Clearwater on a roll thanks to low loonie
At a time many companies are struggling with challenging economic forces, Halifax- based Clearwater Seafoods Inc. is bucking the trend. Canada is the eighth- largest seafood exporting nation in the world and the low dollar along with growing demand has given the industry overall a boost and helped Clearwater reach its revenue target of about $500 million a year ahead of schedule.
“We continue to enjoy tremendously robust global demand for our products,” chief executive Ian Smith says in an interview from his office, which overlooks the scenic Bedford Basin.
“We have greater demand than we have supply in virtually every species and product we sell.”
Clearwater, which started out selling lobsters from the back of a pickup truck in 1976, has become North America’s largest vertically integrated shellfish harvester, processor and distributor. Smith expects the company, which sells lobster, clams, shrimp and scallops, to report revenue of at least $500 million when its 2015 year-end numbers are released March 22.
The Canadian dollar’s sharp drop over the past year is an advantage for a company like Clearwater, which exports in excess of 85 per cent of its product to more than 40 countries. New international trade agreements, low fuel prices and increasing demand for seafood, par
ticularly in Asia, have also helped.
China, the fastest growing market for Canadian seafood exporters, is Clearwater’s biggest Asian market. The company’s sales to the world’s most populous country could exceed $ 100 million this year, up from $ 20 million five years ago, Smith said.
“The Chinese might be using less steel and less copper. … Their demand for hard commodities might be slowing down, but their demand for high- quality protein, particularly seafood protein, is not slowing down,” Smith says. “It’s a massive opportunity for growth.”
Clearwater’s recent strong performance is partly reflective of the general state of Canada’s seafood industry. While other sectors, particularly oil and gas, are hurting, the fishing industry remains in decent health.
Smith argues the Canadian fishery is a “bright spot” in the economy, one that is overshadowed by the troubles elsewhere.
Michelle Boudreau, president of the Fisheries Council of Canada, agrees.
“It’s generally pretty bright,” she says of the sector’s current state. “There has been some good growth.”
According to the latest statistics available f rom Fisheries and Oceans Canada, the country exported $ 4.9 billion worth of fish and seafood in 2014, up from $4.4 billion in 2013 and $4.1 billion in 2012. (Statistics for 2015 are expected at the end of February.)
The two biggest seafood-exporting provinces are Nova Scotia, with 19 per cent of national shipments and British Columbia, with 16 per cent. The sector’s most valuable species are lobster, snow/queen crab, shrimp, Atlantic salmon and scallops. Lobster, the top export species, topped $ 1.5 billion in shipments in 2014. Roughly 80,000 Canadians earn a living from fishing and related activities.
The U. S. has traditionally been the main market for Canadian seafood exports, but rising demand in Europe and Asia is eroding that dominance.
In 2015, Canadian seafood exports to China advanced 15 per cent year- on- year, while in Malaysia and South Korea they were up 62 and 50 per cent respectively, Boudreau says.
A recent trade deal with Korea has aided Canadian seafood exporters. And the Trans- Pacific Partnership trade pact will further improve conditions for shippers in Asian markets, Smith says.
Clearwater faces a 34 per cent tariff on the raw frozen lobster it ships to Vietnam, and a 10 per cent tariff on scallops shipped to Japan. In all, it has sales of approxi- mately $ 60 million to TPP countries that are subject to tariff barriers. That number would be expected to jump if the deal is ratified.
“The Trans- Pacific Partnership ensures that Canadian seafood will be on a competitive level globally,” Smith says. “It’s a win for Canadian seafood.”
Smith presents a generally rosy assessment of his industry, but it’s not without challenges.
An obvious concern involves the supply of seafood. As Boudreau says: “It’s not like you can make more. It’s not like growing potatoes.” ( However, aquaculture is also a key component in Canada’s seafood export industry).
Smith stresses Clearwater’s commitment to sustainability. All of its core species have had Marine Stewardship Council certification since 2012. That means the international non- profit organization has deemed the seafood as having been “responsibly caught.”
However, in the bigger picture many species are over harvested, Smith says, adding there are issues on a global basis with regard to bycatch and discards for commercial fisheries.
In Canada, the sector is highly regulated with a complex system of licenses and quotas. To boost its holdings, Clearwater is on the acquisition path.
On Oct. 30, Clearwater completed its 94.4- million pound ($ 195 million) purchase of Macduff Shellfish Group Limited, the United Kingdom’s largest shellfish company. The acquisition immediately boosted Clearwater’s potential supply of shellfish by 20 per cent.
“If demand is greater than supply, the best way to accelerate growth is to increase your access to sup- ply,” Smith says. “We like to think that Macduff is the first of a number of strategic acquisitions.”
A 2013 report from the Conference Board of Canada, aimed at strengthening Canada’s commercial fishery and aquaculture sector, argued that both industries must improve to fully capitalize on the growing global demand for seafood.
Among the authors’ observations was the need to acquire more capital, to modernize and boost the profitability and competitiveness of the sector.
Smith says Clearwater has, in recent years, invested in training, research and development, and technology to reduce costs and make both its land and sea operations “more sustainable.”
In July, t he company launched its new $ 65- million clam harvesting boat. The Belle Carnell is the single- largest vessel investment in Clearwater’s history. Smith says such spending is boosting productivity and pulling more value from the company’s licences and quotas. And he argues the results are particularly noticeable in the clam business.
“For more than two decades, Clearwater has invested heavily in vessels, processing technology, marketing and sales promotions to transform Canada’s Arctic surf clam fishery into a world- class business,” he says. “Before Clearwater, the fishery was one of the worst run and a perennial money loser.” The company’s clam sales are growing in all markets, but particularly China.
“We see, over the next five years, really unlimited ability for us to continue to grow,” Smith says. “We have more growth opportunities than we can act upon.”
The Tangier Lobster Co., a Clearwater competitor, is riding that same wave.
The Nova Scotian company, based in Tangier, about 95 kilometres east of Halifax, can store up to one million pounds of live lobster in its land-based storage facility. Those crustaceans are then sorted and shipped to customers in 21 countries.
Tangier’s managing director, Stewart Lamont, says the company traditionally sent about a quarter of its product to the U.S. Increasingly, he is shipping orders to Asia, particularly China, but also to Malaysia, Taiwan, Japan and Singapore.
According to La mont, Asian demand for live and processed lobster has grown 500 per cent in the past few years.
But there are snags, including a significant branding issue. In Asia, Canadian lobster is known as “Boston lobster”.
La mont says it’s particularly frustrating because Canadian lobster is generally of higher quality than its American cousin. He says the industry must unite to brand and promote the Canadian crustacean. “That’s the biggest challenge we have.”
Still, Lamont, like other exporters, is savouring the existing market conditions. It’s been a decade since the industry enjoyed such advantage sin both the U.S. exchange rate and the lobster price (currently around $9/lb in southwester Nova Scotia).
“We’re on a bit of a roll now,” Lamont says from his office, which overlooks the aptly named Pleasant Harbour.
“It’s been quite promising from every level of the industry — from the boat to the plate.”
PARTNERSHIP ENSURES THAT CANADIAN SEAFOOD WILL BE ON A COMPETITIVE LEVEL GLOBALLY.