Answer fowlling questions 10
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interview-henry_demone.docxHenry Demone
Henry was born in High Liners home town, Lunenburg, NS, in 1954. A mathematician by academic training, Henry joined the Company (then National Sea Products), in 1977, soon taking over management of international sales. In 1980, he left National Sea to serve as Managing Director of a French subsidiary of Franz Witte AB, a Swedish food company and division of Volvo. Returning to National Sea in 1984 as Vice President, International, Henry was appointed President and Chief Operating Officer of the Company in 1989. At the Company's Annual Meeting in 1992, he was appointed President and Chief Executive Officer. Henry has charted High Liner through a decade of rapid change. From its roots as a fishing company, Henry has lead the transformation of the Company to a food processor and marketer of high quality seafood and frozen pasta. He is a member and former Chairman of the Atlantic Canada Chapter of the Young Presidents’ Organization, and is a director of Dover Industries Limited and the Food and Consumer Products Manufacturers of Canada.
Company Profile
· Company: High Liner Foods Ltd.
· Size: Medium
· Industry: Seafood
· Business Activity: Manufacturing
· Type of Entity: Public Corporation
· Number of Employees: 25 to 500
· Country: Canada
· Headquarters: Lunenburg, Nova Scotia
· Yearly Revenue: Greater than $25 million
1. Can you tell us a little bit about yourself and your career path to date?
I'm Henry Demone; I'm president and CEO of High Liner Foods. I've spent my career in the seafood business when I graduated from Acadia, took my Masters at Dal, then started off working for National Sea Products, spent four years working for a Swedish company, part of it in Canada and part of it in Europe. And then came back to National Sea and stayed there through the last 20 years.
2. What does your company do and why is it unique?
High Liner Foods is the leading value added frozen seafood supplier in North America. What makes us unique is that unlike most seafood companies we have a market focus; we're focused on consumers and customers. We deal with all the big customers in North America and we provide them with value added products, strong brands, and we remove some of the complexities of the seafood business which has a very complex, global supply chain with many different species and many different origins.
3. What is the business model of your company?
Our business model is really to be a market leader in all of the key sales channels in North America. By having the leading brand, doing unique value added products, getting critical mass so that our procurement department can buy cheaper than our competitors.
4. Who are the customers of your company and what customer needs do your products or services satisfy?
We deal with all of the big customers in North America, whether they're retail, food service, or club stores. Whether they're US or Canadian. The retail customers would be people like Walmart, Loblaws, Sobeys. Food service customers would be people like Sysco, Gordon Food Service, US Food Service. The club store customers would be people like Costco, Sam's Club, or BJ's in the US. What we do for our customers is we remove the complexities from the seafood supply chain. The seafood business is a very global and complex business. If you think about the chicken business you're essentially dealing with one species. If you think about the seafood business, High Liner buys 30 species from 20 countries and that's a complexity that we understand. But it's a complexity that many buyers and big customers, particularly the largest ones, are not prepared to deal with. If you take a buyer in a big retail chain, they may have been transferred from health and beauty aids and may stay in frozen foods for 2-3 years so they need good suppliers who can deliver in the frozen seafood category with the same reliability as their health and beauty aid suppliers. So, we at High Liner provide that and we provide it across the market in North America.
5. Can you describe the flow of activities that define the value chain for company?
Let me do it in two ways. The first way would be product development. When we develop products it usually comes from the consumer needs in retail or the operator needs in food service; the operator being the person who runs the restaurant or the away from home eating establishment, it could be a cafeteria in a business or in a hospital or something. So, we do market research with those people, we try to understand their needs, then we develop products that meet those needs and go out into the world, source the raw materials, bring them back into Canada or the United States, produce the value added products in one of our plants, and then ship them to our customer base across North America. That's from a product development point of view. From a day-to-day business point of view, it starts with a sales forecast and this is a very important function within High Liner Foods. We spend a lot of time trying to predict what demand will be three to six months from now. And that's critical because we want to have the right level of inventory. If you have too much inventory that impacts the balance sheet and our returns, if you have too little inventory you're going to have bad customer service and that's unacceptable. So we start with the sales forecast which then goes into a planning system and generates a plan for production line time, a plan for packaging needs, a plan for ingredient needs, our procurement people then go out to our suppliers and source the raw materials and ingredients and packaging that they need and then we produce, to inventory, aiming to turn our inventory five times a year. And then ship to our customers with a high degree of reliability, meaning 98.5% on time delivery and 98.5% case-fill rate.
6. What are some of the performance metrics that your company uses to judge its success?
Market share is important. Then looking at other customer focus metrics, on time delivery, case-fill rate. Then we look at the ratio of consumer marketing to trade marketing; that's a measure of, you know, are we supporting our brands, are we providing the right level of marketing support. Then we look at waste and productivity in our plants, pounds per person hour, down times, scrap, these different operating metrics. Then on the procurement side, we look at purchase price compared to the price in the business plan. Then on an overall basis we tend to look at return on equity and return on capital employed, in terms of efficiency, and we also measure EBITDA margins, earnings before interest, taxes, amortization and depreciation.
7. How would you define the Atlantic Gateway?
The transportation system, both marine, land-based, as well as air transport, to and from Atlantic Canada it really is, its objective is the efficient movement of people and goods to and from the region.
