OBI Seafoods, the newly created entity formed by the merger of the Alaska operations of Ocean Beauty Seafoods and Icicle Seafoods, has a confident manager at its helm.
When the deal was announced on Friday, 29 May, it included the notice that Mark Palmer, the CEO of Ocean Beauty Seafoods, will be taking over the same position at OBI.
In an interview with SeafoodSource soon after the deal became public, Palmer expressed confidence the merger will help OBI compete against rivals Trident Seafoods and Silver Bay Seafoods in the Alaska salmon and groundfish space. He said a commitment to reinvesting in the company, strong brands, and now the flexibility the merger has given OBI in terms of physical plant and processing options, will give it the boost it needs to win out.
“Between our smoked group, Icicle, and OBI, we have well over 2,000 customers, and because of all the recent trade fluctuations, that’s really important,” he said. “We have customers all over world, and we can shift products we’re bringing to market to get the best return. And we have to do that to compete for fishermen. I think OBI is a very attractive home for fishermen. If you can supply service, can handle volumes, and give the best return in the marketplace, that’s attractive to the fleet. And our ability to retain fleet and loyalty has really been great, I think this deal makes us very well-positioned to compete for fishermen.”
Huge fluctuations in pink salmon runs in recent years forced Ocean Beauty to rethink its operations, Palmer said, and the merger with Icicle creates a much bigger footprint for moving around processing loads and specializations.
“These odd-even year cycles have really forced us to come up with a more variable cost model, especially regarding direct and indirect labor. We’ve worked hard to reduce our expense loads in these even years and incorporating Icicle’s footprint allows us to do that.”
This summer, due to a smaller predicted run in Kodiak, OBI doesn’t plan on running canning or freezing operations at its Larson Bay facility, with Palmer saying the company can handle that capacity in Alitak, Seward, or Cordova, though the company will have a small staff on-hand to support fresh operations and provide service to the fishermen.
“Next year ... we’ll be at full operations [there],” he said.
OBI’s assets and the cooperative agreement with Icicle will also give Palmer the ability to operate a cannery in Naknek that has been shuttered for the past three years. Fewer processors have been running canning operations in Alaska in recent years, he said, but due to higher demand for canned salmon that has emerged during the recent coronavirus-related lockdowns in the United States, along with an oversupply of 2-4s that dragged down the sockeye market, “that product has a much better return in the can than H&G [headed and gutted],” Palmer said.
“This deal gives us the ability to expand and contract, and we can also specialize our product forms to do more fillets and fresh and less canning or H&G. With this new configuration, you get that – the combined company will have a significant share of canned salmon market, and our combined canning business will have a significant share of overall market,” he said. “It’s a perfect example of how we will consolidate our platforms.”
Canning will be a focus of OBI “for the next couple of years at least,” Palmer said.
“It’s a good category to be in, especially versus frozen pinks, which if that’s your only option, means you will be forced to continue to chase Russian production, which has been tripled in recent years, which is why that’s not a place we want to go. So now we’re not forced to produce big volumes of frozen,” he said. “There’s always some part of your inventory that will be frozen, but now we can focus on where we think the best opportunities in market are.”
Palmer said OBI’s ownership group has committed to reinvesting in its processing facilities to better improve product quality and give it options to pivot in case of changing market dynamics, like the surge in demand for canned salmon.
“Our ownership group is putting money back into the company and that is being used to accelerate the modernizing of our factories,” he said. “Since 2016, we’ve spent over USD 50 million (EUR 45 million) on improving our Egegik and Wood River facilities, which now have state-of-the-art lines. No one in Alaska has a nicer salmon fillet operation then they do. That’s what our customers want, and we have the depth to not go to a broker but all the way to the end. If we can capture that segment of the market, we can compete for fishermen.”
Palmer said he’s had lots of time to think out the potential of the merger, as discussions between Ocean Beauty and Icicle’s owner, Cooke Inc., have been ongoing for several years. A deal was nearly concluded last June but was put on hold as the fishing season began.
“There were a few details we couldn’t work out before the fishing season started … So we had to stop and roll over talks until after we got through the selling season,” he said. “In the fall, we started to reengage, and that’s the genesis of the current deal.”
The talks were initiated in part by Howard Klein, Ronald Shaw, and Michael David Selby, who comprise 50 percent of the ownership of Ocean Beauty (the Bristol Bay Economic Development Corporation owns the remaining 50 percent of the company). Klein, Shaw, and Selby will continue as owners of Ocean Beauty Seafood Smoked and Distribution – Ocean Beauty’s remaining assets not falling under the OBI umbrella, but will not be a part of the OBI ownership group.
“For Howard and his group, this is an exit. It positions the company for them to transition out,” Palmer said. “They’ve been in the business for a long time and wanted that opportunity; This sets them up to do that.”
Despite the long timeframe it took to get a deal done, Palmer said Icicle had always been an ideal partner for Ocean Beauty.
“To do a deal, whether it’s with long-term agreements with customers, partners, distribution companies, or anything else, you have to have a trust. There needs to be at least some culture in common between the two companies,” he said. “We have worked with people from Icicle for years. And one thing operations people would tell you and I would tell you is that the people we worked with, we trust. They follow through with what they say and they’re great to work with – with them, it’s not our way or the highway.”
Palmer said he expects the merger, which will bring between 65 to 70 people into OBI’s new corporate office at 1100 West Ewing St. in Seattle – Ocean Beauty’s current home – plus having additional employees working at Ocean Beauty’s smokehouse and distribution center in Renton and smokehouse Monroe, to go smoothly due to “a culture between two companies that’s very similar.”
“I’ve been here for 36 years and there are people in this company I’ve worked with from day one. Icicle has the same thing. For a lot of people in these two businesses, they’re lifers in the seafood business and they’re passionate about it,” Palmer said. “I think this is a great cultural fit, and that has been demonstrated with the response we’ve had to COVID. We have run this huge operation to test all 2,000 of our workers heading to Alaska, get them to Alaska, and then test them again. It has been an incredible with a lot of cooperation and teamwork, and this proves to me we have a group of people who are very effective working as a team.”
Photo courtesy of OBI Seafoods
