The First Private Fishing Company of the Far East Celebrates Its 25th Anniversary

Russian harvesting of biological resources has always been one of the main manufacturing sectors of the Russian Far East. Having reached peak of its development in the middle of the previous century when the biggest processing facilities and fishing fleet were built at public expense, many big companies got into a deep and long-lasting crisis in 90s after beginning of market reforms. At that very moment there appeared not only the first fishing company in the Far East but first private fishing company - Vostok-1 Fishing Collective Farm.

Vostok-1 celebrates its anniversary, 25 years after its establishment.

History Written by Professionals

“Establishment of a new fishing enterprise Vostok-1 in 1991 became possible due to global changes taking place in the country at that time, - remembers founder and Chairman of company Board of Directors, Valery SHEGNAGAEV. - Life in itself gave a chance to active people and talented organizers of production to use this favorable situation. A new market with its corresponding relations was emerging. In the beginning of 1991, in spite of absence of a legislative framework, we understood that new times had come and brought new possibilities. We could not only think, but, which was important, to act as we saw fit, not from dictation of higher-level authorities. We could make our own decisions and act realizing our professional and organizational potential in full force”.

It should be noted that as distinct from many others fishing companies having some basis in a form of material resources from Soviet times, Vostok-1 began its business from scratch. Company’s assets included only experience, professionalism and organizational abilities of specialists making up a skeleton of company’s management, and their ability to inflame people with their idea and lead the way. Tangible assets were grown gradually.

“During the first several years we worked on rented vessels - many vessels of the fleet stood idle at that time and we rented them, - continues Valery Kharitonovich. - Knowledge of fishing areas and the most efficient terms of fish and crab harvesting, as well as considerable experience of expedition work in the mixed fleet enabled efficient use of rented fleet in harvesting various species of crab, sea urchin, Alaska pollack, herring and cod. We were generous in paying to the crews by implementing a progressive form of payment for labor, and taught fishermen to modern harvesting technologies. Activity of the crews based on mutual respect and artistic attitude to business helped to considerably improve indices of vessels working at the same object during the Soviet time. In spite of the fact that a lot of fleet was rented in 1992 - about 50 vessels of Russian fishing fleet and 8 foreign processing vessels and depot ships - the expenses were covered and the company got great financial resources in a form of net profit”.

The first successes helped the management to understand that they had to move forward. It meant that it was necessary to provide the vessels with work, i.e. catch quotas. Yet, a principle of interest allocation has gradually moved from the Soviet past to new economic realia. It means that all biological resources were given to former governmental enterprises that turned into joint stock companies. Vostok-1 being a new private company had almost no quotas. Moreover, right during that period, in December 1991 USSR Vnesheconombank went into bankruptcy, as a result of which most regional fishing companies had no means for performance of their primary activity. Science was in need together with the fishermen: the Ministry of Fisheries almost stopped financing scientific expeditions and researches but allocated, particularly to TINRO, considerable biological resources for joint activity with industrial enterprises, hoping that enterprises gaining profit would finance science.

“Due to old business and companionship relations with TINRO, we made a decision to support scientific team of TINRO-Center and agreed with Director Valery AKULIN on allocation of quotas for us, - tells Valery Shegnagaev. - From that moment our active cooperation with science, existing today too, has begun. All 50 vessels rented by us operated using TINRO quotas. In exchange for them we remitted part of our profit to the scientific institute. Thus, from March to October 1992 Vostok-1 remitted to TINRO 62 mln rubles, i.e. 10 mln rubles every month. That sum was very significant for those times taking into account the fact that prior to September 1992, 1 ruble cost 52 US cents. Transfers from fishermen covered internal needs of the institute, including employees’ salary, as well as scientific researches”.

Efforts of the private enterprise aimed at rescuing branch science, as well as increasing potential had not gone unnoticed: in the end of 1992 All-Union Fishing Production Association “Dalryba” ordered to include Vostok-1 into a list of manufacturers together with former governmental enterprises, which provided the company with access to quotas.

Crab success

The first, it may be said global success of this young enterprise was beginning of mass reclamation of king crab in 1992. Scientific quotas provided the company with considerable amounts of this resource in the area of Kamchatka-Kuril subzone of the Okhotsk Sea. Before that no one used to catch king crab there. For the purposes of harvesting the company rented 3 newest American crab-fishers using bareboat charter system with subsequent purchase. Whereby, an absolutely new fishing technology was applied on these very boats.

The point is that USSR used crab-fishing nets for crab procurement, catching crab of different sizes: 20-30% - species of standard sizes and the rest are juveniles and females. It was impossible to release the latter since they were broken during net rising, inflicting irreparable damage to this object.

Vessels of company Vostok-1 began to use special crab traps - so-called “suitcases” - invented by American fishermen. The advantage of this new method was the fact that even though all the crabs got in it, they kept quite well. As a result, adult species were sent for processing, while juveniles and females were released back into water alive, which facilitated preservation of this bioresource. Such type of harvesting was certified as complying with all environmental norms, and later on crab-fishers of the whole Far Eastern basis switched to it. This pioneer start made by Vostok-1 secured qualitative outbreak for the whole crab harvesting in Russia.

