In January 2015, Tri Marine, an American seafood giant based in Bellevue, Washington with more than 5,000 employees involved in fishing processing, trading and distributing tuna, opened a new USD 70 million (EUR 63.6 million) tuna canning factory in the village of Atu’u in the U.S. territory of American Samoa with great fanfare.
The Samoa Tuna Processors factory was equipped with state-of-the-art technology producing shelf-stable and frozen products that were marketed and sold to the U.S. through The Tuna Store, Tri Marine’s downstream distribution arm.
In advance of the opening, Tri Marine CEO Renato Curto said the investment in the facility was evidence of his company’s bullish outlook on its business model of vertical integration between its U.S. flagged vessels, its processing facilities and its distribution channels, allowing it to market and sell “Product of the USA”-labeled tuna to its private-label customers.
"We are USD 70 million confident of our investment in the cannery project," Curto said at the factory's opening in 2014. “Our decision to invest came down to our belief that tuna is a good, nutritious product, that tuna stocks can be sustainably managed for the long-term and that processing in the islands is the right thing to do.”
Curto’s confidence in the project was matched by that of Don Binotto, the former president and CEO of Starkist and of Contessa Seafoods, who took the job of CEO of The Tuna Store and Samoa Tuna Processors in March 2015.
"The innovation taking place at The Tuna Store and Samoa Tuna Processors has the opportunity to be a real game-changer in the industry, and I am excited to take part in shaping its future,” Binotto said upon his hiring. “Tri Marine’s commitment to quality, sustainability, and the communities where it does business provides a great foundation for growth and success.”
But last Thursday, 13 October, Tri Marine announced it would be closing the Samoa Tuna Processors factory, resulting in 800 layoffs. Among those losing their jobs was Binotto, who was replaced by Joe Hamby, who had been serving as Tri Marine’s chief operating officer, Tri Marine spokeswoman Heidi Happonen confirmed to SeafoodSource.
Happonen said the closure was the result of numerous factors combining to create “challenging economics.” Tri Marine was prevented from entering much of its prime fishing grounds for a several-month period earlier this year as the South Pacific Tuna Treaty expired and negotiations to revive it proceeded slowly. Even after the treaty was renewed, Tri Marine had tough luck fishing, resulting in raw materials shortages at its factory, Happonen said. And late last year, Tri Marine missed out on a federal tax break known as the American Samoan tax credit, which saved companies that had previously established production facilities in the territory millions of dollars, but didn’t apply to companies that had been built after 2006.
The most detrimental factor, however, was the inability of Tri Marine to get “Made in America” tuna to catch on with consumers in the United States.
“Demand wasn’t rising fast enough for the responsibly-caught tuna that was processed at SGP,” Happonen said. “In all honesty, the investment was approached as if it were a start-up, and you can expect to lose money in the first two years of any start-up, but when you consider all those other factors compounding together, it became a lot to overcome.”
Tri Marine’s and Curto’s gamble on “American-made” tuna was a business decision that had viable goals and noble aspirations, but also inherent risks, according to Gregory Morrow, a principal at Squire Patton Boggs and former executive vice president, chief legal officer and corporate secretary at Contessa Premium Foods.
“For the average American consumer, tuna is tuna. It’s a commodity item,” Morrow said. “To get the consumer’s mind around applying the concept of higher quality and better standards that comes along with the ‘Made in America’ label to tuna was a big challenge to take on.”
As a major seller to private label food retailers, Tri Marine also had to convince its large corporate buyers that its tuna was worth a premium.
“These private label food retailers are looking for high quality at the lowest possible price, and they’re very good at driving down prices,” Morrow said. “It puts so much pressure on suppliers like Tri Marine that their margins are very slim, and if they run into any kind of problem that results in even a slight increase in the price point of their product, it can create significant systemic challenges for their business model.”
A timeframe of less than two years for the rollout of such an ambitious agenda may have been another factor that led to the closure of the Samoa Tuna Processors plant, Morrow said. But its demise was probably not the result of one cause in isolation, but rather “death by a thousands cuts.”
“I have a great deal of respect for Renato Corto’s strategic vision and business acumen, and Don Binotto certainly had background and experience in tuna industry that would have been effective. A company of Tri Marine’s standing would do everything they could to make it a successful investment and I’m sure they did,” Morrow said. “Unfortunately, every business suffers from ideas that fail from time to time. You can invest so much with a business development plan and execute it well and then find out your premise wasn’t accurate. Or, as I believe was the case in this situation, just suffer from bad timing or market forces beyond your control. However, whatever the cause or causes, there comes a point in time that you have to make a tough, rational judgment as to whether or not the plan you devised is working, and if it’s not, what you’re going to do about that.”
That day of reckoning came last week. Happonen said Tri Marine’s decision to close the plant had been “extremely tough,” and that the workers at the plant had been given 60 days notice of its closure. Tri Marine is looking at “all kinds of opportunities” regarding the future of the facility, including a sale.
Asked about the reasons for the plant’s closure, Happonen replied, “There are no easy answers.”
