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In the can
North America's seafood suppliers grow sales despite
fears of an economic downturn
By Steven Hedlund
May 01, 2008
Amid talk of a recession and increasingly unfavorable
financial conditions, North America's Top 25 seafood suppliers
raked in sales of $11.6 billion in 2007, according to SeaFood
Business' annual Top 25 list.
The wholesale seafood business
is growing organically by garnering new customers and launching
new products, as U.S. seafood consumption steadily rises due,
in part, to the protein's healthful profile, reaching a
near-record 16.5 pounds per capita in 2006. The continent's
leading seafood companies are also expanding through
acquisitions and mergers.
Two major acquisitions were finalized in 2007. The Maruha
Group-Nichiro Corp. merger closed last October, forming Maruha
Nichiro Holdings, by far the world's largest seafood company.
The deal included eight Pacific Northwest seafood companies:
Alyeska Seafoods, Golden Alaska Seafoods, Orca Bay Seafoods,
Peter Pan Seafoods, Premier Pacific Seafoods, Supreme Alaska
Seafoods, Trans-Ocean Products and Westward Seafoods. In an
interview, Junichiro Yoneoka, president of the Japanese
company's U.S. operations in Seattle, said Maruha Nichiro plans
to continue to expand its U.S. presence through acquisitions
(see One on One in SFB April issue, p. 70). Maruha Nichiro
declined to disclose a 2007 sales figure for this year's Top 25
list.
The reign of a Top 10 perennial, Fishery Products
International, came to an end last October when shareholders
agreed to split up the St. John's, Newfoundland, company and
sell its assets to rival Canadian seafood companies Ocean
Choice International and High Liner Foods for a combined $301.5
million (High Liner consolidated its two U.S. businesses in
March).
Other significant acquisitions over the past year
included:
• Trident Seafoods purchased Bear & Wolf Salmon Co. of
Seattle in February and Japan's Kako Foods and its KM Foods
subsidiary last November
• Icelandic Group unloaded the U.S. arm of shrimp importer
and distributor Ocean to Ocean Seafood of Virginia Beach, Va.,
to Singleton Fisheries in January, the final step in the 2005
Icelandic-Samband merger; the Canadian arm, Ocean to Ocean
Canada, was bought by the company's management in February
• New York private equity firm Fox Paine Management III
netted Icicle Seafoods of Seattle last August
• Spanish seafood giant Pescanova landed shrimp importer
Ladex Corp. of Miami last July
Will the U.S. seafood industry continue to consolidate?
Probably, but financial conditions aren't as favorable as they
were a year ago.
"When it comes to financing a large acquisition, if you're
looking to borrow money or you're looking to a private equity
firm, it's certainly not going to be as easy as it was this
time last year," says Tim Antilla, VP and senior relationship
manager at Wells Fargo in Seattle, whose clients include
several Northwest seafood suppliers. "But there has been no
credit crunch or adverse effect on companies' ability to borrow
when it comes to the seafood companies I deal with, and it's
pretty much business as usual."
That's not to say 2008 won't be a challenging year. Soaring
food and energy costs and lackluster labor and housing markets
are taking a toll on consumers and raising recession fears.
Consumer spending, which represents two-thirds of total
economic activity, increased just 0.1 percent in February, the
weakest showing since September 2006, and the
Reuters/University of Michigan consumer sentiment survey
dropped to 69.5 in March, the lowest reading in 16 years.
With consumers tightening their purse strings, seafood,
which typically costs more than competing proteins, will be a
tougher sell this year.
"People still need protein," says Scott Etzel, VP and
agribusiness consultant at Wells Fargo in Portland, Ore. "But
if the economy is suffering, they're going to eat the protein
that's the most economical."
Seafood companies "are very professionally reviewing the
situation and evaluating their strengths and weaknesses,
vis-à-vis the competition," says Antilla. "There's probably a
more cautious attitude overall. Even though the economy is
slowing or possibly in a recession, it hasn't developed into a
full-blown recession. So you need to gauge how long and how
deep this [economic downturn] may be. If it's relatively mild
[like] the last two recessions, people are going to come
through just fine."
In fact, even if the unemployment rate reaches 6.1 percent
and the GDP (gross domestic product) falls 0.4 percent, the
2008 recession would be milder than the 1990-91 and 2001
recessions and the average postwar recession.
But for many seafood suppliers, especially in the Northwest,
the weak dollar is offsetting the economic downturn at home and
attracting business from abroad, particularly in Europe, where
demand for whitefish like Alaska pollock is through the roof
and the euro is stronger than ever.
"Helping U.S. seafood suppliers cope with the economic
slowdown have been new and expanded opportunities to market in
Europe, as U.S. products are now very competitive," says
Michael Richard, director of Glitnir's U.S. subsidiary, Glitnir
Capital Corp. in New York. Glitnir, Iceland's third-largest
bank, handles several global seafood companies.
"Despite the economic slowdown," he adds, "the U.S. seafood
industry continues to capitalize on increased awareness of and
demand for seafood, thus seeing top and bottom line
growth."
Methodology
Ranking seafood suppliers by annual sales is an inexact
science. SeaFood Business asked company executives to share
financial information and reviewed public companies' annual
results.
Trident Seafoods Corp. reported 2007 sales of more than $1
billion, while Rich Products Corp. provided a sales range of
$150 million to $200 million, and, in that case, the median of
the sales range is used for the Top 25 list.
Two companies on last year's Top 25 list, Red Chamber Co.
and Singleton Fisheries, failed to participate this year, and
their sales figures are carried over from the previous
year.
One company, Pacific Seafood Group, declined to disclose a
sales figure for the second consecutive year and was removed
from this year's Top 25 list.
Pacific Seafood and Maruha Nichiro would easily be among the
Top 10 seafood suppliers, pushing total sales for the Top 25
over the $13 billion mark.