indirect manner reduces his price to retailers, the other two large canners find it necessary to agree to a similar arrangement. This action in turn tends to increase the canners* output, but probably impairs their profit. In addition, the competition between private and national brands is severe. Markets. The markets for canned tuna are (1) the institutional market, and (2) the household market. 309 The institutional market, accounting for approximately 22 per cent of the total, consists of (1) government institutions and agencies, including the military, and (2) hotels, restaurants, cafes, clubs, private schools, etc. The household market, accounting for 78 per cent of the total, is the market on which the southern California tuna canners have focused their attention and effort through (1) packing of tuna in household size containers, (2) selling through food brokers who specialize in contact ing retail stores or selling direct to retailers, and (3) advertising. Those institutions which are not obliged to buy domestic canned tuna have concentrated on purchasing im ported canned tuna (which is canned in brine) because the price is a few cents cheaper per pound and the quality is roughly the equivalent (including a higher protein content) than is found in American brands. Brand names are not of consequence in selling canned tuna in the institutional market; hence, there is very little interest among insti tutional buyers in purchasing nationally advertised brands. Consumption pattern. Three-quarters of the families throughout the United States consume canned tuna at least once a year. Consumption, however, is concentrated among 45 per cent of the families making up this group. There fore, even a small increase in consumption of the group 310 that rarely uses canned tuna would lead to a substantial increase in aggregate consumption. The one-quarter of American families that do not serve canned tuna may be very difficult to convert to regular users because the principal reason given for non use is dislike of the taste of tuna, or of fish in general. Favorable factors in the consumption pattern of canned tuna include the tendency of younger rather than older family groups, and those families with a college education to eat canned tuna. Unfavorable influences include the fact that the combined efforts of the several fish- and shellfish-canning industries (tuna, salmon, sar dines, shrimp, clams, oysters, etc.) have not increased the consumption per capita of canned fish during the past twenty years. In 1938 consumption per capita of canned fish stood at 4.8 pounds; in 1958 the figure was 4.2 pounds. Within this framework, however, the per capita consumption of canned tuna has increased significantly: 1938, .5 pounds; 1940, .7 pounds; 1947, .9 pounds; 1950, 1.2 pounds; 1955, 1.5 pounds; 1958, 1.8 pounds. It is noteworthy that even those consumers who serve canned tuna regularly do not eat substantial amounts, com pared to consumption of meat and a few other staple foods. In the foreseeable future increases in consumption per capita of canned tuna probably will be slight. There 311 are no Indications that the American consumer will increase his over-all consumption of canned fish. Further gains in consumption per capita of canned tuna with concurrent decreases in consumption per capita of other canned fishes will become progressively more improbable. Effect of the tariff on the consumer. As a result of the 35 per cent tariff on tuna canned in oil, the house wife, except in the rarest of instances, does not find foreign tuna canned in oil on grocers' shelves. Hence, her selection is curtailed to that extent. The 12.5 per cent tariff on tuna canned in brine tends to increase the retail price per can by two to three cents at most. The institutional buyer pays approximately 14 per cent more than the price otherwise would be. A tuna sandwich, therefore, may cost the patron at a restaurant an additional 16 per cent as a result of the tariff. On the other hand, if the tariff were removed, it is not a fore gone conclusion that the resultant benefits would be passed on to the consumer. In any event, consumers are imposed upon very slightly as a result of the tariffs on canned tuna. As a matter of principle, however, there are sound reasons to eliminate the tariff, thus encouraging competi tion and foreign trade which act to the advantage of the economy. A gradual reduction would tend to give the 312 canning industry an opportunity to adjust to changing conditions. Stimulating demand for canned tuna. Access to ample raw material, and the development of a routine canning process leave the area of demand-stimulation as the funda mental problem that has caused a number of firms to with draw from packing tuna. The advertising activities (eight to nine million dollars a year) of the large canners tend to