decades. Over those years is a distinct pattern that

repeats and repeats.

But in the last several years, that pattern is no

longer there.

This is Rick Goche.

He's been fishing since he was 13.

Today he's the owner of Sacred Sea Tuna, a family

owned albacore canned tuna business.

Rick is just a small part of the massive $40 billion

tuna industry in its latest tracking from NOAA.

The US imported over 637 million pounds of tuna in

2020. Nearly 71% of that was canned.

Over the course of the 40 plus years I've been in the

fishing industry, we've had to learn to be more

adaptable and more nimble in our response to new

technologies, new markets, changes in global markets.

The industry is largely made up of multinational

conglomerates, with large fleets of suppliers sourcing

tuna for household names like chicken of the sea,

owned by Thai Union Group, the largest seafood producer

in the world.

At the union is around 4 to $4.5 billion, and it has

been growing quite nicely over the past two years.

But despite its vast scale, the canned tuna industry has

faced some serious challenges since 2000.

Per capita consumption has dropped by more than 45%, a

decline mainly triggered by shifting consumer

preferences. But there are also some other challenges,

like years of consolidation, stifling

competition, questions around sustainability and

transparency, and a price fixing scandal lasting

nearly a decade.

The CEO of Bumblebee ended up getting indicted and then

convicted for price fixing.

All sorts of things going on.

This is a $40 billion industry so unsustainable,

illegal, unregulated and unreported fishing is a

major concern.

Cnbc visited chicken of the seas packaging facility in

Lyons, Georgia, and Wild Planet Tuna in

Mckinleyville, California, to get a better idea of the

inner workings of the $40 billion tuna industry.

Over 100 miles from the nearest ocean.

In the heart of Georgia's countryside lies one of

America's largest canned tuna processing facilities.

Chicken of the sea.

I'm standing in front of our giant drive in freezer.

These frozen pallets are brought in through the Port

of Savannah, where we receive them from processing

plants all over the.

Most of our fish are processed in Thailand, but

we also receive fish processed from other areas

of the world.

Most major tuna brands, like chicken of the Sea and Wild

Planet do not have their own dedicated fishing

fleets. Instead, fishing is outsourced to third party

suppliers.

We don't have any, any, any boats, any fishing boats on

this one. So we are buying all our fish from third

party suppliers and we don't control them at all.

Of course we are significant because we are

producing maybe one can out of 4 or 5 within the within

the world.

Canned tuna has been a staple in American pantries

for years, and for good reason.

It's cheap and loaded with protein.

The process of how it gets into American homes looks

something like this.

Thai Union and other similar entities primarily

gather tuna from global fishing fleets and tuna rich

zones. Fishing vessels spend days or even weeks

catching fish before returning to ports.

Some even prolong their time at sea using

transshipment, a process of where they offload their

catch to a carrier ship, resupply and head back out

for more. Once caught, the tuna is prepped for

processing, and that's in Thailand, where the tuna is

frozen, and from there it's transported to places like

Lyons, Georgia. The tuna shipped from Thailand is

then thought at chicken of the seas canning facility to

about 38 degrees.

It's then unwrapped from its plastic casing, cut to

size for cans filled with brine, oil or water.

Then pressure cooked in its retort process, where about

18,000 cans are cooked at a time.

Once the tuna is done cooking, it's then ready for

shipping. But there are other ways to prepare canned

tuna for the masses.

Just take Wild Planet's approach.

So I began canning tuna in 1999 with just pure tuna in

the can with only salt, no water or oil, and that cooks

in the can. Exactly the same as my Portuguese family

method that we had done for decades before, that

conventional tuna processing is done with pre

cooking of the tuna in ovens and then cleaning the

tuna once it's cooked, and the meat is firm and easy to

clean, and then it's packed in the can but it's lost its

moisture. And so they have to add water or oil and then

cook it again in the sterilization process.

Catching tuna is exceptionally challenging,

even for the largest tuna processor and exporter, Thai

Union Group, which brought in $4.3 billion in 2022.

Vessel costs are rising, import tariffs are pricey,

oil prices are constantly fluctuating, and tuna

migration patterns are becoming unpredictable.

When you head out on the open water and you are

trying to catch something that may or may not be there

and trying to follow it around the globe, and then

get it back to your point of origin, to then have it

processed, to then ship it out.

It's just a much more dynamic space, you know,

it's not a high margin business.

Thai Union brought over $980 million in revenue and a 3%

profit margin in the second quarter of 2023.

Overall, our operating margin stands around four

five 6% during the good year.

If you're not performing well, if you're not

efficient in your operations, then you will

lose some ground.

Despite being a tight margin industry, tuna companies

like Thai Union have faced dwindling US consumption

rates for decades, plateauing from 2016 to

2018.