8. Why did you get involved?
Atlantic Canada has lots of challenges currently, we have demographic challenges, the local markets are small, to be successful in Atlantic Canada at a minimum you have to sell nationally, if not in North America or internationally. So, having successful transportation links is critical for us; it's critical for us and it's critical for the local economy. So, it's a critical success factor for the region, it's a critical success factor for High Liner Foods. And then I also looked at the current environment, if you go back a year, we were in the middle of a very bad recession, the government was talking about stimulus spending and probably a one time opportunity to access capital funding to improve the Gateway and it was importuned to me that this was invested strategically, and that a generation from now when people look at the transportation infrastructure that people would say, "Wow, they sure did a good job in 2010-2011 with this money that was available and thank goodness they invested where they did," as opposed to if we invest the money for political purposes and don't think strategically, it could have very serious negative consequences and we could pass on a great opportunity.
9. What are the three main issues or challenges for the Atlantic Gateway?
First of all, the port of Halifax is well under capacity, and there are a number of issues with the port of Halifax. First of all, in the short term, there's been big investment in US east coast ports, in the New York area, as well as farther south in Savannah and, I believe, New Port News; these ports are closer to major population centres so it's tough for shipping line to call on Halifax and be competitive to Forward Freight, to those big east coast markets. I think we have a better chance of being competitive in, kind of, the industrial heartland whether, Southern Ontario plus Michigan, Illinois, Western Ohio, but even there, there are some challenges. The rail service from Halifax to those markets is acceptable given the volume of freight we have, but if you are a customer in those areas, would you rather bring your cargo in through Halifax and depend on CN with one train a day or would you rather bring in through an east coast port and have more dependable rail service. So, I think that the land based component is a big challenge. And then the third challenge, I think, is a political challenge, you know, while we have Halifax, which is a great port, that's well under capacity for some reason and I'm not quite sure, I mean, I look at this as a businessman and say, "Why would they ever come up with this business model?" But, when you have other ports in Nova Scotia saying, well lets compete with Halifax and, again, as a businessman, and someone who is forced to think things through strategically, I mean, that would be the silliest thing we could do. I mean, we have a great port in Halifax, lets figure out how to use it and make it efficient, as opposed to divide our efforts and have two or three ports that are well under capacity instead of just one.
10. What role does your business play in the Atlantic Gateway?
We are a net importer, we bring in about 1500 containers a year, mainly raw materials, and some finished goods for our plants in Eastern Canada and for distribution in our Canadian sales and marketing network. So, our main role is to be an importer and it's important to have importers because you need a balance of trade; when you have an imbalance of trade that's a problem for the shippers and, generally, Eastern Canada is export oriented whether it's seafood products or blueberries or french fries, it tends to be an export oriented area because the local market is so small.
11. How would you define success or measure results?
Success for me will be, is do we have a transportation infrastructure which is economically viable, and which serves not just Halifax but serves the people of Atlantic Canada to move people and goods to and from the world; that's the definition for me. You know, I don't think we should get into subsidizing operations that aren't economically viable because at a point in time the subsidies will be pulled and it won't last. I mean, I think we need to, we need infrastructure which is economically self-sustaining, and serves the people of Atlantic Canada whether it's import or export.
12. What is the key thing or contribution the Atlantic Gateway Advisory Council can have on this initiative?
The people who sit on the Gateway tend to be senior executives from leading companies in the region. They are big users of the Gateway, first of all, and I think, secondly, they can provide the politicians with some useful feedback. You know, it's the job of a politician to get reelected, to a certain extent, I know they have other responsibilities but that's in the back of their mind and I think that politicians can come under political pressure to make investments that wouldn't fit with my earlier definition of success meaning a competitive transportation infrastructure. So, the Gateway is a group that can say look, I know this may be politically popular but it just doesn't make sense to invest tax payers' money in the following area.
13. From your perspective, are there new careers in trade and transportation that individuals need to train for?
Transportation and logistics is a very dynamic field; it's critical to the success of most businesses, particularly a business like High Liner Foods which is in the frozen food business. And I think that technology is evolving, customer needs are evolving, the current hot-button topic is traceability. So, High Liner Foods today has, first of all, we're acquired by US bioterrorism laws that we can trace one step forward and one step back. But we can do more than that. We can trace our seafood raw material back to the source, we can trace our finished goods out to the last point of distribution before the consumer buys it or consumes it, that could be the restaurant of the supermarket. But now people, and nobody can do this yet, but people are talking about full pedigree distribution where you scan the barcode on a product and it says that the seafood came from Norway and the packaging came from and not just Norway but this vessel, caught on this date, the packaging came from Maritime Paper Products in Dartmouth, the breading came from Griffith Labs in Toronto and, furthermore, the wheat in the breading came from Manitoba, the cooking oil came from wherever; there's a big push for traceability right now and I think there will be a lot of interesting career options there. And these are skilled, high-tech jobs, clearly you need a big system's infrastructure to provide this full pedigree, traceability and that will develop in the next five to ten years.
14. If you were granted three Atlantic Gateway wishes, what would they be and why?
Invest our money wisely and resist the urge to make politically expedient investments. That we end up with an efficient transportation infrastructure for the people of Atlantic Canada. And that the people and the businesses in Atlantic Canada take advantage of this to grow their market share around the world.
The biggest competitor to Halifax is probably Montreal and the government is very much in user pay mode which is fine. However, I believe that the ships going to Montreal in the winter months are provided with tax payer funded ice-breaking which amounts to an enormous subsidy and, you know, if the government is in user pay mode, then the port of Montreal or the people using the port of Montreal, it needs to cover the cost for that. But right now the users need to pay for the extra distance from Montreal to Halifax, whether it's by road or rail, but the government is paying for the ice breaking which makes the port of Montreal viable for the winter months. I think there's a fundamental inequity there; I haven't looked into it enough to understand why but I think that's one area that needs to be investigated.
