Sustainable fishing with Baffin Fisheries’ CEO, Chris Flanagan

Joe Mimran (00:02): Hi, I’m Joe Mimran and welcome back to Export Impact. When you think of Canadian exports, your mind might drift towards oil, gold, maybe car parts, but I’ll wager it doesn’t land on cold-water shrimp, turbot or halibut. Well, Baffin Fisheries is helping European and Asian markets discover these northern delicacies. This 100% Inuit-owned subsidiary of Baffin Fisheries was created to sustain fisheries resources for Nunavut. The company reinvests profits from the commercial offshore fishing industry back into the community to bolster the local economy. They’re also working on ways to minimize their environmental impact at sea. 

Chris Flanagan is the CEO of Baffin Fisheries and he and I sat down to chat about the state of Canadian fishing, the economic and climate hurdles it’s facing, how things have changed and how the appetites of foreign markets are shaping the future of this industry. I hope you enjoy. 

I’d like to begin today’s episode by acknowledging that we’re recording from my office in Toronto, which is on the traditional unceded territory of many nations, including the Mississaugas of the Credit, the Anishnabeg, the Chippewa, the Haudenosaunee, and the Wendat peoples, and is now home to many diverse First Nations, Inuit and Metis people. We value taking this moment to deepen the appreciation of our Indigenous communities wherever we are, and to remind ourselves of our shared debt to Canada’s First Peoples.  

Welcome Chris, and thanks for joining me. Before we get into Baffin, perhaps you can share a little bit about your background. I discovered prior to entering the corporate world, you were a business reporter asking tough questions and doing hard-nosed reporting. What made you want to be answering questions rather than asking them?

Chris Flanagan (02:03): Good question, Joe. That was back in the days of print journalism when people read newspapers and unfortunately, as wonderful as the internet was, there was a clear indication in 1999-2000 that newspapers were on the way down; really on the way out, I’ll be honest. And so, I got an opportunity to join the Dark Side, as we used to call it and that was with CHC Helicopters. That was a growing company. It was really exciting. I didn’t have to think twice about that and from there, ended up in the fisheries—a long story, but it’s great to be here.

Joe Mimran (02:32): You’ve got a great background and you’ve taken on this, I would say, challenging role as CEO of Baffin Fisheries with all of its complexities and all of the good work that it does at the same time. Maybe you can take us through the original vision of the coalition that was formed and why Baffin Fisheries is so unique compared to other Canadian-owned fisheries and also some of the challenges that come from such a remote operation. A lot of questions in that one question.

Chris Flanagan (03:04): Sure. And I’ll even answer with a different kind of an answer to start: That is that I’m really proud to work for an Inuit company. A lot of Canadians don’t realize that it’s a 100% Inuit-owned and private, profit-making, tax-paying—a lot of tax we pay—and more profitable, which is every year since I’ve been here. It’s a great success story. I get asked a lot of times, is it government  funded? No, it’s not. You know, we’re very proudly tax-paying, profitable, as I said, company. 

It started in 2001 as a coalition of all the smaller companies and the vision was to create a company that was big enough to own assets. In the early days of the fishery, adjacent to Baffin Island, the companies would just basically take a royalty. They would hire a southern company or a nice landed   company and just take a royalty.

So, it was generating some money for the communities, but not real ownership; not a lot of employment. And it was a great vision by many people in the Nunavut government, another private sector who put together the coalition and the first mandate was to own vessels. We now proudly have three vessels and are building a brand new 80-metre trawler, which will be the largest Canadian-owned fishing vessel in the country. We’re very proud of that and that’s only in 20 years that they’ve come a long way. We’ve come a long way.

Joe Mimran (04:15):  And you’ve been with the company how many years, Chris?

Chris Flanagan (04:18): Seven years now.

Joe Mimran (04:19): I noticed that you announced that vessel, that new $72-million vessel, I believe it is. When is that going be ready?

