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Who Controls Fish Processing in Newfoundland & Labrador?

in Analysis/Featured/Investigation/Longread by

News that Royal Greenland is Newfoundland and Labrador’s largest fish processor has reignited discussions about what corporate concentration means for the fishery. The province’s fisheries minister, Elvis Loveless, has expressed confidence in the Royal Greenland deal and says the matter is now closed. But opponents of the deal say it is still unclear what a larger footprint for fewer corporations—including foreign ownership—means for domestic enterprises, workers and communities.

Among the critical unanswered questions for the company are: How much quota does Royal Greenland stand to control with the new deals? And will the company—which is owned by the Government of Greenland (a Danish territory)—support fair wages and conditions for workers here?

In four years, Royal Greenland went from having no presence in the province to becoming its largest fish processor. That raises a broader policy question for the provincial government: Is corporate concentration a central part of the province’s long-term strategy for the fishing industry? If so, then how does that benefit everyday Newfoundlanders and Labradorians?

A Royally Green Deal

“This deal, this transfer is done,” Elvis Loveless, Newfoundand and Labrador’s Minister of Fisheries, Forestry and Agriculture, told reporters at the end of October about Royal Greenland’s purchase of St. Anthony Seafoods Ltd. and Quinlan Brothers Ltd. With that seal of approval from the Minister—who holds the ultimate authority over processing licences in the province—the deal was as good as done.

But as of this week, Royal Greenland is not yet prepared to discuss details, saying the deal has not been finalized. 

“We are in positive dialogue and due diligence regarding Quinlan Brothers. While in process, we have no further comments to this transaction,” wrote Hanne Kvist, the Director, Market Development and Marketing for Royal Greenland, in an email to the Independent on November 5th. On November 16th, she followed up by expressing that “we do not wish to comment further on possible timeframes from this on-going process.”

Size of the deal

Once the ink dries, the deal will add five registered sites to Royal Greenland’s existing nine locations in Eastern Canada. This brings their total presence to 14 sites in the region, 12 of which are in Newfoundland and Labrador. (See Table 1, noting the Black Duck Cove location was completely destroyed by fire in 2019, with no plans to rebuild; the company also owns processing plants in the communities of Matane, Quebec and Louisbourg, Cape Breton, Nova Scotia.) Royal Greenland’s production sites represent about 13 percent of all registered seafood processing facilities in the province (of which there are 90 listed in 2020-21) and 17 percent of all registered primary seafood processing plants (of which there are 69).*

*A note regarding the methods to calculate these percentages. The numerator (12 sites) and the denominator (90 and 69 sites, respectively) are based on registered processors in the province. The Black Duck Cove location is included as the twelfth site (see Table 1); even though a fire destroyed the plant, it is still listed in the 2020-21 government processors licenses list, which is the most up-to-date list on this subject.

Table 1. Royal Greenland’s Seafood Processing Plants (existing and in negotiation; including full or partial ownership) in Newfoundland and Labrador (NL).

Sources:
i. In email correspondence, Royal Greenland said—not accounting for the latest deal—the company is the major shareholder in eight processing locations in Atlantic Canada: six via their ownership in Quin-Sea Fisheries Ltd. in Newfoundland (Old Perlican, Cape Broyle, Cupids, Southern Harbour, New Harbour and Conche) and one in each of Matane, Quebec (Eastern Quebec Seafoods Ltd. in Matane) and Louisbourg, Cape Breton, Nova Scotia (A&L Seafoods Ltd.). This information is also available on their website: https://www.royalgreenland.com/royal-greenland/our-locations/production-sites/. Upon clarification, also by email, the company indicated they also retain partial ownership of Independent Fish Harvesters in Brigus, however, they don’t customarily list sites for which they are not the major shareholder (e.g., their ownership is less than 50 percent). The company also clarified that Conche Seafoods is managed by Quin-Sea Fisheries Ltd. (which represents an update to government sources, reference iii).
ii. The Fish, Food and Allied Workers Union (FFAW-Unifor) cite the above as the full complement of Royal Greenland production facility ownership (including co-ownership) in the province: see “What is Royal Greenland” https://ffaw.ca/app/uploads/2020/10/Corporate-Concentration-Submission.pdf.
iii. Government of Newfoundland and Labrador 2020-21 Fish Processors Licences Expire March 2021: https://www.gov.nl.ca/ffa/files/2020-21-processors.pdf includes all of these sites as active registered facilities (including the Gulf Shrimp Ltd’s Black Duck Cove location which was completely destroyed by fire in 2019; Baie Verte is listed as a site managed by Gulf Shrimp Ltd., but reference iv cites that location as operated by Quinlan Brothers Ltd., which Royal Greenland confirmed; Conche Seafoods is recognized as a separate entity, but Royal Greenland clarified it is managed by Quin-Sea Fisheries Ltd.)
iv. Fish Processing Licensing Board August 31 – September 3, 2020 Board Recommendations:  https://www.gov.nl.ca/ffa/files/R-Fish-Processing-Licensing-Board-Recommendations-to-Minister-Loveless-September-2020.pdf indicates a change of ownership of the five listed locations above, noting the Black Duck Cove location was destroyed by fire in 2019.

