Carson, California, U.S.A.-based Southwind Foods recently entered an agreement to acquire Fort Bragg, California-Caito Fisheries, solidifying a business relationship that’s older than Southwind itself.
The acquisition includes Caito's four locations in the U.S. state of California – San Francisco Pier 45, Fort Bragg, Eureka, and Crescent City. All the locations buy fresh seafood from California fishermen, including Dungeness crab, salmon, black cod, halibut, and rockfish.
Southwind Foods President Sam Galletti told SeafoodSource the two companies have done business each other for decades, and the acquisition will allow Southwind closer access to the fishermen that Caito Fisheries relies on. Both companies are family-owned, and Galletti said the relationship between the Caito brothers and Southwind is older than Southwind, which was founded in 1999.
“My family business, which started way before I was old enough to work, they were already doing business with Caito back in the late ‘70s,” Galletti said. “The relationship between the two organizations and the two families goes way back.”
Galletti said the acquisition will not fundamentally change how Caito Fisheries is operated, with the Caito brothers – John, Joe, and Jim – all remaining with the company.
The acquisition is a natural fit and mutually beneficial for both companies, Galletti said.
“Knowing the Caito brothers for as long as we have, and them knowing us for as long as they have, I think it was a natural lead into a conversation about, 'Hey, you know our strategy is for acquisitions, our strategy is for growth,’” he said.
Galletti said the acquisition lends itself to that growth strategy. In 2017, it acquired California seafood distributors Galaxy Foods and Equator and, in 2021, it bought Certi Fresh Foods and Terra-Sea Foods.
“For us to be able to have the opportunity to deal directly with the fishermen, to deal directly with the resources, we feel that makes us a so much stronger as a supplier to our current customers,” Galleti said. “That’s really the key to it. It wasn’t so much the amount of top line revenue that they [Caito] do, it was more about supply and the strategic categories that they bring to the table.”
Along with the acquisition, Southwind also announced it is constructing a 40,000-square-foot processing, storage, and distribution facility in Salt Lake City, Utah, U.S.A. Construction starts April 2023 and is expected to be completed by April 2024.
“That’s been something we’ve been working on for about three years now,” he said. “We bought a piece of land in Salt Lake City that’s probably 10 minutes from the international airport.”
Southwind Foods has done business in Salt Lake City since 1976, but an expansion into Utah required additional space for the company to operate, Galletti said.
“We do distribution there in supermarkets and restaurants [in Utah] and the business has grown, but we found that with our current facility we just can’t grow anymore,” he said. “We think it’s a great opportunity for us to grow in a region that is definitely growing in population, and we think it’s a strategic hub for potential frozen products that can be distributed nationally.”
The company is also constructing a new 60,000-square-foot cold-storage facility in Vernon, California, with the capacity to fit over 10,000 pallets.
The addition of the new facility will address supply-chain weaknesses exposed by the Covid-19 pandemic, Galletti said.
“What Covid did to all of us in this industry, along with other industries, was that it exposed something that we never really thought of before. And that’s that we all take the supply chain for granted,” he said.
Galletti said relying on third parties for cold storage resulted in back-ups as they faced logistical problems and a lack of capacity during that pandemic, motivating Southwind to bring its cold storage in-house.
“All of a sudden it just came into question,” Galletti said. “I think the best thing you can do as a business owner or a leader of a business is to try, if you can, to take control of what is controllable.”
Galletti acknowledged that the proposition isn’t necessarily cheaper, but it will make business more predictable.
“The benefit comes not only with the fixed cost to our cold storage, expense-wise, but it also means we have control of our own products going in and out,” he said. “You have to stand in line sometimes to get your product out of cold storage, and you have to stand in line to get it delivered. We just don’t want to stand in line any more.”
Looking forward, Galletti said Southwind is still interested in acquisitions, provided they’re the right fit for the company.
“Our acquisition strategy is to continue to look for more companies that add to what we already have, whether it’s distribution or potentially another resource or product," Galletti said. "We’re not out there aggressively pounding on the doors of companies to ask if they’re for sale."
However, he said lately there has been an uptick in companies approaching Southwind asking if they're interested in buying.
“We are getting a lot more unsolicited calls from people that are in the business to actively market companies that want to be sold or acquired,” Galletti said. “The question is, what’s the right fit? Because for us the right fit includes a good management team that’s already in place.”
Photo courtesy of Southwind Foods
