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Photographs by RA Chandroo

The Power Of I 2018

Fishing for Growth
After making it big in seafood exports, this Kochi-based firm now wants to dominate local waters

Prathamesh Mulye

Sorting as usual: With a two-pronged seafood strategy, Kochi-based Abad Fisheries is sailing through turbulent times

Abad Fisheries’ story began in the early 19th century when Usman Mohamed Hashim sent sun-dried shrimps to Burma. What started as a one-man driven exporter business has today turned into a group worth 10 billion. The company has 12 factories across India, which send processed seafood to countries in Asia, Europe, the Middle East and the US. The seafood exporter boasts of a production capacity of 300 MT per day and has cold storage capacity of over 16,000 MT. The Abad Group has diversified into hospitality and construction businesses, and has made inroads into the domestic market with ready-to-eat products and stores. With diversified units and large capacity, the company hopes to ride over turbulent times in the global seafood market.

At Marine Drive, off the Kochi coast in Kerala, a 50-minute drive from Kochi airport, a unit of Abad Fisheries processes 50 tonne of seafood every day. Faraz Javeed, director, Abad Fisheries, who is walking us through the factory that was set up in 1995, proudly states that this is one of the smaller factories of his 10-billion Abad Group. “We do have bigger factories with higher capacity on the east coast but we produce valued-added products here,” says Javeed.  

Faraz Javeed, director, Abad FisheriesAfter wearing the factory hygiene uniform, we enter the primary area of the factory. Here shrimps that have freshly arrived from the farms undergo the careful process of sorting, cleaning and peeling. Following this value-addition, seafood is packaged and transported to supermarkets and stores. And when you buy a value-added seafood product from a swanky retailer in your city, there is a good chance that they are from this factory. 

The company, started by Usman Mohamed Hashim in 1931, has come a long way. The seafood division of Abad Group today has a turnover of 7 billion with 12 factories across India. The history of Abad Fisheries dates back to the 19th century. After starting off as a sun-dried shrimp exporter, the company pivoted to canned seafood in the 1950s and then switched to exporting frozen shrimps in the 1960s. 

Sitting in his plush sea-facing office, Javeed recounts the journey of his family-run business. “My great-grandfather used to go alongside the cargo to Rangoon (now Yangon) to sell shrimps. They used to go by steamers in 1930,” says Javeed. As the business grew, the company adopted several modern practices such as freezing technology to provide quality products. “We were the first company to bring individual quick freezing machinery. We imported it from Sweden in the 1980s,” recounts Javeed. 

Big Leap

Abad’s seafood business has spread its wings over the years with Abad Fisheries and Abad Overseas being the major contributors. Abad Exim, Abad Exports, CAP Seafood, Abad Delicacies and Abad Seafood Agency are other subsidiaries of Abad’s seafood division. Apart from Kerala, Abad has factories on the east coast in Visakhapatnam, Nizampatnam and Chennai. From its 12 factories in India, the company exports processed seafood to its customers in Spain, Italy, China, UAE, Qatar, Egypt, Algeria, Tunisia, Australia, New Zealand, Japan, South Korea and Taiwan. 

Powered by a processing capacity of 300 metric tonne per day and 16,000 metric tonne of cold storage infrastructure, the company processes a wide range of seafood catch that includes vannamei shrimps, cuttlefish, squids, grouper, red snappers, red mullet and the Indian mackerel. “It’s mostly a seasonal market. Whatever comes in the season, we pack it and export. We have regular buyers for these products,” says Javeed. While much of what is processed is seasonal, farmed shrimps, which have been the key growth driver for Indian exporters in recent years, are harvested throughout the year. 

In recent years, Indian seafood exports have been fuelled by shrimps. Riding on the wave, the company has reaped the benefit of an uptick in global demand. “From the point of view of export markets, the advent of vannamei shrimps from the east coast has been a new revenue addition. These shrimps are grown in Andhra Pradesh and are one of the primary exports of Abad Overseas,” says Javeed. The revenue of Indian seafood exporters from shrimps grew 21% and 31% in FY17 and FY18 respectively even as Chinese, Vietnamese and Thai production was hit by the dreaded early mortality syndrome, according to Crisil.

Hetal Gandhi, director, Crisil ResearchWhile Indian seafood exporters had a dream run in FY18, the good days seem to be over. “Now, two factors are threatening shrimp realisations — a spurt in supply following the increased production of vannamei shrimps in India and other key exporting countries, and a slower offtake from the US, a major importer,” says Hetal Gandhi, director, Crisil Research.

Expansion spree

To take advantage of growing markets, some of Abad’s competitors such as Apex Frozen Foods and Avanti Feeds are on an expansion spree. While Apex is scaling up its capacity to 20,000 mtpa from 9,240 mtpa, Avanti Frozen Foods, the shrimp processing unit of Avanti Feeds, has also added 15,000 mtpa shrimp processing capacity by spending 1.2 billion. 

Abad, too, is looking to add an additional 150 tonne of freezing capacity in two years. “We are based in seven locations across south India, and now we are expanding to newer markets. Going forward, we are looking at setting up a pan-India chain of cold storages,” says Javeed.

But the US, which is the largest importer of Indian shrimps, has witnessed sluggish demand. Crisil expects US shrimp export realisations (in dollar terms), which account for 70% of export value, to fall 10% in FY19. Moreover, rising raw material cost and higher anti-dumping duty in the US could dent the operating margins of Indian seafood exporters. Under the protectionist drive of US President Donald Trump, the US Department of Commerce has now suggested a 3x increase in anti-dumping duty from 0.84% to 2.34% on shrimp imports. 

