Interview: Stewart McLelland, chief executive of the Scottish Salmon Company

The new chief of the Scottish Salmon company tells Erikka Askeland that his firm is shaping up for a great leap forward

AS YOU drive along the coast of the Western Isles, you will see the tell-tale tops of the round cages that contain farmed salmon. It is an important foodstuff for Scotland and the UK, but increasingly the fish is becoming an even more important commodity as demand for high-quality protein grows around the world.

In January, Stewart McLelland was named as chief executive of the Scottish Salmon Company – one of Scotland’s largest fish farmers, producing around 20 per cent of total output.

Operating from more than 50 sites on the Hebrides and west coast of Scotland, the company employs more than 380 staff.

Last year, its production volumes slipped slightly from its 2010 output of 24,000 tonnes. But by 2016, the company aims to hit 40,000 tonnes.

McLelland is confident of reaching the target, but it hasn’t been an easy five years for the company he now runs.

Previously the firm was called Lighthouse Caledonia, which had been made up of a hodge-podge of fish farms divested from a major conglomerate of the biggest salmon companies in the world, Marine Harvest and Pan Fish, which had merged in 2006. The European Union’s competition regulator ruled it had to divest some sites and, in 2007, Lighthouse Caledonia was formed and floated on the Oslo’s junior stock exchange, Axess.

But by the end of 2010, the firm was in crisis mode. Problems emerged in 2008 when a cash crisis caused the firm to have its shares suspended, which lead to the closure of its processing plant near Stornoway. The following year saw a major escape of 60,000 fish from its farm on Loch Striven in Argyll. Its chief executive, OddGeir Oddsen, left acrimoniously last year.

But the firm found a saviour in a new investor – Edinburgh-based Ukrainian banker Yuri Lopatinsky. With a £30 million initial investment provided through the Lopatinsky-backed private equity firm, Northern Link, the company has since rebranded and devised a plan.

Last week the firm unveiled full-year figures that showed the extent of the firm’s restructuring. Pre-tax profits fell from £25.2m in 2010 to just £1.5m in 2011. But the company also confirmed that it had plenty to invest after extending its banking facilities with Dutch bank DnB NOR by an additional £40m.

Growth is set to come from new farms – the company plans to open three sites this year, two more in 2013 and three in 2014. The company will also open another harvest station, where the fish are slaughtered, on Stornoway, which will add a further nine jobs, which McLelland says will be “a real boost for the island”. This will be in addition to processing factory that was re-opened in 2010.

Growth will also come from better management. Currently the company’s production cycles suffer from an imbalance caused in part by the haphazard way the business was formed. The firm produces a much larger amount of fish in the first half of each year.

“That leads to inefficiencies and additional cost,” says McLelland. “We need to flatten that out. If we get new consents [for fish farms] now, it will round out production. When we get to 2016, we will have a much better balanced business.”

McLelland came to the Scottish Salmon Company through his colleague and former business partner Bill Hazeldean, who was a non-executive director and subsequently chief executive of Lighthouse Caledonia, helping lead it through its darkest phase.

Previously the two had set up and built Macrae Foods from a small producer of roll-mop herring to a £100m company, which they then sold to Young’s, part of multinational food giant Findus.

With the support of Northern Link and Hazeldean, the Scottish Salmon Company is now part of a wider network of linked “sister” companies. This includes Scottish Seafood Investments, which last week acquired the oyster producer Loch Fyne. Another business, now chaired by Hazeldean, is Associated Seafoods, which recently acquired two new businesses, in smoked salmon and langoustines.

McLelland says: “What is very important is you stick to your knitting and you get the team in place that you know can do it.

“The associated businesses all have management teams and can get on and run that activity. We at Scottish Salmon Company can focus on delivering on our strategic plan.

“We decided to keep it simple, sort out the farming, and in the meantime we have investments running alongside that are more added value.”

The big prize for the firm and its related companies will be exporting to emerging markets.

“Our strategic plan of growing our tonnage isn’t focused for the UK, it is focused for export. It is about two and two making four, or even five or six,” he adds.

Because of the high standards most firms farming in Scotland have in place, Scottish salmon is a premium product. McLelland says his firm is leading the way in this and is working towards gaining “Freedom Food” accreditation from the RSPCA. It is also researching cleaner and more environmentally-friendly aquaculture techniques.

While the price of salmon dropped globally in 2011, selling Scotland’s premium fish is about hitting the right markets. The Scottish “Label Rouge” brand is a delicacy in France and sales in Germany and Italy are also strong. But Europe, with its financial troubles and its relatively-small population, is becoming less important in terms of world demand. Scotland is wooing international markets in Russia and the Middle East.

Then there is China. Last year, Norway – the world’s largest producer of farmed salmon – was scandalised when China imposed import controls on Norwegian salmon in apparent retribution for Oslo awarding the Nobel Peace Prize to Chinese dissident Liu Xiaobo.

“Sometimes you get a bit of luck, don’t you?” says McLelland of the impasse. “What you have to do is maximise the luck in these situations.

“The European markets are large, America has potential, but the Middle East, China and Russia have a lot of potential.”

The company has brought in an agent to crack the notoriously complex Chinese market.

“If you take the number of people in Shanghai or Beijing, it is huge. We only have to sell quite a small amount of salmon. There are enough wealthy customers there for us to target.”