Call it 2016 to 2018, there was an oversupply of tuna

simply because the trends weren't in the consumption

favorability. But since then and now, as it's

continued to expect to grow at a 5% rate, there's every

likelihood that tuna prices will continue to fluctuate

and go up as a result of the demand.

But in 2020 there was high demand for tuna.

A big part of that surge was the pandemic, as

consumers flocked to this affordable, protein packed

staple. Pushing consumption rates to its highest since

2011. That translated to a near 19% profit spike for

Thai union in 2020, with consumption growing about

18% from the previous year.

Us consumption stabilized, while Thai Union's profits

saw record highs.

But in 2021, Tuna's consumption rates dropped

again and consequently Thai Union's profits went down by

about 20% from 2021 to 2022.

Due to its unique positioning, Thai Union has

protected itself from serious downturns.

The company began as a processor and exporter of

canned tuna in the 1970s, but over the last 46 years,

the conglomerate steadily invested in acquired tuna

brands in order to compete in new markets.

So very, very rapid growth over the first 30 years, I

would say the past ten years.

I think we have been facing with a more mature market.

So the challenge we are facing is really how can we

attract, again, some new consumers in the category.

The tuna industry has experienced significant

consolidation, all of which has had implications on

market control and pricing.

In 2014, chicken of the sea pursued a $1.5 billion deal

to acquire Bumblebee, but that never materialized.

Instead, it opened up a Pandora's box of legal woes

for the top US tuna brands as the DOJ unmasked a price

fixing scandal.

There was a huge lawsuit in 2015 where Bumblebee and

Starkist and Chicken of the sea were thought to be in

collusion. There is a lot of competition in the space,

but I think it's one of those rare situations where

there's also competition.

At the time.

The three largest companies, Bumblebee,

Starkist and Chicken of the sea, collectively controlled

80% of the US market.

They were accused of conspiring to increase tuna

prices, leading to lawsuits, substantial fines

and imprisonment.

Bumblebee and Starkist pleaded guilty and agreeing

to fines of 25 and $100 million, respectively.

In September of 2017, Thai Union acknowledged the fact

that chicken of the sea had taken on the role of

whistleblower and therefore avoiding direct penalties.

Nonetheless, the company didn't emerge unscathed.

It took on settlements approximately $39.5 million

and went through a comprehensive overhaul of

policies and leadership structure.

First of all, we have been changing many people in the

top management and in the in the in the executives

also. Plus, we have been launching also a very strict

compliance and training program for, again for the

top management, the executives and also for the

whole sales force.

We made it very clear that there cannot be any

discussion at all with competitors, even friendly

discussions. You cannot have a friend with your

competitors because it's too dangerous and too risky.

On this one, the.

Facts of the scandal trickled into consumers as

well. The DOJ estimated $600 million in losses for

both customers and retail and business partners.

The former CEO of Bumblebee and the scandals alleged

ringleader, was sentenced to 40 months in prison less

than a year later. Bumblebee was acquired by

Taiwanese FKF for roughly $928 million.

The pandemic caused serious supply chain backlogs

entering 2023.

Inflation increased operational costs because.

We had to do some some price increase, and the whole

industry has been doing some price increase to cope

with the inflation.

The price of the tuna right now is record high and has

been record high since the beginning of the year, so we

are still impacted a lot by inflation.

One pressing concern for Thai Union has been freight

costs. Being a global supplier with a vast

manufacturing base in Asia, shipping from Thailand to

its largest importer, the US has ballooned.

Of course, we have a very large manufacturing

footprint in Asia and in Thailand, so the price of a

container from from Thailand to the US is very

important for us. And we have been facing some prices

multiplied by 4 or 5.

Last year we have been facing also after the war

between Russia and Ukraine, on inflation, on the energy

prices, also on the packaging and also on the

utility prices.

But the price surge isn't limited to just operational

logistics. The cost of tuna itself has spiked.

Typically, Thai Union sourced skipjack tuna for

anywhere between $1300 and $1700 per ton, or 2,000

pounds in 2023.

Those figures are hovering between 1800 to $2000.

And the issue we are facing is when you are reaching

this kind of level of tuna price, then many customers,

they will just wait and see, okay?

They know the situation is not supposed to last very

long, so they will just stop ordering and they will

wait for some some price decrease.

And this is a bit the situation we have been

facing since the beginning of 2023.

To better mitigate these price shocks, Thai Union has

been proactive, trying to push for automation and of

course, raising prices.

Beyond inflation and record prices, the industry is also

battling more existential threats.

Sustainability, climate change and illegal fishing

are just a few areas affecting large

conglomerates like Thai Union and smaller business

owners like Rick O'shay.

The way I see it, the the biggest threat to the

viability of the albacore fishery to future

generations of fishermen is climate change.