Siam Canadian in World's 100 Largest Seafood Companies 2015 Report : Undercurrent News
2014 turnover $320m ( year ended Dec 31 2014, +18%)
2013 turnover $272m
Key executive Jim Gulkin, CEO
Bangkok, Thailand based Siam Canadian Group was founded by Canadian-born entrepreneur Jim Gulkin in 1987.
Gulkin started the business off as a small trading company specializing in food products. It was during this time that Thailand’s seafood industry was entering a period of dynamic growth, fuelled by the rapid expansion of farmed shrimp, initially black tiger and then vannamei.
Gulkin saw the growth opportunities and thus frozen seafood, in particular shrimp, soon became its core business and the main focus. Shrimp is still 60% of the company’s volume.
In 1992 Siam Canadian opened its first overseas branch in Vietnam. Siam Canadian continued to grow its procurement network and expand its operations by subsequently opening additional offices in China, India, Indonesia and Myanmar.
Siam Canadian later added an international trading division to its Bangkok headquarters to facilitate procurement of products from other countries where it does not maintain its own offices.
Founder Gulkin would like to see his company boost its $320 million annual revenues to over $500m over the next
five to seven years by expanding its seafood importing and distribution businesses, he told Undercurrent News.
“Having said that, the total sales value is often so skewed by raw material prices, either up or down, that it is not necessarily a good indicator of the health of one’s business. We are much more focused on the bottom line and will continue to be so,” he said.
The drivers of growth will be “expansion of our customer base, increased sales in existing markets and further penetration into some of the newer markets, such as Asia, Central and South America and Africa. Our import business will also hopefully play an important role in our growth”, said Gulkin.
“Imports are still a small percentage of our overall business. However this is something I see as growing and we are working towards this, diversifying our product range and expanding our customer base. Thailand is our first import operation but we expect to expand to other offices as we go forward. We are learning the business step by step.”
Siam Canadian is focused around offering six services: procurement, quality assurance, logistics management, new product development, and printing and packaging inventory management.
“I cannot say I am ‘happy’ with our role as one must constantly strive to improve and re-invent. More of the same is not always a recipe for growth,” he said. “However, I must admit that
I have come to really appreciate our business model.”
The company’s approach has “proven to be resilient to major changes and upheavals in the market. We have amazing flexibility and can move quickly in different directions as market conditions necessitate”, said Gulkin.
“We are constantly improving what we do and what we offer to our customers and as long as we continue to do that and always add value to their businesses, our business will continue to grow,” he said. “Of course, we must always keep a very open mind and look to take advantage of any opportunities that come our way.”
Demand in 2015 for shrimp has been down, meaning Siam Canadian will not exceed $320m, he said.
He listed several reasons for this. Firstly, the devaluation against the US dollar of many currencies, including Australian dollar, Canadian dollar, euro, Mexican peso, Russian ruble, and many others. “The rapid drop in shrimp prices resulted in many importers and end users holding
higher priced, difficult-to-sell inventory which has plugged up the system and slowed demand,” said Gulkin.
Weaker economies in Europe, Russia, Canada, Australia and other countries then impacted consumption, he said.
“Uncertainty or more accurately, concern that prices would drop further has made many buyers hesitant to commit forward to larger orders.”
This has seen much more “hand-to-mouth”
buying this year,” said Gulkin.
Demand has recently improved, however. “We are seeing more orders being placed recently, particularly from the US. The UK
has picked up to some degree. Europe is still sluggish. Australia still sluggish, Canada slightly improved,” is how Gulkin summed up the market picture in September 2015.
“Shrimp has always been the single largest
item that we sell and I don’t see that changing, although the broad range of products we offer enables us to take advantage of opportunities that present themselves in the market,” he said.
Gulkin has been running his company for 28 years, during which time he has learnt how to maintain and adapt a business from scratch. The way to ensure your business lasts is to secure long-term relationships with customers, Gulkin told Undercurrent, in an interview in 2013 on the company’s history.
“The only business worth having is long-term business, and the only way to do long-term business is to do a good job,” said Gulkin. “To do what your customers expect of you, deliver what you promise you’re going to deliver, keep your word and build a reputation that is worth something.”
Some of Siam Canadian’s customers have been working with it for 22 or 23 years, he said.
“Those relationships are very strong, there’s
a level of trust, a level of friendship as well,” said Gulkin. “Whenever we start business with someone we hope we’ll be able to do business with them for many years to come.
The way we do business is to provide a level of service and function that means something and has value to people over the years, and not to go for any quick kills but to be a sustainable business in itself.”
Starting out, Gulkin had no financial backing, business advice, or even any experience of running a company, let alone a long-term plan.
At that point he just wanted to build a business, and that ambition has driven the company’s expansion since.
“We’re constantly expanding our business, our customer base, and we’re very aggressive in expanding our customer base – exhibiting at trade fairs, visiting trade fairs, working through the internet, advertising, you name it. We’re there and we’re able to grow our business like that,” explained Gulkin.
This expansion has made it possible to ride out the challenges that inevitably come with running a seafood business.
