US seafood firms look across the border to consolidate

It might happen slowly, but over time the seafood industry has to come together through consolidation.

Michael Richards, VP of seafood industry banking at Santander, told SeafoodSource that this year has seen a little more in terms of consolidation activity than in the past, pointing to recent larger moves including U.S.-based shrimp importer Eastern Fish Co. being acquired by Japan-based Marubeni Corp., Canada’s Cooke Aquaculture’s expansion in Scotland and Massachusetts and U.S.-based Eastern Fisheries’ investment in a Japanese distributor.

“Consolidation in the seafood industry is driven by the desire to increase in scale and increase efficiency,” Richards told SeafoodSource. “Because [seafood companies] recognize how global the industry is and how important it is to solidify the network of customers.

“Pretty much anything beyond the top three of four species — larger supply categories, species like salmon and tuna and shrimp — those categories are not fully consolidated by any means, but the larger players are seeking scale, and beyond that fragmentation becomes pretty apparent. Groundfish is a very fragmented sector, warmwater species like mahi and snapper and things south of the border are very fragmented species.”

According to Richards, who joined Santander in March of this year, the Boston, U.S.-based bank is seeing more interest from its seafood customers in gaining access to supply internationally. Richards said customers are recognizing that long-term they have to be connected globally.

“The industry is very global, we’ve come to see more interest among our customers in gaining access to supply internationally, so we’re looking at assisting some of our customers in cross- border activity, They’re looking into things that will meet their objectives of access to the markets and recognizing that long-term we have to be connected globally.

“We have teams in South America and in Europe and in Asia where we can really work on identifying those opportunities and make those transactions happen,” said Richards. “It could be because we have a greater presence in South America, but we’re seeing a lot of interest from customers for prospects in that area. Getting access to markets or supply, there seems to be a lot of interest in better understanding opportunities.”

Richards said Peru, Brazil and Mexico are top interest regions and he is helping customers navigate those geographies.

“These things take so long. You’ve heard people take about consolidation in the seafood industry for 10 to 12 years,” said Richards. “The wheels of progress move very slowly.

“People have to understand the risks, the landscape, they have to be very comfortable that they’ve found the right opportunity, the right partners. There’s a host of challenges related to cross-border transactions — local regulations, legal complexities, the labor market. Cross-border transactions just take two to three times longer, but they get done every year.”

Richards said specific species aren’t driving cross-border consolidation, but customers are interested in buying more shrimp from South America because of the supply issues in Asia.

“Salmon is a big source of supply down there,” he said. “Customers are also looking to understand other wild caught species, like crab, some of warmwater species. There could be a very viable supply market for shrimp there versus Asia in the long term.”