« September 2006 Table of Contents
Consolidation alters landscape for seafood
By James Wright
September 01, 2006
Take a spin through the 2006 issues of SeaFood Business and
you'll notice a trend: Since the year began, SFB has reported
on more than 20 mergers, acquisitions or strategic alliances
involving some of the biggest names in the business.
You'll also read about a failed deal that would have been
one of the biggest mergers in the industry's history, one that
would have created a company generating nearly $1.5 billion in
annual sales. It also could have indelibly changed
seafood-sourcing dynamics in the Pacific Northwest and beyond (
SFB May '06, p. 1 and June '06, p.1).
Consolidation throughout the food industry is not a new
phenomenon. In 1998, 10 of the nation's largest supermarket
chains were reorganized with more than $41 billion in
As a result, retailers took a hard look at their purchasing,
with some scaling back their seafood departments' variety and
square footage. More recently, consolidation shook the
foundations of the farmed-salmon industry.
The road ahead will likely be filled with more maneuvering
by seafood suppliers; that pool may soon shrink to a select few
for any given species, whether wild or farm-raised. How the
buyer-seller dynamic evolves is what everyone will be watching.
Further consolidation in the seafood-supply chain seems
inevitable, considering the merger activity in the food
industry as a whole.
According to The Food Institute of Elmwood Park, N.J., 323
mergers and acquisitions closed in 2005 in a category that
includes food processors, retailers, restaurants, packaging
and equipment suppliers, investment firms and banks, with
another 75 announced deals that had not closed by year's
That total was actually down from a frenzied 2000, when 637
such agreements were finalized.
"Activity may have declined compared to previous years, but
there were a number of significant transactions," says Danielle
Breuel, research and education director at TFI, which has
tracked food-industry merger and acquisition activity for 25
Atop that list were the sale of Albertson's to a consortium
of investors including Supervalu, and the bankruptcy of
Winn-Dixie that led to its fire sale of more than 100 units,
Why are so many big fish gobbling up their competitors? For
one, an acquisition or merger is often a low-risk move that can
kindle growth and enhance the bottom line.
"Examination of certain deals illustrates the use of
acquisitions to strengthen current operations or to enter new
areas of business," notes Breuel.
"Meanwhile, divestitures enable firms to exit
W hat's more, a diversified supplier can offer unmatched
product lines and services while also ensuring access to
increasingly finite supplies. As seafood consumption increases
in the United States and abroad, the competition for market
share and marine resources - as well as farm-raised species -
will intensify. In most cases, the bigger fish rule the
For example, supply-side consolidation has begun in Alaska,
where the crab fisheries were rationalized in 2005. The
introduction of sellable fishing and processing quotas led to
the sale of several companies that held desirable shares. Since
sourcing seafood is now played out in a global arena, some
companies became commodities, swept up by large overseas
corporations. But what's still uncertain is if consolidation
has actually benefited a fragmented seafood industry.
"It makes sense from the standpoint of companies wanting to
offer a broader array of products with the deepest integration
of services possible," says Matt Fass, VP of Maritime Products
International, a seafood importer in Newport News, Va.
"However, those who try to become integrated may miss out on
quick developments in other areas, like aquaculture. Things may
not work out quite as some envision, which may lead to a
"There's got to be strategic reasons for it," says Richard
Mullins, senior marketing manager at Orca Bay Seafoods in
Renton, Wash., which markets a variety of wild-caught species.
"The huge story will be access to resources in the next 10 to
15 years. [In Alaska], there's only a handful of big players
A real beauty
Few players are bigger today than Trident Seafoods, with an
estimated $800 million in sales in 2005, ranking third among
North American seafood suppliers. The industry was buzzing
when, on March 27, Trident announced its bid to acquire Ocean
Beauty Seafoods' processing operations and merge the two
Seattle rivals' smoked-fish and distribution businesses. The
potential gain was big: Ocean Beauty's 2005 sales were $500
million, a nice catch for Trident founder and CEO Chuck
The arrangement would have spawned a salmon- and
pollock-buying mega-firm that could have tightened its pricing
controls on Alaska's seafood bounty. Trident already operates
25 fishing vessels and at-sea processors and 18 processing
plants throughout the Pacific Northwest. (Trident recently
announced it is restructuring operations with several staff
hires and promotions, see Late News, page 4). Adding Ocean
Beauty's nine distribution facilities and eight processing
plants in Alaska and Seattle would have been a major move
But it didn't happen. On May 3, Bundrant said the deal was
off and offered little insight as to why.
"We simply were not able to reach an agreement on this
transaction," he said at the time.