Across Eastern Canada in 2020, Kvist says Royal Greenland directly employs about 900 employees, consisting of plant workers (including seasonal workers), landing site and office employees in eight facilities across NL, NS and QC. That number is significantly smaller than estimates from the Fish, Food and Allied Workers Union (FFAW-Unifor, the union representing most inshore fishers and plant workers in the province), which reports Royal Greenland currently employs 1500-1800 plant workers in the province and will stand to employ as many as 2300 here with the new deal. (FFAW-Unifor says their numbers come from provincial government sources, but the Independent could not corroborate the figures.)

Given the province reports fish processing employs over 6,000 people (6,120 in 2019) in the province, the FFAW-Unifor estimate would mean Royal Greenland is the primary employer of a sizable share of fish processing employees here. The discrepancy in numbers between the company and the union likely relates to these factors:

  • First, Royal Greenland accounts for sites for which they are a major shareholder (e.g., those figures exclude employees at Independent Fish Harvesters). 
  • Second, the company captures Full Time Equivalents (FTEs) rather than employees (e.g., “this implies that i.e. three seasonal workers at any plant . . . may convert to one FTE,” Kvist told the Independent, adding “we consolidate these numbers into FTEs once a year.” This further explains why the figures on the company’s website are lower still; for example, they report 569 employees in all countries, outside of Denmark and Greenland, in 2019). 
  • Third, the figures do not yet include employees at sites that are part of the new deals with St. Anthony Seafoods and Quinlan Brothers. 

Given Quinlan Brothers was already one of the province’s larger processors, its addition will unquestionably account for a sizable rise in Royal Greenland’s employee numbers.

For context, for the last financial year 2019, Royal Greenland employed a total of 2,166 FTEs globally (again, that number only includes sites for which the company has majority ownership) with more than 50 (fully- or majority-owned) facilities globally. This includes 37 in Greenland, eight in Canada, three in Germany, three in Cuxhaven, and the company owns 50 percent of a processing plant in Chile.

How the deal happened, and two outstanding questions

In September 2020, the Fish Processing Licensing Board (FPLB)—an arms-length government board that makes public recommendations on fish processing license proposals or requests made to the NL government—tabled its recommendations to the Minister regarding the Royal Greenland deal.

In its report, the board recommended the change of operator, with the Greenlandic company gaining partial ownership of Quinlan Brothers Ltd.’s fish plants in Old Perlican, Bay de Verde, Baie Verte and Black Duck Cove; and, in partnership with Clearwater Seafoods, of St. Anthony Seafoods (the percentage of ownership afforded the respective parties is redacted, however). While the board cited limited to no opposition against the deals—it actually cited 24 letters of support for (and one letter of opposition against) the St. Anthony Seafoods deal, and no letters of opposition for the Quinlan Brothers deal—they warned the province of the implications of growing foreign investment in the fishing industry:

“The Board had a lengthy discussion on the issue of foreign investment in the fishing industry, in particular, foreign investment by companies in the fishing business who are normally our competitors in the world markets. It raises the possibility of key decisions affecting our industry and fishing communities here in Newfoundland and Labrador being made in another country. This matter is outside of our jurisdiction as a Board; however, it might be a policy matter that the Government may want to pursue. The level of investment is getting to be significant.” (See the board’s full recommendations.)

The contents of the board’s report—and the provincial government’s response—raise two critical questions. The first is a question of transparency, while the second is a matter of policy.

1. Why does the report cite no letters of opposition to the Quinlan Brothers Ltd. deal?

Even if there were no formal letters, there was public opposition. Most notably, FFAW-Unifor outlined objections in two media releases (the first in March, another in September), as well as a report detailing concerns over corporate concentration in fish processing, addressed to the Department of Fisheries and Land Resources in July and in direct response to the board’s public request for information (see Figure 1; the report is also fronted with the email correspondence, dated in July, between the union and the department). They also appeared at a hearing to the board in July. With the exception of the September 22 media release, all of these measures were taken before the board tabled its recommendations to the government on September 9, 2020.