However, Javeed is unfazed by the fall in prices and the possibility of an oversupply of shrimps. While he sees these concerns as near-term challenges, he claims his company is insulated from the turmoil in the global seafood market. Pointing out that exports to the US only account for 2%, he says, “The US is not a large market for us. We focus on different products as compared to other players. The problems which exist for US-centric players don’t apply to us”. 

He also believes that consumption will only increase in the future and demand for seafood products will rise. While Crisil doesn’t expect India’s seafood industry to replicate the 25% growth in FY18, its research arm predicts growth of 17-18% in FY19. 

Additionally, a weak rupee has been beneficial for seafood exporters. Rising crude oil prices, trade war concerns and weakness in emerging market currencies have pushed the rupee to a record low this year. As the rupee continues to remain under pressure, the currency depreciation is likely to limit the impact of sluggish demand and oversupply. “Now that the rupee has depreciated, it is very beneficial for us,” says Javeed.  

While the depreciation in Indian rupee will help Indian seafood exporters to increase revenue, it wasn’t always smooth sailing for Abad Fisheries. With the flood of foreign exchange inflow, in 2006, the rupee had appreciated by 10%. “There was a slowdown in the export market when the rupee was very strong 10 years ago. We were not competitive compared with countries such as Vietnam or Thailand. Now with the rupee weakening, we have become far more competitive,” says Javeed. 

Crisil’s Gandhi is of the opinion that a 2% depreciation in the rupee and reduction in hatchery seed prices will partially offset a fall in dollar realisation. 

Exercising control

Like its competitors, Abad Fisheries has started the process of setting up aqua farms in Tamil Nadu, Andhra Pradesh and Kerala. “If you have control over the whole process from harvesting to processing, then you have much better control over quality and the sizes which you wish to harvest. You also have control over the kind of feed used and that ensures food safety,” says Javeed.

Vijayan kk, director, CIBAVijayan KK, director, CIBA, believes that Indian seafood exporters must also invest in improving the quality of shrimps. He says exporters must give incentives to farmers to produce high-quality shrimps. “Basmati rice exporters give incentive to farmers who grow high-quality rice. Similarly, Indian seafood exporters should also give incentives to farmers who produce high-quality shrimps,” says Vijayan.

Comparing Indian seafood exporters to their developed country counterparts, he says, “In Europe and the US, the private sector also supports R&D, thereby strengthening the efforts of the government and government institutions. While in India, seafood industry, whose exports are worth around $5 billion, hardly contribute anything to R&D”. 

Homeward bound

After successfully establishing its presence in the international market, Abad has now turned its focus on the domestic market. 

Javeed, who has been associated with the company since his teenage days, says his biggest contribution to Abad Fisheries has been setting up of the domestic distribution system. “It has grown quite well over the past few years to become the largest frozen food service provider in south India. We are based in seven locations, and now we are expanding to newer markets,” says Javeed. 

Incorporated in 2011, Abad Food Services is the domestic arm of Abad Fisheries and the brainchild of Javeed. “We serve five-star hotels and caterers and have got around 5,000 customers across south India. We provide frozen seafood and all other kinds of frozen food. This is one of the fastest growing divisions of our group,” claims Javeed. He has set a target of reaching a turnover of 1 billion over the next few years.

In 2014, Abad Fisheries also decided to enter the ready-to-cook and ready-to-fry market. The company is in the process of setting up a new factory in Guntur in Andhra Pradesh to expand its range in value-added products. The company sells a wide range of products such as curry shrimp, fish fillet, squid rings and white pomfret through its retail brand Sea Sparkle. “We decided to go into the value-added business because of people’s diminishing cooking skills. With both husband and wife working, they are time-starved to cook a balanced and nutritious meal. As India develops, we expect the market to pick up,” says Javeed. 

In fact, he believes that the Indian seafood industry can replicate its success of FY18 if it continues to scale up the production of value-added and ready-to-eat products. He asserts that the ready-to-eat industry is still nascent and there is an opportunity for growth as more and more people shift to seafood. 

Buoyed by the tremendous response to its retail products, Abad Fisheries is looking to expand in the B2C segment. 

New territories 

The latest addition to Abad Group is a chain of stores named Wild Fish. The company has set up three stores catering to retail and institutional customers. Looking at the constant demand for fresh seafood in the domestic market, Javeed decided to start Wild Fish in 2015. “Because of a lot of health scares in the market and due to a lot of unscrupulous players, we want to create a brand which assures the customers of clean and fresh seafood,” says Javeed. 

A range of seafood products such as prawns, shrimps, squids, seer, black kingfish, pomfret, salmon and mullet are sold at the stores. Javeed says Wild Fish aims to bring fish to the retail market in its freshest and cleanest form. Along with fresh seafood, the stores also sell ready-to-cook and ready-to-eat products of the company.

All these initiatives paying off will give Abad a healthy share of the domestic market. While the global turn of events threatens to derail the growth of Indian exporters, Abad Fisheries has an edge over its competitors due to a unique spread of products and marginal exposure to US markets. 

Javeed is confident that despite the headwind the industry faces, Abad Fisheries will be able to sail through. “Headwind would depend on increased output globally which could create a glut in the market. That’s something you need to worry about, but as long as you have a unique offering, you can create a niche in the market,” says Javeed.

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