Sanford takes Glory Bay Salmon and Nutraceuticals to US market
Adding value to seafood products combined with quality NZ story helps drive volume and revenue growth for Sanford
Sanford is one of New Zealand’s largest seafood companies, owning 19 percent of the country’s fishing quota. Its vision is to be the best seafood company in the world. It was with this vision in mind that (now former) chief executive Volker Kuntzsch became part of Te Hono, attending the fourth Stanford Bootcamp.
“When I joined Sanford, the objective was to turn a commodity-focused business to an added-value-focused business, really highlight the value of our marine resources, figure out how to get these to the world and make sure people pay a generous price for our wonderful product, instead of just putting it into a container and shipping large volumes to faceless wholesalers.
“Bootcamp gave me the opportunity to come together with a network of leaders from other food and fibre companies who had similar objectives. To realise that there were other, likeminded people that were interested in collaborating across industry was the biggest eye-opener from Stanford. If you embark on reshaping a business in an environment where many are still focused on what’s always worked, it can feel uncomfortable sometimes, that you are the odd one out. To know and be connected to others undertaking the same process, learn from each other, have access to very learned people who can show you how things can be done differently and to leave with that knowledge and network was a great opportunity.”
Two years later, Sanford sent their newly appointed chief customer officer, Andre Gargiulo, to bootcamp and when asked what the benefit for him was, he too expressed joining a network of likeminded people was invaluable. “The diversity of the people, the industries they come from and their own experience and the way in which everyone is comfortable to share their knowledge as well as be a sounding board to test and challenge, was massive. How to play in the American market came from attending bootcamp. It wouldn’t have happened without being part of Te Hono.”
Te Hono bootcamp focuses Sanford’s sights on high value US market
The objective of bootcamp is that attendees return to their business and apply the knowledge gained to commence instigating change. Volker was already committed to transforming Sanford from a volume to value model and bootcamp gave him the extra confidence to start the journey.
“Bootcamp opened my perspective to the fact that the globe is a really small place and New Zealand plays a massive role. Too often, due probably to our sense of humbleness, we take the approach that we’re too small to make a difference when actually we are not, we have an ability to make real, significant change in markets that are a lot more mature and more complex than ourselves.”
It was with that belief that over the last four years Volker and Andre have led Sanford’s commitment from transforming from a volume to value approach; entering the USA’s food service market at the premium end with Big Glory Bay Salmon and the consumer market with nutraceuticals, investing in a multimillion-dollar marine extraction facility, overhauling its domestic customer touchpoint and exploring the value in alternative proteins. Volker and Andre, together with their colleagues on the executive team, have also had to lead a mindset shift of Sanford’s people and assess all aspects of how their supply chain is supporting their new approach.
As part of their involvement with Te Hono, Sanford was part of Team USA, a group of primary sector leaders who, whilst at bootcamp, also spent time engaging with leading businesspeople and visiting markets and companies, with the objective of eventually entering the market. From this exercise Sanford identified the opportunity to capture value within the American food service channel and in consumer nutraceuticals. Capitalising on these opportunities has led to double digit volume and value growth.
Andre says their involvement in Team USA has opened up markets they never thought were possible, to the point that the American market is their fastest growing and most critical market for future progress.
Action 1: NZ fisheries company enters the US market
Sanford invested time understanding the markets they were interested in by conducting market research, honing their brand story and once they were clear on who they would target and what they would say, they went about ensuring their messages were reaching their intended customers.
Their food service research involved engaging people to knock on doors to understand food service needs. Andre explains: “We did a study to understand who the key influencers in the market were, what areas we needed to be in, what the important markets were, what were the progressive channels and what cuisines were coming through. From there we developed a list as to how we could go about getting into these areas and executing a plan to do so. A lot of that came down to who we partnered with in market.”
The research resulted in Sanford identifying their Big Glory Bay Salmon product and its story as a perfect option to sell to the American food service industry.
Volker explains: “Via the work from Team USA and our research we realised that while we feel we are a big entity in New Zealand on the global scale we aren’t and that’s where the opportunity is, to highlight the value of what we do here, to the rest of the world as being something really special. Big Glory Bay Salmon is a perfect example of this. It is a farmed king salmon. The total volume of farmed king salmon globally is really small and the value of that lends itself to creating tremendous opportunity, especially when it comes from an area like Big Glory Bay in Stewart Island, that most people around the world have never heard of. You can describe the bay’s pristine environment and that you don’t use antibiotics or deal with diseases in that water. This product and its environment lends itself to the most premium markets, like Michelin star restaurants, and that’s what we targeted in the US. It does take door knocking and talking to chefs to tell that story, convincing them almost one fish at a time, but that is worth it. We are now working with high end restaurants in the US and also Hong Kong; through word of mouth it’s spreading. It is wonderful to hear a chef tell you they think this is the best fish they have come across.”
Action 2: The importance of taking the NZ seafood story to the world’s markets
The ability to tell the Big Glory Bay story and tell it well was crucial to their success. Andre drew heavily on the case studies at bootcamp and advice from companies and faculty which was to identify your niche and then tell your story.
