Online Fishmonger with Wild Alaskan Company Founder Arron Kallenberg - TAS #10

I sit down with Arron Kallenberg, founder of Wild Alaskan Company, to discuss how building a tech platform around the family business of fishing Bristol Bay sockeye is reviving the dying profession of personal fishmonger in the internet age. We talk family history in Alaska, why so many fishermen are intellectuals, the inception of Wild Alaskan Company, the challenges of marketing and moving frozen fish online, and how the book "Antifragile" helped his company prepare for disruption. Links WildAlaskanCompany.com TheAKShow.com Interview Notes Arron is the founder of Wild Alaskan Company, a tech-enabled marketing and logistics company that sells wild-caught Alaskan seafood. Their customers are all over the United States and they are looking to establish some international fulfillment centers in the future. Arron’s grandfather was born in Manhattan, grew up in New Jersey, and came to Alaska in 1926. Arron’s son was born in Manhattan 6 months ago, so his family is oscillating between Alaska and eastern seaboard. His grandfather was very academic and a city kid but was very interested in farming and the outdoors. He also had asthma. He looked around the lower 48 and decided to go to Alaska originally, as the story goes, to herd reindeer. He moved out to the DIllingham area at 23 in the 1920s. There was no road out there. Instead of herding reindeer he fell in love with the salmon fishery. He started fishing on one of the original wooden sailboats. At some point he wanted to get married so he went down to Florida on a fishing charter and met Arron’s grandmother, who was also from New Jersey. They got married after only knowing each other 2 or 3 months and packed up and moved to Alaska and had 5 children, one of which was Arron’s father. His grandfather went back and got his master’s degree at Cornell at one point. His master’s thesis was a study of the red salmon at Bristol Bay with a focus on conservation. He went on to serve temporarily on the territory board of fisheries and was pretty active in conservation efforts early. That was the ethos of the Kallenberg family. Fishermen, focused on sustainability, and very academic. That’s a big part of his family’s history and is inseparable from the genesis of Wild Alaskan Company. Often fishermen are very academic and accomplished. Why is that? Arron has observed that phenomenon as well. He’s woken up on the boat to hear a conversation on trigonometry on the radio in Bristol Bay. His dad used to say there’s no good reason to be a fisherman if you don’t love it - there are easier ways to make money. His dad told him if they wanted to make money they’d be in stocks or real estate. It attracts people who might be quirky or idiosyncratic who prioritize certain things. Alaska and fishing self-selects for a certain type of person. The only thing harder in e-commerce than selling frozen fish on the internet is probably ice cream. If you’re a Kallenberg born in NYC you go to Alaska. If you’re a Kallenberg born in Alaska you need another challenge. Arron’s grandfather was back and forth but they always had a home in Alaska. They moved from Dillingham when his dad was in high school to Chugiak and lived the rest of their lives there. His grandmother passed away in Chugiak and his grandfather passed in Anchorage a few years later. Arron’s father and his siblings carried on the tradition of nerdy fishermen. His dad has a degree in aerospace, astronautics and aeronautics. He was working in the aerospace industry for Boeing and then came back to Alaska to fish in the bay. He was involved in the design of refrigeration systems at fish processing plants as well as being a fisherman. Arron’s mom tells everyone he caught his first fish with her, but when he got old enough to fish in the Bay he went out with his dad. They were always working with the fish plants. All his uncles fished as well. Arron was just born into that culture - it wasn’t an option. Arron had a major interest in computers when he was young. Growing up in Alaska was pretty humbling. He had no running water or outhouse. But he was interested in how the internet could connect him to the outside world. It was a huge outlet for him as a kid to sit in the middle of Homer, Alaska but be connected to the entire world. He got his first internet connection at XYZ.net. Even when Arron was out in Bristol Bay in the 90s he rigged up a boat phone to a modem and was learning to code in between picking fish. Even back then they were talking about building a website and selling fish online. As he got older and into the tech industry it became less of a pipe dream to something that was just a little crazy and then to going for it. There was 15 years of him leaving Alaska, going to college, working, then getting the gumption together to start this company. When was the moment he’d decided to start the business? In 2010 Arron wrote an email to someone and asked his dad to crunch the numbers on the economics and the shipping. You start with the raw commodity, then you need someone to process it, and you get shipping and back into the price per lb you have to sell it at. Then you look at the market on, say, the east coast and see if they’re paying that much, and they were. Arron was working in tech at that time and asked investors if they were interested and heard radio silence. Fast forward 7 years he was working in tech on the east coast and he met his wife. He was positive he would marry her on their first date. THey connected on wanting to have a family. On the third date she moved in with Arron and within a year he proposed to her and within two years of meeting they got married. What happened was Arron was living in NYC and his wife was visiting from Colombia. SHe was born in Colombia and raised in Miami. She was supposed to go home and decided