FFAW-Unifor’s project manager, Robert Keenan, additionally wrote a letter to the editor of The Telegram on October 15th citing the deal as “A terrible deal for the fishery.” Other opposition over the foreign takeover of fish plants in the province came from former president of Fishery Products International, Gus Etchegary, and former president of the Federation of Independent Sea Harvesters of Newfoundland and Labrador (FISH-NL), Ryan Cleary, as examples. 


Figure 1. The public notice from the Fish Processing Licensing Board, which makes public recommendations on fish processing license proposals or requests made to the provincial government, requesting evidence on the issue of corporate concentration regarding the Royal Greenland deal. FFAW-Unifor responded to this request, tabling a report to the board and government in July 2020.
2. Will the Minister open public discussion about foreign corporate concentration in fish processing, and what it means for the long-term future of the fishery in this province?

Beyond its jurisdiction, the board signaled to the provincial government that the level of foreign investment in this sector is “significant” and an issue the government “may wish to pursue.” To do so, one suggestion from the union representing fishers and plant workers was to allow the deal to be debated on the floor of the House of Assembly.

Not wanting to stall the decision or introduce politics (the board operates at arm’s length from government), the Fisheries Minister didn’t bring the deal to the House. As the ultimate authority over fish processing licenses in the province, the Minister has significant leverage to compel changes by Royal Greenland if necessary; for example, he may suspend processing licenses at his discretion. (The Independent reached out to the Minister’s office asking for actions he’s authorized to take, but did not receive a response by time of publication.)

There’s nothing warranting an action of that degree. In fact, the Minister has commended Royal Greenland’s contributions, citing its investments and job creation (a reported $21M and 650 new jobs in the province since 2016). But opponents of the deal say the most critical questions have not been asked: What controlling agreements or how much quota stands to be controlled by Royal Greenland with this new deal? In other words, how many financial agreements does Royal Greenland’s NL-based fish processing companies have with individual inshore fishers, in effect, granting the company control over their quotas? Also, is Royal Greenland prepared to support collective bargaining reform—fair negotiation of wages and other employment conditions for workers in the province?

Opponents of the deal say these questions ought to have been answered before the government approved the deal. Transparency on these matters can also influence future fisheries policy and practice.

History Repeating

If this deal seems like history repeating, that’s because it is. Royal Greenland brokered its first deal in the province in 2016, garnering 25 percent interest in Quin-Sea Fisheries at the time. That deal happened fifteen years after Royal Greenland established itself in Quebec in 2005. The 2016 NL deal also gave Royal Greenland a spot in the Nova Scotia processing industry (and based on the company’s 2019 annual report, it has recently secured full controlling interest in the NS facility). 

Then, as now, the usual sources voiced the same opposing arguments. And back in 2016, the issue of controlling agreements was similarly left on the table. At the time, then-Fisheries Minister, Steve Crocker, commended Royal Greenland’s “wealth of experience with onshore fish processing and international marketing” and argued the company’s presence would “help diversify [the] province’s seafood industry.” Overall, the Royal Greenland deal followed a similar path to government-approval in 2016, as it did this year. 

But in 2020, it has become abundantly clear that foreign acquisitions leading to corporate concentration are not isolated events. So then, are they part of the province’s long-term strategy for the fishery? If so, with reduced processor competition, how exactly will the province protect wages and conditions for NL workers? Can we expect to see more buy-outs of NL companies? And what entities, ultimately, control the majority of agreements governing fisheries quotas in the Northwest Atlantic?

The Big Three

While Royal Greenland is the largest processor in the province, together with two domestic enterprises (both with NL roots)—Ocean Choice International L.P. and Barry Group Inc.—are what those in the industry refer to as “The Big Three.” With between 8 and 12 registered processing plants each in the province (see Table 2), The Big Three collectively own 32 percent (29/90) of all registered facilities and 38 percent (26/69) of all registered primary processing facilities. For perspective, the next biggest processor in the province has five plants (Labrador Fishermen’s Union Shrimp Company Limited) with all others owning one or two.

Table 2. Registered Processing Facilities and Processed Species of “The Big Three” (Royal Greenland, Barry Group Inc. and Ocean Choice International L.P.) in Newfoundland and Labrador 2020-2021.

Source:
i. Government of Newfoundland and Labrador 2020-21 Fish Processors Licences Expire March 2021: https://www.gov.nl.ca/ffa/files/2020-21-processors.pdf
ii. The Independent emailed Barry Group and OCI to validate, but the companies did not supply information in response to our request.