While the real reason it fell through is hotly speculated,
some say the merger would have been a boon to Alaska's seafood
"It also would have given an advantage to consumers," says
Clem Tillion, a semi-retired fisheries-management veteran of
Halibut Cove, Alaska. He believes only an entity of large
proportions could effectively market Alaska seafood as a
"That kind of consolidation doesn't hurt anything, it still
[puts product] on the open market on a daily basis. If you pay
enough, you can still get it. You have to have a competitive
system," Tillion adds.
"I've always had one guiding principle in fisheries
management, and that's getting quality product to the consumer
at an affordable price. Consolidations that allow you to
provide a better product throughout the year are good for the
A number of companies on the annual SeaFood Business Top 25
Seafood Suppliers list have grown through consolidation. Nippon
Suisan USA of Redmond, Wash., a part of Nissui of Tokyo, owns
UniSea and Gorton's of Gloucester and recently bought
frozen-seafood importer and distributor F.W. Bryce, also of
Gloucester, Mass. Nippon also took on King & Price Seafood
Corp. last year, adding $130 million in sales to its portfolio.
Further, the Bumble Bee-Connors Bros. merger of 2004 created
North America's largest branded seafood company.
Just three days after Trident announced its bid to acquire
Ocean Beauty, it closed on a deal with ConAgra Foods of Omaha,
Neb., for the Louis Kemp brand of retail surimi products. The
sale was part of ConAgra's attempt to further shed its
struggling seafood, refrigerated meats and cheese businesses.
Seafood was clearly outside ConAgra's core product categories;
conversely, adding Louis Kemp and its Motley, Minn., plant
augmented Trident's production of its SeaLegs® brand of surimi,
the bulk of which is sold to foodservice operations.
Trident spokesman John van Amerongen says acquiring Louis
Kemp and its market recognition gives Trident access to the
U.S. retail market for surimi, comprising 170 million pounds
"We'd like a bigger share of that market, and it takes a big
plant and good people to fill that demand," van Amerongen said
At the time of the sale, however, the Louis Kemp ship was
taking on water. Sales of its Crab Delights® had fallen 24
percent in the 52-week period through Feb. 19, to $19.3
million. Sales of Lobster Delights® and Scallop Delights® were
also tumbling. Trident is confident of a turnaround,
The Louis Kemp saga is illustrative of the current marketing
culture, where the name on the bag is as much of a sellable
product as its contents. Since its inception in 1985, the brand
has been owned by five separate entities yet has managed to
remain one of the most trusted names in retail for
analog-seafood products. Whatever company has owned Louis Kemp,
it's Louis Kemp that's been at the top of the product
James Dettore, president and CEO of The Brand Institute of
Miami, which conducts branding and marketing research for large
corporations, says Louis Kemp's success is precisely what made
it an attractive acquisition.
"We see it time and again with top brands. A lot of seconds
and thirds will buy No. 1 to become No. 1," Dettore says. "If
the investment is good and the brand is No. 1, it's a lot
easier decision than buying the No. 10 brand. There are a lot
of upsides to being on top. It makes sense if it's the right
time to sell, and it was the right time [for ConAgra]."
Some win, some lose
The big fish eat the little ones. The axiom about life under
the sea also applies to the industry that depends on the
oceans' creatures as its commodities. And the companies that
are closest to the resource have a strategic advantage.
Just ask Dave Keene, who has been in the crab business since
1977. Last year, Keene and his partners sold Royal Aleutian
Seafoods to a group headed by UniSea. Keene says the sale might
not have happened if Sen. Ted Stevens hadn't rationalized
Alaska's king and snow crab fisheries.
"The biggest raison d'etre [for rationalization] was to
prevent over-capitalization on both sides," Keene says. "There
was too much gear chasing too little fish, too much gear
processing too little fish. It created a dangerous operating
Under the old derby-style system, harvesting crab was a race
rife with risk: boat versus boat, processor versus processor
and everybody versus Mother Nature. With typically just three
and a half days to fish, often in inhospitable conditions in
the Bering Sea, there were winners and losers.
"And with a derby, all you could do was ram the max amount
of pounds through your plant each day, 24 hours a day," Keene
adds. "The biggest downside, though, was that the type of
product was one-dimensional. No added value, just bulk packs
that need further processing."
Alaska's crab fisheries now operate in a somewhat
controversial two-pie system intended to benefit both
harvesters and processors. Both receive quotas that can be
sold, which ultimately eliminated many small boats from the
fishery. And since Royal Aleutian at the time had some of the
largest quotas in the state, especially for brown crab, the
Dutch Harbor processor was ripe for the picking.
