Pacific Seafood Group


DULCICH, FRANK: The West Coast seafood industry has long been the scene of comings and goings: independent fishermen and small retailers, laborers, processors as powerful as Mafia dons, labor unions and the fish themselves. In the late 1970s, Pacific Seafood Group could have been one of the goings. But faced with a series of setbacks, Frank Dulcich and family responded with a string of rapid acquisitions--several on a "go for broke" basis that would either position the company to survive future hard times or finish it off. Pacific Seafood Group earned $220 million in 1996. It has 1,500 employees and distributes a diverse product mix that includes--but will never again totally rely on--crab, shrimp, groundfish, crawfish and razor clams. Dulcich, 41, now company president, oversees the diverse operations from airy headquarters offices on Southwest First Avenue in downtown Portland, Oregon. Although he says his purchases "weren't brain surgery," Pacific Seafood's turnaround through acquisitions can serve as inspiration for small-business owners in a jam.

Frank Dulcich Sr., a Croatian immigrant, started Pacific Seafood in the 1920s. His son Dominic joined the company in 1940, and by 1978 grandson Frank had returned from a psychology internship at the State Hospital in Salem to join the family business on Powell Street. Pacific Seafood had about 18 employees. In Frank it had a new man on the floor and a new restroom attendant. Dominic surprised Frank, who had graduated from the University of Portland with a degree in clinical psychology, by handing him the scrub brush. At Pacific, Frank started his own sales company, American International Food Co., consisting of little more than a dream and a phone number. He also studied business at Portland Community College at night. But the family business was floundering. "Obstacles? Oh, you can't even imagine the obstacles," Frank recalls. First, they faced "product flow and systems difficulties" in their new 20,000-square-foot warehouse in Clackamas, "that darn near broke us," Dulcich says.

Interest rates, meanwhile, had climbed to 22 percent. Out on the Pacific Ocean, El Nio created current and temperature havoc between 1981 and 1983 that ruined fishermen and sent seafood processors into bankruptcy, quickly effecting a 37 percent drop in Pacific Seafood's supply of fish. Dominic's right-hand man was hired away by a competitor. Two key suppliers, Ocean Beauty and California Shellfish, decided not to supply Pacific Seafood but instead to compete as distributors, a loss of another 50 percent of Pacific's supply. Then company founder Frank Sr. died. The family business was moving about $15 million in seafood and making less than $50,000 a year. It was time to shutter the store, park the trucks and go home--or make radical changes. Frank Dulcich admits to liking a good fight. His company's crisis sent adrenaline coursing through the former international-level karate competitor, who by 1981 was serving as general manager. He went into acquisition mode. In 1983, Pacific acquired its first processing facility in Warrenton at the mouth of the Columbia River. El Nio and subsequent mismanagement had put Sno-Mist on the block, according to Dulcich, and Pacific was able to purchase it from U.S. Bank for $500,000 at $5,000 a month. Although the Sno-Mist facility was in poor shape, Pacific had secured a niche as a processor. The company's small fleet of gas delivery trucks (called peddle trucks because the drivers were also salesmen who loaded and then peddled the fish) were nonrefrigerated and expensive to operate. Since 1980, the fleet has been replaced twice, and now consists of more than 100 refrigerated diesel rigs. As the Warrenton plant underwent upgrades, Dulcich concentrated on the distribution side. In 1985, he purchased a former Fircrest poultry plant in Grants Pass. In 1986, he purchased the only razor clam processing plant in the United States in Kenai, Alaska, ensuring that Pacific would become the dominant producer and distributor of a seafood delicacy whose price was sky high.

Next, Dulcich looked southward, and found Lazio Fish Co. in Eureka, California, a third-generation family fish-processing plant that had been losing a million dollars a year. "We bet the company on that acquisition," Dulcich says of what had been the largest family-owned fish company on the West Coast. As in the Sno-Mist acquisition, the Dulciches found great support in their bankers. "Banks are extremely important as financial partners," says Dulcich, who took over banking relations for his companies in 1993 and admits to having had less-than-optimal relationships with some of his father's bankers. "They need to know the good as well as the bad on a timely basis. They want you to do what you say, period." He recommends that businesspeople take as long as a year to develop good relationships with loan officers. "Find someone who has similar beliefs," he says. "And tell them what's happening with your business before it occurs." As Pacific grew dramatically, Dulcich worked to develop relationships with fishermen, employees and banks.

"Every business we've bought has been in pretty tough shape," he says, "in attitudes as well as financially. You don't have much time. We usually have a weekend for the transition and then 30 days, tops, to turn things around."

After the crucial Lazio acquisition, Pacific started its own food service distribution in June 1989 with Pacific Fresh Seafood, a company that has moved from $1.5 million the first year to an estimated $50 million in sales this year. In November 1989, Pacific took over Jake's Crawfish, the distribution, air freight and international crawfish business that was a subsidiary of McCormick and Schmick's of Portland. In January 1990, Pacific snatched Pacific Choice in Charleston, Oregon, from bankruptcy, purchasing the processing business once owned by Charter Oil Co. for $275,000. Then came Stuart Seafoods in Washington state, Fitts Seafood in Salem, and Washington Crab Producers in Westport, packers of the noted Sea Rock Dungeness crab. Dulcich continued expanding markets and marrying processing and distribution in Pacific's growing family of companies.

Pacific built the $1.5 million Pacific Oyster Co. in Tillamook and opened another distribution operation--this one in Fresno, California, a growing and largely ignored market. It wasn't until the Pacific Group bought Pacific Fish Co. in Seattle, Washington in 1995 that Dulcich could say he came pretty close to stumbling. In fact, he says "It was the worst mistake I ever made." Pacific Fish Co. had a 40 percent share of one of the strongest fish markets in the country, and Dulcich's Pacific had 37 percent of the Seattle market through other acquisitions. It looked like a sweet--though admittedly expensive--deal. It soured as transition troubles plagued the companies, sales slipped, and Dulcich had "the wrong managers in place." Since then, the Pacific Fish acquisition has been made profitable, and Pacific Seafood Group companies are positioned for future successes as Dulcich turns more attention to marketing and brand development. Today, Dulcich has nothing but praise for his father's insistence that he begin at the bottom, even with a scrub brush in his hand. Through all the acquisitions, he's seen too many managers who didn't know their businesses well enough to make them succeed. Although he says successful acquisitions don't require a killer instinct or an obsessive drive, he admits: "I'm driven. I can't stop. Not to be the biggest. That's never been important to me. But to be the best." (Cox, D. 1997)