benefit all firms, large and small, because the idea of eating more canned tuna is thereby promoted. In advertising their respective leading brand of canned tuna, the large canners stress such things as versa tility of use, ease of preparation, high protein content, and high quality of the product. Tuna recipes have appeared in many of the newspaper advertisements in recent years. The attempts to increase consumption by packing tuna with another product, such as noodles, have not in creased consumption significantly. II. RECOMMENDATIONS Recommendations may be framed emphasizing one or more objectives. Therefore, it is necessary to specify the point of view that is assumed. The following recommendations are based on the premises that: (1) the goal of the southern California tuna 313 canners Is to maximize their profits; and (2) the economic well-being of American consumers should be improved. Encourage Tuna Fisheries In order to afford potential entrepreneurs an incen tive to build and operate modern boats, positive action is required. Expand education services. The organization of an extension service, operated either by the State of Cali fornia or by the Federal Government, could do much to bridge the gap between educational and scientific centers and the active tuna fishermen at San Pedro and at San Diego. The Fish and Game Division of the State of Cali fornia, Scripps Institute of Oceanography at La Jolla, the United States Fish and Wildlife Service, and a few other organizations have experts specializing in different prac tical aspects of United States' fisheries. Their accumula tion of knowledge is not readily accessible to the busy tuna fishermen. Holding meetings with fishermen and en couraging interested fishermen to make better use of existing government-sponsored sources of information would tend to improve the technical efficiency of the more pro gressive tuna boat operators. Of far greater importance in the long run is the 314 interest such a program might evoke in commercial fishing as a vocation. A well-planned program could give young men a far broader, more accurate picture of tuna fisheries, technological advances, and financing possibilities than could be gained by chatting with a few fishermen. Provide tax relief. An accelerated depreciation schedule applicable to tuna boats and related equipment would increase the return to the tuna boat entrepreneurs and encourage more prompt and more intensive modernization activity. The problem of unrealistic depreciation rates besets many industries today on account of the rapid pace of technological change, and therefore is not a phenomenon associated solely with fisheries. Permit purchase of fishing boats abroad. American tunaboat operators are penalized by existing legislation obliging them to have their boats built in American boat yards. This means that at the present time the tunaboat operators are required to pay a substantially higher amount In 1956 the average depreciation book figure per bait boat was $18,200. Cost of new vessels exceeds $500,000; consequently, the average book depreciation figure is unrealistic. See United States Tariff Commis sion, Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution by the Conadttee on Finance of the United States Senate. Dated August 20. 1957 ^Washington. D.C.: United States Tariff Commission, Hay, 1958), Table 14. 315 2 for a new boat than do their overseas competitors. An alternative course of action would be a differ ential subsidy program undertaken by the Federal Government to eliminate the construction inequity with respect to com mercial fishermen. This would be in consonance with the merchant marine shipbuilding program. The relative merits of the two courses of action, involving questions of con tinuing employment at shipyards and fostering of boat building skills that have military implications, are beyond the scope of this study. Improve Canners* Position In order to improve the economic position of the canners, the following suggestions are proposed. Retain fresh or frozen tuna as duty-free. Retention of fresh or frozen tuna as duty-free encourages competition between United States and foreign fisheries, thus enabling American canners to purchase their raw material at a lower price than otherwise would be the case. Since raw material O ^The cost differential ranges from two hundred thousand dollars up for a modem tuna vessel. Statement by Charles Carry, California Fish Canners' Association, Terminal Island, California, relative to S. 3229 in: United States Congress, Senate, Committee on Interstate and Foreign Commerce, Fisheries Legislation. Hearings before Committee, 85th Congress, 2d Session, on S. 237, S. 2719, S. 2973, S. 3229, S. 3530, July 15-17, 1958 (Washington, D.C.: Government Printing Office, 1958), p. 146. 