BlueFOOD / FishGREENS

Transcription

1 BlueFOOD / FishGREENS an UrbanVenture in Aquaponics THE BUSINESS PLAN February 03, 2013 University of Minnesota Institute on the Environment ACARA Challenge 2013 Ally Czechowicz Phill Kelly Eric Sannerud Eric Svingen

2 Table of Contents Executive Summary / page 2 Background / page 2-3 Products / page 3 Market Description & Analysis / page 4 Industry & Competitors / page 5 Market Capture Strategy & General Operations / page 5-6 Risks & Assumptions / page 7 Pilot Phase Operations & Management / page 7 Financial Analysis / page 8 Conclusions / page 8 Appendix / page

3 Executive Summary Minneapolis has one of the strongest food scenes in the country, pushing locally and sustainably sourced food in restaurants not as a fad but as a norm. However, the Minnesota growing season can only offer fresh, local produce for a limited time of the year. Furthermore, Minnesota s distance from most commercial sources of fish makes for a rather long-distance supply chain. Customers and chefs in Minneapolis are pushing for a source of food that the current market is unable to provide. That s where BlueFood steps in. BlueFood was born out of the fall of 2011 Acara Challenge. Piloting our first business plan in India we found two things: one, we had a pretty good business plan that was relatively hard to implement and two, we had a strong team of skilled individuals that worked well together. Taking advantage of our team s strengths, BlueFood is back in Minneapolis to offer fish and edible greens through an aquaponics farming system. By creating a closed loop system where the only input is fish food, in aquaponics we can raise fish whose waste water is then used to fertilize the growth of our plants - which in turn purify the water for fish to use again. Using this system, BlueFood is creating the opportunity to provide local, sustainable products to customers year round - unlike outdoor farmers - by raising and growing fish and greens in an indoor, closed-loop system. According to executive chef Bruno Oakman, who is in charge of six restaurants leading the way in Minneapolis local food scene, our pilot phase business model has a market of about 75 restaurants in the Twin Cities area that are going to be willing buyers in our first year. That customer base will only grow as we become more established in our production process; especially because there are more restaurants opening in Minneapolis every month than closing. Through communication and relationship building with our customer base, BlueFood has the ability to secure customers and sales for our products before we even begin Background Aquaponics is a coupled food production system. Typically performed indoors, aqua+ponics symbiotically combines traditional aquaculture (the raising of aquatic animals like prawns and other invertebrates, though typically fish) with hydroponics (the cultivating of plants in nutrient-rich water in lieu of soil). This system is said to operate symbiotically because both plants and aquatic animals benefit from being raised together in the same system. Most basically this symbiosis operates as follows; fish defecate in their tanks, this nutrient-rich effluent is pumped to irrigate and fertilize the plants that flourish by uptaking this effluent. The remaining, now clean and aerated water is circulated back to the aquatic animal tank to continue serving the aquaculture and continues cycling indefinitely. Reducing aquaponics to these two parts (plants + fish) is a simplification, however. There are additional components that support the two parts in functions like the effective removal of solid wastes, the adding of buffers to maintain appropriate ph levels, and the maintenance of adequate dissolved oxygen levels. Typical components include: Rearing tank: the tanks for raising and feeding the fish Solids removal: a unit for catching uneaten food and detached biofilms, and for settling out fine particulates Biofilter: a place where the nitrification bacteria can grow and convert ammonia into nitrates, which are usable by the plants Hydroponics subsystem: the portion of the system where plants are grown by absorbing excess nutrients from the water Sump: the lowest point in the system where the water flows to and from which it is pumped back to the rearing tanks ( en.wikipedia.org/wiki/aquaponics, accessed 02/03/2013) Aquaponics is not a new idea. Its exact history is debated, though it has been documented that rice paddy farmers raised fish in the paddies in ancient times ( accessed 02/03/2013). Serious development of the paired aquaponics system began at the New Alchemy Institute in Massachusetts during the 1970s when the notion of a closed loop water circulation system was explored. To date, aquaponics have not appeared in mainstream food 2