A new dawn for domestic fishery became a method of crab processing proposed by the company: Vostok-1 offered to the market brine frozen crab instead of raw crab sold by almost all Russian fishermen. This new product was of absolute success among foreign consumers and got high positive evaluation of RF Committee on Fisheries: supplies of super-technological products to the foreign market had political importance for Russia in 1992. That is why the company obtained almost free access to limits of king crab and snow crab, and three rented crab-fishing boats procured 8 thsd tons of the products, while numerous fleet of “Dalmoreprodukt” procured 9 thsd tons. Products of Vostok-1 were very popular in Japan and the USA, and its cost was 20-30% more than in “Dalmoreprodukt”. This example of a young enterprise that started a new page in history of Russian crab fishing was followed by Kamchatka and Sakhalin companies.

However, a new approach was applied not only in relation to fishing. From the first days of its existence the company was known for its special attitude to human capital assets. A new idea was organization of a system of crew rotation right in the sea every 4 months. This system is quite expensive and related to attraction of outside transport fleet. Yet, on the one hand it helps to increase return on harvesting (reduction of a number of idle hours and port calls), and on the other hand it is more suitable for fishermen: they come ashore more often, spend more time with their family, have rest and gain strength for the next voyage.

By the beginning of 2000s Vostok-1 was the most prestigious company for fishermen of the basin: during 4 months of a voyage they earned enough money to have a rest and improve their living conditions. The company has always paid big attention to conditions of living and work at its vessels - even today modern communication systems help the crew to be aware of the latest events happening in the country and in the world and to always keep in touch with their family. Seamen appreciate this care and try to work with total efficiency instead. This very approach helped to the company to find regular personnel and achieve new heights in business.

Going Deep

During the first 10 years of its existence the company managed to do a lot: new schemes of fleet management reducing harvesting expenses were applied, products of Vostok-1 conquered international markets, and rented vessels were replaced by own fleet. Yet, successful “crab” experience of Vostok-1 has not gone unnoticed. Other companies and poachers began reclamation of king and snow crabs, which resulted in considerable reduction of stocks and later on to complete prohibition of crab fishing. It was a new challenge that was met by quite extraordinary solutions of company’s management, correctness of which is already proven in time.

“Company’s Board of Directors had a good composition, - continues Valery Shegnagaev. - It included Nikolay KOTLYAR, a former Minister of USSR Fishing Industry, his Deputy Evgeny SHIRYAEV, and close contact was established with science represented by Director of TINRO-Center, Lev BOCHAROV. At the edge of centuries the Board of Director made kind of a fateful decision: to develop harvesting not in traditional areas at the shelf of 200 meters deep, but to go to bigger undeveloped depths and catch objects that had not been reclaimed in commercial scales yet. It was a period of auction sale of bioresources that is why the company directed all its free financial resource into purchasing deepwater objects of crab and fish harvesting. The first shot for the company became organization of procurement of deepwater japonicus and triangle crabs at the depth of 800-1,200 meters. We were not discoverers of this type of harvesting, in the beginning of 2000s about 90 Russian vessels worked with this resource. However, they processed not all the crab and stored it in vessel tanks to be taken to Japan. Our company brought fresh perspective to this type of harvesting too: we began to process crab, freeze it and supply the USA and other Asian-Oceanic countries with frozen sections. That decision turned to be farsighted: when it was prohibited to export live crab from the Russian waters, all our vessels were provided with technological equipment necessary for crab processing and freezing. Our colleagues procuring this type resource did not want to spend money on new technologies, as a result of which our company having a big number of quotas and several more enterprises with inconsiderable number of quotas were left for harvesting of these objects”.

Today Vostok-1 is the only company in Russia procuring this type of crab and developing deepwater fishing gradually and continuously for about 15 years. Aleksandr SAIFULIN, Director General of Vostok-1, explains a reason of lack of competition at the deepwater market by the fact that deepwater fishing requires considerable material expenses while cost of finished products at the market is not very high. Yet, company’s management succeeded in achieving profitability in this case too.

“Totalallowablecatches of deepwater crab are almost two-fold higher than of king crab. These crab species - we harvest japonicus and triangle crab at the depths of 800-1,200 meters - are quickly replenished, - speculates company’s Director General. - The point is that “kindergarten” in a form of crab juveniles is located at the depths of more than 1,800 meters, while an area with growing crab generation, so-called sub-recruits, or simply “youngsters”, is located at the depths of 1,200-1,800 meters, and standard-size crabs are located at the depths of 800-1,200 meters. These depths are developed by our, Korean and Japan fishermen. Depths with juveniles and teenagers are treated as reservations, and we do not work there. It helps to preserve commercial stocks. All other crabs in the Far Eastern basin are usually born and grow at the same depth where they are caught, that is why they are influenced by commercial pressing - up to complete destruction of this species.

