Capital Seafood International Inc.

Growing markets and growing businesses

By Ania Swiatoniowski

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One of China’s (and the world’s) largest seafood companies has recently turned its eye to the east coast of Canada. Zhangzidao Group Co Ltd have recently purchased a lobster company in Nova Scotia. The acquisition marked the creation of Zhangzidao Group’s newly formed subsidiary, Capital Seafood International Inc.

Nova Scotia lobster is renown worldwide for its quality and flavour and demand on the international market is growing. The Atlantic Canadian provinces, including Nova Scotia, are the biggest exporter of fresh lobster in the world and have a very large supply capacity.

“In early 2013 our company made a strategic decision to include overseas resources into our business in China,” says Jack Liu, Director of Capital Seafood and General Manager of Zhangzidao Group’s European and American Business Division. “The reason is that after two decades of economic growth in China there is enough wealth that the market has matured enough for a [seafood] demand not only for our own resources but resources from other countries as well.”

In light of this supply and demand opportunity, Capital Seafood International Inc was born.

Zhangzidao Group, based in Dalian, China, purchased the Fish Basket (2013) Ltd and its facilities in Eastern Passage, Nova Scotia, in October 2014, which would become the home of Capital Seafood. The company purchases lobster from Nova Scotian fishermen for export primarily to China. Capital Seafood and its facilities are already in full operation and there are plans for expansion.

Capital Seafood plans to change production from seasonal to a year-round operation, shipping 6 days a week. The company expects to export 2.3-4.5 million kg of lobster to China in 2015 and exporting a total of 4.5 million kg of lobster annually once fully established to take advantage of the large supply capacity in the province.

China will be the primary market for export. However the company will also export Nova Scotia lobster to the United States, Europe, and other parts of Asia. In particular, Zhangzidao Group hopes to continue to open export opportunities to Europe, extending the selling season and improving marketing.

Purchasing Facilities

Over 2013, while purchasing lobster in Nova Scotia, Liu got to know Reg Hartlan, one of his lobster suppliers from Eastern Passage and a Nova Scotia native. Hartlan is now General Manager for Capital Seafood.

Hartlan is spearheading upgrades to the Eastern Passage facility over 2015 to increase the facility’s holding capacity and processing area. The company is currently shipping live lobster and hopes to begin production of cooked lobster in the spring. Expansions to the facility is expected to create 50-80 jobs. According to Liu, both blue and white collar jobs will be created and the workforce will be hired locally preferentially.

Capital Seafood is run by Zhangzidao’s Canadian operation, ZF Max International Inc, which also has an office in Yarmouth, Nova Scotia. The Yarmouth office was established in 2013 to begin sourcing lobster for export to China and works closely with Capital Seafood. John Crandall Nickerson is Atlantic Canada Manager of Procurement and Sales at the Yarmouth office. Under Nickerson, the Yarmouth team works on establishing and optimizing operations and on purchasing lobster from dealers.

The Yarmouth location also has plans for expansion and is looking to purchase a holding facility in the area that could be upgraded to hold at least 0.5 million pounds of lobster or, if none is available, to build a facility in the area.

“In the beginning we just bought from other companies and exported to China,” explains Liu. Zhangzidao Group began purchasing Nova Scotian lobster in 2013 through the Yarmouth office. But in keeping with the parent company’s philosophy of full integration and vertically owned operations, Capital Seafood was formed. “We wanted to have a stronger foothold in the resource,” continues Liu. “Just like we do with other [seafood] species in China, we want vertical integration in Capital Seafood.”

Zhangzidao Group’s primary business is bottom cultured marine aquaculture, a wild, free-range farming operation harvesting various seafood species in the Yellow Sea, the Bohai Sea, and the East China Sea. The group has possession of 2000 km2 of “A” level seawater area. Species farmed include scallops, sea cucumber, abalone, various clam types, conches, sea urchins, and others. Zhangzidao Group not only has access to a large sea area but also owns facilities, controls trade and distribution (domestic and international), and handles all of its own sales. Basically controlling every step in the seafood business process.

“We are vertically integrated. We do our own hatchery, we sow the seed at the bottom of the ocean, then we harvest, process, do our own distribution. We have our own storage, our own transportation fleet, we have a sales force, retail outlets, and a rapidly growing E-commerce division… Our operations in China are truly from the ocean to your plate.”

Tied to the Ocean

Zhangzidao Group began as a Fisherman’s Co-op (Zhangzidao Fishery Group Co Ltd) in 1958 on the Zhangzi Islands –four small and remote islands located 60 nautical miles off the coast of mainland China, deep in the Yellow Sea. While the company has grown over 50 years from a co-op to a seafood powerhouse, Zhangzidao Group remains faithful to its founding principle.

“The small fishing communities all along the coast of Nova Scotia always reminds us of our own origins, our own beginnings in China. Even today, as a public company, 70% of shares of our company are still directly or indirectly owned by fishermen and the residents of [the Zhangzi Islands]… We understand fishermen. We are fishermen,” say Liu reflecting on how he sees Zhangzidao’s future in Nova Scotia. That commitment includes offering fair prices to fishermen for their catches and becoming positive and contributing members of fishing communities.

In one first step to developing community involvement and support, Capital Seafood and the Yarmouth ZF Max team are currently looking for a Nova Scotian minor league hockey team to sponsor.

The company’s principles also include supporting a sustainable fishery. “When we decided to start sourcing overseas resources to China, we made a policy that we would only work with, source, and buy sustainably managed resources,” Liu says explaining that Capital Seafood will reflect its parent company’s standards for sustainable fisheries. “If the resource is not sustainable, if the resource is not well-managed, if the resource is not beneficial to local fishermen and local communities, we will not touch it.”

“Our livelihood has always been the ocean, that is why our company is a pioneer in sustainable fisheries in China,” says Liu. Zhangzidao Group’s scallop operation is the only fishery in China being assessed by the Marine Stewardship Council (MSC) –currently in process. Liu hopes that soon they will become the first MSC-certified company in the country.

The company plans to eventually extend their list of seafood species for export –both shellfish and finfish– in time as their operations expand in Nova Scotia and potentially other Atlantic Canadian provinces.

Indeed the air is optimistic. “We’re steadily growing each day,” says Nickerson. “There are always learning curves and hiccups, but I feel that I have the team in place that are going to do their due diligence and will do us proud on any stage. So I feel confident.”

Liu is also optimistic, and dedicated to success. “We are here for the long term. We will invest money, build the facilities, hire local people, and be here as a good partner. We want to create a win-win situation between our company and the fishing communities.”

Resources Quarterly - Winter 2014-2015
This article originally appears in the Winter 2014-2015 edition of Resources Quarterly.

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