‘I want to sell more US-farmed seafood’

January 7, 2013, 4:14 pm

Sean O’Scannlain hopes the US government will wake up to the need for a shift in policy on aquaculture soon.

“It’s incredibly frustrating,” said O’Scannlain, co-founder of foodservice-focused US processor and distributor, Fortune Fish Company, and current vice chairman of the National Fisheries Institute.

“Aquaculture is the future. If you look at the wild catch fisheries, we are at the maximum level for a lot of species. Growth has to come from aquaculture.”

However, the US regulatory environment for aquaculture leaves a lot to be desired, in his view.

“It’s poor. The regulatory environment is terrible,” he told Undercurrent News, in the latest instalment of our Seafood Entrepreneur series.

“It is almost impossible to do aquaculture from the start in the US. We need that to change, but it is not going to change under this administration,” he said.

The attitude from environmentalists to aquaculture is part of the problem.

“It is astonishing to me that they [environmental groups] are not particularly friendly toward aquaculture. The same environmentalists want to talk about concepts like food miles,” he said.

“Let us grow fish here and we won’t have to fly fish in from halfway around the world or put it on a boat,” said O’Scannlain.

O’Scannlain became vice chairman of NFI on Jan. 1, having been treasurer the year before.

He will become chairman of NFI at the start of 2014 and plans to use this to push for more open regulation on aquaculture in the US.

“The chairman can focus on a particular part of the industry that they like and I think aquaculture can be that for me,” he said.

This would involve getting the regulatory environment changed and getting politicians to see things differently.

“Fish is a protein that we don’t eat enough of and we can use to combat heart disease and obesity. It can be used to combat some of the bigger health problems that we have in this country.”

There is a need to start “aligning some of these regulators and say, ‘let us grow more fish here’. Let us take certain zones and cut some of the red tape.”

‘Not in my backyard’

Part of the problem is that areas well suited to aquaculture are often close to premium property space.

“Southern California is perfect for aquaculture, but people do not want to look out onto a fish farm. It is only slightly less appealing than an oilfield,” said O’Scannlain.

In addition, the people living in these areas are often the rich, famous and ‘well to do’ in the US.

“Barbra Streisand does not want to look off Malibu and see a fish farm. And those are very powerful people. But it is shortsighted for the future.”

Fortune Fish buys a range of fish from farmed sources, including salmon from Norway, Scotland, the Faroe Islands and from Canada.

Cobia is one new species that O’Scannlain sees a lot of potential for in the US market.

“It grows fast and is perfect for the American palate,” he told Undercurrent.

The company buys cobia from Open Blue Seafarms, a Panama-based operator founded by Brian O’Hanlon, a US-born aquaculture entrepreneur.

O’Hanlon has had to base his operation in Panama, because getting anything done in the US has been so tough.

“They [the government in Panama] let him do what he does and he is thriving there. That should not be the way it happens, we should be doing this in our own country for so many reasons,” he said.

It’s not just about the tax dollars and jobs, but also to “get this product produced closer to our shores so it is less expensive to get it to our people and it is more environmentally friendly, frankly”, he said.

Despite the low volumes, Fortune Fish is buying US-farmed fish, when possible.

In fact, O’Scannlain sings the praises of some of the fish produced by small operators.

“We like to get into buying from some of these artisanal operators. There is a guy in Indiana growing lake perch hydroponically, and an indoor farm in Wisconsin that is doing an arctic char that is phenomenal,” he said. “I think there is going to be some real innovations on closed system and indoor aquaculture, if we can get the cost down and figure out the biological side.”

Consultant turned entrepreneur

O’Scannlain stumbled across the fish business in his previous life as a consultant, for financial services giant Ernst & Young.

In 1992, after stints in banking and an MBA in Chicago at the Kellogg school, he was tasked with sorting out the finances of Chicago Fish House, a third generation family business that was then the largest seafood supplier in the region.

“I knew I was an entrepreneur, so I thought that consulting would give me a chance to see a wide range of businesses. I like the turnaround situation, because this allowed me to see businesses that were struggling and see who could be turned around.”

He liked the business at Chicago Fish, as well as “the product and the customers. Then the owner of the company offered me a job. I wanted to get operational experience before I started my own company, so I said, ‘yeah, okay’.”

O’Scannlain was then part of a group of investors that tried to buy Chicago Fish, but were outbid.

Due to differences of opinion with the new owner, he ended up going his own way.

Through the sales process, he met the team who were running The Plitt Company, another Illinois seafood supplier that was then in its infancy.

The owners of Plitt offered him a job as president and 25% of the company’s equity.

“I was the sixth employee and was running the company. The other owners, they were involved in marketing research and had their own company. I was really on my own growing this business,” he said.

Plitt was focused on shellfish only, and had two trucks, one salesperson and an operations guy.

O’Scannlain saw a chance to grow the business into finfish and other seafood.

