Floundering Fish Importer Reels In Crucial Catch

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When San Pedro seafood importer Contessa Premium Foods Inc. was put up for sale in April, the sharks were already circling. Potential buyers began touring its facilities the day the company announced its insolvency; within weeks, 32 parties expressed interest, from local competitors to celebrity chef Ina Garten, who had partnered with the company on a frozen-food line named after her “Barefoot Contessa” television program.

Now a winning bidder has emerged, and it is Vernon’s Red Chamber Group, one of the largest – and most secretive – seafood companies in the United States, with revenue estimated at $1.9 billion a year. Its name did not appear on the press release announcing the late May sale, which said the buyer was an affiliate of Seattle’s Aqua Star, known to be a Red Chamber subsidiary.

The sale marks a key acquisition for Red Chamber and the latest change in direction for Contessa, founded three decades ago by John Blazevich, a high-flying entrepreneur known for an extravagant Rolling Hills mansion with a five-story underground tennis court.

Contessa’s most attractive asset was for years a financial albatross. In 2008, Blazevich built a $40 million, first-of-its kind green manufacturing plant in Commerce. The building garnered major national press, including a feature on “CBS Evening News.”

But its high construction costs, together with declining sales in the midst of the recession, plunged Contessa into bankruptcy. Boca Raton, Fla., private equity firm Sun Capital Partners Inc. bought the company out of bankruptcy in 2011 for $51 million, but then ran into debt troubles of its own. Contessa was sold again late last month through an assignment for the benefit of creditors for $21 million. Industry experts said the company’s processing facilities, including the Commerce plant, are its most valuable assets.

Executives at Red Chamber and Aqua Star did not respond to requests for comment.

Steven Victor, senior consultant at Development Specialists Inc., the assignee that handled the sale, confirmed a Red Chamber affiliate had purchased the company.

“We had a lot of people to go through,” he said. “Theirs was the highest and best offer.”

Seafood players

Both Red Chamber and Contessa boast long histories in the local seafood business.

Red Chamber was co-founded in 1973 as an L.A. restaurant by Chinese emigrant Shu Chin Kou and his wife, Shan Chun Kou. Sons Ming Bin and Ming Shin Kou worked in the family restaurant in high school and later took the reins of what became a large seafood importing operation. The brothers greatly expanded the company, in part through a series of major acquisitions. Among those was the purchase of Aqua Star, one of the country’s largest seafood importers, in 1998 and some seafood operations from ConAgra Foods Inc. in 2006. Today, Red Chamber owns at least a half-dozen companies.

Red Chamber buys a wide range of seafood products directly from producers and exporters and sells to retailers and restaurants including Wal-Mart Stores Inc. and Red Lobster. In 2006, Red Chamber’s largest subsidiary, Red Chamber Co., was the largest seafood supplier in North America with more than $1 billion in sales, according to SeaFood Business magazine; the next year it stopped reporting figures to the magazine. Red Chamber Group continued reporting sales to the Business Journal until 2011, when sales reached $1.6 billion. Today, its revenues are believed to be close to $2 billion.

Joseph Sabbagh, a seafood industry consultant in Calabasas, said one of the company’s big advantages is its strong global sourcing.

“Nobody really owns the ocean, but there are companies that have very good sourcing relationships,” he said. “They have access and that’s what’s important.”

The company is press shy, rarely giving interviews or discussing business affairs, but a court case from last year illustrates the importance of sourcing to its operations.

The company alleged in a lawsuit against Thailand’s May Ao Foods Co. Ltd. that in November 2012 it ordered 144,000 pounds of frozen cooked seafood products at $4 a pound, to be shipped the following January from Thailand to cold storage facilities in Chesapeake, Va. But the supplier later canceled the order, citing domestic issues in Thailand.

Red Chamber claimed it was able to find 127,000 pounds of similar seafood product at $4.36 a pound – a cost increase of $46,000. The substitute product was uncooked, so the company had to cook and process the seafood then transport it from California to Virginia. In all, the added steps increased the price of the order by 49 percent. Red Chamber sought compensation and damages but later dismissed the case.

As the company and its sourcing network has grown, it has made acquisitions to expand its processing capabilities. Last year, it purchased a Canadian lobster plant and began co-packing in a shrimp factory in Guatemala owned by Spain’s Pescanova. A trade publication said Red Chamber was interested in purchasing some of Pescanova’s assets.

Then, in April, one of Southern California’s premier seafood processing facilities hit the market. It had been the brainchild of Blazevich, whose Contessa racked up more than $4 billion in aggregate sales since he founded it as ZB Industries in San Pedro in 1984.

Blazevich was also a seafood importer, focusing on shrimp, but took a more public approach to business, getting Contessa-branded products on store shelves and promoting them at trade shows.

“He was one of the first guys out there to really try to promote a brand,” Sabbagh said.

Going green

Blazevich opened an ambitious 110,000-square-foot plant in Commerce in 2008. It was the first LEED-certified frozen-food manufacturing facility in the United States, generating energy through solar panels on its roof and recycling heat generated by its refrigerating systems. But the plant was expensive and Contessa struggled to grow into the facility.

“It’s really the size of the building that ended up being the problem,” he told the Business Journal in 2011.

At the same time, Contessa’s sales dropped to $154 million in 2010, down from $221 million in 2007. It filed for bankruptcy; Sun Capital scooped it up in 2011 and Blazevich left the company.

Blazevich formed L.A. seafood importer Viva Food Group the next year and remains its chief executive. The company supplied food to Contessa.

Last year, Blazevich, born in Sarajevo, Bosnia-Herzegovina, put his Rolling Hills home on the market for $53 million, telling the Los Angeles Times he wanted to move to Croatia.

Under Sun’s ownership, Contessa began partnering with chef Garten to produce “Barefoot Contessa”-branded frozen meals. The venture was the result of efforts to resolve a legal dispute with Garten, whom Blazevich had sued over use of the “Contessa” name.

Despite the diversification, the company struggled. On April 30, it executed an assignment for the benefit of creditors, a bankruptcy alternative in which an insolvent company transfers its assets to an assignee who sells them. The company had $13 million in liabilities, Development Specialists’ Victor said.

Red Chamber subsidiary OFI Imports Inc. bought the company for $21 million, less than half of what it sold for three years ago. In addition to plants in Commerce and Sewickley, Pa., the purchase included the company’s brand, accounts receivable and inventory.

Garten publicly said she was interested in buying Contessa, and Victor confirmed he had been in communication with her representatives during the sale process. But she also told the New York Times that she had concerns about the cost of running the Commerce plant.

Still, Sabbagh predicted that the large plant would be a boon for Red Chamber.

“There are not many facilities like that down here,” he said. “I don’t think Red Chamber has one like it. … They could utilize the facility to make a number of different brands and products.”

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