to stay with Arron instead. Eventually she had to go to Florida and he missed her so much he flew down there. He had to go to a conference in Ireland and he convinced her to go to Europe with him. They had a romantic start to the trip and Arron got the worst food poisoning ever in Paris and she took care of him and Arron knew he had to marry her. It was easy to talk her into coming back to New York because she spent 30 years of her life in NYC. They got married in Colombia. If you want to see a culture clash bring a bunch of Alaskan fishermen to Colombia for a Latin-Jewish wedding. She got pregnant on their honeymoon and they lost the baby. Arron’s wife is six years older than him and they decided to try IVF. They had another baby and lost it again. It was heartbreaking. They did 12 rounds of IVF. Now they have a son, who you can hear in the background. It was the result of some stubborn people. About halfway through that journey which took 3 ½ years Arron was working for a private equity and venture capital group doing technical due diligence on companies and meeting with amazing founders. As an entrepreneur at heart it was torturous to see these amazing companies and founders and not being able to be one.  At round 6 of IVF the doctors told his wife she had to take a break for a summer. It was her dream of going to Japan so they decided to take a trip. Arron told his firm that he was going to leave, and they told him he couldn’t go. When the firm wouldn’t co-sign the trip he gave them his resignation letter and they had an amazing trip. The first thing they did was go to the fish market the year before it burned down. They saw all the seafood and traveled everywhere. It was another romantic trip. When Arron got back to NYC he didn’t know what he’d do - but he always had this idea for the seafood company. A lot of his friends talked him into doing it. He thought what did he have to lose? The only thing he really wanted was a family and he didn’t have that so why not? He didn’t know how it would work.Fast forward to today they have five distribution centers across the country under contract, they’re moving a large amount of seafood each week. Arron was going to be happy with like 40 monthly seafood subscribers or “members.” That would be enough to pay him to keep the business going. They definitely blew past that number. How long was it from the moment he decided to start the business to the first sale? Arron wrote the business plan in 2016 and pulled the trigger in 2017. He’d had the plan fleshed out and had a bunch of people he trusted read it. He wanted economic security and didn’t want to rock the boat around IVF. He spent most of 2017 getting the fulfillment network in place. That was the most difficult part. It’s cheaper to move fish via freight to a local distribution center and have them take it the last mile versus shipping direct from Alaska. It was tough to find distribution centers that could hold frozen inventory and do it well. There was one really good frozen warehouse group and Arron spent a lot of time talking to them. A competitor at the time exercised a non-compete agreement they had with that group to stop them from shipping out of the only national frozen fulfillment center. Arron works with independent operators, they had to design a whole new inventory management system to put together their own network of warehouses. He has business intelligence that can determine location to customer and inventory. A salmon box can have a combo of sockeye and coho, in the combo box there can be pollock and cod and other fish. They can change what the customer is receiving based on localized inventory. That took a year along with building the warehouse group relationships. A lot of them were used to catering to grocers and they were figuring out how to do direct e-commerce business. Arron had to work with their engineers a lot. February 12 of 2018 they sold their first box of fish. That felt unreal because he had this dream since he was a kid. Gunny Bishop is the name of their first member - Arron talked to him on the phone for forty minutes. Now he has a staff of almost 40 people that talk to their customers. They had about six other sales that first week then radio silence. After the first two days and valentine’s day hit they were spending thousands on advertising and had zero sales for a while. There were two guys working with Arron plus his wife at the time. They were wasting money and Arron thought he’d made the worst decision of his life. His in-laws were encouraging him. They had to do a lot of tweaking to their marketing to start getting sales again, but it started to really snowball. Now on a good day they might get 1400 new members. They probably have had more than that. It took a lot of tweaking but there is clearly a huge demand for sustainable Alaska seafood. It was a logarithmic progression. At first you don’t register the increase but as you get huge jumps you really notice. That’s been the journey of the last three years or so. A large degree of responsibility falls on the membership side. Most of Wild Alaskan Company is the membership experience team - they call them “personal fishmongers.” They help customers with shipping problems or getting them recipes or educating them on how to shell spot shrimp. Their employees have to go through “fish school” to learn all about fish. What can Wild Alaskan Company do that grocery stores can’t? They stay in their lane. Amazon owns Whole Foods - does the consumer want to buy fish from the same place they order a tv online? There’s a reason why Amazon tried to put Zappos out of business but acquired them instead. Zappos did one thing well - they built a world-class support team. Shoes are scary to buy online like fish. But Wild Alaskan Company has a big member experience team which is what differentiates them. That team that supports your shipment and teaches you how to thaw and cook are things that come into the price of their fish. If you look at the evolution of the American seafood industry - there used to be localized small fishmongers on the docks. That market is almost dead and was taken over by national grocery chains. Wild Alaskan Company is trying to revive that model online. The biggest marketing mistake initially was Arron believed people would buy their fish because it’s sustainable and it’s Alaskan. But people didn’t understand that stuff. Arron wasn’t getting the response on that messaging. The real initial consumer driver is health. People understand wild Alaskan seafood is good for them - their doctor said they had high triglycerides. They weren’t selling a lot at the beginning based on the initial marketing strategy - but they can continue to educate customers. 