Chris Flanagan (04:30): That’s a great project, thanks to some great funding from EDC and Scotiabank. That’s going be ready in the summer or late spring of 2024. Now, there have been some delays. Tragically, the steel mill that was providing the steel was in Ukraine and the steel mill was bombed on the first day of the invasion. So, we did have a three-month setback, but it’s coming together now and starting to look like a vessel. It’s very exciting.

Joe Mimran (04:55): I’m just trying to imagine a $72-million vessel that’s got to have a lot of high-tech qualities to it. And we’re going get into that a little bit because I do want to understand how you process right on that ship because that’s pretty interesting, as well. 

But before we get into that, maybe you can explain how the quota system works? I know that there’s been lots of issues that the Canadian fishing industry has had to deal with over the years—overfishing and environmental impact, all of that. Tell us a little bit about how the quota system works and who sets them? How do they monitor the setting of those? And then if you only have a limited quota, how does that sort of work into your ability to raise capital and do all the things you need to do from a financial standpoint?

Chris Flanagan (05:44): Our quota is co-managed by the Nunavut Wildlife Management Board and the Department of Fisheries and Oceans (DFO), the federal government. What makes it unique and I think pretty special is that Nunavut companies are judged on their performance every year under the Nunavut Allocation Policy. What the NWNB—that’s the Nunavut Wildlife Management Board—does is they score us out of more than 100 points on everything from sustainability to governance, to environmental protection to economic performance. There’s a lot of points in the system—Inuit employment is another big one—and only if we perform well, do we get to keep our quota. 

Every five years, the company can theoretically lose almost all of its quota if it’s not performing and the basic measure is providing value and good governance to the beneficiaries under the Nunavut Land Claims Act. Those are our owners and nobody else has that. All the other companies, they have to follow the regulations, the environmental regulations, but they don’t have that extra step where they’re actually scored in a report card and where they reinvest the money is part of that score. It’s pretty unique. 

And then what happens is the Nunavut Wildlife Management Board makes either a recommendation if it’s offshore or a decision, if it’s in the Nunavut land claims area, sends those to DFO, which either ratifies or condemns or even changes that decision. But it’s co-managed, it certainly keeps us on our toes. There are many times where we’d prefer not to have that system. 

And you mentioned how do we raise capital? That’s about the only time where we find the system a little bit too onerous because how do we go to the banks and say we need to borrow $60 million? Oh and by the way, if we slip up, we could lose all our quota and be bankrupt in a few years. We have some great partners who took the time to see how the system works and looked at our track record and realized that this was a company that would continue to meet the standards of the NWNB.

Joe Mimran (07:41): What you’re saying is in five years’ time, you’ve got this in the bag, so to speak. I mean I can’t imagine getting a loan knowing that the quota system might not be friendly towards you at the end of the five years. So, I guess there’s a huge amount of trust, but also you’ve got a track record that says that hey, before you lose any quota, something pretty dreadful is going to have to happen.

Chris Flanagan (08:07): That’s true. We’re two years in now, a little more than two years in, so it’s only three years away until we have the next big allocation route. But in every single year, there’s an annual report that’s due, as well. You get a report card in the interim years, it can actually, if there’s a real transgression, they can make a move in the middle years, but it’s highly unlikely. 

Last time, though there were two of the four, none of the companies did, in fact, lose a large amount of quota for performance not coming to where the NWNB thought they were, which was, you know, very unfortunate for them. But I think both those companies are much stronger now and better for it. We do have, I think, a pretty good future going forward in Nunavut; even in the Arctic, there’s a tougher environmental regime there, as well.

Joe Mimran (08:46): And so, your last report card you got, what did you get like 99 out of a 100? I mean how did they rate you? Is it like A-plus?

Chris Flanagan (08:54): I honestly can’t remember the exact score because it’s in five parts, but it’s probably only in the 80s. There’s room for improvement. We did, in fact, get some performance targets that if not met, you face the risk of quota reduction in the next round. I’ll be honest, one of them was Inuit employment. That was really the only one. Inuit employment is very difficult because Transport Canada has strict requirements for working onboard vessels and Nunavut doesn’t have a marine institute or college that can provide all of the necessary requirements. So, we have to identify the candidates, train them, and get them the sea time they need. We’re working on that. It’s tough. We’ve got some great new mates on the vessels now from Nunavut.

