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Wells Fargo: Here's how seafood can attract more investment

With a loan book of close to $1 trillion, Wells Fargo gives IntraFish details on what investors are looking for in the seafood space.

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With macro-trends at the industry's back and increasing investor interest in raw material resources, the breakneck pace of seafood consolidation isn't likely to slow anytime soon, and may in fact pick up in North America, top executives at Wells Fargo Food told IntraFish.

Wells Fargo, the fourth-largest lender in the United States, with a loan book of close to $1 trillion, is active across the business and personal loan space, including seafood.

The group's seafood lending and investing team, based in Seattle, has played a key role in several major US seafood companies, and is ramping up its focus on the sector with its newly formed national food, beverage and agribusiness group.

Growing interest from investors

Nick Kokkonis, vice president and senior relationship manager with Wells Fargo, has spent 24 years working in the agriculture as well as the food space, where he has helped companies involved with a range of species and categories.

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Kokkonis told IntraFish he has seen increasing interest from his clients in seafood, particularly local investment firms with family money who are interested in middle market companies. Those companies typically post annual revenue of between $100 million (€90.6 million) and $3 billion (€2.7 billion), which encompasses the majority of US seafood companies operating today.

"The interest is higher than 10 or 15 years ago," he said. "Fifteen or 20 years ago, people still ate a lot of beef and chicken. But people are seeing seafood as a viable protein."

Jana Dombrowski, senior vice president of Pacific Northwest Food and Agriculture at Wells Fargo, said seafood is now viewed as a critical component of the agriculture space, not just an outlier.

"We don’t look at seafood just as seafood, but as part of the entire food industry," she told IntraFish.

Valuations are increasing across the board in every aspect of food, Dombrowksi said, but seafood may have a leg up on terrestrial proteins because it is more efficient and cost-effective, and could ultimately achieve a scalability beyond terrestrial proteins as aquaculture continues to grow and innovate.

"Seafood for the most part, in this region, has an excellent sustainability story," she said.

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Age as a driver

Nearly two dozen new CEOs were appointed by global seafood companies and organizations, while half as many announced their departures over the first seven months of this year, analysis of IntraFish reporting shows.

The fact that founding seafood executives are now old enough to retire is one factor driving consolidation, Kokkonis said.

"These companies have aging vessels out there, and they are expensive. Rather than investing to upgrade, it's sometimes just easier to sell," he said. "The economy has been strong, but for seafood especially. It's probably a good time to sell if you’ve been thinking about selling."

Kokkonis noted another trend in seafood is bigger food players -- such as Cargill and Tyson --making plays and investing beyond their traditional businesses, as they seek to play a larger role in global food supply.

What do investors find valuable in seafood?

While investors are interested in the space, some opportunities are more compelling than others.

"One of the attractive directions companies are moving in is doing value-added," Kokkonis said. "Catching and filleting a fish is where the industry started, but if you create a brand and sell it in grocery stores and at Costco, that's more valuable for somebody to invest in than purely producing a commodity product."

"if you create a brand and sell it in grocery stores and at Costco, that's more valuable for somebody to invest in"

Any company with fishing rights is also viewed as high value, he said. The bank has been involved in helping to upgrade the aging North Pacific Fleet.

"With fishing rights come vessels, which we have helped finance in the past," he said. "We finance shoreside processors, we’re comfortable with that industry."

The bank finds a vessel even more valuable if it has an onboard processor, which allows it to be financed similarly to a land-based factory.

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Not all US seafood companies are created equal, and some of the newer developments are a little too far out for US investors who lack the experience and knowledge to take the risk.

That's why financial support for major recirculating aquaculture system (RAS) projects such as those undertaken by Nordic Aquafarms and Atlantic Sapphire still comes from Norway, even if the product is largely geared to US consumers.

"The banks in the countries that have had most success with aquaculture, have the highest comfort with it," Dombrowksi said.

And as for other novel food trends, such as the explosion in popularity and investor interest in plant-based and lab-grown meats -- Tyson only last week invested in a shrimp -- Dombrowski says innovation is part of the space, but that the seafood sector is safe with its unique attributes.

"We try to look at the food world as a holistic and changing, evolving thing," she said. "I don’t see alternative proteins taking over any terrestrial protein, and not seafood."

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