"Our crab quotas were very attractive to larger companies -
the Japanese companies, Peter Pan, UniSea, etc.," Keene says.
"Pollock sustains them, and crab is a small blip on their
radar, but from their standpoint, after rationalization was
introduced, and given the size of our quotas, we became an
The face of Alaska's crab industry changed; whereas 10 years
ago there were upwards of 20 major crab processors in Alaska,
today there are just six, four of them owned by large Japanese
corporations: Alyeska Seafoods and Westward Seafoods of
Seattle, both owned by Maruha Group; Peter Pan of Seattle,
owned by Nichiro Corp.; and UniSea. Rationalization shrank the
pool of suppliers, but Keene notes that it also improved
product quality and increased safety in one of the world's
Of course, not everyone is happy with the new system.
"Do I think the crab fishermen got screwed? Yes," says
Tillion. "I also think it was bad for the crab-consuming
public. Exclusive rights are detrimental to the consumer."
But Keene, who now owns WOW! Crab Co. in Seattle, says
consolidation has obvious benefits for both the buyer and the
"By consolidating, [UniSea's] fixed costs went down, and
they go from a middle-of-the-road crab player to the largest
one in Alaska right now, with pricing power and other
On the farm
Farm-raised species pose another set of concerns when it
comes to consolidation. Harvesting quotas and price
negotiations with fishermen make way for pond-acreage output,
disease control and feed costs, for example. Major moves have
been made recently in the tilapia and Atlantic salmon markets,
proving that size does matter.
Take Pan Fish. The Norwegian salmon producer, along with
many of Norway's seafood companies, fell on hard times a few
years ago, posting losses of $360 million, and its stock value
fell 98 percent. But those days appear to be over, thanks to
the power of consolidation and an extremely wealthy
entrepreneur named John Fredriksen, a Norwegian shipping
This March, Pan Fish, with 2005 sales of $300 million, took
a big step forward by purchasing rival Marine Harvest for $1.6
billion from Nutreco and Stolt-Nielsen, forming the world's
largest aquaculture company. Pan Fish now expects to produce
346,000 metric tons, roughly one-fifth of global farmed-salmon
How did Fredriksen, who holds a 47.3 percent stake in Pan
Fish, manage to buy Marine Harvest, which posted sales of $1.3
billion? By trading up: As part of the transaction, he sold his
25.7 percent stake in Fjord Seafood, the world' s
fourth-biggest salmon-farming company. And Geveran Trading,
indirectly controlled by Fredriksen, had just acquired Marine
Harvest from Nutreco and Stolt-Nielsen.
Other big moves may loom for the farmed-salmon industry, but
which others may see a shuffling of suppliers? Look to sources
of strength, like tilapia (U.S. consumption is expected to top
500 million pounds this year).
At the International Boston Seafood Show in March,
Miami-based producers Enaca USA (RioMar Tilapia) and Mountain
Stream Tilapia announced an alliance of their Central and South
American farming operations, forming a new company,
Aquamericas. The companies gained an estimated 25 percent
share of the U.S. market for fresh tilapia fillets. According
to Roger Duarte-Rodriguez, Aquamericas' managing director, the
move paid dividends.
"The merger has allowed us to gain efficiencies in
distribution and logistics, and the increased supply has given
us much more flexibility in meeting our customers needs," says
Duarte-Rodriguez. As for future consolidation in the global
tilapia market, "anything can happen," he says. "It is a very
competitive environment, especially in light of the growing
imports of frozen fillets from China."
Why consolidate? Supply, selection, service and the bottom
line can all improve. But for many seafood buyers, it's still
all about trust. So, when Tampa Maid Foods acquired Cox's
Wholesale Seafood of Tampa, Fla., this May, it was noteworthy
that Cox's 80 employees kept their jobs. As it turns out, Cox's
kept its customers too.
"You build relationships [with vendors], especially with
seafood," says Denise Englade, seafood buyer for the seven-unit
Central Markets of Dallas, owned by HEB.
Englade buys pink shrimp from Cox's and was happy to see
that, despite the merger, it would be business as usual. If
not, "it would have been like starting over," she says.
Today, as sourcing seafood goes global, only the largest may
be allowed to play. Therefore, further consolidation can be
"Consolidation is the name of the game," says Tillion.
"I'm not worried about who in the industry takes the hit,"
he says. "Look at each merger or acquisition and ask, 'Will
this create a better airline? Cheaper bread? Better fish?' If
it benefits the consumer, then I'm all for it."
Assistant Editor James Wright can be e-mailed at