Our company catches 65% of japonicus crab and 39% of triangle crab total allowable catches. Profitability from harvesting these species of crab is achieved at the expense of catching volumes and skilful work of the marketing group constantly expanding a list of consumers. Sometimes there appear companies which also try to work with this resource, but after they understand that at first they will have to spend big money for powerful fishing mechanisms, technological equipment, personnel training and to tap the market, they understand that it is a very complicated business and go away. I can state the following: we have almost no competitors in the conditions of huger deepwater crab resources in the Far Eastern seas.”

Another type of fishing developed by the company in the middle of 90s was long-line harvesting of black halibut in the Okhotsk Sea at the depths of 600-800 meters. For two years vessels of Vostok-1 worked there alone and procured up to 12-16 tons of black halibut per day, which is a very good index for today. Only during the third year of successful work other enterprises working the basin reacted. The company keeps procuring this object today. However, due to a tendency of the whole Far Eastern basin towards reduction of black halibut catching due to frightening activity of killer whales completely biting off the catches during long line selection, Vostok-1 began developing new types of resources.

We concentrated our attention on grenadier, some species of which live at the depth of 2,500 meters. During development of new depths Vostok-1 has found not only new objects but also proved that depths are inhabited and have a huge potential for commercial fishing.

“The company began to develop grenadier harvesting from the beginning of 2006, when the problem of killer whales became fully blown. During all these years we were drilling tactics and technology, solving issues of technical equipment of vessels and training of crew members to work at the depth. We had to study everything from scratch, - continues Aleksandr Saifulin. - However, put efforts and means were justified: the company has developed and successfully performs harvesting of grenadier, which has become the main object of Vostok-1 in terms of procurement volumes. Thus, following results of 2015, 15 tons out of 21 tons of fish caught by the farm falls on grenadier, i.e. more than 2/3 of harvest is procured from the depth of up to 2,500 meters. We are not just actively developing a new type of fishing. We actively carry out products marketing by expanding a field of operation. Deepwater fish is not very well known to our consumers but its advantages include price affordability and big health utility. Deepwater grenadier is a mine of irreplaceable amino acids and contains more amino acids than any other fish, two-fold more than in halibut for example. That is why it is very useful for a human organism being an optimum food in case of cardiovascular diseases, obesity and other illnesses and for people that need optimal healthy diet. While in Russia this little-known object is recognized by not many people, its useful properties and affordable cost is already appreciated in China. This is a place to which most part of the products is sent. However, there are positive tendencies in its sale in Russia too: sales volumes increased almost two-fold during two years”. The company also achieved big heights in technologies of product processing and developed almost a wasteless production cycle.

The assortment includes both gut headed fish trunks and steaks, and heads of all fish species, cheeks, stomachs, roe, milt, liver and tails. Whereby, “byproducts” are an important delicacy in Asian-Oceanic countries.

Being Fit for the Anniversary

The company has accumulated a big baggage of various achievements by its 25^th anniversary. These include its own renewed fleet in the amount of 15 vessels; a friendly team consisting of more than 600 employees consolidated into a real fishing family during these years; popularity at the Russian and international markets; a huge experience of mutually beneficial cooperation with science and other partners. All these have been securing stable positive financial result during the last 5 years, which is very important nowadays.

“Today, by breaking time into historical periods, we may say that 20 years were spent on searches and trials, and selection and training of company’s management, and only the last 5 years showed that those searches were not in vain and all company’s positions were drilled, which is proved by positive financial result, - says Valery Shegnagaev. - During these years we managed to raise a new generation of managers in the interior of the company. Among which are Aleksandr Saifulin, Vladislav Shegnagaev, Aleksei Kumshatsky, Aleksandr Kosenyuk and many other people that can be entrusted with company management”.

“Fishing Collective Farm Vostok-1 means professionalism of people employed plus modern fleet and high technologies. This triunity is a formula for stable success at the world market. Rates of procurement and production volumes are steadily growing, and quality of finished products is constantly improving”, - adds Aleksandr Saifulin.

Today Vostok-1 is steadily oriented to improvement of technical and technological equipment of its fleet, development of new areas and fishing objects, as well as application of new technologies together with a sectoral science.

“On the threshold of the 25^th anniversary of the company we congratulate all crew members of Vostok-1, their families and friends. We also would like to congratulate a wide specter of business partners; partners covering our requirements; we are especially grateful to employees of Korean shipyards; employees of all enterprises helping company Vostok-1 to achieve results specified in this article, - says Aleksandr Saifulin. - We are very thankful to our elders - Nikolay Issakovich Kotlyar, Evgeny Dmitrievich Shiryaev and Valery Kharitonovich Shegnagaev, and make a profound bow for their wisdom used in development and implementation of a strategy of company development, as well as for their pieces of advice and recommendations on practical activity. We wish everyone strong health and good endeavors which, I am sure, will lead to great results”.