“We’ve told a magnificent story about the country we are privileged to operate in, we’ve told a magnificent story about the quality of the products we provide and a stunning story about the people we engage to do that.
“I have an email from a customer in the States saying, ‘Only a Kiwi would have the balls to walk into my restaurant and start cutting up fish in my kitchen. Only a Kiwi would have the audacity to be told ‘no’ hundreds of times but keep coming back, and now I can’t not buy your fish, it’s so good’.”
Action 3: Meeting US consumer demand for natural health and nutraceutical products
Sanford knew that people were looking for healthy alternatives to current pharma-medicine, so they undertook an assessment of US consumer demand for marine extracted nutraceuticals. Sanford’s marketing team went into people’s homes in the States and interviewed them to understand what was important to them, what they were buying, how much they were spending and what it is they were trying to achieve by purchasing nutraceutical products.
This resulted in the development of a collagen product extracted from the skin of their fish and a mussel powder proven to assist with inflammation management.
The return Sanford now gets on its collagen products means that they would be best to catch the fish and discard everything but the skin. But for them, that approach doesn’t fit with their values or their story. Instead they are making their biggest investment into a new venture in 10 years to continue understanding how they can extract more value from their existing product volumes.
Action 4: Investing in fisheries and marine innovation and research
Due to the many opportunities in nutraceutical and pharmaceutical areas and increasing consumer demand, Sanford has invested in the development of a marine extract centre in Blenheim that will focus on science-based product research and development. The centre will cost $23 million to develop and opens in March 2021. Not only will the facility give them a platform to pursue nutraceutical and pharmaceutical product development, it will also be used to research alternative proteins, with the business exploring innovation with algae and seaweed.
Andre says of the investment: “People are looking for really healthy alternatives to current pharma-medicine and certain markets are prepared to pay significant prices for natural alternatives that are scientifically proven to work.”
This is Sanford’s largest single investment they have made in the last 10 years, which highlights the potential value they believe exists in exploring alternative proteins and human health benefits from marine extraction.
Action 5: Transforming local seafood offerings
Sanford has not only applied changes to how it approaches exporting; New Zealanders are enthusiastic consumers of seafood, so their customer preferences were also examined.
This resulted in an overhaul of the Auckland Fish Market. Formerly somewhere Volker describes as “a place where we used to sell a heap of dead fish” is now a vibrant space in the heart of Auckland’s waterfront precinct where they sell fresh New Zealand seafood.
“It’s a place we can now share our beautiful product in an appealing space, that is designed for our New Zealand customers.”
Action 6: Resourcing the change
All of these actions required significant investment and Andre says, “It also required a level of bravery to go ahead. Some things worked and others didn’t, but we were nimble enough in our approach and mindset to ensure we didn’t let the failures define the outcome of our attempts.”
As well as the investment in the marine extraction centre, Sanford has invested over $21 million in their overhead structure over the last four years to make the transformation happen, with investment having been made across the company. They remain mindful of finding the right balance in how they resource their research, development and innovation activities, ensuring the business remains profitable.
Volker indicated that deeply thinking about how to distribute resource was key to the rate and success of the change, “We’ve had to think about all areas of the business – things like ensuring operational planning processes support the new approach, such as linking the customer to the processing team, we’ve made sure that the innovation team understands what consumer expectations are, how we invest to extract more value out of resources – it’s a fascinating journey.”
Meeting the challenges of action
Challenge 1: Getting into the US market
Door knocking was not without its challenges, but Volker leveraged the knowledge that people are attracted to New Zealand and opened the door for them to come to visit and experience it for themselves as a means of gaining their buy-in and trust in the product.
With the industry connections and trust built and in-country visits proving valuable, Sanford is now in the process of collaborating with other food and fibre sector companies to create an experience for customers which will see them tour New Zealand, sampling produce from each company with the hopes they will choose to use those products back home. The idea is customers would begin to see this as the New Zealand offer, and one that comes from the heart and passion of the producers and serves as a basis for building trust for a strong relationship.
“The one thing that stands out for Kiwis is their hospitality. I used to be a fish buyer based in Europe some decades ago. New Zealand was the only country where the supplier invited me to their home on a Sunday afternoon and said, ‘Join my family’. Elsewhere that wouldn’t be possible. Our hospitality is something that we need to take advantage of. We want them to be able to tell their story back home, to their customers.
“To share New Zealand with others, getting people to come here and feel ‘wow’ and making them feel they want to buy product from this country because it is so special.”
Challenge 2: Overcoming fear and taking your people with you
Andre explained at the outset of this journey they had to overcome their personal fear of how big the US market was; their initial attitude meant they were taking the approach that they weren’t big enough in a volume perspective or presence perspective to be able to enter the market and be able to open doors.
“The experience proved to be totally counter to that. It was actually because of our size and the story we had to tell that opened up doors, because bigger companies, conglomerates or countries just couldn’t do that.”