“My own philosophy has been that you need to be quick-footed, able to move in different directions, and the broader one’s product base, supply base and customer base are, the easier it is to get through difficult times,” he said. “There’s an always difficult time, every single year there’s something. There’s always two steps forward one step back, that’s the nature of the seafood business.”
While there are always new hurdles and bumps in the road, the last couple of years have been some of the most challenging the company has seen, said Gulkin.
The economic climate globally has been tough, with Europe and even the US proving difficult, but Siam Canadian grew its business despite this, he said.
The biggest problem has been raw material supply, something which is outside of the company’s control.
As early mortality syndrome (EMS) hit shrimp production in Thailand, Gulkin has focused the company is able to focus more on a different product, with pangasius, tilapia, tuna, squid and cuttlefish being some of the options open to the firm.
THAILAND IN RECOVERY
Thai shrimp production looks on the road to recovery and could hit as much as 450,000 metric tons in next two to three years, said Gulkin. After being hit by EMS in 2012,
Thai shrimp production dived to around 200,000t in the last two years, from a peak of 640,000t. Farmers are finding ways to produce with EMS, however.
“I believe Thailand will continue to recover. I think Thailand will continue to increase production until it finds its new comfort level which I would venture would be somewhere between 400,000-450,000t. I think this process will take two to three years,” Gulkin said.
In the shorter term, Gulkin feels the progress in overcoming EMS and other disease problems means output of 240,000t-250,000t for 2015 is achievable. Gulkin’s comments came soon after Thai Union Group announced a shrimp price guarantee scheme, supposedly to assist in bolstering production to hit 250,000t in 2015.
As well as its Bangkok, Thailand base, Siam Canadian also has offices in Vietnam, India, Indonesia, China and Myanmar, to give a diverse sourcing base. As Thai shrimp production has declined, the company has sourced more from other countries. In India, vannamei shrimp production has risen dramatically since Thailand’s fall from grace, as farmers switched over from black tiger.
Indian production continues to grow, as does its importance in the world marketplace, said Gulkin.
“So far India has not hit any major bumps in terms of disease and we certainly hope that continues.”
Next year, “India production will continue to increase, barring any major disease problems”, said Gulkin.
For Vietnam, where Siam Canadian set up its second office in 1992, lower prices in Q2 have discouraged some farmers from re-seeding,he said.
“We may see a slight drop in total production compared to last year. Imports from India for further processing have been robust this year, but now [are] starting to slow.” As for the outlook in Vietnam for 2016, production is “always a mystery and an unknown”, said Gulkin.
“I expect low production in Q1 [next year] in Vietnam. Farmers have not been generally happy with prices and seeding will be less. If prices are high enough, will see improvement in the second 2016.”
In Indonesia, farmers have had some disease issues, particularly white spot and white feces, and that has had some impact on production, he said. This has been “enough to keep raw material prices on the high side, higher than India and that has made it tougher for Indonesia to compete in certain markets, such as the US”, said Gulkin.
The rupiah has devalued against the dollar, which should be helping, as it is helping Thailand, but apparently this is not enough, he said.
In China, production continues to be hampered by EMS and other diseases. “The Chinese aquaculture business is too fragmented and many players in the farming and hatchery side of the business are smaller operators and perhaps not sophisticated enough to take a long-term view,” said Gulkin. “Substandard broodstock, poor hatchery management, poor farm management have meant China production continues to drop,” he said.
The general consensus is that China production for 2015 is somewhere between 25-40% below that of 2014, said Gulkin. “And 2014 was significantly lower than 2013. China is heavily dependent on imports from India for further processing and imports from India, Ecuador and other countries for domestic consumption. This will continue until China improves its own production.”
China production will continue “to be problematic” in 2016, he said. “There simply is not yet enough will or cohesiveness to heal the industry.
A CANADIAN IN THAILAND
Gulkin has been in Asia since 1979, when he arrived as a backpacker aged 21. After a year of travel and running out of money, he took a job with a French oil company and worked for them for seven years, across Singapore, Indonesia, Malaysia and the Middle East.
“That brought me to 1986, and I decided I wanted to get out of the oil field and start a business of some kind,” he said. “I’d been coming to Thailand quite frequently on my time off, working in the oil field, and I ended up investigating possibilities to do business in Thailand, and finally I started a business to trade, even though I wasn’t sure which products I was going to trade.”
“Thailand was becoming an important place for aquaculture, black tiger shrimp, and was already an important exporter of other frozen seafood products. So I started getting into that and I built up a business from there.”
After 26 years, the possibilities for expansion in Asia are limited. Siam Canadian has about as many offices across
different countries as it needs, said Gulkin, and the focus is shifting elsewhere.
“We have looked a little bit at South America but we’re not really feeling ready to make a move there, to establish an office or anything like that.”
“It’s something that we keep in mind for the future. Right now we’re continuing to expand our business and grow our customer base and supply base, and that’s our goal for the time being, and looks for other opportunities- importing into other countries and take these opportunities as they appear,” he said.
As Asian consumption of seafood has increased, less and less product is available for export, so Gulkin is beginning to move into importing via Siam Canadian’s offices, another move designed to add strength in depth to the company.
“Back in 1987, if somebody had suggested we’d be exporting product from China to Indonesia or from India to Thailand or Vietnam, I’d have thought it was laughable. But times change.”