EMPRESAS: Pescanova, The Vertical Integration of a Large Leader (in English)

WHO IS PESCANOVA

Pescanova is one of the largest seafood companies in the world. The firm was born in Vigo (Spain) in 1960, and at the present it has become a very important group of companies in the area of food.

The company is a very good example of vertical integration: it has a fleet of about 130 ships that fish in the best grounds of half the world, and also has fish farms in which several fish species are raised. The group is also composed by companies that process, produce and market all kind of seafood and frozen products.

In 2010 Pescanova Group had a turnover of 1.564 million euros and about 6,000 workers. In this year the company had sold more than 120,000 tons of wild fish from the capture of their ships, and about 67,000 tons of farmed fish (turbot -rodaballo-, shrimp -langostinos-, tilapia and salmon).

At the present Pescanova is the sixth seafood company in the world, only behind Japanese, Thai and Norway companies. Its headquarters are in Chapela (Vigo Area - Spain), its products are present in 21 countries, and it has subsidiaries in Portugal, France, Italy, Greece, Poland, Japan or the U.S. among others.




ITS HISTORY AND EVOLUTION

Pescanova was founded in 1960 by José Fernández López and his brothers. They had experienced in the field of industrial refrigeration because they had created two companies related to this industry a few years ago: Frilugo and Frigsa.

In the late 50, José Fernández often spent time in Vigo for work, and here he contacted with Valentín Paz Andrade, an expert in fisheries.

Because of this relationship Pescanova was born with the launching of its first ship in June 1960. The company had developed a new technology in the world of fishing: its ships were true factory ships, and the fish were processed and frozen on board. This innovation was revolutionary in the industry, and the company soon began to grow.

New species were incorporated into the catalog of products marketed by Pescanova, and its ships started to operate in new grounds. The fleet gradually grew, and the company became the national leader of seafood.

In the 80 following market trends, the company opened the factory Frinova to offer all kind of breaded products and prepared meals from fish. Pescanova also grew largely with the purchase of other companies involved in some stage of fishing, processing or trading as Hasenosa or Pescafina among others. In this way the company was consolidating its vertical integration project.

The growth of exports has been steady: Pescanova is the leader of the Portuguese seafood market, and it also has a significant presence in the European and American market. In 2006 to enter the French market, the Galician company purchased Krustanord, an important French marketer company. With this acquisition France came to represent 10% of group sales. The company has also bought other companies in several countries: in 2007 it was acquired the marketer company of prawn (gambas) Ladex in the USA, in 2008 it purchased two Ecuatorian shrimp companies (Promarisco y El Rosario), and many other in different countries. The growth strategy of the company was often by buying companies (traders or suppliers) in its target markets.

On the other hand, aquaculture has been one of the strongest bets of Pescanova. In fact, over the years the company has been opening several aquaculture sites in Spain, Portugal and South America, to get an easier and safer access to raw materials. In 2009 the company opened the world´s largest plant for turbot farming in Mira (Portugal).

In 2009 the Spanish fishing multinational made a capital increase worth 100 million euros, one of the largest ever made in Spain. This operation would let the company to make its investment projects and strengthen its financial structure.

The turnover of Pescanova hasn´t stopped growing since its beginning. It has also been diversifiying into new markets: in the 90 the national turnover represented around 80% of the total turnover, but in 2010 exports represent half of total sales. The company´s net profit has also been growing, and in 2010 it was 36.3 million euros, 15% more than last year.

In 2011 Pescanova issued convertible bonds into shares worth 180 million euros, to serve the general financing needs of the company and to extend the average maturity of debt. The firm will pay for them an annual interest rate of 5,125% and the bonds will have mature in 2017.


ITS ORGANIZATION

The group is divided into 3 main areas called Fishco, Aquaculture and Aliholding.

1) Fishco:
It is composed of several companies engaged in fishing with his fleet of 130 ships. Pescanova´s ships sailing the world´s best fishing grounds: Atlantic Ocean, Namibia, South Africa, Mozambique, Australia, South America...  By this, the group has subsidiaries and partners in many countries all over the world.

Part of its fleet (about 100 ships) is composed of factory ships, in which much of the catch is processed, prepared and frozen on board. The companies that made the Fishco Area are Pescafresca and Boanova in Spain, Jego - Quere in France, Eiranova Fisheries in Ireland, Novanam and Novagroup in Namibia, Pescamar in Mozambique, New Fishing PTY in Austrialia, Argenova and Belnova in Argentina, and Pescachile in Chile.