Joe Mimran (09:35): You’re out there with the three vessels, you’re catching a lot of fish. My understanding is it’s something, like annual harvest of 8,000 tonnes of turbot and 5,000 tonnes of shrimp. It sounds like a lot of product on three ships. How long does it take to process that? I would think you’ve got a window to do all your fishing in, right? And you’re in pretty harsh conditions. Explain that a little bit. 

I think everybody would be interested in knowing how that works. Like are guys sleeping, guys and gals? I dunno if you have guys and gals on these ships? What’s it like? How long do they have to be out in the water? What do they have to do when they’re actually on these ships? And then how do you process all that food and get it to market?

Chris Flanagan (10:23): Joe, those are great questions and it also answers the other question about why a boat would cost $72 million and it’s because of the processing they post onboard, as well. On a turbot trip, there are 28 crewmen and unfortunately, all our crew members are men at the moment. We’re trying to recruit women, but you can’t just recruit one woman. I don’t think you start with one—it wouldn’t be a very good environment. So, we’re trying to recruit more than one at a time. The first thing we have to do is get them to take the training and then recruit them to work for us, so that’s a big challenge. 

The interesting thing about offshore trawlers is that the work goes on around the clock, but it’s not 12-hour shifts; it’s six-hour shifts. Every fisherman works six hours on, six off, six on, six off. They have to pack in six hours sleep—not eight. And it’s the lifestyle that they’re used to for generations. When you’re working on the line and you’re, for example, working on a heading machine with the fish or the gutting machine or even packing, it’s just too hard to do it for 12-hour shifts. So, they do it for a six-hour shift and then they’ll do another one in another six hours. 

Every turbot that comes onboard is probably handled by about five or six men. And that’s, you know, very carefully taking it off the first conveyor belt, putting it through a cutting machine for the heads and tails, bleeding them appropriately, so that the meat stays fresh and they don’t suffer, and then you’ve got sorting, weighing, then they’re immediately frozen. 

Our fish is harvested. It’s on the deck of the vessel and then it’s into the freezer within four or five hours. It’s a very fresh product and it’s valued higher than non-frozen fish. All of our turbots are exported simply because the Europeans and the Asians will pay a lot more for it than the North Americans will. It’s considered a high delicacy there and it’s very high in protein and omegas. It’s very healthy food.

Joe Mimran (12:05): And why is it more valuable than non-frozen? Is it just because you just flash-freeze it immediately? You always think of frozen as not nearly as good as non-frozen. Is it the travel time that non-frozen goes through that degrades the product? Why is that?

Chris Flanagan (12:24): It’s a function of the time and markets. In China, for example, turbot is used in a lot of retail sales to make a family stew in the kitchen. So, it’s great to buy it and keep it frozen until it’s needed to be used.

Joe Mimran (12:38): Would you say Asia is your biggest market at this point?

Chris Flanagan (12:42): Yes, it is. A lot of the product that goes into Europe, for example, is smoked. Smoked turbot is very popular in much of Europe. Again, if it’s still going to be processed in a smokehouse then you’re better off with the frozen product because they need it to sit in their inventory until they get it to the smoker. Oftentimes, that’ll take place in a smaller operation. So, they do need to take the fish out of the freezer as needed.

Joe Mimran (13:05): Was Baffin Fisheries always involved in exporting? Was any of it at any time for the domestic market or was it always export-based business?

Chris Flanagan (13:16): A lot of our shrimp was for the domestic market. That number has really decreased as the cost of fuelling has gone up in Canada. And the turbot really, there’s just a few, you know, if we sell seven or 8,000 tonnes of turbot, it would only be a few hundred kilograms would be sold in North America—a very small amount. But we’re working on getting it into markets in North America, into restaurants. It’s becoming very popular in New York and the New York restaurant scene is starting to come onboard. We do hope and we plan to expand North America, but we’re not there yet.