316 accounts for 60 per cent of processing costs, the canners would then be In a position to continue selling their finished product at a low price, thus tending to increase sales and give the consumer better value for a given expenditure. Increase plant dispersion. Southern California tuna canners would be well-advised to emphasize the erection of canning facilities at new locations closer to the sources of raw material. For instance, the erection of a plant on the Gulf Coast warrants serious study because the location would be closer both to existing major sources of raw material and to the large eastern markets than are the southern California canneries. In addition, such a plant would be staffed by workers compensated at a lower wage rate than that prevailing in southern California. A plant on the Gulf Coast also would have product-diversification possibilities, for instance, the canning of shrimp. The erection of plants in Mexico and at overseas locations also should be carefully studied. The objective is to find a happy set of conditions, in which framework southern California tuna canners could contribute their specialized knowledge to the advantage of all concerned. Possibilities worth further investigation are locations in Argentina, Brazil, Australia, Nigeria, Ghana, and Angola. In each case, raw material, a labor force, 317 a rising level of living, and a growing population are present.^ The pioneering American canners would have to be sufficiently flexible to modify their products so that they would concur as closely as possible with the taste prefer ence of the specific market in which sales are intended. Undertake financial participation in other firms. The possibility of financial participation by southern California tuna canners in other cannery establishments in the United States and abroad should be investigated. For instance, an alliance with an existing fish-processing organization on the Gulf Coast or elsewhere could have mutually beneficial results, particularly if the canner is successfully engaged in the packing of another fish, or of fruits, or vegetables. The advantage of such an arrangement lies in the fact that by participating in a going concern in another region, and preferably packing a product other than tuna, the southern California firm would benefit from the good will and experience of the allied firm, and broaden its base of operations. 3 ^Argentine concerns packed five thousand metric tons of tunalike fish in 1958. Refer to Table XI. Australian groups wish to export frozen tuna to the United States. See "Australia Tuna Export to America is Forecast," Pacific Fisherman. 57:50, April, 1959. 318 Merge with general food producers. A sound merger with a general food producer would result in several sub stantial benefits for the tuna canner. These benefits would net a higher income resulting from reduction of oper ating costs and an increase in sales volume. The reduction in operating costs in a sound merger would come about through a frank interchange of ideas and suggestions and through coordination of the activities of the two firms' respective purchasing, accounting, produc tion, personnel, marketing, advertising, and other depart ments. As a consequence, in a sound merger an effective organization would evolve. By becoming an integral part of a general food com pany, the tuna canner would escape from its present economic vulnerability arising from reliance for its exist ence on a single raw material (tunas), and on a single finished product (canned tuna). Therefore, if in a par ticular year, the tuna catch were poor, or if the canned tuna market were depressed, the company probably could offset this showing by a better-than-average sales perform ance of one or more of the firm's other products for that period. Specific advantages resulting from the merger of a tuna canner with a firm producing complementary products include the following. In the area of advertising and 319 sales promotion it would be possible to advertise "brand X" tuna salad with "brand X" mayonnaise, or a tuna casserole with "brand X" peas. As a result, the dollar advertising expenditure per product, if kept at the former levels, would now achieve more intensive penetration, or more extensive coverage of the market than formerly in the case of the tuna canner. Other advantages of a sound merger include facili tating the financing of long-term loans covering purchase of equipment and erection of plants. The prestige factor and greater possibilities of advancement in a large firm appeal to many supervisory and executive-type men and women. Thus, by producing diversified products the firm would have a greater selection of well-qualified applicants than does a company specializing in tuna canning. The strength of the foregoing advantages is such that, in the writer's estimation, merger with general food producers has the