Ocean Nutrition

"Today, overnight shipping is a way of life—order something from Amazon and it’s on your doorstep within days or even hours. Risley was ahead of the game by decades, developing rapid air shipping of lobster to Europe and Asia in the late 1970s and early ’80s. With Ocean Nutrition, Risley foresaw opportunity in the burgeoning nutrition, health, and supplements marketplace. Columbus, meanwhile, rode the wave of massive internet expansion during the 2000s. In other words, Risley has been a pioneer and innovator in three very different industries—in each case riding on the crest of global forces."

"attended one particular function in the mid-1990s, where he was seated next to the head of research from a Swiss pharmaceutical giant. Their conversation eventually turned to seafood, with the research director telling Risley that omega-3 fatty acids were the single biggest deficiency in the North American diet, and no nutrient could have a greater impact on the health of the world’s population. Dieticians have long recommended eating fish rich in omega-3s. Oily fish such as mackerel, herring, anchovies, salmon, sardines, and albacore tuna contain rich amounts of the omega-3 fatty acids EPA (eicosapentaenoic acid) and DHA (docosahexaenoic acid), which have been observed to aid cardiovascular health and lower the risk of heart disease. Fish and omega-3 fatty acids have been the focus of tens of thousands of studies on their health benefits, and have been said to aid arthritis, lessen ADHD, and reduce the likelihood of heart attacks and cancer, although as the New York Times has noted, there are skeptics within the nutrition field. Most people, however, don’t eat enough oily fish to receive the benefits of omega-3s. The only other way to secure EPA and DHA is through supplements such as fish oil capsules. According to Risley’s recollection, the Swiss pharma company had pumped millions of dollars into omega-3 research but determined—despite the compelling health potential—it wasn’t a business for a Big Pharma company, which seeks patents, monopolies, and profits from proprietary medicines. “You couldn’t patent omega-3 fatty acids—they were naturally occurring molecules in fish oil. It was an opportunity for someone else,” Risley recalled. “I thought, ‘Jeepers, we’re in the seafood business.’” That serendipitous meeting represented only the first leg of what became a three-legged stool in the genesis of Ocean Nutrition. The second leg of the stool appeared when someone told Risley that Bob Ackman, a world-leading fish oil researcher—Mr. Fish Oil, as Risley referred to him—worked at the Technical University of Nova Scotia (now part of Dalhousie University). “So here was an expert in our backyard,” he said. “[ He was] very helpful.... Almost an inspiration.” The third and final leg of the stool came around the same time, during the mid-1990s federal budget-cutting pursued by Jean Chrétien’s Liberals. Risley had a meeting with Newfoundland’s Brian Tobin, then Chrétien’s fisheries minister, and was very critical—railing on Tobin for what he saw as the detrimental cutting of federal research spending in Atlantic Canada. “You guys are stupid,” Risley told Tobin. “The researchers who actually leave and take a cheque to go out the front door are the people who know they can get jobs elsewhere—those are the best people. So we’re losing our good people and keeping our worst people.” “Well, if all the good people are leaving, what are you doing about it?” Tobin shot back. “If they’re so goddamn good, why don’t you hire ’em and do something with them? Where’s the private sector in all of this?” Risley was stunned by the comment but, walking out of the meeting, realized Tobin was correct. “Why can’t we do something with these scientists?” he thought to himself. Thus began Ocean Nutrition."

"Risley was at this point—the mid-to late-1990s—still predominantly focused on the larger picture at Clearwater. A new company focused on omega-3 R and D would require a dedicated top executive, someone to help actualize Risley’s big-picture vision—someone to focus on the day-to-day, granular details that were of little interest to him. He found that operating partner when CFFI bought Laer Products, a company that had supplied omega-3 fish oils to the veterinary industry before going bankrupt. Risley tapped Laer’s general manager, Robert Orr, a former grocery executive, to build a team and create a new company, which was formally incorporated as Ocean Nutrition in March 1997."

"Ocean Nutrition’s initial research focus was broad—too broad. It pursued the anti-cancer effects of shark cartilage; developed a product derived from seaweed to boost immune system function; and worked on applications involving glucosamine, a compound found in cartilage that is harvested from shellfish and used to treat pain associated with osteoarthritis. On the surface, that was an obvious research target for Ocean Nutrition, given Risley’s shellfish background. Overall, the goal was to use Clearwater’s seafood waste materials to develop a portfolio of nutritional products and ingredients, but the scattered focus was expensive. “We were spending way too much money and losing too much money,” Risley recalled. “So we ultimately decided to focus on omega-3s and dispense with all the other stuff.”"

