16 Jul Responsible fishing creates new growth opportunities
Kristjan Davidsson, Chairman, Brim, illustrates how the leading seafood company’s robust financial backbone, sustainability track record and operational strength are benefiting its customers and society
Brim is one of Iceland’s largest seafood companies, with a long history and strong expertise in the utilization of natural resources and fish production. It has integrated operations spanning fishing, processing and marketing, and sells its products all over the world. To start, can you give us a brief tour of the company and explain how it stands out in the global fishing and seafood industry?
Brim’s roots go back as far as 1906 and it has a strong history of operations in fishing, in production, that spans over a century. Today, we are an integrated seafood company that operates along the whole value chain of the seafood industry and are listed on the stock exchange. Brim is the result of the fusion of at least 20 companies that have combined their forces over a period of time to create a sustainable business that is today the workplace of 800 people and an important player in the seafood industry.
We are currently running nine large-scale fishing vessels and plants in three places in Iceland. We produce and process fish from our own fleet as well as from external sources. We also own sales companies that market our products in a number of countries around the world—to mention just a few: France is a very important market for us, as is the U.K., North America and a number of other countries going all the way to Asia, including Japan, China and South Korea. We are among the biggest seafood companies in Iceland and are involved in both groundfish fisheries, which are fish that live on the bottom of the ocean, and in pelagic fisheries, which are fish that swim up in the ocean. Our main office and operations are in and around Reykjavik, but we are also established in the east of Iceland.
Can you give us an idea of your current production levels?
We catch about 100,000 metric tons of pelagic fish—like mackerel, herring and so on—and another 50,000 metric tons of bottom fish, such as cod and redfish. In total, that makes around 150,000 metric tons. In many cases, we produce food that is ready to cook: skinless, boneless portions that you only have to throw in the pan for a couple of minutes. But in a lot of cases, we also produce raw material for further processing by our customers.
Brim produces frozen and fresh products all year round. Fresh products are shipped the same day by air or in refrigerated containers, while frozen products are exported in freezer containers or shipped on bulk ships. What kind of advanced technologies is Brim using for its processing and how does the company guarantee impeccable quality for its products?
Operating in Iceland means that you have to comply with rigorous regulations that aim at securing the sustainability of our resources for the coming generations, so that they can continue to enjoy the productivity of these resources. Over time, we have invested heavily into not only increasing our efficiency but also into increasing our sustainability. Both in catching and processing we use the latest technology, such as, for example, software-controlled robotic technology that learns from its previous operations. We invest continuously: for instance, this year we have invested several million euros in the full renewal of our main fish-processing factory here in Reykjavik.
We use automated lines to increase the preservation of quality, increasing the ergonomic environment for our staff and to secure that we can trace products from catch to the final packages, so that we know exactly, for every produced item, who is getting what, from where and when. We monitor the quality of the fish throughout. We have software systems that control all this and we also allow our buyers abroad to see our product portfolio over the internet, so they can put all necessary parameters into their order. Once they have keyed in their orders, and these have been approved by our sales teams and production managers, they go directly to the production equipment that not only takes care of the selection and packaging of the product but also its labeling, icing, closure and palletizing.
Fresh products go by air or sea vessels that sail to the U.K. and mainland Europe. Frozen products go by containers or in bulk carriers to Europe, and from there to Asia and North America, whatever is needed. We invest millions of euros every year in securing the continuous development and improvement of our operations and products, be it related to fishing or processing. We’re also investing in the marketplace to get closer to the consumer, so that we can learn more about their preferences and try to meet the demands of customers.
The Icelandic fisheries sector has seen significant consolidation over the last few decades. How has this reinforced the industry and what are some of the biggest evolutions that you’ve seen in the market over the past 10 years since the 2008 crisis?
The consolidation of the sector has been an ongoing development for decades. After we expanded the exclusive economic fishing zone of Iceland—in order to make sure that we could preserve, control and manage our seafood resources—we saw an increase in fleet activity, so there was a real danger of overfishing. But we have been aware for a long time that we need to focus on the environment and sustainability.
In 1983, Iceland implemented a quota system limiting input factors in the form of ships and machinery, actually taking on a journey of increased sustainability through reducing the “waste” in input factors: capital, vessels, plants and so on. This has led to increased sustainability but also to increased consolidation because it has both enhanced the possibility for specialization and economics of scale. It has also made a division between those performing well and those not performing so well. Companies have joined forces to be able to participate in this development, which brought consolidation.
Brim is a merger carried out over 100 years of more than 20 companies. Today, Brim has a strong financial backbone, and it has the sustainability track record and operational strength to serve its customers well. Most fisheries are seasonal, which means that you are catching fish in periods that don’t necessarily coincide with the preferences of consumers. You’re also frequently catching them in areas where they are not consumed. It’s a very international trade: fish is often caught in a “hostile” environment where there is no big population and it is brought to markets in the metropolises of the world. To be able to do this in a secure way, you need big investments and for that you need financial strength. This has led to the consolidation that we see today.
Building stronger and larger companies enables you to gain in efficiency and sustainability. For the last 40 years, Iceland has been doing a lot in this respect. 15 or 20 years ago, the biggest companies held perhaps one-third or a half of the total quotas; now perhaps a dozen companies hold the majority of the quotas. This has led to a very big drive to increase efficiency. As an example, Brim has reduced its consumption of fuel in our plants and vessels by around 46 percent since 2005.
