Dive Brief:
- StarKist Co. and Bumble Bee Seafood both pleaded guilty to federal price-fixing charges of increasing the cost of canned tuna for U.S. customers. Bumble Bee is now considering filing for bankruptcy to pay the fine despite the figure being reduced from $81.5 million to $25 million at the time of sentencing, Bloomberg reported.
- The Justice Department gave Bumble Bee a five-year installment plan that required no more than $2 million up front, citing financial distress. The company is facing declining revenues and has surpassed its leveraging ratio limit.
- A judge in San Francisco has postponed sentencing for StarKist. Court records show the company may not be able to pay the $100 million fine, The Miami Herald reported.
Dive Insight:
After getting caught in a price-fixing scandal several years ago, two of the three tuna titans — StarKist and Bumble Bee — continue to face the consequences of those actions. Not only have StarKist and Bumble Bee been slapped with multi-million dollar federal fines, but the two companies are fighting legal battles on multiple fronts.
In 2016, while the two companies were facing federal investigations, Walmart sued these companies claiming that StarKist, Bumble Bee and Tri-Union Seafoods, which does business as Chicken of the Sea, conspired to fix tuna prices for more than a decade. StarKist settled with Walmart earlier this year for $20.5 million. All three companies are facing claims they mislabeled products as dolphin-safe.
These accusations aren't going to help a tuna industry that is facing a drop in sales. According to market research firm IRI, tuna sales fell 4% by volume between 2013 and October 2018. As a result, Andy Mecs, the vice president of marketing and innovation for StarKist, told The Wall Street Journal that tuna companies have been searching for ways to reinvent their packaging since most millennials don’t even own can openers. StarKist has developed packaging such as pouches as well as more sustainable premium options and flavors designed to attract younger generations.
With a market already turning away from canned tuna and bankruptcy potentially on the horizon for Bumble Bee, it is going to be difficult for these companies to weather the storm. Bumble Bee, in particular, is in a tight spot as it will be facing lawsuits even after it declares bankruptcy. This will leave it financially vulnerable and a prime candidate for an acquisition —if there is a company willing to take on its legal headaches.
Chicken of the Sea's parent company tried to buy Bumble Bee in 2015. The proposed deal raised questions that an acquisition could limit competition and leave consumers susceptible to higher prices. While StarKist has not declared any intentions to file for bankruptcy, there are similar questions about the company’s future and its ability to pay the up to $100 million in penalties tied to its guilty plea.
As for whether these companies can turn their fates around, that is likely going to be a very difficult though not impossible task. To do so, the companies will require the support of their consumers and a push to attract new ones. Perhaps a public commitment to transparency and marine life safety would help, but a potential partnership or an investment in cell-cultured seafood could also be a path that these struggling companies might consider.