jetro-seafood-supplier
20
Oct

The Story Of How It All Came To Be

Before delving into my plan on how to deal with K and company going forward, it is important to understand where we stand as a company, which I will lay out in detail for my own sake as well. Since inception, the company has undergone a multitude of directional changes and now finds itself stuck woven in an immensely complex web of partners. This is not necessarily good or bad, but I am not convinced our focus is in the right place. To make matters worse, K’s explanation of the situation is an embellished version of reality, forcing me to probe other sources to link together the pieces of the puzzle.

The beginning.

K first came to Bangkok to expand his father’s business of selling fish, and as articulated before, was unable to without a license. They did not know that back then, and approached me to find them buyers, which I did. At the time, I brought them 5 leads – all mid-large sized Thai companies looking to import seafood for one reason or another. One of these leads was a company called MGD.

MGD is a well known and respected management chain that happens to own 8 high end Japanese restaurants throughout Bangkok. Interestingly, the man heading the company enjoys somewhat of a ‘celebrity’ status in Thailand and sports an impressive business resume, securing him some level of influence. Being the astute businessmen that they are, they are always on the lookout to lower costs, which was the premise for our initial meeting. Curiously enough, that was the only one meeting I was not able to attend and did not know of the outcome until a year later.

The folks over at MGD made it clear they wanted fresh and frozen Japanese seafood, and cheap. They had a certain swagger in their walk and were used to getting what they wanted, when they wanted. Rather than being intimidated, the guys from Hokkaido saw it as an opportunity. Why not? They had something unique to offer; prime seafood direct from the source. Little did they know, there are many others offering the same.

Long story short, a deal was struck for K’s company to supply seafood at 30% below market value, on the presumption that the volume would be significant. In order to do that, a joint venture would be created between MGD and K’s company in Hokkaido, dubbed MT. This new joint venture, MT,  would hold the import license. The structure: MGD would own 51%, K and co would own 49% – a split defined by Thai law (foreigners cannot own more than half).

Business commenced, but the volume was far less than expected. K and co were in too deep to turn back, and for the past 2 years have been left holding the bag, booking losses for every shipment. K’s company in Hokkaido would sell to MT, and MT would then sell to MGD. The profits at MT could be kept by K (MGD did not care because there were no profits).

Back in Japan, K and co were scheming how they could lower costs on their end, sourcing cheaper fish. If they could lower costs by means of partnering with a cheaper source, and at the same time find other buyers in Thailand to buy in size, they could lower their cost per shipment immensely, making the losses from the MGD deal not seem so egregious. With a little bit of hustle, the Japan side could be taken care of seamlessly. Finding Thai buyers on the other hand, not as simple, predominantly due to the communication barrier between the two parties, limiting them to rely on government sponsored business match-making services. When you find yourself having to rely on the likes of JETRO to find you partners, you know things probably aren’t going as swimmingly as it should.

Months of meetings and sales pitches later, they found another Hokkaido company, IZM, that would agree to partner. K miraculously got the folks at IZM to buy 5% of the Thai JV, a deal that is supposed to close next month. The 5% would come out of K’s holdings, effectively lowering his stake in MT to 44%.

IZM is a mid-sized company in Hokkaido that manages fishing vessels – giving them the best price on fish. They are already selling to Thailand, albeit through different importers who add on fat margins before passing it on to their end clients. This doesn’t sit well with IZM, so they see exceptional merit rerouting their orders through MT, which they could own 5% of and have full transparency on the added margin.

In regards to the politics surrounding MT, MGD could give zero fucks as to what happens. The talk of rearranging shareholders is nothing but noise to them, as they are already reaping the rewards of their savvy deal-making from the get-go. Their intention was never to create a stream of income from their ownership in MT, but merely use it as a vehicle to secure seafood prices they couldn’t have possibly gotten elsewhere.

On the other side of the equation, the shareholder structure seems to mean everything to K and co. For the past year, they have been myopically focused on meeting with wholesalers and local distributors, not for the purpose of selling to them, but rather trying to persuade them to buy a portion of MGD’s 51% – with the prospect of being able to push IZM’s low-cost seafood through the pipelines of said wholesalers and distributors. Most of K’s time in Bangkok is spent scurrying about, translator by side, meeting with wholesalers trying to secure a partnership.

“Invest in our company, because our seafood is better and we have one, single, money-losing deal that you can be a part of also”

That is a sales pitch made from hell, designed only to humiliate the pitchman negotiating that arrangement. It would take a real bozo to take the other end of that deal. The chances of that happening are slim to none, and an immeasurable amount of time has been wasted on this scheme. In addition, I hate the idea of pitching through a translator since too much of the message relies on the words chosen. Cultural discrepancies need to be taken into account also, and everything from an off-tune cadence to an awkward gesture can ruin the outcome of the pitch, should your translator not be in line with your vision.

Now, having said that, not all is in vain. On the plus side, what we do have is a strong connection to sources in Japan, an established logistics route, and a local partner with a respectable name. What we need is sales volume to strengthen the above relationships, not to find ‘partners’ to have them do the work for us.

Due to the fact that most end buyers of seafood are restaurants and cannot buy in substantial amounts, we may need to have a wholesaler to sell seafood. I get that. Ideally, we should be taking that position wholesaling but are under capitalized to do so. Frankly speaking, if we cannot wholesale ourselves, we are not even needed in the above structure of partners proposed by K. Nevertheless, there are other ways we can profit.

I was offered some stock from K, coming out of his 49%, which I will turn down indefinitely. To me, there is one opportunity, and one opportunity only, and that doesn’t involve useless meetings with a sundry of ‘partners’. In front of me, we have a vehicle primed for import and is not just limited to seafood. We can sell anything provided we have a buyer, something K couldn’t get but perhaps I can try.