Joe Mimran (13:49): Any advice to other firms that are looking to export any particular services or programs that you’ve been able to take advantage of that allowed you to grow the business, fund the business and get the help you needed to export to these countries?

Chris Flanagan (14:05): First of all, on the basic side, I would say CFIA, the Canadian Food Inspection Agency, even though they’re an inspection agency, they’re a great assistance to companies getting into markets, as long as you’ve got your ducks in a row and your product is the highest quality as it needs to be. But also EDC has a new program where they’ll help us get into new markets. They may be in a position where they’re a lender to a foreign buyer, for example, and they’ll try to act as a matchmaker there. It’s a great service. We haven’t availed of yet because we haven’t started our own seafood marketing company yet.

Joe Mimran (14:36): When you look at how much of the fish that you’re now harvesting, what would you say the total amount is available within your region? Like if the quota, you’ve got a quota system, you’re allowed say, 8,000 tonnes a year. Is there 50,000 tonnes available? Is there 100,000 tonnes available? What’s the total capacity that’s available to be fished for turbot and shrimp?

Chris Flanagan (15:04): The way shrimp works is they set a percentage of the biomass as the total allowable catch and in general, it doesn’t exceed 20%. You don’t want to catch more than 20% of the biomass. Now, shrimp is a little higher than turbot because shrimp reproduce maybe every three to four years, that’s their lifespan. And in the areas we fish, it’s probably in the 15% to 18% range because the northern shrimp fisheries are a little bit newer. They haven’t gotten up to the 20% range, but we believe that’s still totally sustainable. In Europe, there are some areas that fish 30% of the biomass when it comes to shrimp.

Joe Mimran (15:37): I understand that some areas of the world, like the Mediterranean, is overfished and they’ve been depleting their fish there over the years. Are we in good shape here in Canada? Are the fisheries back to a sustainable position and one that will keep us for the long term?

Chris Flanagan (15:56): Yes. This year, I’m also chair of the Fisheries Council of Canada and we spend a lot of time working on the reputation Canada has and Canadian fisheries are, in general, very well maintained. DFO is a strict regulator and across Canada, I can’t speak to every region, of course, because I’m not involved in every region. But Canada has a great reputation and great track record with managing sustainable fisheries and there are cautionary frameworks in most fisheries and sustainability is the absolute key. 

Shrimp, as I mentioned, is a percentage of the biomass is used as a measure. It’s a little bit different in turbot because it’s difficult to measure the entire biomass. But on the turbot fishery, it’s certified by MSC (Marine Stewardship Council), which is an international certification agency, which comes in, does independent audits to ensure that next year and 20 years down the road, there still will be fish and that it’s being harvested at levels that ensure the species is maintained. We’re very proud of that. 

We think Canada is the leader in sustainability. The fisheries we’re involved in are both MSC certified. I mentioned turbot, but the shrimp is also MSC certified. We think there are lots of safeguards and measures in addition to those, as I mentioned, they’re both co-managed in Nunavut. The Nunavut Wildlife Management Board takes yet another look at sustainability of fisheries.

Joe Mimran (17:12): That’s wonderful. And in terms of the give back to community, you say it’s a private organization and there’s a lot of give back. What was the vision, the original vision, and how is that a priority for you and how is that managed?

Chris Flanagan (17:26): The vision was to deliver not just money and profits back to the communities, but as I mentioned earlier, jobs. We do a lot of recruitment in the communities, but there’s a third element, as well and that’s socioeconomic development. It’s another thing that we are scored on in our allocation annual reports and we invest money in buildings. For example, we’ve built office buildings in Pangnirtung in Clyde River in Pond Inlet. We’re refurbishing a building in another community, Kimmirut. We have a large office in Iqaluit. So, we have the infrastructure we’re starting to build, we help them build community freezers, so they can store their other products that they hunt or fish. 

I’ll tell you though, we’ve got a lot more to do. I mean, Nunavut really doesn’t have the infrastructure that anywhere else in Canada does. We’re working on developing an inshore fishery, which was actually a little bit more exciting for the owners of the company, Nunavut beneficiaries, because then they get to stay home.

