Blumar Seafoods- Integration in sea and on land

Blumar Seafoods- Integration in sea and on land

Blumar Seafoods, Chile

With over 2,500 miles of coastline, it’s no surprise that Chile has one of the most prominent fishing and aquaculture industries in the world. One of the largest firm in that industry, Blumar, was formed in 2011 from the merger of Itata and El Golfo, two firms which themselves had been founded in the 1940s and 1960s respectively.

As with many countries, Chile operates what’s known as an Individual Fishing Quota (IFQ), whereby each company is assigned a percentage of the fishing quota each year. Blumar currently has the largest share for Jack Mackerel, sardines and anchovies, hake and hoki.

Fishing only constitutes about 50% of the Blumar business, however; the rest is consumed by aquaculture, with salmon farming and  mussels dominant share of activity. The firm owns 50% of Saint Andrews, the largest mussel producer in Chile.

In sea and on land

The integration of fishing and aquaculture is just one way in which the firm is integrated. In fact, where Blumar differs from most of its competitors in Chile (and indeed, in other countries) is that its operations are integrated right across the board – in sea and on land.

After fish are caught (or farmed), they are processed in Blumar’s own processing plants and then distributed by Blumar, through the company’s sales and distribution channels. In salmon, the company is involved from the egg, right through to fresh water hatcheries, open pen farming, processing and sales (which includes sales offices in the US and China).

This level of vertical integration provides the company with better ability to plan and control its value chain, ensuring that the quality of the product can be ensured and that its developing relationships with the end client – by they in a traditional market like the US, or Blumar’s newer markets, China and Russia.

Challenges in the industry

Fishing could justifiably be considered as one of Chile’s greatest natural resources after its mineral deposits. Just like those minerals, the value of Blumar’s fishing stock can fluctuate wildly based on any number of exogenous factors. Even a precious resource comes with its challenges.

To begin with, the fishing quota is constantly changing – be it due to government decree (as in the 1990s which led to a wave of consolidation in the industry) or natural factors (as in the case of the earthquake that Chile suffered in 2010 (which led to another wave of consolidation).

Through adversity, comes strength: consolidation has been one of the saving graces of the industry, allowing its firms not just to survive, but to compete on a global level. For example, Blumar now co-operates in sales with three other Chilean firms in the Chinese market.

As Daniel Montoya, Commercial Director at Blumar recently explained: “we can see a certain stability in the fishing industry thanks to all the consolidation. I think the players operating there today are strong enough to survive. Of course, there are good years and bad years, but mostly it’s quite stable.”

Farming brings its own challenges. Consolidation hasn’t been an issue – with around 20 Chilean companies active on the market. Here, challenges over the past five years alone have included declining market prices due to over-supply and even an ISA virus scare at the end of 2009 and through 2010.

Corporate Social Responsibility

On top of its commercial commitments, Blumar is highly pro-active in the field of CSR; as Mr. Montoya states: “We are really committed to sustainability. Our  work has a responsibility to the environment, the workers and the communities here in Chile. It has to take into account all their needs.”

When Mr. Montoya joined the firm back in 1993, the concept of CSR was underdeveloped. It was enough for a company to take some pride in its home city and for it to be reciprocated. Mr. Montoya says: “Clearly, that just wasn’t enough and we needed to do more.”

As a large employer in its city – Blumar employs just over 1,400 locals – there are a lot of different voices to take heed of. But being pro-active in CSR, the company can anticipate the workers’ requirements and concerns before they arise. This is as true for other stakeholders as it is for employees.

Montoya says: “Everybody is conscious that the way we produce our products has to be environmentally sustainable. And certain standards under which we have to certify our production. We follow that trend. But then all this social responsibility is also important for buyers around the world.

Our communities are empowered. They’re more educated. They understand the potential impact that the industry can have both on the environment and their whole way of life. So they’re not willing to tolerate excesses that go beyond what they believe is acceptable.”

Navigating for the future

Blumar’s salmon exports to the United States comprise about 7% of Chile’s total. It finds itself in fith place among its exporters (2015). A look at the country’s sales over the past few years shows how volatile the business can be, even for the larger players in the market.

Nevertheless, the emergence of Blumar five years ago has given the market something different: a fishing company and an aquaculture, both with considerable heritage, entering a 50-50 merger, to create a company which is not only vertically integrated but horizontally integrated too.

When one is experiencing tough times, the other side can compensate. Daniel Montoya says: “We have a sound financial position because of our diversification. We’ve had positive years on the fishing side which has allowed us to keep our aqua culture operation running. We haven’t changed our stocking programs so that will give us production for the coming years.”

That will be music to the ears of consumers of Blumar’s high quality produce all over the world.

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