Profitability, restructuring and innovation can lift seafood to unprecedented levels.
He has been both Minister of Fisheries and Minister of Petroleum and Energy. But Eivind Reiten is particularly known for his long-standing efforts as industrial conglomerate Norsk Hydro’s Chief Executive. Conference organizer Seafood Norway has brought in Reiten to tell what the seafood companies can learn from some other industries that have undergone similar developments.
Hydro is a Norwegian-owned energy, metals and chemicals multinational that used to own Hydro Seafood (known earlier as Mowi) until 2000.
Reiten was initially crystal clear on what is absolutely fundamental – for every industry.
“The trivial word “profitability” is the term number one. You lose a lot if you do not safeguard the basic profitability” said Reiten, adding: “It is not that we found a lot of oil that was unique, but the profitability we achieved.”
He does not hide that he shares the widespread perception of huge income opportunities in the marine sector over the decades to come.
“At the moment, this industry has a very high profitability. And that is what makes this industry the largest value driver than anyone else in Norway. It sounds trivial, but important to bring it with,” said Reiten.
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He shared his experience as a Hydro boss.
“The process industry was succumbing in the 80s. It did not help to keep hiring advisors to write brochures about how important this industry was to districts, employment, fjords and mountains. We took it in. We went through a restructuring process and regained profitability,” he said.
“In 2013, the major oil companies had to have an oil price of USD 120 per barrel in order to achieve an acceptable return on capital for shareholders. We were caught in a cost trap. And why did we go into this trap? We underestimated the complexity of developing the industry. In addition, we also got a industry management structure characterized by increasing bureaucracy from the authorities,” he explained.
“This could be a burden so heavy it can only be carried when the prices are extremely high. Then it is convenient to sit back when prices are as high as now. But mark my words, there will come a day when this industry must have a different cost structure for this to perform well,” said the Ex-Hydro boss.
The ability and willingness to innovate is also central, said Reiten.
“I do not want to interfere here in the discussion about [the processing ship] “Norwegian Gannet”, but one thing the oil industry has been good at is chasing innovation to follow the product cost-effectively to the end customer,” he said, warning against resistance to innovation.
“If there is a road that is cheaper to bring the goods to the market, then that road will eventually win,” he said.
Reiten advocates tackling the problems, in the same way as the process industry took hold of the pollution that was stifling it in the 1980s.
“We took hold of pollution. We took hold of that and changed the industry, and today this is not a topic. Because if you are against this today, then you are against the product itself,” he said, while encouraging farmers to tackle this pollution problem with the highest degree of seriousness.
“Be extremely objective, but be aware that if you are going to deliver 14 million fish meals daily, then that also comes with a certain environmental impression,” he advised.
Reiten then came back to his first focus area: Costs and control of this. “Push as much of the cost base over to variable costs. It is part of the solution to succeed in an industry with fluctuating prices,” he added.
“If you go out on an oil platform you will not meet many people from Equinor or Shell. But you will find many people with helmets and overalls from a wide range of highly specialized subcontractors. There is extreme expertise that ensures that we get the oil up in a cost-effective manner. It is the sum of this expertise that makes the industry so competitive. Being competitive is to live with subcontractors who are extremely skilled,” he said, with a clear nod to the extensive undergrowth of supplier companies that have emerged in the aquaculture industry over the past decade.
At the same time, the former politician used the opportunity to tell those who celebrate that the “basic resource rent tax” is politically dead, not to be to impressed by the political breakthroughs they get in the parties national meetings.
“Remember there is a municipal election the autumn,” he added.