By James Wright, Senior Editor
Published on Wednesday, May 01 2013
Originally published in Seafood Business Magazine
Top 25 North American Seafood Suppliers expand in different ways
Five years ago, Steve Chen and Dennis Morgan had a decision to make. Their Pasadena, Calif.-based seafood processing company, Yihe Corp., had been importing and packing Alaska salmon, pollock, cod and a handful of other species for private-label sales and the United States’ largest seafood suppliers for about a decade. On the supply side of the industry, Yihe was known and valued.
“There’s not a major [salmon] importer in the United States that we haven’t packed for,” says Morgan, executive VP for Yihe’s U.S. operations. “As far as salmon coming into the country, nobody does more.”
But a household name they were not. Venturing out on their own into a competitive marketplace, selling branded products direct to retail buyers, was certainly a risk. As it turns out, it was a risk worth taking, because Yihe’s new business model was quickly embraced. The company asked major volume buyers like Walmart if they wanted to buy Marine Stewardship Council-certified salmon and other products direct from the manufacturer, cutting out a link or two in their supply chains.
“Almost everybody said yes,” says Morgan, touting the early success of its Ocean Eclipse Premium Seafood brand and products with great growth potential, like salmon burgers. “Making that decision put us on the map.”
Yihe Corp. has since transformed from a relatively unknown, behind-the-scenes player with $50 million in annual sales to a potential juggernaut with approximately $500 million in sales in 2012. The company is enjoying 23 to 24 percent growth annually, a stunning growth rate regardless of industry. “Even our banks are scratching their heads,” says Morgan.
Yihe Corp. debuts at No. 10 on the annual SeaFood Business Top 25 North American Seafood Suppliers list, a diverse group of companies that range from $1.5 billion to $185 million in annual sales; the ranked companies on the 2012 list account for nearly $13 billion in annual sales.
Including companies that do not report annual sales, the top 25 seafood suppliers in North America accounted for an estimated $15 billion in sales in 2012, more than one-third of the entire U.S. wholesale seafood industry (estimated at $42.2 billion in 2011, according to the National Oceanic and Atmospheric Administration’s Fisheries Service).
Consolidate for the customer
The growth rate that Yihe Corp. is enjoying may not last forever, but it illustrates how effective a vertically integrated strategy — a business model that encompasses harvesting, processing and direct sales — for seafood can be. Access to resources, affordable labor and a vibrant market is a recipe for success in the global seafood industry.
There are many ways to get there, including timely operational mergers or asset acquisitions. One of the biggest deals that shaped the current order of the list actually occurred in December 2011, when High Liner Foods of Lunenburg, Nova Scotia, scooped up Icelandic USA in Newport News, Va., and its branded seafood product lines. Icelandic USA’s annual sales had decreased for four consecutive years, dropping from $460 million in 2007 to $256 million in 2011, but the company had access to Iceland’s groundfish supplies and a modern processing and distribution facility strategically located near major East Coast metropolitan areas.
The deal made High Liner the world’s largest cod and haddock supplier. Keith Decker, president of High Liner Foods USA in Portsmouth, N.H., says the acquisition made sense not only for an aggressively growing company (now ranked No. 4 at CAD 942.6 million), but for its customers as well.
“The biggest impact for us was the ability to take a great brand or series of brands and a great portfolio of premium products, which matched up nicely with our FPI and Viking portfolio, and to consolidate that,” says Decker. “From a customer perspective, it gives us the opportunity to help them with one less purchase order, one less truck and one less third-party food-safety audit. So for them, there’s a simplification of the process, which I think is an important aspect of the supply chain side.”
Decker, who calls the U.S. seafood industry “highly fragmented,” says there’s a lot of opportunity for further consolidation and High Liner will be pursuing further acquisitions. It’s good for seafood buyers, he adds.
“They’re trying to buy dozens of species from dozens of vendors, they’ve got food-safety and quality and sustainability and traceability [concerns] and all the things a customer needs, and to have to parse it out among dozens of suppliers in order to accommodate that … when you look at a mature industry, whether it’s beef, pork or chicken, the law of threes seem to rule, which is three major competitors. We’re a long ways away from that in our industry.”
High Liner is knocking on the door of $1 billion in sales, but that milestone is not the goal, says Decker. Rather, the aim is to “continually improve earnings for our shareholders,” he says. “We have an aggressive goal now, which was announced as part of our annual earnings report, to grow our earnings by another 50 percent in the next three years. Some of that will come by managing the business better, tighter, with better efficiencies in the supply chain, etc. But some of that has to come from acquisitions.”
Not all deals have to be earth shattering to make a huge difference. American Holdco, parent company of East Coast Seafood (No. 22) in Lynn, Mass., acquired scallop supplier Seatrade International of Portsmouth, N.H., in mid-January 2012. Michael Tourkistas, CEO of East Coast Seafood, says the two companies shared a similar philosophy and corporate culture and the merger increased logistical efficiencies and other operational advantages, like purchasing. It also boosted East Coast’s sales from $150 million to $241 million.
Consolidation isn’t the only avenue for expansion. As president of Chicken of the Sea Frozen Foods in El Segundo, Calif. (No. 2), Bryan Rosenberg has overseen tremendous growth of the company’s frozen seafood products, which include crabmeat, shrimp and ahi tuna, all during a challenging economic period. Its sales increased from $900 million in 2011 to $980 million in 2012.
“In our core product categories we continue to increase share with current customers and have been fortunate enough to pick up some new ones,” says Rosenberg.
Like many large shrimp suppliers, the company will be keeping a close eye on the early mortality syndrome, or EMS, disease that is impacting farms in Thailand. Some reports put the nation’s supply reductions at around 30 percent. “Reduced supply due to EMS will have a significant impact on pricing and resulting demand as we move through the second and third quarters,” says Rosenberg.
Chicken of the Sea Frozen Foods has three- and five-year growth plans that are periodically reviewed by parent company Thai Union Frozen Products, PCL, he adds. The Samutsakorn, Thailand-based corporation had $3.6 billion in global revenue in 2012.
Elevated tuna prices throughout 2012 boosted the bottom lines for all the major suppliers. Bumble Bee Foods of San Diego passed the $1 billion mark for the first time, while StarKist jumped from $630 million to more than $710 million. Tri Marine International’s annual sales have roughly doubled since 2006, and the Bellevue, Wash., company is our top-ranked supplier at $1.5 billion in 2012 sales.
For the full list, visit our digital edition, page 24.
Ranking seafood suppliers by annual sales is an inexact science. The ranked companies operate on vastly different business models, but 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.
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.
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 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 offered the option of providing a sales range or an estimate instead of a specific number. For companies that decline to participate, their sales carry over from the previous year, but for only one year; companies that decline two consecutive years are removed from the list. Calls were made to more than 40 companies across the continent, including some that have reported their sales in the past but no longer do so.
There are four noteworthy firms that don’t report annual sales estimated at $1 billion or more, including former No. 1 company Trident Seafoods of Seattle, which last confirmed sales of $1.25 billion-plus in 2009. Red Chamber of Vernon, Calif., hasn’t shared its results since 2006, when it posted more than $1 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. 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.
Email Senior Editor James Wright at firstname.lastname@example.org