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One Man's Opinion: Nippon Suisan gambles on breading shrimp

Peter Redmayne
Peter Redmayne
August 01, 2005

More than a few people in the fish business were left scratching their heads this summer when Nippon Suisan, Japan’s second-largest seafood company, forked over a reported $148 million for King & Prince, a Georgia-based seafood company with one of the largest shrimp-breading operations in the United States.

This isn’t the first time King & Prince has been sold. In the late 1980s, Hillsdown Holdings, a U.K. company on a seafood-acquisition binge, bought it. A few years later Hillsdown’s ill-fated seafood adventure was over, and King & Prince employees bought the company back at a fraction of the previous sales price.

King & Prince’s annual sales are about $130 million, so the conventional wisdom was that “Nissui” was paying a premium price for its latest foray into the U.S. breaded seafood sector. In 2001, Nissui snapped up Massachusetts-based Gorton’s of Gloucester when Unilever, the Dutch-Anglo consumer-products giant, decided to bail on the U.S. breaded-fish business.

Nissui paid $175 million for Gorton’s, a company with annual sales of $250 million. Five years before that, Nissui acquired Los Angeles-based Fishking Processors, which produces breaded and battered seafood under its Mrs. Friday’s brand.

Now, $148 million is probably not a lot of money to Nissui, which has annual sales of $4.6 billion. The fact that its stock price has soared almost 60 percent in the last year also certainly helps. But “why pay so much for a breadedshrimp company?” people in the shrimp business were asking. “Is breading shrimp really that profitable?”

It may have been in the past, but the outlook for U.S. shrimp breaders is not
particularly bright at the moment. Consumption isn’t the problem. The flood of cheap, imported, farmed shrimp has led to a healthy rebound in breaded-shrimp consumption in recent years as more restaurant chains run promotions. Over the past 10 years, production of breaded shrimp has jumped from about 100 million pounds to just over 150 million.

But who will be breading all the shrimp Americans will be eating?

After getting slapped with a hefty dumping tariff, most Chinese shrimp processors have seen their shrimp exports to the United States plummet. Through April, U.S. imports of frozen shrimp from China were off almost 75 percent from the previous year.

But China’s exports of breaded shrimp, which are not included under the dumping action, are soaring. And that’s not good news for anybody who breads shrimp in the United States. Through April of this year, U.S. imports of frozen breaded shrimp from China were more than 20 million pounds, compared to less than 5 million pounds last year.

“It’s the same old story,” says one large U.S. shrimp buyer who imports large quantities of breaded shrimp from China. “The Chinese are cheaper — a lot cheaper. I can’t be competitive buying from U.S. breaders.”

The future for breaded fish in the United States doesn’t look all that promising, either. In 2003, the most recent year for which statistics are available, U.S. processors cranked out 193 million pounds of breaded fish, a far cry from the 325 million pounds they produced in 1995. And how much longer do you think it will be before the Chinese go after that business, too?

Maybe the brain trust at Nissui knows something most people in the fish business don’t. Time will tell. But one thing is certain: Down in Brunswick, Ga., there are a lot of very, very happy people.
 

August 2005 - SeaFood Business 

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