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In the can

North America's seafood suppliers grow sales despite fears of an economic downturn

The suppliers on this year's Top 25 list pulled in
    sales of $11.6 billion in 2007. - Photo by Laura Lee Dobson
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.

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