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Top Story: Top suppliers get bullish on brands

Consolidation, high prices, branding bump sales for top North American seafood suppliers

The Top 25 North American Seafood Suppliers earned $13 billion-plus in sales. - Photos by Angela Coulombe
By James Wright
May 01, 2014

Access to resources and lucrative markets got the continent’s leading seafood suppliers to the top of a crowded field of competitors. Maintaining relationships with key customers and building trusted, branded product lines should keep them there. 

The annual SeaFood Business Top 25 North American Seafood Suppliers list illustrates the importance of name recognition. Except for the No. 1-ranked company, Tri Marine International of Bellevue, Wash., a tuna fleet operator supplying the largest canned tuna companies, the leading suppliers in terms of dollar sales are bullish on brands.

“The marketplace has a lot of choices, so you need to position a strong brand, particularly with seafood,” says Christine Ngo, executive VP of H&N Foods International in Vernon, Calif., which imports and distributes a range of fresh and frozen seafood under its Blue River, Pacific Light and Pacific Delight brands. H&N debuts on this year’s list at No. 12 with $417 million in 2013 sales. 

“For a company like ours, if we don’t position ourselves we can’t go to market,” says Ngo. “We want people to remember us and the product we source for them.” 

Unlike the beef, poultry and pork industries, seafood companies are great in number with widely varying business models across the industry. As the economy continues on a path of gradual incline, mergers and acquisitions (M&A) are becoming more commonplace (three major supply-side deals were made in the past year). But no longer are companies acquired merely for their accounts — the strength of brands is what’s driving consolidation today, even in the U.S. wholesale seafood arena, which is worth approximately $40 billion each year, according to the National Oceanographic and Atmospheric Administration’s Fisheries Service. 

“Our focus is buying branded businesses, preferably value-added. Brands set you apart and if you can buy great brands they come with an intrinsic value to the customer and the consumer,” says Keith Decker, president of High Liner Foods USA in Portsmouth, N.H. “Brands that have been around for decades have their own persona, if you will, and we believe brands are the differentiator to set you apart, whether you’re a vertically integrated producer or a market-facing company. If you’re stuck in the middle, ultimately you’re not going to be successful and make the types of margins that keep you in business for a long time.” 

The 115-year-old Lunenburg, Nova Scotia-based company, one of only two publicly traded seafood companies in North America, holds on to its No. 4 ranking for the second straight year with CAD 947.4 ($893.7 million) in 2013 sales, up from CAD 942.6 million. A high-profile purchase of Icelandic USA in late 2011 padded annual sales by more than CAD 250 million ($227.8 million). In October, High Liner acquired American Pride Seafood from American Seafoods Group of Seattle; a full four quarters of revenues from scallop sales should give High Liner yet another boost. 

Decker says American Pride is “complementary” to High Liner’s vision, “a good manufacturer with national chain restaurants, good with the K-12 school-feeding programs and a scallop business, which we felt we could take deeper into our supply with our customers,” says Decker. “There’s a certain point where, from a scale perspective, we need to either grow the innovation, create new white space or new dining opportunities or simply put more products on the back of the same truck.” 

Another scallop-supply acquisition from two years ago is paying dividends. East Coast Seafood of Topsfield, Mass., which acquired New Hampshire-based Seatrade International in 2012, has seen annual sales increase from $149.9 million in 2011 to $276 million in 2013. 

The time is ripe for increased M&A activity throughout the seafood industry, both in the United States and abroad, says Ignacio Kleiman, managing partner of Antarctica Advisors in Miami. 

“When the M&A cycle starts it continues to increase,” says Kleiman. “There is significant liquidity on the financial side, with attractive interest rates, and on the equity side. I think there will be plenty of activity this year.” 

Other recent noteworthy deals include Bumble Bee Foods acquiring Anova Food and, on the distribution side, Sysco acquiring US Foods in a transaction that will create an $8.2 billion food-distribution giant. Also, just two months ago, Japanese general trading company Marubeni picked up frozen shrimp supplier Eastern Fish Co. of Teaneck, N.J., which is ranked No. 15. Eric Bloom, CEO of Eastern, says the buying power of Marubeni gives the company financial resources it didn’t otherwise have. 

“In a nutshell, it’s business as usual,” says Bloom. “The [Eastern] ownership is staying long term and intends to grow the business. We think along the same lines. It’s a wonderful opportunity for both parties.” 

Companies like Marubeni are going to make the U.S. market more competitive, says Kleiman, particularly if they diversify into additional species. “That creates market disruption, which creates M&A activity.” 

Shrimp, still America’s favorite seafood at 3.8 pounds consumed per capita in 2012, appears to be the biggest in-the-water variable going forward regarding sales forecasts. The aquaculture disease early mortality syndrome (EMS) has had a profound impact on supplies and has forced shrimp prices up by $3 a pound for certain sizes. Inflation was a key driver in increased dollar sales for leading frozen shrimp suppliers like Chicken of the Sea Frozen Foods. 

