Ocean Beauty Seafoods, Inc.

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Ocean Beauty Seafoods, Inc.

1100 West Ewing Street
Seattle, Washington 98199-1321
U.S.A.
Telephone: (206) 285-6800
Fax: (206) 285-9190
Web site: http://www.oceanbeauty.com

Private Company
Founded: 1910 as Washington Fish & Oyster
Employees: 250
Sales: $500 million (2003 est.)
NAIC: 311711 Seafood Canning; 311712 Fresh and Frozen Seafood Processing.

Based in Seattle, Washington, privately owned Ocean Beauty Seafoods, Inc. is one of the largest vertically integrated seafood companies in the Pacific Northwest. Although the company buys fish from all over the world, it specializes in seafood products originating in the waters of Alaska, Canada, and the Pacific Northwest. It then processes and distributes the seafood in facilities located in Alaska and the lower 48 states. In addition to the Ocean Beauty label, the company also sell its products under another 20 brand names, such as Ocean Bonita, Sea Choice, LASCCO, Three Star, Icy Point, Tribe, Pink Beauty, Searchlight, Commander, and Neptune. Customers include commodity buyers, retail buyers, food service buyers, private labels, and export buyers. Production facilities are located in Copper River/Cordova in Prince William Sound, home to a major salmon run; Naknek in southwestern Alaska, the world's largest sockeye fishery; Petersburg, Alaska, the largest chum fishery in the state; Kodiak, Alaska's second largest fishing port, where fresh, frozen and canned salmon, as well as halibut, perch, cod, pollock, flatfish, and herring are produced year round; Nikiski, one of Alaska's premiere fresh water salmon fisheries; Alitak, a remote processing plant at the south end of Kodiak Island in Alaska; and Excursion Inlet, located 40 miles west of Juneau. Ocean Beauty maintains distribution operations in Astoria, Washington; Boise, Idaho; Dallas, Texas; Phoenix, Arizona; Portland, Oregon; Salt Lake City, Utah; and Seattle and Spokane, Washington.

Company Heritage Dates to the Early 1900s

Originally known as Washington Fish & Oyster, Ocean Beauty was founded in Seattle, Washington, in 1910. During the 1930s, the company first became involved in Alaska, decades before the territory achieved statehood, by opening a processing operation there. Over the years, Ocean Beauty expanded on its Alaskan business, becoming in 1954 the first seafood company to portion and vacuum pack Alaska seafood steaks and fillets. Then, in the 1960s, the company bought the oldest and largest seafood production plant in Kodiak, Alaska, established in 1911, to process the catch from Alaska's central gulf, a thriving area where some of the most fertile fishing grounds converged. Species included salmon, cod, halibut, herring, and pollock.

During the early decades of its history, Ocean Beauty also expanded its distribution capabilities. In 1948, the company opened a Spokane, Washington, branch to sell seafood to customers in the Inland Empire, an area between the Cascade Range and the Rocky Mountains, comprising eastern Washington, eastern Oregon, northern Idaho, and western Montana. The Pocatello, Idaho, distribution operation was launched in 1956 as Idaho Fish & Poultry and served customers in southeast Idaho. A year later, a Boise, Idaho, branch was added. Ocean Beauty moved into the Montana market in 1964, when it opened an office in Helena to distribute the company's seafood products that were either flown in or trucked in.

In 1978, Ocean Beauty opened a production plant in Cordova, Alaska, a remote town situated on Prince William Sound and close to the world-famous Copper River, where some of the more prized salmon in the world thrived. Salmon are born in fresh water, migrate to the ocean to feed, then return to their natal river as adults, swimming against the current, to lay their eggs and die. Because the flow of the Copper River is so strong and the distance, some 300 miles, to the headwaters so long, only the hardiest salmon are able to make the journey. Hence, they possess a high oil content to provide protection from the freezing waters that originate in the surrounding glacier-etched mountains, making Copper River King and Sockeye salmon some of the world's best-tasting fish. Moreover, they are high in Omega 3 oil, which many people believe lowers cholesterol, allowing this product to command a premium price.

Ownership Change in Late 1970s

In 1979, Ocean Beauty was acquired by Sealaska Corporation, an Alaskan regional Native-owned corporation established several years earlier by the United States government. The creation of Sealaska and a dozen other for-profit regional corporations was the culmination of a century-long dispute over the ownership of aboriginal homelands. Soon after the United States purchased Alaska from Russia in 1867, the Tlingit Indians objected to the transaction, rightly pointing out that they and other Native tribes had inhabited the land for centuries before the Russians established their first settlement in 1784. Hence, the Russians should not be able to sell something that they never owned. The Tlingits were, in fact, shrewd businessmen, legendary for their trading skills. As an increasing number of Americans encroached on their lands over the ensuing decades, the Tlingits eventually turned to the U.S. courts, filing a lawsuit in the U.S. Court of Claims in 1947.

As the issue lingered in the court system, the problem of land claims only worsened after Alaska was granted statehood in 1959, because the terms of the act allowed Alaska the right to take possession of 100 million acres of land for development. Natives became concerned that such development might threaten their traditional lifestyle, and given the nature of some of the proposed projects, they had cause for concern. For example, the U.S. Army Corps of Engineers wanted to build a massive dam on the Yukon River to generate electricity, in the process submerging a number of Athabascan villages and forcing the relocation of more than 1,000 natives. Then there was Project Chariot, an idea floated by the U.S. Atomic Energy Commission, which wanted to set off a nuclear device to blast out a harbor at Cape Thompson to allow the shipping of minerals and other goods from northwest Alaska. While the economic advantages were obvious, no one considered the effects radioactive contamination might have on the Native population. Project Chariot caused such outrage that the first statewide Native newspaper, the Tundra Times, was established, providing a forum for Native land claims and other grievances. Next, the Alaska Federation of Natives was created and the land claim issue became its primary focus. In 1965, the Natives scored a major victory when U.S. Interior Secretary Stewart Udall granted a freeze on all land transfers pending a resolution to the Native claims. Perhaps the most important factor that led to a settlement was the 1968 discovery of oil on Alaska's North Slope. The major oil companies wanted access to the oil and to build a pipeline, but could not proceed as long as Native land claims were still outstanding. They eventually put their support behind the Alaska Natives. A settlement was reached in 1971 with the passage of the Alaska Native Claims Act (ANCSA), which awarded the Alaska Natives $962.5 million and 44 million acres of land. To manage the assets, the government formed a dozen regional corporations; a 13th was later created for Alaska Natives living outside the state. Each Alaska Native born on or before December 18, 1971 received 100 shares of stock in their regional corporation. In exchange, the Natives gave up their aboriginal land claims and surrendered their aboriginal hunting and fishing right.

Representing Tlingit, Haidi, and Tsimshian Natives, Sealaska was the largest of the regional corporations with $93 million and 220,000 acres of timber land. Its directors decided not to pursue passive investments, such as oil leases, opting instead to invest in businesses that were important to the community. In addition to timber, Sealaska became involved in the seafood industry, which had played an important role in the area economy for many years, as well as the lives of many Sealaska shareholders. The purchase of Ocean Beauty was advantageous because the processor could purchase the catch of some shareholders while employing others in the plants, thereby circulating money throughout the region and building up local communities.

Unfortunately, Sealaska and Ocean Beauty suffered immediate setbacks. When a Belgian man died from botulism poisoning after eating salmon, the Food and Drug Administration recalled all canned salmon packed in 1980 and 1981 from eight Ocean Beauty processing plants in Alaska. The parent company also had to endure a stumbling timber industry and extremely high interest rates in the early 1980s. The situation became so dire that Sealaska was on the verge of declaring bankruptcy by the end of 1982. The company managed to recover, due in large part to the performance of Ocean Beauty, which in addition to the botulism scare was able to overcome a collapse in crab stock and low salmon returns.

Company Perspectives:

Setting the standard for quality since 1910.