greatest merit for the southern California tuna-canning firms. BIBLIOGRAPHY BIBLIOGRAPHY A. BOOKS Adelman, M. A. "Concept and Statistical Measurement of Vertical Integration," Business Concentration and Price Policy, pp. 281-330. A Report of the National Bureau of Economic Research, New York. Princeton: Princeton University Press, 1955. American Can Company. The Canned Food Reference Manual. Third edition. New York: American Can Company, 1947. Asia Kyokai (ed.). Japanese Fisheries, Their Development and Present Status. Tokyo: Asia Kyokai, 1957. "Atum," Grande Enciclopedia Portuguese e Brasileira, III, 699-703. Lisbon: Editorial Enciclopedia, Limitada, 1935. Bain, Joe S. Pricing, Distribution and Employment. Revised edition.New York: Henry Holt and Company, 1953. Ballard, G. A. The Influence of the Sea on the Political History of Japan. London: John Murray, 1921. Bennett, M. K. The World’s Food, A Study of the Inter relations of World Populations. National Diets and Food Potentials. New York: Harper & Brothers, 19^4. Bottemanne, C. J. Principles of Fisheries Development. Amsterdam: North-HoHand Publishing Company, 1959. Boulding, Kenneth E. Economic Analysis. New York: Harper 6t Brothers, 1941. Bryson, John (ed.). "The Scholar-Gypsy," Matthew Arnold. Poetry and Prose. Cambridge, Massachusetts: Harvard University Press, 1954. Pp. 175-81. Bundesministerium fttr Em&hrung, Landwirtschaft und Forsten. Jahresbericht Uber die Deutsche Fischwirt- schaft 1958. Berlin: Verlag Gebr. Mann, October, 1959. 321 322 Cassady, Ralph, Jr. "The Marketing of Fishery Products In the United States," The Economics of Fisheries. Ralph Turvey and Jack Wiseman, editors. Rome: The Food and Agriculture Organization of the United Nations, 1957. Cervantes Saavedra, Miguel de. La Ilustre Fregona. in Novelas Eiemplares, Vol. II. Barcelona: Biblioteca Clasica Espanola D. Cortezo y C. a., 1886). Pp. 43- 137. Chamberlin, Basil Hall. Things Japanese. Sixth edition revised. London: Kegan Paul, Trench, Trubner & Co., Ltd., 1939. Chamberlin, Edward H. The Theory of Monopolistic Competi tion, A Re-orientation of the Theory of Value. Seventh edition. Cambridge: Harvard University Press, 1956. Clark, Dan E., & Associates, Inc. Top Ten Brands Across the Nation, Combined Consumer Inventory for 1958. Personal Interview Survey of Ten Major Home Markets. Portland, Oregon: Dan E. Clark & Associates, Inc., 1958. Cobb, George Watson, Jr., and John Kerr Rose. "Canning," Encyclopaedia Britannica (1960), IV, 748-50. Cohen, Jerome B. Japan's Postwar Economy. Bloomington, Indiana: Indiana University Press, 1958. Conference on Price Research. Cost Behavior and Price Policy. New York: Bureau of Economic Research, 1943. Cooper, Lenna F., et al. Nutrition in Health and Disease. Philadelphia: J. B. Lippincott Company, 1953. Cutting, C. L. Fish Saving. A History of Fish Processing from Ancient to Modem Times. London: Leonard Hill Books Limited, 1955. D’Ancona, Umberto. "Tonno," Enciclopedia Italiana di Scienze, XXXIII, 1030-33. Milan: Instituto della Enciclopedia Italiana, 1937. Demoll, R. FrUchte des Meeres. Berlin: Springer-Verlag, 1957. Diaz de Rivera y Caseres, Pascual. Politica Pesquera. Madrid: Ministerio de Trabajo, Escuela Social, 1^44. 323 Fellner, William. Competition Among the Few. New York: Alfred A. Knopf, 1949. Florence, P. Sargant. The Logic of British and American Industry. 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Jordan, David Starr, and Barton Warren Evermann. American Food and Game Fishes. New York: Doubleday, Page & Co., 1902. Kaplan, A. D. H., et al. Pricing in Big Business. A Case Approach. Washington, D.C.: The Brookings Institu- tion, 1958. Kleppner, Otto. Advertising Procedure. Fourth edition. New York: Prentice-Hall,Inc., 1950. Lafaye, Georges. "Piscatio et Piscstus," Dictionnaire des antiquites grecques et romaines. IV, 469-94. Paris: Librairie Hachette et Cie., 1919. 324 Lebret, L. J., and J. Sauvee. PScheries mqndiales et marche du poisson. Institut National de la Statistique et des Etudes Economiques, Vol. 1. Paris: Presses Universitaires de France, 1950. Le Danois, Edouard. Fishes of the World. London: George C. Harrap & Co., Ltd., 1957. Lopez-Matas, Antonio. Enlatado, curado y otros metodos de preservacion del pescado y elaboration de subproductos. Santiago de Chile: Food and Agriculture Organization of the United Nations, 1952. Machlup, Fritz. The Economics of Sellers* Competition. Baltimore: The Johns Hopkins Press, 1952. Manacop, Porfirio R. "The Principal Marine Fisheries," Philippine Fisheries, pp. 103-23. A Handbook Prepared by the Technical Staff of the Bureau of Fisheries. Manila: Philippine Bureau of Fisheries, 1953. Maurice, Henry Gascoyen, and E. A. Power. "Fisheries," Encyclopaedia Britannica (1960), IX, 294-99. Morgan, Robert. World Sea Fisheries. New York, London: Pitman Publishing Corporation, 1955. National Canners Association. Canned Foods in Human Nutrition. Washington, O.C.: National Canners Associ- ation, 1950. ______ . The Canning Industry. Third edition. Washing ton, D.C.: The National Canners Association, 1957. Onions, C. T. (ed.). The Oxford Universal Dictionary on Historical Principles. Third edition. Oxford; The Clarendon Press, 1944. Poor’s Register of Directors and Executives, United States and Canada 1959^ New York: Standard & Poor's Cor- poration, 1959. Reischauer, Robert Karl. 