How powerful is The Big Three’s processing capacity in the province then? Take shellfish as an example—in 2019, while shellfish represented just over half of total landings (52 percent), it represented the majority (83 percent) of value ($659 million in 2019 alone). In order of value, snow crab, shrimp, and lobster haul in the greatest profits, respectively.

Collectively, The Big Three have the majority of processor licences for snow crab (48 percent, with 12 of the 25 registered processing sites) and shrimp (66 percent, with 6 of the 9 sites), and one-third of the share for lobster (30 percent, with 9 of 30 sites). 

A processing footprint of that scale is potentially problematic for a couple of reasons:

1. From minimum pricing to monopsony

The collective bargaining system in NL establishes minimum prices for fish. Under this system, price flexibility exists thanks to wharf competition, with processing companies competing with one another to secure landings from fishers. To work well—to garner the best landed value for catch (or price per fish, which is essentially, the fisher’s wage) on the wharf—requires multiple companies competing. But when only a few companies dominate, then the wharf becomes an oligopsony, a buyer’s market, and fishers can no longer shop around for better prices or conditions. (A monopsony arises when there is only a single buyer.)

2. Policies meant to protect workers risk falling short

When Royal Greenland first entered the province’s processing sector in 2016, then-fisheries minister Steve Crocker said there is nothing to stop foreigners from buying up fish plants in this province, as long as they comply with minimum processing requirements (MPR) for exported products.

But the MPR, a policy meant to protect NL plant workers’ jobs by requiring the “minimum amount of transformation of a species from its live and/or landed state before the product may be shipped from Newfoundland and Labrador” (as per the Fish Processing Licensing Policy Manual), no longer applies to the European Union—where Denmark receives about 5 percent of NL seafood exports (NL 2020). The MPR was phased out as part of a recent trade agreement with the European Union (against initial opposition by the Dunderdale government). And so, a policy intended to protect jobs in the province (and used to rationalize foreign investment) is now significantly weakened.

Meanwhile, over the last 20 years, larger processing companies, particularly The Big Three, have bought up small- and medium-sized processors. While new processing licences can be issued, FFAW-Unifor told the Independent that “it will be very difficult for another company to break the stranglehold that the ‘Big Three’ currently have in crab and increasingly, with lobster.”

Corporate Concentration: Necessary Dependency, or David and Goliath?

Often, the best predictor of the future is past practice. If that’s the case, then is the viability of the commercial fishery in this province dependent on corporate concentration (be it domestic or foreign)? 

One sobering perspective came from someone closely involved in the fishery and processing sector in rural NL for decades. (They asked the Independent to maintain their confidentiality). They said (paraphrasing): It’s impractical for smaller processors to set up shop in rural NL because it’s dying. If a company wants to invest in rural NL, are we supposed to say no? There’s already corporate concentration in the fishery in this province, welcomed by the provincial government.

Unquestionably, the fishery faces greater challenges than ever before. This has been accelerated by the COVID-19 pandemic, which has pushed many domestic enterprises to the brink and, indeed, opened them up to foreign investment and acquisition. (Consequently, the federal government committed to greater scrutiny of such cases under the Investment Canada Act during the pandemic, although that scrutiny does not appear to have been applied in this case—why not?). The same federal policy statement recognizes “Foreign direct investment [as] essential in ensuring that Canadian businesses are able to invest in innovation and to compete in the global economy.”

For its part, Royal Greenland says its presence in the province is a win-win. “As a company originally based in Greenland we see only advantages to both Eastern Canadian and Greenlandic stakeholders—seen on a global scale we are neighbours, and it is our experience that, when joining forces, the fishing and processing communities in Greenland and Eastern Canada can establish a much stronger position on the world market, where we compete against strong fisheries and species from other parts of the world,” Kvist told the Independent.

In this province, the fishery employs nearly 16,000 people from 400 communities (based on 2019 government figures), so a key question must be: Is what’s good for the commercial fishery good for the fisher and plant worker? Only by understanding who controls the fishery can we begin to address that underlying and critical question. If governments will not pose the tough questions to major corporations—especially those whose primary controllers and beneficiaries are beyond our borders—then perhaps we have our answer.

Jenn Thornhill Verma is a freelance journalist and Fellow of the Royal Canadian Geographical Society. Jack Daly is a fisheries policy analyst and research assistant.

Photo: Processing cod at St. Anthony Seafoods, September 2018. Photo by Jenn Thornhill Verma.

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