“We expanded the product line and expanded the sales force. In 1995, we were doing a little over a million bucks and by 2001 we were doing $40m in revenue.”

The other owners of the company then started to get more involved, leading to disagreements on strategy.

“I saw us getting away from what made the company successful. We clashed,” he said.

This lead to a tough decision for O’Scannlain, which saw him decide to leave a company he’d built up in 2001.

“Life is too short to have a partner that you don’t get on with. I wanted to buy the company, as I felt like I’d really built it, but they had more stock,” he said.

“So, we said ‘fine, we will start over’. That was June 2001 and we opened the doors in August 2001.”

9/11

Then came 9/11. “It was just about the worst time ever that you could open a business, as you can imagine,” he said.

“The economy took a hit, as did spend in restaurants and air travel. Transport was made so much harder. It was not a good way to start. But you have to get through the tough times.”

Since 2001, Fortune Fish has gone from nothing to over $100m in turnover, with $125m expected in 2013, and with a full year of its new non-seafood acquisition, JDY Gourmet.

The reason for the company’s growth is simple, he said. “It’s a cliché, but it’s about listening to the customer and giving them exactly what they want.”

When the company realized that chefs were placing orders late at night after dinner service was over, it made changes to make ordering easier.

“It was getting harder and harder for people to give us an order the day before. You saw a lot of people in the restaurant industry trying to keep as low an inventory as possible, for cash management, as well as quality and shelf life.”

So, they would wait until after dinner service and call the order in late at night, he said.

The order would then go to a tape machine, with someone having to come in early to listen. “It got to be a nightmare if you wanted to get your trucks out early.”

So, the company started staffing its office until 2am, to take orders. “No one else in the industry did this. To this day, we have five or six sales people on a busy night answering the phone, until 2am.”

Partnerships with customers are the most “important assets a company has”, he said.

Processing in US

Although it costs more, the company also tries to process as much as it can at its plant in Bensenville, Illinois, close to O’Hara airport, where much of the company’s fish is flown.

“We do a lot of processing here in Chicago, which is important. I would argue that processing overseas in big volumes is taking a short-term view. Once you take a knife to a fish, the quality is going to deteriorate rapidly,” said O’Scannlain.

We run three full-time shifts 24 hours a day of processing product to order in Bensenville,” he said.

“It costs more; if you ship a whole fish across the world, you immediately have 50% yield and you have paid freight on something that 50% of which you are throwing out,” he said. “But, at the end of the day, the quality is better and the customers are happy. That is what we are about, serving our customers and partnering with our customers.”

That is where the acquisition of JDY Gourmet comes in.

More and more, Fortune Fish was getting requests from chefs for gourmet products, which they would then source and sell on.

“It’s like, you have a relationship with a chef and he says ‘I really need a good sea salt or olive oil, do you know where I can get one?’, so we go out and find it and we start selling it to them.”

Each “extra line or two” on an invoice makes all the difference, he said. “You are already sending a truck to the customer, you already have a sales person speaking with them and you have someone in the accounts department talking with them, it makes sense.”

That is why when this opportunity came along, it made a lot of sense for us. It was something we are already doing and now we can do it in on a much larger scale.”

‘Retailers who buy like restaurants’

Fortune Fish generates 75% of its turnover from sales to restaurants, and the other 25% from retailers that “buy like restaurants”, said O’Scannlain.

Its retail business is made up of “smaller gourmet retailers that have a cafe or retailers that like to source like chefs”, he said. “We tend not to work with the ‘big box’ supermarkets, who are really focused on price, price and price.”

Having said that, Whole Foods is one of Fortune Fish’s largest retail customers.

“They [Whole Foods] really buy like a fine dining restaurant, with a focus on quality and sustainable good choices. They don’t fit the typical mode of retail.”

Whole Foods has done a “phenomenal job”, he said.

“If you go to most of the other retailers, the fish counter person is badly paid and so has no passion, no enthusiasm and, most importantly, no knowledge of fish.”

“I would argue that processing overseas in big volumes is taking a short-term view. Once you take a knife to a fish, the quality is going to deteriorate rapidly”

Questions on cutting the fish or what might go well with it are often met with “I don’t know”, he said.

“You go to Whole Foods and they will know everything about the product and ways to prepare it and what goes with it. If you don’t know what wine goes with the fish you want, you just have to ask and they will say ‘go and see Al in the wine department, he has this great Pinot that goes well with that’. It is a completely different story.”

No retirement plans

It’s clear that O’Scannlain loves the seafood business and says he has no plans to retire or sell.

“Moving to Florida and playing golf every day doesn’t really excite me,” he said.

“I love what I do, I am 48 and have five little kids to feed and educate,” he said “I am the kind of guy that doesn’t plan to retire, I want to keep active and keep doing what I am doing to the very end.”

Fortune Fish is a “great company with a great infrastructure and great people, which is allowing me to take a step back and look at the bigger picture”.

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