By James Wright, Senior Editor
Published on Tuesday, May 01 2012
Originally published in Seafood Business Magazine
The Top 20 North American seafood suppliers’ 2011 sales near $11 billion
The 30 largest seafood suppliers in North America generated an estimated $15 billion in sales in 2011, and a majority of the companies polled this spring by SeaFood Business say 2012 is shaping up to be bigger and better. Why? Consumer confidence appears stronger and U.S. employment rates are improving; many wild fisheries around the world are certified sustainable or are in rehabilitation; export markets are eager for U.S. and Canadian seafood; and industry consolidation is again becoming a hot topic of conversation, an indicator that the economy is on the mend and that investors’ interest in the industry is healthy.
Our annual Top Suppliers list, which doubles as an industry pulse check, looks different this year with a new No. 1 and a strong debut from one of the continent’s largest salmon farmers. This year we ranked 20 companies based on 2011 sales, a total just shy of $11 billion.
There are plenty of familiar names near the top, including the three leading U.S. tuna companies and, of course, a slew of Seattle seafood stalwarts. Of the ranked companies, only four registered a smaller sales number than the previous year, while several companies saw major revenue increases, with one of them realizing a year-over-year gain of 33 percent.
Reasons for the strong performances are as varied as the companies on the list. Increased costs for raw materials and improving global demand for seafood are obvious parts of the equation. That aquaculture production overseas has recovered from catastrophic weather events and diseases (i.e. flooding in Thailand and infectious salmon anemia in Chile) certainly doesn’t hurt.
But as much as the Top Suppliers list is about looking back, it’s also a good time to look forward. Executives at leading supply companies discussed numerous issues affecting supply and demand with mostly positive outlooks.
For instance, some say prices for key farmed species should come down, stabilizing or even stimulating demand; but several pelagics-procurement specialists are shooting blanks, particularly with the scarce yellowfin tuna supply. The emergence of Asia as an import market is ratcheting up the competition for resources; but importers are keeping a close eye on rising labor costs in key production and processing areas like China and Thailand. The Alaska salmon season projects to be a bit short of last year’s strong marks; but with Chile’s farmed salmon production regaining its stride, there should be plenty of salmon on the market, and at reasonable prices.
One thing is for sure: There’s plenty of talk about industry consolidation, which in recent months has been increasingly active. If mergers-and-acquisition (M&A) pursuits pick up this year, it just might include members of the Top Suppliers list.
The "C" word
The consolidation rate in the seafood industry today is not what it was six years ago, when a flurry of transactions changed the landscape of the business and shifted the balance of purchasing power to fewer (and larger) companies.
According to The Food Institute of Elmwood Park, N.J., 381 M&A’s were recorded in the food industry overall in 2011, including processors, retailers, restaurants, packaging and equipment suppliers, investment firms and banks. In 2006, when more than 20 seafood mergers occurred, there were 450 such transactions in the food industry overall.
The extended economic recession that began in the fall of 2008 after the collapse of Icelandic banks slowed consolidation considerably.
“Uncertainty always affects M&A first,” says Ignacio Kleiman, CEO of New York-based Glacier Securities, which served as a financial advisor for Seattle-based American Seafoods when it acquired value-added frozen seafood processor Good Harbor Fillet Co. of Gloucester, Mass. That deal, which was announced in January, was a perfect match, he adds. “In the processing business, you need a certain scale to get reasonable margins. That was the primary driver. These two businesses put together, it was one plus one equals three.”
Economic factors for consolidation are ripening, Kleiman says, despite question marks as several European nations grapple with massive debt.
“In 2009 and 2010 — those were slow years, difficult to get financing,” he says. “Companies were cautious. In 2011, things started warming up. Now we’re looking at a number of situations here, in Canada and overseas.”
Kleiman says pressure on U.S. and Canadian companies could come from Asian firms, which he says are very good at buying out resources. “The American companies have to wake up to that situation soon, otherwise they are going to miss the train. CEOs and shareholders of leading companies are interested in consolidating. We are not back to 2007 or 2008, but things are happening.”
Glacier Securities, a division of Iceland’s Islandsbanki (formerly Glitnir), also advised a company that sought to acquire Icelandic USA (No. 19) late in the year. Kleiman says there were several companies interested in that acquisition.
High Liner Foods of Lunenburg, Nova Scotia, was ultimately the winner in that sale. It’s now unquestionably the largest seafood company on the Eastern Seaboard.
CEO Henry Demone says the Icelandic USA pick-up gives the company a network of high-quality suppliers in Iceland, a good fit for the supplier’s groundfish business.
“This deal made us the largest cod buyer in the world, and the largest haddock buyer in the world, in spite of the fact that we’re North American and 75 percent of the consumption of those species is in Europe,” said Demone at the International Boston Seafood Show in March. “It’s many countries with many companies and it’s highly fragmented whereas North America is more of an integrated market.”
High Liner supplies heavyweight buyers like Walmart, Sysco and Target, all of which, he notes, have a presence on both sides of the U.S.-Canada border.