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Vance, Stanley. American Industries. Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1955. Walford, Lionel A. Living Resources of the Sea, Oppor tunities for Research and Expansion. New York: The Ronald Company, 1958. Walker*s Manual of Pacific Coast Securities. San Fran- cisco: Walker's Manual, Incorporated, 1959. Wright, Sidney H. The Romance of the World's Fisheries. Philadelphia: J. B. Lippincott Company, 1906. B. PERIODICALS 1. General "Advertisers' Expenditures in Newspapers 1958," Advertising Age, 30:58 ff., May 4, 1959. Castle and Cooke, Inc. Annual Report 1958. Honolulu: Castle and Cooke, Inc., 1959. 326 Food and Agriculture Organization of the United Nations. "General Aspects of the World's Tuna Fisheries," Fisheries Bulletin. 2:82-105, July-August, 1949. Hess, E. Current Technological Problems in Fish Canning. Fisheries Bulletin, Vol. IX, No. 4. Rome: Food and Agriculture Organization of the United Nations, October-December, 1956. Inter-American Tropical Tuna Commission. Annual Report for the Year 1952. La Jolla, California: Inter- American Tropical Tima Commission, 1953. ______ . Annual Report for the Year 1953. La Jolla, California: Inter-American Tropical Tuna Commission, 1954. ______ . Annual Report for the Year 1954. La Jolla, California: Inter-American Tropical Tima Commission, 1955. ______ . Annual Report for the Year 1955. La Jolla, California: Inter-American Tropical Tuna Commission, 1956. ______ . Annual Report for the Year 1956. La Jolla, California: Inter-American Tropical Tuna Commission, 1957. ______ . Annual Report for the Year 1957. La Jolla, California: Inter-American TropicajMCuna Commission, 1958. "The Fishing's Fine," The Canner and Freezer, 124:13-15, January 7, 1957. "The Supermarket: Revolution in Retailing," Business Week. June 28, 1952, pp. 38 ff. Van Camp Sea Food Company, Inc. Annual Report. Year Ended May 31. 1951. Terminal Island, California: Van Camp Sea Food Company, Inc., 1951. _. Annual Report, Year Ended May 31. 1952. Terminal Island, California: Van Camp Sea Food Com pany, Inc., 1952. _. Annual Report. Year Ended May 31. 1953. Terminal Island, California: Van Camp Sea Food Com pany, Inc., 1953. 327 Van Camp Sea Food Company, Inc. Annual Report, Year Ended Mav31. 1954. Terminal Island, California: Van Camp Sea Food Company, Inc., 1954. _. Annual Report. Year Ended June 2. 1956. Terminal Island, California: Van Camp Sea Food Company, Inc., 1956. _. Annual Report. Year Ended May 30, 1959. Long Beach, California: Van Camp Sea Food Company, Inc., 1959. 2. Articles from Pacific Fisherman "Australia Tuna Export to America is Forecast," Pacific Fisherman. 57:50, April, 1959. "Big Samoan Tuna Deal Reported in Japan," Pacific Fisher man, 53:23, June, 1955. "'Bumble Bee' Tuna--The Story of a Business of Three-Score Years and Ten," Pacific Fisherman, 56:12 ff., May, 1958. "By-Products," Pacific Fisherman, International Yearbook Number, 58:245-47, January 25, 1960. "Castle and Cooke Increases CRPA Holding to Control," Pacific Fisherman, 57:19, March, 1959. "Decade 1943-52, Shaping the Course for the Years to Come," Pacific Fisherman. 50:69 ff., August, 1952. "Decade of Drama and Development 1923-1932," Pacific Fisherman, 50:38 ff., August, 1952. "Decade of Emergence 1913-1922," Pacific Fisherman. 50:20 ff., August, 1952. "Fishing Facts from Indonesia," Pacific Fisherman. 51:59, February, 1953. "Foundations First, 1903-1912," Pacific Fisherman. 50:5-16, August, 1952. "Ghana," Pacific Fisherman. International Yearbook Number, 58:202-^03, January 25, 1960. 328 "Here Tuna Canning; Began/1 Pacific Fisherman, 51:15, December, 1953. "How Radical Surgery Saved an Ailing Cannery," Pacific Fisherman. 53:43-45, July, 1955. "Indian Ocean Tuna Yield from New Areas Soaring," Pacific Fisherman, 57:24, April, 1959. "Italians Find Japanese Tuna Landings Excessive," Pacific Fisherman, 56:19, March, 1958. "Japanese Clipper Tests Caribbean Tuna Resources," Pacific Fisherman, 53:51, November, 1955. "Japanese Tunaman Lands Second Argentine Trip," Pacific Fisherman, 57:21, April, 1959. Koesoemowinoto, Soepanto. "Indonesia," Pacific Fisherman, International Yearbook Number, 58:153-54, January 25, 1960. "Magic in Ecuador," Pacific Fisherman, 57:10 ff., July, 1959. "Markets," Pacific Fisherman, International Yearbook Number, 58:129, January 25, 1960. "One Thousand-Ton Tuna Vessel on Maiden Voyage," Pacific Fisherman. 