Joe Mimran (18:21): That’s such a good point. And global warming. What’s been the impact of climate change to your industry in particular? Especially given where you’re fishing, I’m sure you’ve heard from residents. What are you seeing?

Chris Flanagan (18:36): What we do is we swap some of our quota first, some southern quota. We do a couple of swaps, so that we can operate more year-round. We do fish off Labrador for a couple of months with some northern quota that we swapped. And these last two years, we haven’t been able to get in. Right now, we’ve got a vessel off Labrador that can’t really fish because most of it’s still encased in ice. But they’re saying—I’m no climate expert—one of the reasons is that ice is melting in Greenland. So, you’ve got this super cold water up in Greenland that circulates down off the coast of Labrador and then it freezes a lot easier because it’s coming down cold. You have this oceanic cycle going on where the melting of the glaciers actually results in colder water off Labrador and more ice, tougher fishing. It’s been an odd one.

Joe Mimran (19:21): I can’t imagine those conditions and what you’ve got to do as a business to manage all that. And so, I always ask this question of all my guests, what advice would you give to other companies that are looking to export and might be specific to your industry, but is there any specific advice that you would provide?

Chris Flanagan (19:44): I would say know your regulations and have staff who are skilled in administration. And here’s some advice I’m going to give myself as well, which is don’t put all your eggs in one basket. We say we export mostly to Asia and Europe and it’s really a pretty small market of buyers, so we’re looking to mitigate our risk and export more to all the states, to Canada and even to other places in Asia. We don’t export a lot to Indonesia, which is the fourth-largest country in the world or Malaysia. We’re looking in those markets, as well, because we know there’s an appetite there for it. 

I guess the advice is that don’t do what we’re doing, do what we’re saying, which is broaden your market, look to a lot of markets and don’t get trapped into just having one or two.

Joe Mimran (20:29):  And how would you do that if you wanted to go to Indonesia and Malaysia? How do you plan on cracking those markets? Is it through the government? Do they assist you in terms of making connections or do you go to trade shows? How do you crack those markets?

Chris Flanagan (20:47): Yes, definitely trade shows, first and foremost. We have our sales team going to Barcelona, the International Seafood Food show there at the end of April is a huge one. And face-to-face still means everything in sales. Global Affairs Canada is extremely helpful. They have staff at the embassies in marketing who really know the buyers on the ground and groups, like EDC as well, which have special programs to help match you up with buyers who might be getting some Canadian financing. 

Great introductions there because really we’re competing against other companies to sell turbot in Greenland, halibut and shrimps. But also we’re competing in the whole protein market, right? So, it’s important to meet as many people and potential buyers as we can. We work with the embassies, with the trade commissioners there. They’ve been extremely helpful: EDC, CFIA, and the trade shows.

Joe Mimran (21:37): That’s wonderful. Well, I think you’ve done an amazing job from what I can see. It’s an industry that I think we started off by saying is pretty challenging in terms of the workforce, the requirements, all the regulations you’ve got to go through and all the good work you’re doing on behalf of the people of Nunavut. You know, that’s something that we’re very proud of, everybody should be proud of here in Canada. And to you for making that big switch from being a hard-hitting business reporter to a hard-hitting executive, we thank you for that. You’re doing an amazing job.

Chris Flanagan (22:13): Thanks, Joe. This is the greatest job I’ve ever had and I love working for the Inuit owners. I’ve got a board of 10 elders, not always elders, but 10 hunters and trappers really from the small communities and they’re just such great people to work for and looking really forward to going to Barcelona with our chairman from Clyde River in the next couple of weeks. It’s been a great ride and I hope it continues for a while.

Joe Mimran (22:34): I’m sure it will. Wishing you all the best and lots of continued success, Chris. Thanks for joining us today on the Export Impact Podcast. If you enjoyed today’s episode, we’d love for you to subscribe, rate, and leave us a review on your favourite streaming platform. See you back here in two weeks.