Terry Downes is the chief operating officer for Juneau, Alaska, U.S.A.-based Sealaska, which recently purchased a majority stake in New England Seafood International (NESI), a supplier of fresh and frozen premium seafood based in Chessington, Surrey, United Kingdom. NESI had USD 200 million (EUR 171 million) in sales in 2019, and combined with Sealaska, the companies will form a business nearing USD 1 billion (EUR 853 million) in sales. Downes spoke with SeafoodSource about the acquisition and his company’s goals for expansion.
SeafoodSource: How did the NESI deal get its start?
Downes: We done all our deals one-on-one; We’ve not bought companies in a sale process. When we connect with people, it’s not about transaction necessarily, it’s about finding another reason for working together. In this case, we opened a deal dialogue about six months ago. NESI had been working with Orca Bay for about 20 years and we knew they had a similar philosophy about sourcing and sustainability – both companies prioritize sourcing the highest-quality seafood, and they have been sharing intelligence on resources for some time.
SeafoodSource: What initially drew your interest to NESI as a potential partner?
Downes: We had been looking for a company that is as product- and marketing-driven [as NESI] for a long time. There not many companies that are terrific marketers in the seafood industry, but this is one. Their people are well – with early career experience in Unilever, Proctor and Gamble, Coke etc. NESI has recruited those kinds of people after they’ve been working in fast-moving consumer goods for 10 years or so, so they really understand product marketing, categories, and the needs of retailers. They also have a passion for seafood.
SeafoodSource: How will NESI’s operation be folded into Sealaska’s?
Downes: The overlap is one of values. I know it sounds cheesy, but that’s what it is. The organizations are run the same way, focusing on utility and getting more people to eat fish. We know that 80 to 90 percent of people know fish is healthy for them to eat, but those that avoid it are doing so in many cases based off an emotional response to a previous bad experience. NESI prepares seafood that people actually want to eat, and that’s something that both companies have a real focus on. In fact, it’s their reason for existence. I think we see the world exactly the same way. In respect to [business] resources, we foresee many opportunities to work together and there will be overlap in time. We don’t have a mindset that would drive us to replace management or cut costs. Our practice is to encourage companies we acquire to continue to run independently, as they have been. A benefit of us not being private equity or publicly owned is that we can take our time and find ways to work together that make sense, rather than focusing on immediately improving short-term profitability. We’re not going to squish the companies in together or change what people are good at. We’re not like that. We’re going to take our time so that the benefit of a common ownership structure is realized naturally. We’re going to run the companies side-by-side and give each the benefit of working with the other on their own terms.
SeafoodSource: How does the NESI acquisition compare to Sealaska’s purchase of Odyssey in 2017 and its merger with Orca Bay in 2018?
Downes: The Odyssey transaction was a little different, as Orca Bay had lot in common with Odyssey. Both operated in the same geographic area and had facilities that were underutilized. We took the philosophy of “let’s take the best of the two and stick with it.” But in the case of NESI, Sealaska has had no operations in Europe to date, so we’re entering a different country. We’re making a deliberate decision to emphasize continuity. All the managers are staying, and Fred is staying as an owner.. But NESI’s day-to-day existence will not see a lot of change. It’s just now they’ll be part of a bigger, like-minded organization with even more resources. We want to run NESI the way they’ve been doing it. We believe they’ll benefit from having a bigger owner and a bigger footprint around the world, rather than operating as a standalone company.
SeafoodSource: How have you structured your organization so that a group in the United Kingdom can be integrated successfully into an Alaska-based operation?
Downes: We run all of our food businesses within our food division, which is managed together, but they don’t work for each other. They all work with us. We encourage the various businesses to behave like a team. We have a very flat structure, no hierarchy. We just really try to understand and encourage everyone to work with all our different elements. We tend not to focus on structure as much as communication – we want to get good ideas floating around in the ether. We think that approach of putting together a group of people who are motivated by what they do and a vision for getting more people to love seafood, while also keeping a commitment to improving ocean health all over the world. And then we want to create an environment where everyone can work together to achieve it as seamlessly as possible. We think that approach is unique in the industry.
SeafoodSource: Was Europe always in your sights as a geographic region you wanted to expand into, or did it just come into the picture by chance?
Downes: Europe, and Northern Europe in particular, is an area we’ve really had an eye on for a while. The markets and business culture in Northern Europe and the United States are really quite similar, but we think there’s a lot to be learned there that we can bring back to the U.S. in terms of product development, how markets are developing, what products work, how consumer preferences are evolving. And the European markets tend to be more demanding in terms of food safety requirements and other regulatory requirements, so it’s great to be in a place that’s often a little ahead so we can take those learnings to the U.S. market before they’re required – we think that will give us an advantage. So for all those reasons, we have been looking at Northern Europe for a long time before came across NESI.
SeafoodSource: Are you looking anywhere else geographically for future growth?
Downes: North America and Northern Europe are still our primary focus. As I said, the business culture is similar, and it’s a fairly relatively easy transition into Northern Europe over other parts of the world right now. And while we source from all over the world, in terms of where we process, it’s just those two markets. So certainly for next three to five years, we’ll focused on those two areas, unless something exceptional comes along. But it’s still a very fragmented industry, and there are still lots of opportunities in North America and Northern Europe that we will also still be looking at.
SeafoodSource: How would you define your growth and acquisition strategy?
Downes: At any given time, we’ve got conversations on the go, so you never know how things will unfold, but we tend to be proactive and not wait for companies to get to market. We have dialogues with management of many companies, and we find that when you open that dialogue, you learn from each other in a healthy way. Over time, a relationship can lead to a conversation about a change of ownership and because we already have that dialogue and trust and understanding, it makes the process very easy. While every deal is different, in general, we want the management and owners to continue to be involved in the company and we are a long-term owner with a consistent business philosophy. The seller often can’t find too many other options like that.
SeafoodSource: Do you have any other acquisitions in the works?
Downes: We always have five to 10 conversations ongoing at any time. We’re not always motivated purely by an acquisition mindset, but these conversations often lead there eventually. We wouldn’t be surprised to have something [additional] happen next year, but we have no agenda driving this in terms of numbers, it just happens. We think we have lots of great organic opportunities too, and we’ve done two ocean science deals in the last 12 months, so our philosophy is generally letting things happen naturally and acting on opportunities as they arise.
Photo courtesy of Sealaska