“Our tonnage sales increased significantly as well. We experienced strong year-over-year same-customer trends and were also fortunate enough to add some new relationships into the mix,” says President and CEO Bryan Rosenberg. “That said, the real demand impact from high shrimp prices due to EMS has really only shown itself since November-December and has amplified in February and March.” 

The disease, which has devastated shrimp farms in Asia and elsewhere, has put added pressure on supply areas that have not been affected, such as Ecuador. Ngo of H&N Foods says maintaining its relationship with suppliers in Ecuador has been crucial as the competition for product gets stiffer. 

“We’ve been in Ecuador for 20-plus years. We’ve never gone out of that country,” says Ngo. “We have the committed product lines we need to purchase, but we also need to be on top of our financing needs and credit facilities to pay these suppliers quicker than the other guys are willing to bid for product. To stay ahead of the curve is to be financially sound.” 

Kleiman of Antarctica Advisors says the climate for lending and other financial services has greatly improved, with new banks coming into the game and increased interest from investors. 

But there’s another rather unavoidable factor that could increase consolidation, he adds: Father Time. 

“There’s more gray hair in the industry,” says Kleiman. “The industry is getting older at the ownership level and some [may be] looking for exits.” 

Itemized list 

To paint the most accurate picture of the North American seafood supply landscape possible, it should be noted that at least three noteworthy firms with sales estimated at $1 billion or more no longer report their annual sales. Former No. 1 company Trident Seafoods of Seattle last confirmed sales of $1.25 billion-plus in 2009. Trident, which is opening a processing facility in Georgia later this year, is poised for even more growth and could soon top $1.5 billion if it hasn’t already. 

Red Chamber of Vernon, Calif., hasn’t shared its results since 2006, when it posted $1 billion-plus in sales. And the last time that Pacific Seafood of Clackamas, Ore., disclosed its annual sales was in 2005, when it generated $874 million. 

Maruha Nichiro Holdings, an $8 billion Japanese conglomerate with U.S. headquarters in Seattle, does not report sales for its U.S. holdings, which include Westward Seafoods and Peter Pan Seafoods of Seattle and Trans Ocean Products of Bellingham, Wash. 

Another notable absence this year is Yihe Corp. in Pasadena, Calif., which debuted at No. 10 last year with $500 million in sales. The company ran into tumult in 2013 when it was placed into receivership by one of its creditors, which resulted in turnover at the executive level and a major decrease in sales. When approached at Seafood Expo North America in Boston in March, company founder Steven Chen said Yihe’s annual sales would not qualify it for the list but he expressed hope of returning soon. 

Lastly, in late March, Cooke Aquaculture in Blacks Harbour, New Brunswick, reached an agreement to purchase Meridian Salmon Farms in Scotland from Marine Harvest. The sale was required by the European Commission for its approval of Marine Harvest’s acquisition of Polish salmon producer Morpol in September. The Meridian pickup could tack on CAD 150 million or more to Cooke’s annual sales. To view the full listing, visit our ePub site here

Methodology 

The Top 25 companies include vertically integrated suppliers, wholesalers and distributors. Inquiries were made to more than 40 companies across the continent. 

The ranked companies operate on vastly different business models. It’s understood that, in some cases, the sale of the same fish may be counted more than once, as certain companies on the list are known to do business with each other. Two examples: Tri Marine International supplies tuna to the major U.S. tuna canners — Chicken of the Sea, Bumble Bee and StarKist — and all four companies are on the list. Secondly, Cooke Aquaculture sells its farmed Atlantic salmon to a number of the other companies on the list. 

SeaFood Business asked qualifying-company executives to share their total seafood sales and reviewed the annual results of two public companies, Clearwater Seafoods and High Liner Foods, both based in Canada. The sales for the three Canadian companies (including Cooke) are adjusted to the U.S.-Canadian exchange rate as of Jan. 1, 2014; 365 days prior, the two currencies were at parity. 

All leading U.S. seafood firms are privately held or family-owned and are not obligated to report sales to the media; their voluntary participation is appreciated. Corporations based in foreign countries like Japan, Thailand and South Korea own several companies on the list; we ask them to isolate their North American business interests. 

Companies are also offered the option of providing a sales range or an estimate instead of a specific number. For companies that choose not to participate, their sales carry over from the previous year, but for only one year. Companies that do not participate two consecutive years are removed from the list. Ocean Beauty Seafoods and Icicle Seafoods, both of Seattle, declined to divulge financial information for 2013. Calls to Nissui went unreturned.

Email Senior Editor James Wright at jwright@divcom.com   

 

February 2014 - SeaFood Business  
 

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