During the 1980s, Ocean Beauty significantly expanded its processing and distribution operations. In 1982, it opened a distribution branch in Astoria, Washington, to serve customers in Oregon and Washington; this was supplemented by a nearby production facility. Also in 1982, Ocean Beauty established a distributorship in Salt Lake City that became the largest in the state of Utah. It not only served customers in Utah but those in Wyoming and Nevada as well. Ocean Beauty built up its processing capacity in 1984, acquiring a facility in Petersburg, Alaska, that offered both canning and freezing capabilities. Like many Ocean Beauty plants, it was seasonally operated, from late June to mid-September. Another development in 1984 was the opening of the Seattle distribution branch, which shared space with the company's headquarters and acted as a hub for seafood coming in from Alaska, Canada, Oregon, and Washington. In 1988, Ocean Beauty acquired another seasonal processing plant, this one in Naknek, Alaska. Operating seven days a week, 24 hours a day from late April to mid-August, the Naknek plant, located on Bristol Bay, processed salmon as well as herring. Another significant development was the 1989 launch of a processing vessel. Spanning 225 feet in length, the Ocean Pride was capable of accommodating more than 140 crew members and workers. The ship followed the fishing fleet into the Bering Sea, where king crab and bairdi and oplilo tanner crab were caught. By having a floating processing operation nearby, the fisherman did not have to leave the grounds to make the difficult, time-consuming trek through rough winter seas to southern delivery points. Moreover, they cut down on the "dead loss" of crab on board.

Ocean Beauty Put Up for Sales in the Late 1980s

In the latter half of the 1980s, the market for Alaskan seafood prospered. Most of it was exported to Pacific Rim countries, in particular Japan. By the end of the decade, Ocean Beauty, operating twelve processing facilities and eight regional distribution centers in five western states, processed and marketed more than 100 million pounds of seafood, generating annual sales of nearly $200 million and accounting for about three-quarters of Sealaska's total revenues. As a result, the parent company rebounded in the 1980s after posting just three profitable years during its first decade of existence. In 1989, Sealaska was named the Governor's Alaskan Exporter of the Year due to its strong timber and seafood sales. Because the company wanted to pursue other business opportunities, it elected to put Ocean Beauty on the block in late 1989, the result of a formal strategic review initiated several months earlier. By the end of August 1990, the terms of a sale were completed and Ocean Beauty was acquired by Ika Muda International, a company based in Pekalongan, Indonesia. Ika Muda was Indonesia's largest prawn producer and also maintained seafood processing and trading operations in the Far East and the United States. Sealaska realized a $14.6 million profit on the deal.

A group of local investors bought back the company in the 1990s, but as it had done during Sealaska's tenure, Ocean Beauty continued to expand over the course of the decade regardless of who owned it. A three-million pound capacity cold-storage facility was added to the Kodiak plant in 1992, allowing the company to lay away seafood during production peaks. This surplus could then be used for value-added production when the plant was less busy. In 1995, Ocean Beauty acquired a pair of specialty companies: Los Angeles Smoking & Curing Company (Lascco) and Three Star Smoked Fish Company. Lascco had been in business since 1921 processing smoked fish and pickled fish products, while Three Star had been producing similar products on the West Coast since 1938. Another smoked fish operation, Boston-based Rite Foods, would be acquired in 1999 to flesh out this specialty division. In 1995, Ocean Beauty also took steps to build up some brand recognition, as its distribution operations in Astoria, Boise, Helena, Pocatello, Portland, Salt Lake City, Seattle, and Spokane all adopted the Ocean Beauty name. By the end of the decade, Ocean Beauty sales topped the $300 million mark.

In the early years of the 21st century, expansion continued for Ocean Beauty. In 2000, it acquired Monroe, Washington-based Circle Sea, a company with 20 years of experience producing and marketing smoked and pickled products for foodservice and retail customers. Ocean Beauty moved into the Texas market in 2001 with the purchase of Landlock Seafood Co. of Carrollton, Texas, a seafood processing company founded in 1978 and the leading seafood distributor to the Dallas, Fort Worth, and Houston markets. With Ocean Beauty's backing, Landlock was able to move into other untapped markets in the Southwest. In the fall of 2002, Ocean Beauty agreed to merge its operation with that of Los Angeles-based Prospect Enterprises to create a new seafood-distribution company with combined sales of $325. However, the deal was scuttled by early 2003. Also in 2002, Ocean Beauty acquired three Alaskan production plants: Cook Inlet Processing, located on the Nikiski Peninsula, and processing plants located in Alitak and Excursion Inlet purchased from Wards Cove Packing Co. Ocean Beauty opened a new distribution operation in Phoenix in July 2004. In that same year, it also acquired several noteworthy brands, including Commander Sardines, Port Clyde Sardines and Fish Steaks, and Neptune Minced Clams. With annual revenues in the neighborhood of $500 million, Ocean Beauty now ranked among the top ten of North American seafood suppliers.