55:41, January, 1957. "Paita— Peru's Ancient Port Finds New Prosperity in Fisheries," Pacific Fisherman, 57:10-13, October, 1959. "Peru," Pacific Fisherman, International Yearbook Number, 58:185-87, January 25, 1960. "Peruvian Fishing," Pacific Fisherman, 55:24, November, 1957. "Powerful Advertising Push Builds Behind Fish in L. A.," Pacific Fisherman, 55:39, March, 1957. Sakai, Kenji. "Japan," Pacific Fisherman, International Yearbook Number, 58:115-20, January 25, 1960. "San Diego Shipper Acquires Big Frozen-Tuna Transport," Pacific Fisherman, 56:22, December, 1958. 329 "South Africa Seeks Deal With Peru on Fish Meal/1 Pacific Fisherman, 58:14, March, 1960. "Star-Kist Builds Tuna Cannery in Puerto Rico," Pacific Fisherman. 57:4, January, 1959. . "Star-Kist Dispatches Fishermen on a 5-Month Exploration," Pacific Fisherman, 51:67, December, 1953. "Star-Kist No. 4," Pacific Fisherman, 50:11 ff., November, 1952. "Supers Give Super-Push to Tuna in Lenten Advertisements," Pacific Fisherman, 57:48, March, 1959. "The Tuna Titan," Pacific Fisherman, 54:45, May, 1956. "Tuna Foundation Marshalls Drive for Lenten Selling," Pacific Fisherman, 55:37, March, 1957. "Tuna Packing at Ponce.--Van Camp's Easternmost Outpost in Puerto Rico," Pacific Fisherman, 55:8 ff., July, 1957. "Twelve Hundred Twelve-Ton Tuna Clipper Fishing for Genoa Trade," Pacific Fisherman, 55:46, June, 1957. "Westgate Buys San Diego Coast Baseball Team," Pacific Fisherman, 53:12, October, 1955. "Winter Tuna Sales Ease From '57 Holiday Trade," Pacific Fisherman, 57:35, January 1, 1959. C. GOVERNMENT PUBLICATIONS Anderson, A. W., etal. Survey of the Domestic Tuna Industry. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 104. Washington, D.C.: United States Fish and Wildlife Service, 1953. Burk, Marguerite C. "Pounds and Percentages," Food, The Yearbook of Agriculture 1959. pp. 591-99. Yearbook of the United States Department of Agriculture. Washington, D.C.: Government Printing Office, 1959. 330 Burmeister, Charles A., and Harold F. Breirayer. "Live stock," Marketing. The Yearbook of Agriculture 1954, pp. 485-3^ Yearbook of the United States Department of Agriculture. Washington, D.C.: Government Printing Office, 1954. Califozmia Bureau of Marine Fisheries. The Commercial Fish Catch of California for the Year 1947 With an Histori cal Review l916-1947. Fish Bulletin Mo. 74.Sacra mento: California State Printing Office, 1949. California Fish and Game Commission. "Tuna Disappear," California Fish and Game. 1:72, January, 1915. Classen, T. E. A. The Tuna Industry of Southern Spain. United States Fish and Wildlife Leaflet 188. Chicago: United States Fish and Wildlife Service, 1946. Corwin, Genevieve A. A Bibliography of the Tunas. Sacramento: Fish and Game Division of the State of California, 1930. Federal Trade Commission. "Trade Practice Rules for the Tuna Industry," Trade Practice Rules, September 1, 1935 to June 20. 1945. pp. 427-36. Washington, D.C.: Government Printing Office, 1946. Fiedler, Reginald H., Milton J. LobeII, and Clarence R. Lucas. The Fisheries and Fishery Resources of the Caribbean Area. Fishery Leaflet259. Washington, D.C.: United States Fisii and Wildlife Service, 1947. Godsil, H. C. The High Seas Tuna Fishery of California. California Department of Fish and Game, Fish Bulletin Ho. 51. [Sacramento]: California State Printing Office, 1938. ______. "The Pacific Tunas," California Fish and Game. 31:185-94, October, 1945. ______, and Edwin K. Holmberg. A Comparison of the Bluefin Tunas, Genu8 Thunnus, from New England. Australia, and California. California Department of Fish and Game, Fish Bulletin No. 77. [Sacramento]: California State Printing Office, 1950. Jarvis, Norman D. Principles and Methods in the Canning of Fishery Products^ United States Fish and Wildlife Service, Research Report 7. Washington, D.C.: Govern ment Printing Office, 1943. 331 Le Bovit, Corinne, and Faith Clark. "Are We Well Fed?" Food. The Yearbook of Agriculture 1959. pp. 620-28. Yearbook of the United States Department of Agri culture. Washington, D.C.: Government Printing Office, 1959. Pacific Marine Fisheries Commission. Third Annual Report of the Pacific Marine Fisheries Coomission for the Year 1950 to the Congress of the United States and to the Governors and Legislatures of: Washington. Oregon, and California" Portland, Oregon: Pacific Marine Fisheries Commission, 1950. Power, E. A. (comp.). United States Tuna Fishery 1911- 1958. United States Fish and Wildlife Service, Fishery Leaflet 484. Washington, D.C.: United States Fish and Wildlife Service, 1959. Roedel, Phil M. Common Ocean Fishes of the California Coast. California Department of Fish and Game, Fish Bulletin No. 91. [Sacramento]: California State Printing Office, 1953. Shapiro, Sydney. The Japanese Long-Line Fishery for Tunas. United States Fish and Wildlife Service, Fishery Leaflet 317. Washington, D.C.: United States Fish and Wildlife Service, 1950. Shimada, B. M., and W. G. Van Campen (eds.). Exploratory Tuna Fishing in the Marshall Islands. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 47. Washington, D.C.: United States Fish and Wildlife Service, 1951. ______. Fishing in Indonesian Waters. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 45. Washington, D.C.: United States Fish and Wildlife Service, 1951. ______. Tuna Fishing in Palau Waters. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 42. Washington, D.C.: United States Fish and Wildlife Service, 1951. Stiebeling, Hazel K., and Faith Clark. "Our National Diet, Marketing. The Yearbook of Agriculture 1954. pp. 202-267, Yearbook of the United States Department of Agriculture. Washington, D.C.: Government Printing Office, 1954. 332 Stolting, W. H., and M. J. Garfield, and D. R. Alexander. Fish and Shellfish Preferences of Household Consumers. United States tish and Wildlife Service, Research Report 200. Washington, D.C.: Government Printing Office, 1956. United States Bureau of Agricultural Economics. Consump tion of Food in the United States 1909-52. Agriculture Handbook No. 62. Washington, D.C.: Government Printing Office, September, 1953. ______. Supplement for 1957 to Consumption of Food in the United States 1909-52" Supplement for 1957 to Agri- cultural Handbook No. 62. Washington, D.C.: Government Printing Office, September, 1958. ______. Supplement for 1958 to Consumption of Food in the United States 190£-52 ~ Supplement for 1958 to Agri- cultural Handbook No. 62. Washington, D.C.: Government Printing Office, August, 1959. United States Bureau of the Census. Statistical Abstract of the United States: 1959. Eightieth annual edition. Washington, D.C.: United States Bureau of the Census, June, 1959. United States Congress, House of Representatives, Committee on Merchant Marine and Fisheries. New England Fisheries Subsidies. Hearings before Committee, 85th Congress, 2d Session, on H.R. 10529, May 27-28 and June 10, 1958. Washington, D.C.: Government Printing Office, 1958. United States Congress, Senate, Committee on Interstate and Foreign Commerce. Fisheries Legislation. Hearings before Committee, 85th Congress, 2d Session, on S. 237, S. 2719, S. 2973, S. 3229, S. 3530, July 15-17, 1958. Washington, D.C.: Government Printing Office, 1958. United States Department of Agriculture. Food Consumption of Households in the United States. Household Food Consumption Survey 1955, Report No. 1. Washington, D.C.: Government Printing Office, December, 1956. ______. Food. The Yearbook of Agriculture. 1959. Washington, D.C.: Government Printing Office, 1959. . Marketing, The Yearbook of Agriculture. 1954. Washington, D.C.: Government Printing Office, 1954. 333 United States Department o£ the Interior. Research Activities Under the Saltanstall-Keimedy Act. Tiscal Year 1$$6. Washington, D.C.: United States Department of the Interior, 1956. United States Fish and Wildlife Service. Canned Fish & Byproducts--1958. C.F.S. No. 2021. Washington, D.C.: United States Fish and Wildlife Service, 1959. (Duplicated.) _______ . Canned Fish Consumer Purchases by Family Characteristics. October 1958 - March 1959. Fishery Leaflet 47&h. Washington, D.C.: United States Fish and Wildlife Service, 1959. _______ . Canned Fish Consumer Purchases, July 1959. Fishery Leaflet 478i. Washington, D.C.: United States Fish and Wildlife Service, 1959. _______. Canned Fish Retail Prices, June 1959. Fishery Leaflet 4!76i. Washington, D.C.: United States Fish and Wildlife Service, 1959. _______. "Exports of Frozen Tuna to Europe Expanding," Commercial Fisheries Review. 21:67-68, June, 1959. _______. Fish and Shellfish Preferences of Household Consumers 1956T Special Scientific Report, Fisheries No. 200. Washington, D.C.: United States Fish and Wildlife Service, February, 1957. Fishery Products Report P. San Pedro, Cali- fomia: United States Fish and Wildlife Service. (Mimeographed.) _______ . Fishery Statistics of the United States 1957. Statistical Digest No. 44. Washington, D.C.: United States Fish and Wildlife Service, July, 1959. _____ . Japanese Fisheries Based in Overseas Areas. Fishery Leaflet No. 485. Washington, D.C.: United States Fish and Wildlife Service, 1959. _______ . Report of the Secretary of the Interior to the President and the Congress on Fresh or Frozen Yellow- fin, Skipjack, and Bieeve Tuna.Washington, D.C.: United States Fish and Wildlife Service, May, 1958. 334 United States Tariff Commission. Bonito. Canned in Oil; and Tuna and Bonito Canned Not in Oil. Report on Escape Clause Investigation Under Section 7 of the Trade Agreement Extension Act of 1951. Washington, D.C.: United States Tariff Commission, November, 1952. _______. Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution bv the Committee on Finance of the United States Senate. Dated June 26. 1952. Washington, D.C.: United States Tariff Commission, March, 1953. _______. Tuna Fish. Report on Investigation Conducted Pursuant to a Resolution by the Comnittee on Finance of the United States Senate. Dated August 20. 1957. Washington, D.C.: United States Tariff Commission, May, 1958. Van Campen, Wilvan G. (trans.). Exploratory Tuna Fishing in the Caroline Islands. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 46. Washington, D.C.: United States Fish and Wildlife Service, 1951. ______ . Tima Bait Resources at Saipan. United States Fish and Wildlife Service, Special Scientific Report: Fisheries No. 44. Washington, D.C.: United States Fish and Wildlife Service, 1951. ______ , and Earl E. Hoven. Tunas and Tuna Fisheries of the World, An Annotated Bibliography, 1930-53. United States Fish and Wildlife Service, Fishery Bulletin No. Ill, Vol. 57. Washington, D.C.: Govern ment Printing Office, 1956. D. NEWSPAPER ARTICLES Los Angeles Times, September 13, 1959. Spivak, Jonathan. "Pet Population's Rise Spurs Increase in Vets, Alters Their Practices," The Wall Street Journal, Western edition, December 3l, 1959, pp. 1, 4. "Tuna's Troubles," The Wall Street Journal, Western edi tion, March 10, 1959, pp. T , 1 5 " ! 335 E. UNPUBLISHED MATERIALS 1. General American Tunaboat Association. "The Effect of Imports on the Domestic Tuna Industries." Statement made before the United States Tariff Commission, Washington, D.C., December 11, 1957. (Mimeographed.) Aska, Donald Y. "Marketing Canned Tuna." Paper read at the Industry Tuna Meeting, La Jolla, California, May 19-21, 1959. "Brief History of Van Camp Sea Food Company." Long Beach, California: Van Camp Sea Food Company, Inc., [n.d. ] . (Dittoed.) "History of Van Camp Sea Food Company, Inc." Long Beach, California: Van Camp Sea Food Company, Inc., [n.d.]. (Typewritten.) Johnson, Donald R. "World Tuna Fishery." Paper read at the Industry Tuna Meeting, La Jolla, California, May 19-21, 1959. Letter to the writer dated December 7, 1959, from Earl J. Kolb, Acting Director, Hearing Examiners, Federal Trade Commission, Washington 25, D.C., with enclosure: FTC Docket No. 6623. Schaefer, Milner B. "Scientific Investigation of the Tropical Tuna Resources of the Eastern Pacific," pp. 194-221. Excerpted from papers presented at the International Technical Conference on the Conservation of the Living Resources of the Sea, The United Nations, Rome, April 18 to May 10, 1955. "The Story of Tuna." Terminal Island, California: The Tuna Research Foundation, [n.d.]. (Mimeographed.) 2. Interviews Alexander, Robert, of Alexander's Markets, Los Angeles, California. Personal interviews, January 4 and 9, 1960. 336 Beesemyer, Frank, partner in Beesemyer-Ridnour Co., food brokers, Los Angeles, California. Personal interview, December 16, 1959. f Bradbury, L. T., United States Fish and Wildlife Service, Terminal Island, California. Personal interview, September 24, 1959. Fowler, Karl, Buyer, Certified Grocers of California, Ltd., Los Angeles, California. Personal interview, Decem ber 14, 1959. Harris, Jay, Merchandise Manager, Van Camp Sea Food Com pany, Inc., Long Beach, California. Personal inter view, December 21, 1959. Hatton, Ross, Marketing Specialist, United States Fish and Wildlife Service, Division Office, Terminal Island, California. Personal interviews, May 27, December 29, 1959, and January 5, 1960. Hauser, David, Assistant Manager, Market Research, Van Camp Sea Food Company, Inc., Long Beach, California. Personal interview, June 6, 1959. Morris, E. L., Research Director, Tuna Research Foundation, Terminal Island, California. Personal interviews, May 28 and June 10, 1959. Simonds, Dan, Traffic Manager, Franco-Italian Packing Co., Terminal Island, California. Personal interview, December 21, 1959. Virgil, Tom, Sales Representative, Star-Kist Foods, Inc., Terminal Island, California. Personal interview, January 5, 1960.

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Creator Roesti, Robert Max (author)

Core Title Economic Analysis Of Factors Underlying Pricing In The Southern California Tuna Canning Industry

Degree Doctor of Philosophy

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag economics, general,OAI-PMH Harvest

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Phillips, E. Bryant (committee chair), Campbell, Robert W. (committee member), Mead, Richard R. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c18-86359

Unique identifier UC11358083

Identifier 6004485.pdf (filename),usctheses-c18-86359 (legacy record id)

Legacy Identifier 6004485.pdf

Dmrecord 86359

Document Type Dissertation

Rights Roesti, Robert Max

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA