BY DEBORAH JONES
BOSTON, October 1994

Men in white lab coats lay a platter of Sea Wonders on a table of plenty in the United States boardroom of Fishery Products International Ltd. The honey-flavoured Sea Wonders are a marketing coup, even among the lavish array of some 38 other offerings, including many-sized shrimp, breaded cheese sticks, onion rings, fish rolled and stuffed with crab and variously shaped entree items. This year, schoolchildren in the U.S. government lunch program will devour some 11 million Sea Wonders, a product researched and developed in St. John’s from fish bought in such faraway places as Norway, China and Russia, moulded into 25-gram shapes such as starfish and sea horses in Burin, Nfld., battered and breaded in Boston and trucked frozen throughout the United States. “We like to jump on market trends and we were one of the first to make shapes,” boasts FPI’s Mike Sirois, an American food scientist who’s part of a new breed of fish experts from Newfoundland’s-and North America’s-biggest frozen fish company.

The honey-flavoured sea horses are a concoction that perhaps only children could savour, but that so many do says everything about FPI’s status as a rare success story amid the ruins of Canada’s Atlantic fishery. FPI is thriving despite the collapse of fish stocks off Newfoundland’s coast because it bears little resemblance to its predecessors of generations past, when weather-beaten fishermen sailed out from St. John’s harbour to haul cod, flounder, sole and haddock from the Grand Banks, one of the world’s richest fishing grounds. The fish companies that employed them preserved this bounty with salt, sold it round, or else sliced it up, pressed the unappetizing bits into slabs the shape of giant shoe boxes and shipped the blocks, frozen solid, out of the country for others to add value.

Today’s FPI dispatches well-heeled MBAs armed with laptop computers and chequebooks by jet from St. John’s airport to fisheries around the world in search of raw material for FPI’s remaining processing plants. Other MBAs plot how to add value to the purchases, and develop new markets for them throughout North America. “This is a new company,” says FPI chief executive Vic Young. “We reinvented ourselves, because the alternative was unthinkable.”

Partly because of innovations like Sea Wonders, developed in FPI’s labs in Newfoundland and Massachusetts, this year the company is beating 1993’s record sales of $601 million and is reaping a profit. Revenues increased 73% during the fishery catastrophe even as the company lost 90% of its fish stock; laid off some 6,000 workers, or three-quarters of its employees; closed 13 of its 15 Newfoundland groundfish plants; and mothballed most of its fishing fleet in Newfoundland. After writing down its assets by about $85 million, and enduring total losses of $83 million between 1991 and 1993, FPI’s bottom line has staged a dramatic recovery, showing profits of $7 million in the first half of 1994, compared with a $500,000 profit for the same period the previous year. The stock market has responded favourably: FPI shares have lately jumped to $6, up from $3.05 in the fall of last year. Young, 49, readily acknowledges the trauma associated with transforming FPI from a traditional drawer of fish into a sophisticated multinational research and marketing organization, but he doesn’t see that there was any better way to respond to the collapse of the depleted Atlantic fishery. “If our only response to the crisis had been our Newfoundland rationalization,” Young says, “today, our sales would be $100 million-there’s a big question mark whether the company would even exist.”

The new FPI employs 2,000 workers in Newfoundland and an additional 600 in Nova Scotia and at facilities in the United States and sales offices in North America and Europe. It buys some 30,000 tonnes of fish outside of Canada, compared with just 2,100 tonnes in 1988, and value-added production accounts for 21,500 tonnes of output, up from 17,200 tonnes six years ago. The product line, and the customer base, have been greatly diversified with the 1989 purchase of Clouston Foods, a large seafood trading company, and the 1992 purchase of the U.S. food-service operations of long-time Halifax rival National Sea Products Ltd.

FPI now boasts a marketing network that sells seafood mostly in the United States (66% of sales), with Canada (25%) and Europe and Japan (8%) accounting for the rest. Its products, marketed through sales offices in St. John’s, Montreal, Toronto and Vancouver in Canada, Danvers, Mass., Boston, Mass., and Seattle, Wash., in the United States and in Reading, England, and Cuxhaven, Germany, are vastly different from the Northern cod, flounder and sole it once relied on. FPI’s seafood menu now includes cold-water shrimp, crab, scallops, sole, redfish, lumpfish, capelin from Atlantic Canada, and warm-water shrimp, pollock, cod, salmon, crab, swordfish and sea bass from around the world, including Asia, Central and South America, Europe and the United States.

Sea Wonders are just one of the products Mike Sirois and his product development team have on show today for their bosses, who have flown in from St. John’s to attend management meetings in Boston, the nerve centre of the all-important U.S. market.

Sirois is especially proud of a patent-pending box with holes along the sides and edges, which FPI invented to improve quality in its line of pricy butterfly shrimp. The big succulent shrimp, almost the height and width of a playing card, are bought mostly in Ecuador and shipped frozen to FPI’s plant in downtown Boston. There, they are carefully laid out by hand on processing lines and run through machines that batter and bread them. Lines of women in white coats and hair nets then place the shrimp on plastic trays and layer them in the boxes with holes. The holes allow air in the deep freezer to circulate around the shrimp, freezing them in less than an hour, compared with the industry standard of five to six hours in boxes with solid sides.

The market for shrimp, one of the world’s most popular seafood (continued on page 79) (continued from page 62) items, is very competitive. To be successful, FPI must convince brokers and consumers that its shrimp is somehow better, more exciting than the competition’s. FPI managers are convinced that their trademarked Flow-Thru shrimp, packaged under the brand name Rik-Sha, will help land sales.

Another recent FPI innovation is the “shrimp in a boat,” a 25- centimetre-long boat with shrimp draped over gunwales that’s a new twist on the tried-and-true shrimp rings. Says David Senecal, president of the Clouston Foods Division, which markets the product, “We have a year or two jump on the competition with shrimp in a boat.”

Other FPI campaigns for breaded shrimp and other value-added shrimp products, which the company began selling only in 1992, have included throwing a bash for seafood distributors during the annual Boston Seafood Show above the Cheers bar of TV fame to showcase FPI’s shrimp line, and developing new products, including affordable breaded appetizers made from shrimp bits moulded back into shrimp-like shapes and a spicy stir-fry product that requires just minutes of preparation time for busy homemakers and fast-order restaurant chefs.

Like most of its total of 38 different food products, FPI’s shrimp line will be marketed mostly in North America through a system that breaks sales into three distinct areas. National clients, accounting for 25% of sales, include big restaurant chains such as McDonald’s Corp. and the Red Lobster division of General Mills Inc.; and large corporations with huge high-volume cafeterias. FPI supplies those customers with big boxes of plainly packaged fish products. Club stores, accounting for 20% of sales, include so-called “big-box” retailers, enormous warehouse-type outlets such as Sam’s in the U.S. and Price Club in Canada. Those stores carry FPI’s smaller, more elaborate packages under the Treasure Isle, Mirabel and Royal Sea labels. FPI’s third market sector, accounting for 55% of sales, is a network of brokers in each state and sales staff in Canada, who sell to every kind of independent food service operator, from roadside eateries to bars to upmarket restaurants with white tablecloths.

“We play every market niche,” says Alexander Roche, executive vice- president of international marketing. “The thing about the national account is, you can win big and lose big-having three categories makes business more even and stable than it might otherwise be.”

FPI’s marketing organization is one of the most professional in the seafood business, says Robert Erkins, an international seafood consultant based in Bliss, Idaho, who publishes the Erkins Seafood Letter and organizes the International Seafood Conference in a different country each year. “Over the years, FPI has done a unique job in marketing. It’s one of the few seafood businesses that stand out as not only doing a good job in marketing, but consistently putting out good products and building a broker and distribution system far better than many others have done. They understand the principles of marketing seafood, which much of the seafood industry, which is small and fractured, doesn’t.”

In the all-important U.S. market, Roche estimates that FPI’s seafood sales account for just 2% of total seafood sold, but that in the frozen prepared foods market it ranks as one of the top four suppliers-a remarkable placing for a relatively small Canadian company competing for market share with seafood suppliers with vastly more clout, such as food industry giants General Mills and Campbell Soup Co.

FPI was originally able to enter this rarefied company because it had the rights to harvest the world’s richest fishing grounds, the Grand Banks, right at its doorstep. By the time that traditional source disappeared, it had the wherewithal to set up a worldwide fish procurement network to continue satisfying its existing client base.

Now, having navigated that dangerous water safely, FPI’s future challenge is not only to keep its existing customers happy, but to expand the customer base and continue adding value to increasingly scarce raw resources.

“Today’s consumer wants to be excited, taunted, teased and implored into purchasing a food item,” Young reminded a group of seafood industry executives recently. “Fish doesn’t simply compete with fish for consumer attention. Cod does not just compete with pollock. Indeed, the seafood battle for the centre of the plate is with beef, pork, pasta, pizza, chicken, turkey and all of the exotic non-seafood dishes which titillate the palates of consumers worldwide.”

Since 1992, FPI has increased by 50% the amount of product that goes through secondary processing, from some 19 million kilograms in 1992 to about 30 million kilos in 1994. On any given day FPI’s plant in Danvers, one of the company’s two large value-added plants (the other is in Burin, a Newfoundland outport), is a smorgasbord of value-added seafood products. The plant normally processes 18,000 kilos-about 160,000 fish dinners-in every eight-hour shift.

In the laboratory upstairs, a team of technicians inspects new shipments of shrimp from India and pollock from China for quality. Downstairs, some of the plant’s 200 employees turn a shipment of frozen slabs of pollock caught in the Barents Sea by a U.S. fishing vessel into fish portions covered in cornmeal batter for institutional and restaurant kitchens, precisely sawing the frozen slabs into meal-size portions and placing them on conveyer belts for processing, refreezing and packaging. On an adjacent line, cod tails from a Russian vessel in the Barents Sea are coated in a different batter and packaged for restaurants, which will serve them up as the catch of the day. Visitors pass by a vast mixing bowl the height of a man, which is used to coat frozen shrimp in a hydrogenated oil with spices, which are then packaged in plastic bags and sold mostly through Sam’s and the Price Club stores.

Danvers vice-president of operations Ed Zachko points to a series of giant stainless steel machines and a set of forms the shape of fish fillets. The machines are presses used to mould bits of fish into a variety of shapes, from starfish to anchors to fillets. “For processing efficiency we take natural fish, freeze them in a block, ship them, then try to make them appear natural again,” says Zachko. “FPI is known in the industry for its forming capability.”

“FPI has made a big transformation toward value added,” says Michael Rooney, vice-consul and trade commissioner at the Canadian consulate in Boston. With its main Canadian competitor, National Sea, and a number of smaller private Canadian companies, FPI has contributed to an increase in the value of Canadian seafood exports to the United States-despite a decrease in volume. Total Canadian exports of seafood to the United States in 1993 were more than $1.4 billion, up 2.6% over the previous year. FPI is also expanding into other geographic markets, through sales forays into Mexico and a search for joint ventures and acquisitions in other countries.

The modern FPI is the product of painful evolution in Atlantic Canada’s fishery. Its most recent incarnation dates to the 1977 expansion of Canada’s economic zone from 12 to 200 miles off the coastline. At that time, with vastly more area in which to fish without competition from foreign vessels, private Canadian fish companies invested heavily in new plants, new ships, new technology-believing, recalls Young with an incredulous shake of his head, “that whatever the troubles in the fishery, the supply of fish was not one of them.” Alas, the overextended companies were soon adrift in a sea of red ink as recession struck and soaring interest rates threatened to scuttle them. In both Nova Scotia and Newfoundland, federal and provincial governments steamed to the rescue, bailing out Halifax’s National Sea Products and creating St. John’s-based Fishery Products International, an amalgamation of seven ailing fish companies.

When Young, a Newfoundlander with an MBA from the University of Western Ontario, left his post as president of Newfoundland’s state power company to captain FPI, he boarded a bankrupt company whose 11,500 employees were in the midst of a bitter strike. Young retained the company’s most experienced managers and persuaded David Norris, then Newfoundland’s deputy finance minister, and prominent labour lawyer Bill Wells, to join FPI’s senior management team.

Their mission was to repair FPI and privatize it within five years. No less important, Young was determined to use FPI as a model of financial clout and marketing savvy that could transform Newfoundland’s cyclical fishery into a modern, value-added industry. Says Richard Cashin, former head of the Fishermen, Food and Allied Workers Union and now chair of the federal Task Force on Incomes and Adjustment in the Atlantic Fishery, “The whole concept of FPI was to be a vertically integrated company with a proper capital base to market products.” Emerging from the 1981-82 recession, FPI achieved labour peace while shedding 3,000 employees and selling off 14 fish plants. It got an early start in value-added processing and international marketing that is paying off in a major way today. And it even made money-netting income of nearly $58 million in 1987. FPI’s management team was proud of the corporate restructuring: “We had a strong profitable Atlantic fishing company with a good international base in the marketplace,” Young remembers. In 1987, FPI was privatizated with a $200-million equity issue. Its shares, issued at $12.50 and sold mostly to institutions in Europe and Canada, reached more than $21 prior to the October, 1987, stock market crash.

Alas, the fish began to vanish from beneath Atlantic Canada’s super- efficient, high-tech fishing fleets. The federal government, which sets annual fishing quotas and doles them out to different companies and types of fishing vessels, slashed fishing quotas, in FPI’s case from about 175,000 tonnes of mostly valuable fish like northern cod in 1987 to a paltry 6,000 tonnes of less valuable redfish in 1994.

FPI was forced into another restructuring, this one more painful than the last. By 1993, it had closed 10 plants, deactivated 38 vessels, written down $85 million in assets and laid off more than 6,000 employees- most of them fishers and plant workers in Newfoundland’s outport communities. “It’s impossible to overstate the pain associated with that rationalization,” says Young.

Adds Earle McCurdy, president of the Fishermen, Food and Allied Workers Union in St. John’s, “The company sustained itself by changing itself from a fish harvesting company to a fish trading company and I applaud them for that. They had to deal with a loss of their raw material here and so they went elsewhere. I don’t think it’s fair to say they did that at the expense of the employees-they had no choice. Unfortunately, for most people who made up what FPI was, that is cold comfort.”

In Newfoundland today, FPI still owns 12 plants, seven of which are idle. Three plants operate on a seasonal basis; the only two full-year facilities are a cod plant at Fortune and Burin’s value-added groundfish plant. A scallop plant operates in Riverport, N.S. The two plants in Massachusetts operate almost year-round. Most of FPI’s fleet of vessels is grounded.

When it became apparent that fish stocks were dwindling faster than anyone could have predicted, FPI’s managers and board of directors drafted a survival strategy for international growth and diversification of seafood. Starting in 1988, even before the federal government acknowledged the extent of the fish crisis, FPI began establishing an international procurement network, setting up long-term relationships with fishing and fish-farming companies around the world. Unlike National Sea, which FPI has bumped from being industry leader and which laboured under high debt incurred from an international buying spree of fish companies in the mid- 1980s, a cautious FPI has maintained a strong balance sheet. “Fish and debt don’t mix,” says Young.

David Norris, FPI’s executive vice-president of finance, says, “We’ve got a fixation on our balance sheet because in the seafood business there are some elements we can’t control.” One of those elements, of course, is the state of fish stocks, and the stronger and more diversified FPI is the more able it is to withstand likely future fluctuations in fish stocks in other oceans. Consultant Erkins warns that already “the availability of most major species is becoming tight, and the price will go even higher than it is now.”

FPI continues to seek new acquisitions and joint ventures to give it stability. For now, though, FPI has vanquished its major threat to survival-it has secured alternate sources of raw product, found ways to add value to them and it continued to service its customer base.

Young is not about to let his company slip back into old habits, namely the temptation to wish for a return to good health of the once remarkably abundant fish stock off Canada’s East Coast. “If you get consumed by the Atlantic Canada story, all you have is a story about how we lost all our fish and went bankrupt,” says Young. “Our strategy is not based on recovery of northern cod. We are out of fish and we have to survive.”

Adds Young tersely, “If we don’t continue with new product development and the drive to make seafood exciting, if that’s not our number one priority, then it really won’t matter if the fish come back or not.”

Copyright Deborah Jones 1994

Originally published in The Globe and Mail Report on Business Magazine, October, 1994

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