Santa Monica Seafood seeking merger, aquisition opportunities after record sales

After record sales in 2021, Santa Monica Seafood executives are considering merger and acquisition opportunities, SMS President and CEO Roger O’Brien told SeafoodSource.

The Rancho Dominguez, California, U.S.A.- based seafood processor, distributor, retailer, and cafe operator has “never stopped looking at M&A activity,” O’Brien said.

“Had it not been for the start of the pandemic in early 2020, we would have likely completed a large acquisition that was in process at that time,” he said.

In 2021, the company actively pursued three merger and acquisition transactions, but ultimately decided not to follow through with the deals.

Now, SMS executives are reviewing two merger and acquisition options “and are hopeful we can complete at least one of them this year,” O’Brien said. “We continue to look for strong opportunities to help us grow, primarily geographically, but we will not complete a transaction if we do not believe we have properly addressed all risks.”

Last year, SMS realized the strongest sales in the company’s history.

“Starting in March, foodservice sales came roaring back and continued to increase throughout the entire year,” O’Brien said.

The company had actual fourth quarter sales annualized to nearly USD 600 million (EUR 531 million) and, in December, SMS saw the highest sales volume for the month in the company’s history, according to O’Brien.

Revenue hikes can be attributed to both retail and foodservice business increasing, and strong sales in its skin-pack division, O'Brien told SeafoodSource last May.

In December 2020, SMS bought out the equity interest in a joint venture controlling Ethos Seafood Group, a manufacturer of pre-packaged, chilled seafood products sold at retail outlets across the country.

Ethos Seafood, founded in 2012 as a joint venture between Santa Monica Seafood and Blue Earth Group, is now 100 percent owned by Santa Monica Seafood and is considered a division of the company. The Ethos Seafood name has been phased out as the group becomes Santa Monica Seafood’s value-added products division.

Revenue in that division soared 45 percent in 2020 and was up 32 percent in the first quarter of 2021 versus the first quarter of 2020.

In addition, SMS doubled the size of its Illinois operations last year, from approximately 26,000 to 50,000 square feet, which “significantly helped increase our revenues from this location,” O’Brien said.

“We currently have tremendous momentum from 2021 and anticipate organic growth in 2022 to be significant,” he added.

The company has come a long way since the start of the pandemic, when restaurant closures left some of its foodservice customers unable to pay their bills, O’Brien told SeafoodSource last May. SMS was forced to lay off around 25 workers, but kept on more than 750 employees, according to O'Brien.

And, as much as supply chain and labor issues plagued the food industry, SNS “weathered all those storms remarkably well in 2021,” O’Brien said.

“We ‘bit the bullet’ on labor wage issues in 2021 and believe we will reap the benefits of doing so with enhanced employee loyalty and retention in 2022 as a result,” O’Brien said.

The supplier also shifted to utilizing more of its own vehicles and drivers, to be less dependent on outside carriers. 

“However, this makes us more dependent on hiring enough drivers and, even though this has been and will likely continue to be an issue, we have done quite well in this arena,” O’Brien said.

While the company cannot directly influence supply chain issues, SMS’s purchasing strength “has allowed us to obtain product when other seafood distributors could not,” O’Brien said. “That and our excellent vendor relationships coupled with an increase in purchasing contracts with key suppliers should give us more tools to combat the supply chain issues.”

Still, O’Brien expects transportation, supply chain, and labor issues to continue to plague the industry this year and hike up the company’s expenses. 

Photo courtesy of Santa Monica Seafood