The company mainly uses two fishing techniques at sea: trawl fisheries (pesca de arrastre) and longline (palagre).

Many companies of Fishco Area sell its products directly: fresh fish that is marketed in the local fish markets or is exported to other countries as Japan, US or France. Species caught and sold are cod (bacalao), salmon, sea urchin (erizo), shrimp, Orange Roughy, tuna and Blonde Gambon among others.

2) Aquaculture:
The group is a pioneer in this area. It has 16 farms where fish are fed and grown for several months until it are ready to be marketed. In 2009 the company has opened the world´s largest plant for turbot (rodaballo) farming in Mira (Portugal). Throughout the entire process it is controlled all factors that influence the quality of fish: its feeding, its traceability, its size, etc.

Aquaculture production is based on two stages: (1) farming (incubation, fertilization -fecundación-, hatching -eclosión- and obtaining larvae), and (2) fattening (first in pools, and when it are large enough -weight 300 grs- are introduced in sea pools or sea cages. 

Group companies engaged in aquaculture are:

a) Acuinova España, with shrimp farms in El Dique (Ayamonte-Huelva), and San Carlos and La Carabela (Cádiz).

b) Acuinova Portugal, with one turbot farm of 570,000 square meters in Mira (Portugal).

c) Insuiña España, with four turbot farms: Insuamar (Xove-Lugo), O Grove (Pontevedra), and Chapela and Mougás (Vigo´s coast).

d) Pescachile, with two salmon and trout farms: XI and XII Region in Chile.
e) NovaGuatemala, NovaHonduras, Serviconsa, Camanica and Promarisco, all in Latin American, set up to farming Vannamei shrimp.
f) Pescanova Brasil, company that markets Pescanova products in that country and also manages the tilapia production in its farms.

One of the competitive advantages over competitors is the use of the sales and logistic network of Pescanova Group. It allows the company to market all its products in several countries. In this way, the company that is responsible for trading the fresh and alive products is Pescafresca.

3) Aliholding:
In this area there are several companies that process, cook and elaborate all kind of fish and frozen products with the raw materials supplied by the Fishco companies. In this way, the group has several factories that produce and cooked breaded fish products (Frinova in Porriño-Vigo), several fish preparations as frozen fish o surimi (Pescanova Chapela and Pez Austral in Vigo), frozen pizzas (Bajamar Séptima in Arteixo-Coruña), sauces and flour (Hasenosa in Porriño-Vigo) among other companies.

After being elaborated, these products are marketed in several countries and markets as Spain, France, Italy, Greece, Poland or the US by the trading companies as Pescanova Alimentación, Pescanova Lda (Portugal), Pescanova France, Pescanova Inc (US) and other subsidiaries around the world. The group also has carrier companies as Frigodis for the distribution and the logistic of its products.

ITS SHAREHOLDERS:

Pescanova´s main shareholder is its President and son of its founder, José Manuel Fernández de Sousa-Faro, who has a stake of 23% across several companies. He is followed by Alfonso Paz-Andrade Rodríguez, the Luxembourg investment fund Luxempart, S.A. and the Portuguese company Alqueire Comercio Internacional Lda. with 5,1% each one. Liquidambar Inversiones Financieras, S.L., FBA The Islandic Investment Bank and the newly incorporated Damm have a share of 5% in the company.

COMPANIES OF THE PESCANOVA HOLDING:

Below it is showed the companies that belong to Pescanova Group worldwide:

COMPARISON WITH OTHER FOOD COMPANIES:

As already mentioned, Pescanova is one of the largest food companies in the world. Below it is showed a list of major food companies in Spain and their respective turnover figures.

ITS STRATEGY:

The company has gotten this position because:

-It has been having a diversification policy in species and markets.
-It has been enhancing its own brand and not only the cheaper distribution brands (Pescanova brand is the market leader in Spain and Portugal).
-It has been promoting innovation in processes and products.
-It has been growing in export, entering into new markets.
-And it has been combining aquaculture with traditional fishing.

In fact, Pescanova is promoting the aquaculture by the potential difficulties in accessing some grounds and fishery resources.

BRAND STRATEGY:

The company is trying to create a global brand "Pescanova" that can be recognizable worldwide as the Coca-Cola case. Pescanova is positioned as a family and quality brand, that competes to be the market leader: the first brand on the supermarket shelves.

For this, the firm invests large amounts of money on marketing and advertising activities. The marketing department of Pescanova has created such popular characters as the Captain Pescanova or Rodolfo the Shrimp.