40% of all “Wild Alaskan” seafood in grocery stores was tested to be not from Alaska. Fish fraud is rampant. Alaska is a model of how fisheries could work throughout the world. Why is the seafood industry so secretive or opaque? Arron is a pescatarian. He doesn’t eat land-based animal meat except eggs and dairy. That was a health thing initially, but it’s stuck. He doesn’t know much about how the land-based animal meat market works or even the global seafood industry. He stays in his lane in terms of wild-caught Alaskan seafood. He only sources from one fishery outside of Alaska - it’s a very low-volume, sustainable, high-quality fishery. But the rest is in Alaska. By and large if it’s not caught in Alaska under the fishing mandates that the state has they don’t sell it. He had one of the largest importers of tilapia send him an email to get him to do higher volume, but Arron knows it’s not why he started the business. If there is no money to enforce fishing, they over fish it, and then the fishery is gone. Alaska has been very smart - conscious capitalism - and reinvested money from fishing into enforcement in the fishery. They do by-and-large understand the importance of those economic drivers and Arron doesn’t understand why other areas of the world don’t get it - probably short-sightedness. A Bristol Bay sockeye salmon - their hottest commodity - they’re working with a handful of trusted suppliers they have solid relationships with. They’re typically working on blanket agreements ahead of time with some projections. It’s tough in seafood because they’re not used to an e-commerce company growing 100% in a year. Their suppliers are vertically-integrated seafood companies in Alaska that own the processing plants. Fishermen like Arron’s father sell to these processing plants. The boat fishes for sockeye - it gets dropped off at a tender which goes to the fish processing plant. The fish gets commoditized - they’ll typically buy whole sides that get frozen in Alaska then shipped to Washington State. One of their six secondary processors will take that whole side and turn it into portions without thawing it out because it’s once-frozen in Alaska. THose get sealed and labeled with Wild Alaskan Company’s label. Those get shipped to frozen fulfillment centers in New Jersey, Wisconsin, Oklahoma, California, etc. When a member’s box is up for renewal the system looks at their preferences - do they want salmon or whitefish or pollock or what?  Then it gets put in a box with eco-packaging which is 100% US-grown corn-based. It’s totally dissolvable in water - they don’t use styrofoam. Styrofoam is the best insulator but there’s nothing worse for the environment. The green insulation in their box is corn. You can burn it in a wood stove, compost it in your garden, melt it in your sink, whatever. You can’t be a sustainable seafood company and hold your head high and ship in styrofoam. WIld Alaskan Company could make better margins by using styrofoam, just like selling tilapia, but it’s not in their DNA. The fish goes in there with dry ice. Their software calculates how much dry ice is needed based on the wait and location. They’re actually building in weather API that determines the temperature of the shipping location to get more nuance about how much dry ice they need in the box. They’ve done a bunch of heat chamber tests measuring temperature in each part of the box to see exactly how much dry ice they need for a normal shipping plus a standard delay. A superdelay - like a box that gets lost for 5 days - gets immediately replaced. They have designed it so that when you open the box there should be just a little bit of dry ice or none with the fish still frozen. You can hop on the website and check out recipes. They have members sharing meal ideas. On your second or third box you get a t-shirt. Welcome to the world of adding seafood to their diet. Arron reads the book “Antifragile” by Nicholas Nassim Taleb once a year. It’s like an album you love. He’s met the author a few times. Arron doesn’t think he’s an expert on that subject but it’s had a profound impact on how he navigates his personal life and business. The general concept is if you put something fragile in a box and you ship it it will break. If you ship something tough or robust it won’t break. Something that’s “antifragile” will actually be strengthened by the volatility of kicking something around. When you approach the world instead of trying to predict volatility you want to position yourself to benefit from it. If you look at a bridge you don’t have to predict when there’s an earthquake in order to safely travel over you have to just know the bridge can withstand an earthquake. Predicting when volatility will occur is impossible. We have two eyes because one can be poked out and you have redundancy. An accountant wouldn’t do that. How Arron approaches this is having massive redundancy within the business. He feels grateful to be able to provide seafood when there’s a shortage of other protein sources.