Larsen Mettler is the managing director of S2G Ventures’ oceans and seafood investments. He previously worked as chief financial officer of Alaska processor Silver Bay Seafoods and director of KeyBanc Capital Markets’ seafood investment banking portfolio.
SeafoodSource: What is the state of Alaska’s seafood processing sector? Would you describe it as in crisis mode?
Mettler: No, I would not describe the sector as in crisis mode for processors. 2023 certainly wasn't the best financial year for processors, but they are all coming off of several years of record profitability and extremely high-end market prices. Processors got themselves into trouble for three reasons in 2023: One, holding onto their 2022 sockeye pack too long, likely believing they could find increased end market pricing, but it went the wrong way because that level of demand for the product isn’t there. Two, putting up poor-quality fish, something that happens when you are processing extremely large volumes. My understanding is the 2022 pack had a disproportionate level of poor quality fish versus prior years. And three, not managing their balance sheets well, spending large sums of money or making distributions to owners in the prior record years, and were not ready to buy large quantities of fish in 2023 in a falling pricing environment.
While I wouldn't describe the Alaska processing sector as in crisis mode, I would describe the individual salmon fishermen sector in crisis mode. In my opinion, the grounds prices received in 2023 were not remotely fair to the fishermen. Sure, pack year margins were compressed, but not by the amount grounds prices were adjusted. Many processors mismanaged their capital from the prior record years and then had this 2022 inventory hangover, which they leaned on to compress prices to the fishermen, which creates unsustainable business models for those fishermen. And because the sector operates as an unregulated oligopoly with a broken pricing system, there is little the fishermen can do about it. With further consolidation the issue will get worse and fishermen will have to find other ways to make a living. The only way I think there is a path out of it is via government regulation or a new business model entering the market that shifts the channel power back to the fishermen – something like an eFishery model that is benefitting so many small stakeholders in Indonesia.
SeafoodSource: Why do you think Trident decided to sell such a big chunk of its Alaska processing footprint?
Mettler: I have not spoken with the company, but I believe Trident is likely focusing on its upcoming large capital projects and is looking to preserve its working capital lines and balance sheet management as it engages in these new builds. I do not believe it’s a need for capital. Additionally, I believe there could be concern over environmental changes which would make these locations and assets a less desirable place to operate and invest in the future.
SeafoodSource: Why are Silver Bay and Peter Pan reportedly talking about a merger?
Mettler: I don’t know if they are in conversations, however its clear there is overcapacity in the sector. These companies do have synergies, particularly in Valdez, where the combination would …
Photo courtesy of S2G Ventures