4 production in the United States with only a handful of exceptions ( 2010/12/10/ ground-level-local-food-grocery-retail-producers, accessed 02/03/2013). Operators in Missouri have found success in raising tilapia in above-ground tanks inside solar greenhouses, whose effluent fertilizes and irrigates gravel-cultured vegetables in raised benches. Research has been furthered at the University of the Virgin Islands leading to the Deep Water aquaponics system that uses rafts in lieu of gravel beds to raise herbs and vegetables. The field of aquaponics was not solidified until 1997 when Rebecca Nelson founded a new quarterly journal, Aquaponics Journal, to collate research and application from around the world. Research continues today at many well renowned institutions like the University of Arizona, University of Hawaii, Ohio State University, University Wisconsin, and last but not least, the University of Minnesota. Although the social and environmental benefits of aquaponics was recognized decades ago by researchers at the New Alchemy Institute (now the Green Center, and North Carolina State University, these benefits have not been popularized until recently. Community-focused nonprofits like Growing Power ( in Milwaukee, Wisconsin are leading the way, running aquaponics systems and employing at-risk youth and young adults. Such ventures are finding support in online forums from across the globe where organizations, businesses, and individuals openly share their experiences and promote the development of aquaponics gardening. Products BlueFood will produce yellow lake perch (Perca flavescens), an ideal aquaponics system species. Yellow perch prefer cooler water (saves on heating costs), have a moderately quick growth rate (9 months to market), and are a regional species (consumers seek them out and know how to cook them). Compared to the aquaponics industry standard of tilapia, yellow perch are a premium fish. Tilapia is seen as a bottom rung fish and many premium restaurants won t purchase it. Perch, on the other hand, has many more uses and a better flavor and therefore fetches a higher price. BlueFood will produce three types of greens for market; lettuces, herbs, and specialty greens. Lettuces have a quick growth rate and ubiquitous appeal that make them a great product selection. Restaurants serve lettuce three times a day, breakfast, lunch, and dinner. For individual customers lettuce is an easy, healthy staple in their diets. Examples: bibb, leaf, romaine. Herbs are another quick growing plant that is commonly used in cooking. Off-season, local, fresh herbs demand a high price from chefs and others who value flavor. Chefs are particular. They don t want to use ground, dried herbs, they want the vibrant flavors of fresh herbs. Home-cooks also value the incredible taste of fresh herbs. Examples: basil, thyme, cilantro. Specialty greens fetch a high price due to their rarity and offer a diversity of services in an aquaponics operation including filtering out toxins. Chefs like to experiment with new ingredients all the time. Borrowing from the Chef s Garden model from Ohio we will grow special order greens for individual restaurant buyers, earning extra for this service and product. The general local food consumer is curious about different greens, flavor and potential health benefits of new green varieties drives their consumption patterns. Examples: watercress, sprouts, kale. 3

5 Market Description & Analysis BlueFood will produce a premium product; competing at a premium level. BlueFood competes against other high-quality, nutritionally-dense products, some of which are also locally grown. BlueFood targets two market segments, local, chef-driven restaurants and high-income individuals interested in high-quality produce. Chef Oakman estimated the total chef-driven market in the Twin Cities to be approximately 200 restaurants that could purchase 30lbs per week of either fish or greens. That is 312,000lbs of product per year and growing. We have an oral commitment from Beth Jones, local foods veteran and executive chef at the Campus Club, for 12lbs of fish per week and interest in greens purchasing as well. Chef Oakman s popular Red Stag Supperclub alone could use 30lbs of lettuce and 40lbs of fish a week. Chad Hedberg, owner/operator of an aquaponics operation in Richfield, sells out of 4000lbs of fish faster than he can market them. A good measure of individual consumer s demand for local food is the growth of farmers markets. In Minneapolis alone the number of farmers markets has nearly doubled from 100 markets in 2010 to 143 in 2012 (MDA, 2012). Another model for sales to individuals is Community Supported Agriculture (CSA), a direct-sales business model. Every spring the Seward Co-op hosts a CSA fair. Alison Meyer, the CSA fair s organizer, has noted a substantial increase in fair attendees but is limited in the number of producers she can accept by space. The experience of our team member Eric Sannerud, who started his own CSA farm last year, also tells a story of strong demand, he sold 8 shares with a waiting-list of over 20. A huge market is not a promise of sales. BlueFood holds three advantages over the current aquaponics industry; better marketing, superior customer service, and CSA experience that will drive sales to restaurant and individual market segments. There is substantial room for improvement in marketing in the Twin Cities aquaponics industry. During our market research we were consistently amazed by the lack of presence, social media, web based, or otherwise, of competitors. One competitor was referred to simply as the guy in Richfield. Further, prominent local fish distributor, Coastal Sea Foods, was unaware that any aquaponics producers existed in the Twin Cities market. By developing a business with a personality active on the internet and local publications BlueFood can become the first word in aquaponics in Minnesota. Recognition in the local foods community as the local aquaponics producer will bring customers to us. Another insight gained through market research was the lack of satisfaction on the part of restaurant buyers with the customer service of many local producers. Many producers do not treat their customers to the degree they expect and BlueFood will capitalize on this error. Chef Oakman in particular lamented the struggles he has with local producers, he believes in supporting local but the producer s lack of service makes it hard for him. Customer service means, communication. BlueFood will develop and implement a regular product listing for restaurant customers and research opportunities to implement an online ordering system. These simple communication tools, in addition to social media activity to connect to individual buyers, will establish relationships with our customer segments generating sales and loyalty. Sannerud s history operating a CSA brings valuable insights and expertise to BlueFood s second market segment, individual buyers. The CSA model is a good model for aquaponics producers. CSA customers pay up front before the season starts for their share of the harvest, then they pick up a box of produce each week throughout the season. This model generates positive cash flow for the business and offers flexibility. Since aquaponics produces year-round BlueFood can sell two rounds of CSA shares, summer and winter, generating cash flow year round and capitalizing on individual consumer demand. 4

