High Liner boosts food safety

By CHRIS LAMBIE Business Editor
The Chronicale Herald, Halifax-NS
Fri. Mar 12 - 4:53 AM 

Frozen seafood giant High Liner Foods Inc. wants to "bulletproof" its supply chain.

Consumers are demanding food safety, says the Lunenburg-based company’s recently released management discussion and analysis.

"Becoming ‘bulletproof’ on food safety will allow us to continue to use China for primary processing and manage the risk to our businesses and brands," said the 50-page document. "An important aspect of food safety is traceability in the supply chain — an area we remain keenly focused on continuing to improve."

In order to improve the quality, supply and cost of products it buys from Asia, High Liner set up a joint venture with a European raw material supplier. The joint venture, along with an Asian company, plans to open a processing facility in China this month. 

"Being able to control the processing facility will allow us to better ensure the quality of our products," said the management analysis. "We expect cost reductions for products produced from this arrangement, but the other benefits are more significant."

High Liner’s major customers are demanding products that are certified as sustainable, it said, noting that in three or four years this will be a compliance issue.

"Consumers are focused on food safety and have expressed concerns about food labelled ‘Product of China.’ We do a lot of primary processing in China because the costs are substantially lower than anywhere else. We have worked hard in establishing a procurement structure that allows us to be confident in our quality, no matter where the primary processing is done.

"In many cases, moving the primary processing to another developing country does not solve the problem, and moving it to North America or industrialized Europe would increase costs significantly at a time when consumers are searching for value."

High Liner saw $19.8 million in profit in 2009, or $1.07 a share, up from $14.2 million, or 77 cents a share, in 2008. Revenue was $627.2 million, compared with $616 million in 2008.

Tough economic times and high unemployment will continue to present challenges for High Liner, said the management analysis.

"On the other hand, seafood supply has never been more encouraging. There are quota increases planned for several key species. It has been many years since we felt so confident in our prospects for increased seafood supply. Demographics also favour our business. As the North American population ages, seafood consumption should continue to increase."

High Liner believes seafood is a growing category in the food industry. 

"The global supply of seafood is expanding, and consumer demand is increasing due to the recognized health benefits and taste of seafood. Our growth will be based on these trends."

The company is experiencing what might seem, at first blush, like an enviable problem.

"Growth in the global supply of seafood is due to increased aquaculture production and the stabilization of wild-caught species in most areas of the world," said the management analysis.

"However, until 2009, demand has increased faster than supply, resulting in significant increases in raw material costs."

The increased demand stemmed from North America’s mounting interest in seafood as a healthy choice, it said.

"In addition, increasing disposable incomes in countries like Russia and China also increased demand. The trend of increasing demand was reversed, at least temporarily, during the fourth quarter of 2008 and into 2009 as a result of the global financial crisis and the changed relationship between currencies of producing and consuming countries. However, we expect demand to increase again in 2010."

High Liner will consider gobbling up other companies, but its acquisition criteria are strict.

"The target business must be complementary to frozen seafood, and must leverage our existing leading brands, strong customer relationships, marketing and logistics expertise, and product development expertise."

The company produces several of its own brands, including High Liner, Fisher Boy, FPI, Sea Cuisine, Mirabel and Royal Sea. Its flagship brand, High Liner, is sold to every major Canadian grocery retailer and club store. 

But someone in the firm’s marketing department ought to figure out the Spanish translation for "Have you ever been to sea Billy?" as the company prepares to expand into Mexico and other areas.

The tagline for the iconic Captain High Liner, a seafarer who introduces a young boy to frozen fish in the company’s ads, would likely be stuck in the collective conscious of a generation of Canadians now approaching middle age.

"Our name has been a fixture in Canadian grocery retailing for more than 80 years and today Captain High Liner is one of the most highly recognized consumer brand icons in Canada," said the management analysis.

"We are leveraging our Canadian strength to build upon our established retail presence in the United States and Mexico by introducing more of North America to the High Liner brand."

( clambie@herald.ca)