Iceland has created one of the most modern and competitive seafood industries in the world, based on sustainable harvesting and the protection of the marine ecosystem. Can you tell me more about Brim’s initiatives and efforts toward sustainable fishing and environmental protection?
The seafood resources in Iceland are sustainable, but that works only as long as the fishing is done in a responsible way. Our good results with regard to environmental issues are, not least, because we try to be responsible in the utilization of seafood resources. We also use science as a basis to guide our fishery policy and to tell us how much you can catch for every single species. I dare say that the resources are not only sustainable: they’re in a much better state since the introduction of the current management system, which has been developed since 1983. There were and still are many countries around the world subsidizing their seafood industries to maintain employment, but now a lot of countries have been implementing a similar management system to Iceland in order to transform their fisheries into a sustainable business, making money, contributing to the national economy and to the welfare of the nation.
Responsible fishing has, in turn, encouraged innovation, where you are putting more emphasis on a better utilization of the catch and in finding solutions to increase value and reduce cost at the same time. In collaboration with others, Brim has set up initiatives that enhance the sustainable use of resources, take care of quality and maintain responsibility toward the environment and society.
This is ingrained in our DNA, it is spelled out in the status of the company. We participate in the international Global Sustainable Seafood Initiative and are working toward a cleaner value chain in the seafood industry, always trying to minimize our environmental footprint and our impact on the environment. Every year, we issue our sustainability report, which has a number of key performance indicators where we track our progress over the years—how we are doing now compared to the past—so that we can learn and do better every year.
How was your business impacted by the COVID-19 crisis?
People need to eat and seafood is among the healthiest foods that you can have. We have been somewhat surprised by the resilience of our business model, despite the crisis. There have been challenges and disruptions in sales to restaurants, hotels, catering and so on, but at the same time we’re seeing increased consumption and demand through retail channels. We have made our stress tests, we have made our forecasts for liquidity through the crisis and we are pleasantly surprised by the resilience of this business.
Harnessing natural resources and converting them into food is a cyclical industry because there are variations in the atmosphere, the weather and other things but, at the end of the day, we all need to feed ourselves, so it’s a very resilient industry. We have managed to keep our workforce healthy and have been able to serve our customers. We have also been able to pay dividends to our investors, we’re continuing to invest and we didn’t need to participate in the government’s assistance schemes for industries. As an investor, I would recommend anyone to look at this industry as a sustainable investment object.
How would you summarize Brim’s priorities when it comes to the future expansion and growth for the company?
Iceland’s quota system and management system are designed in such a way that no company can own more than 12 percent of the total fishing quotas that are allocated yearly. Brim is already close to the limit. This is encouraging everyone to participate in further development of the industry. To give one illustration, Brim has invested in a company called Marine Collagen that is developing production of collagen from the sector’s waste. Collagen is used for cosmetics, health products and a number of things. Bringing in marine collagen from a sustainable resource is going to give us another foothold in the market—one based on seafood but in a new market. We are participating in various other different initiatives in a similar way.
We have an investment in Chile—we have participated in the development of the seafood industry in that country for the last 30 years. We intend to continue with that because we find that it’s not only a very interesting project, but it is also a sustainable development of our business. We are also investing in marketing: last year we acquired marketing companies in Japan and China, and this year we invested in a company that is marketing in Central, Eastern and Southern Europe. We believe that this investment will increase our chances to go deeper into the market, adding more value to the products that we already have and developing new products. The limitations imposed by the quota system are forcing us to take new paths and create new growth opportunities in all parts of the business.
Fishing has been ingrained in Icelandic DNA for centuries. What is it that makes Icelandic fishing so unique and such an expertise for people? What are its key strengths of this sector and country?
A key strength of this industry is its management system. Another strength is the location of the country in the middle of the North Atlantic. A lot of the things we use and consume—cars, house materials, furniture and many of the things that we use in our daily lives—have to be imported. If we want to produce anything on any scale, we have to export it. As a consequence, this small country is like a melting pot: we have to learn languages because to trade we have to deal with over 100 countries. Hardly anyone will learn Icelandic! Because of the small size of Iceland, people frequently take their bachelor’s degree in Iceland and then take a master’s or even a doctorate abroad.
We go out, we study, we learn new culture, we learn new language and then we come back home. Then, often, we go into the business of producing something that we have to export. This enhances development of new ideas and new ways of looking at things from different angles. This is one of the key strengths of the Icelandic economy. We learn different languages and cultures, and we meld the experiences from many countries into something innovative.
Our banking system collapsed a little over a decade back, we got back on track in a very short time, we developed our seafood industry, our tourism industry and technological knowledge industries, and that continues today. Living in a hostile natural environment, you have to be inventive and go out and meet the world.
Do you have a final message you like to share with our readers?
I would be very happy to share what we have been doing with the world. People coming here teach us a lot, and Icelanders also travel a lot, for short or long periods of time. You will always do better at home when you look at and learn from what others are doing. So we welcome visitors to Iceland. We welcome business people that want to do business in Iceland and we’ll also be very happy to meet them in their own markets, if they believe that we can do something together of mutual benefit.