“This enhances our leadership position,” said Demone. “We like the plant in Newport News (Va.). It’s the most modern plant in the industry; it’s well run; it’s very well located, close to the port of Norfolk; it’s 5 minutes from the interstate. Given all the things you look at when you locate a plant in terms of availability of labor, quality of labor, cost of labor, taxes, energy, transportation, you name it — the plant does very well on all of those measures.”
Several companies moved multiple notches up the list this year, including The Mazzetta Co. of Highland Park, Ill., which tallied $502 million in sales in 2011, up from $425 million in 2010. Mazzetta made headlines last spring when it acquired one of Maine’s largest lobster suppliers, Atwood Lobster Co. of Spruce Head Island. Terms of the deal were not disclosed.
Mazzetta also owns Beach Point Processing Co. in Prince Edward Island, established in 2010, which specializes in lobster and snow crab. Sales from those two outfits were not, however, factored into the company’s sales; all of the company’s businesses operate independently.
Executive VP Jordan Mazzetta says the Atwood acquisition was made to become vertically integrated in the Maine lobster industry, which the company has been active in for the past four years. It appears to be a good move, as a record 104 million pounds of Maine lobster were landed in 2011. Mazzetta expects further growth this year.
Access to any resource is paramount, and perhaps no other company embodies this truth than the one at the top of the rankings.
Tri Marine International of Bellevue, Wash., is a vertically integrated tuna company that supplies some of the biggest tuna canners in the world. It has offices in North America, Latin America, Asia and Europe, as well as a global network of fishing boats, processing plants and refrigerated carriers at or near productive fishing grounds. CFO Steve Farno says increased tonnage and high cost of raw materials were major factors in the company’s $300 million, 33 percent year-to-year
The No. 3 company, Thai Union International, saw its sales increase from $820 million in 2010 to $900 million in 2011 without the aid of any major acquisitions.
Transcending the shelf-stable arena and entering the freezer aisles has given the company and its iconic Chicken of the Sea brand a boost. Bryan Rosenberg, president of Chicken of the Sea Frozen Foods, founded in 2006, says the frozen foods and perishables division has grown aggressively in spite of inflation on key commodities like farmed shrimp from Southeast Asia. Shrimp has been the United States’ favorite seafood for at least 10 years running; per-capita consumption in 2010 reached 4 pounds.
“Our volume has held strong and our customers have continued to do well,” says Rosenberg. “Barring weather- and disease-related issues, that commodity should remain healthy for the foreseeable future. In spite of inflation, people continue to see [shrimp] as a valuable protein.”
Looking ahead, expect a few changes for next year’s Top Suppliers list. High Liner is poised to take a jump closer to the top, possibly a contender for the No. 2 spot, once the numbers from Icelandic USA are in the fold. And East Coast Seafood of Lynn, Mass., should make a splash upon its predicted return to the rankings. The lobster giant is now a big scallop player as it scooped up Seatrade International of Portsmouth, N.H., in January. The combined 2011 sales would have exceeded $250 million, says company CFO Jim Bouras.
Steady-as-she-goes shrimp supplier CenSea (Central Seaway) of Northfield, Ill., is also knocking on the door.
Ranking seafood suppliers — a group that includes a wide variety of seafood companies operating on very different business models — by annual sales is an inexact science.
To simplify things, we lump in vertically integrated suppliers with wholesalers and distributors. 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. For instance, 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.
We asked qualifying companies 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.
All leading U.S. seafood firms are privately or family-owned and are not obligated to report sales to the media; their voluntary participation is greatly appreciated. Corporations based in foreign countries like Japan, Thailand and South Korea own several companies on the list; we ask them to single out their North American business interests.
Participants 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 in a given year, 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. Calls were made to nearly 40 companies across the continent, including many who have reported their sales in the past but no longer do so.
Trident Seafoods of Seattle, which has previously been ranked No. 1, has decided that it will no longer report its sales. The last confirmed sales report for Trident, in 2009, exceeded $1.25 billion.
There are three other noteworthy firms that also don’t report annual sales, including Red Chamber of Vernon, Calif., which hasn’t shared its results since 2006, when it posted $1.016 billion in sales.
And the last time that Pacific Seafood of Clackamas, Ore., disclosed its annual sales was in 2005, when it generated $874 million. After a series of acquisitions in recent years, Pacific’s sales are believed to be in the $1 billion range.
Maruha Nichiro Holdings, a Japanese conglomerate with U.S. headquarters in Seattle, also does not report its sales; its U.S. holdings include Westward Seafoods and Peter Pan Seafoods of Seattle, Orca Bay Seafoods of Renton, Wash., and Trans Ocean Products of Bellingham, Wash. Globally, Maruha’s sales hit $9.9 billion in 2011, according to an annual financial statement obtained from its website.
Trident, Red Chamber, Pacific and Maruha represent an estimated $3.5 billion to $4 billion in additional sales.
Email Senior Editor James Wright at email@example.com