"“One of the reasons [entrepreneurs like John] do so well, or in some cases they don’t, is they really don’t see risk,” said Dave Brown, an Ocean Nutrition board member. “They see [the] upside, and they have people that work around them that worry about the risk.” For Risley, that worry falls to Spavold."

"One issue hampering the company was, paradoxically, Risley’s best attribute: his ability to see—and desire to pursue—new opportunities. At Ocean Nutrition he was eager to chase new marine oil applications, and like Colin MacDonald in the early days of Clearwater, Jamieson felt Ocean Nutrition was becoming too scattered and needed to prioritize."

"Ocean Nutrition’s effort to inject omega-3s into as many products as possible was part of what Jonathon Gatehouse, writing in Maclean’s, called “the tide of omega-3 products now washing over grocery-store shelves.” Eggs, cereal, milk, pork, and chicken were all being enriched with omega-3s, which were being hyped as a promising nutritional tool to combat arthritis, colon and breast cancers, heart disease, depression, Alzheimer’s disease, and more. For companies like Ocean Nutrition, the explosion of interest in omega-3s—part of a larger and growing market for so-called “superfoods”—had “turned fish-plant garbage into grocery-store gold.”"

"The deal, negotiated in early 2012, “propelled” Ocean Nutrition’s profits and value, provided surety of supply, and further added to the company’s global reach—offices in Europe and Shanghai, powder manufacturing in Wisconsin and Nova Scotia, and oil processing in Peru. The significance of adding the Peruvian business became evident on May 18, 2012, with DSM’s purchase of Ocean Nutrition for $ 540 million. (According to Risley, the final price was closer to $ 600 million by the time the deal closed two months later.) Just a year earlier, DSM had offered $ 320 million. The sale meant Richardson Capital had earned a 20-to 30 percent annualized rate of return on its first investment in Ocean Nutrition, and a 40-to 50 percent rate of return on its second investment. (Richardson had paid a total of $ 70 million for its 45 percent stake.) CFFI earned a 21 percent return on its investment, based on a gain of $ 210 million."

"For Risley, there was more than money tied up in Ocean Nutrition. “Starting a company from scratch creates this crazy kind of relationship between you and the company... which people would perceive as being financial in nature,” he said. “But it also has an emotional component. Seeing something grow from nothing into something that becomes globally important in its particular field is a fun thing to do. And then selling it and giving your baby away to someone else is a bit like walking away from a relationship with a girlfriend you still love.”"

"Risley did not live in the Caribbean during his time as a Columbus founder and investor, nor was he involved in the day-to-day running of the company. Like his involvement with Clearwater and Ocean Nutrition at the time, he was on the board. In the case of Columbus, he was focused on the larger strategy: dealmaking, meeting with banks and raising the capital necessary for expansion."

"MacDonald also alleged Risley spent millions of dollars from their shared holdings when Clearwater was backed by Hillsdown, and also pre-spent their proceeds from the Ocean Nutrition sale. “The money is the business money. It’s not your personal money. And John has never been able to divide the two.” According to MacDonald, this was the real reason they’d launched the initial public offering (IPO) of Clearwater units. “The company was borrowing money to operate, and it wasn’t going just to operations. It was being spent... on his personal [expenses]. They’ll let some of that happen, but not to the extent that it was happening. I think that scared him.”"

"“So am I fair in saying that at these different stages—with Hillsdown, Clearwater going public, and the sale of Ocean Nutrition—that John was pre-spending the money?” I asked. “Oh, fuck yeah,” MacDonald shot back. “He was building, buying, and pissing money away. I didn’t have a problem with him spending money. I simply assumed my money was still in the company.”"

"“He’s been close [to the edge] a lot of the time,” said Hugh Smith. “It’s just a question of who gets paid. Then he sells Ocean Nutrition—gets a windfall. Sells Columbus—gets a windfall. Sells Clearwater. All these core assets get sold and the money just goes....” Smith then made a sound to convey money disappearing in all directions. “He leaves nothing on the table. Nothing. And that was my biggest advice or caution to him: when you have a windfall, it’s not shameful to tuck some away,” Smith continued before letting out a jolly laugh. “In defence of him, a lot of it is feeding the liabilities.... If you make $ 100 million selling Clearwater and you’re building a $ 200-million boat, well, it’s hard to get the math.”"