As a leader, Volker knew changing the mindset within the company’s people of being a commodity-based business to a value-add company was going to be crucial to success and a large challenge his leadership team would face. He was correct, explaining this has been the biggest challenge to date.
“Sanford had been practicing 135 years of fishing with bigger nets and bigger vessels to create larger volumes in the most cost-saving ways. Now it’s all about highlighting the value of this product, it’s about the individual fish. It’s about taking the time to talk to customers about what they want, take that home and turn that into reality. We had to go from a volume approach to a very focused approach towards the needs of discerning customers and being very transparent about what we do.”
It has taken a number of years to make that mindset shift. It took introducing different people to the business, including bringing in people from outside the seafood industry. This was a big step and is the reason Andre was brought onboard and is playing such a major role in the transformation.
“Andre had an FMCG background but no seafood background. But I wanted to bring him and other people in because we needed people who understood how to deal with customers, how to create that emotion within customers so that they would be convinced to come here, experience our product first-hand, discover its special qualities and choose to purchase from us.”
For the existing staff, many of whom had been working for Sanford for more than 30 years, it required getting them to understand that whilst the company was making money there was so much more money to be had by taking a different approach, an approach that complements their decades of knowledge and expertise with a focus on consumers and their needs. It’s a shift that employee engagement scores are showing is gaining traction.
Challenge 3: Building a supply chain fit for purpose
Volker and the team found another challenge was making longstanding partners and customers understand why they were changing and no longer had a need for some intermediaries like a wholesale trader.
“Sanford had to forgo some really strong relationships because the partner essentially wasn’t able to change; their business model was about buying containers of fish at large volumes. Sanford needed people who understood how to deal with the end customer, and some partners weren’t fit for purpose.”
Andre believes that changing who you work with and letting go of long-standing relationships takes courage, but it comes back to their commitment to change and diversify. “We need to remain nimble to ensure that happens.”
Challenge 4: Delivering to your promise
Once Sanford had established a structure and relationships to support the transformation, the final challenge was living up to the expectations they had set; an expectation to deliver a product that is consistently of good quality and figures demonstrate that is happening.
Sanford is still on the journey of transformation and Volker believes it took about two to three years to really gain traction, mostly measured by their shift in their engagement scores. In the first three years the engagement scores were relatively flat at around 50 per cent but in the fourth year they returned a 72 per cent engagement score. Preliminary results for 2020 indicate improvement on last year’s scores.
“We live our values, care, passion and integrity in an environment of achieving together, and people now understand why we have those values. You can feel the vibe in the company changing, people are understanding the ‘why’ of what we do and are developing a pride towards it. They see each other taking action, the company making new investments and they feel proud of how we are doing things differently.”
In terms of financial success, Andre initiated the action of getting into the US market a week after leaving bootcamp in 2017 and it took two years from then to reach a place where Sanford is seeing exceptional results from the efforts. Sanford’s salmon sales volumes increased by 16 per cent in 2019 and sales revenue was up 23 per cent.
Sanford, fishing and the future
Looking to the future, the company has identified multiple changes that will affect them. The first is weather, as climate change creates new conditions in which to operate. Sanford is monitoring how they need to cope with that in terms of operational practices; how they farm salmon or mussels, how they undertake fishing, with vessels that are able to cope with increasing adverse weather conditions. The second is consumer expectations that they deliver a product that is free of anything that would be considered unsustainable.
Andre and Volker are conscious that they don’t have an infinite volume of fresh product to move, so it won’t allow them to operate in large commodity markets. That understanding means they are really specific and honed about where and who they sell to, as well as acknowledging that as New Zealand is so far away from most of their customers, they have to ensure their markets are diverse and they can get to them.
Volker explains: “It’s about looking for ways to operate at multiple levels, across multiple channels, to produce a diverse range of products and meet a variety of markets. This concept encompasses producing fish that suits high-end restaurants through to meeting consumer needs for cheaper sources of quality protein like Greenshell mussels, which is one of the best forms of protein and omega three.”
Reflecting on Sanford’s approach to Bootcamp
If Volker retuned to bootcamp, he would come with two objectives; a collective goal and a Sanford-specific goal, that are mutually inclusive.
The collective goal would focus on answering the questions: How do we ensure that everyone else in New Zealand highlights the value that we can get from the resources we have? How do we engage in preserving the image that New Zealand has in the global consumers’ mind, that is being threatened by conditions like un-swimmable rivers?
“The one real value I think we can create for ourselves as a country is the perception by consumers that this is a paradise, where what we produce is seen as being good for you. I would want to collaborate on actions that will preserve this image.”
The Sanford goal would be discovering who they can collaborate with to assist them to achieve their objectives. “Who can we partner with to invest in something that might be too expensive or risky to go at alone, but that by partnering would spread the cost and risk, and also the potential success?
“An ambitious vision around the need for New Zealand to lead by example in being good for the world coupled with an agreed list of relevant actions for each one of us to achieve that vision – that is the challenge I would present to the group.”