6 Industry & Competitors The aquaponics market in Minnesota is in its infancy and few producers exist in the state. Direct competitors include other aquaponics producers; GardenFresh Farms and The Urban Farm Project. Additionally, during the Minnesota growing season, we must compete with local ground-growers. Indirect competitors include conventional produce distributors, including Bix, and Cooperative or high-end grocers such as Seward Co-op and Lunds. BlueFood has competitive advantages in marketing and customer service over other aquaponics producers who have failed to effectively brand their products and consistently meet customers expectations. During the growing season a flood of producers enter the local market, however, aquaponics systems operate in a controlled environment, not at the mercy of nature like ground-growers, and so outcompete these producers on reliability. Indirect competitors, such as produce distributors, cannot offer special order services to restaurants like BlueFood. Cooperative and high-end grocers are indirect competitors to our individual buyer market segment. However, the CSA model offers a more convenient experience than large groceries the customer simply picks up produce once a week. Our market segment places a high value on connection to the producer, something even cooperative grocery stores cannot provide. Market Capture Strategy & General Operations We recognize partnerships as imperative to our success in a technical field like aquaponics. We have to this point worked with or have aims to work with these organizations: o Traditional Foods Aquaponics Farm (Minneapolis, MN) toured farm and spoke with owners who were both forthcoming and supportive o Aquaponics researchers at the University of Minnesota (Minneapolis, MN) have been in contact and plan set up a meeting to explore opportunities for collaboration o Other research universities to explore other opportunities for collaboration. Traditional Foods has discussed the benefits of partnering with research universities (Example: University of Wisconsin Madison) o Acara University of Minnesota business development program Management of this BlueFood business will occur as following: o Business management/marketing and sales will be handled by Ally Czechowicz whose credentials include a biology undergraduate degree, a masters in environmental design, and gold medal winner in Acara Challenge o Farm operations and maintenance will be directed by Phillip Kelly who is a self-proclaimed foodie, is already a local business owner, has local restaurant and food truck industry experience, and is also a gold medal winner of Acara Challenge o Product preparation/plant management will be coordinated by Eric Sannerud who is a former CSA coordinator and local farmer, self-proclaimed foodie, and has expertise and networks in the local food scene. o Water Quality/Fish Expert will be Eric Svingen who is pursuing his PhD in environmental engineering, currently owns a social venture, and is a gold medal winner of Acara Challenge Though aquaponics is a technical field of cultivating fish and vegetables, we recognize several potential problems with supply. We understand that there exists variability in fingerling availability and quality and that their transportation to our location is a significant cost and potentially tied to regulations enforced by the Minnesota Department of Natural Resources. Additionally, a supply challenge is recognized in the securing of quality fish food (i.e. a lot of market fish food is ocean-caught fish that is ground up, which if used to raise our aquaponics fish, negates our agenda of sustainable-farmed fish). 5

7 BlueFood Fish Greens plans on selling their product to Community Supported Agriculture (CSA) members. This model is common among our intended customers, and because it is typical for CSA members to pick up their goods, we foresee no problem in continuing this practice. We dually aim to sell fish and greens to local restaurants, and due to their custom of having product delivered to them, we will continue this practice and deliver orders via greens packaged in simple plastic bags and freshly killed fish on ice in coolers. General operations for BlueFood Fish Greens is categorized by system component: o Fish. 1x/months we will harvest fish, weekly we will clean fish tanks, and daily we must feed fish, monitor water quality for dissolved oxygen levels, nitrites, ph, and temperature, and perform miscellaneous maintenance. o Plants. Plant work is all daily and includes harvesting, developing and transferring seedlings, amending water, and miscellaneous maintenance. o Business. Weekly business work to be done will include researching and writing research grants and perhaps giving tours to interested parties. Daily tasks will be sales and securing new customers, solidifying orders, and working with clients, and standard bookkeeping Our market capture strategy is premised on the huge market that is year-round local and nutritious fish and greens, as indicated by our own market research and our partners like Traditional Food Farm. In terms of publicity and client securing, we have identified at least eight avenues for getting the word out about our premium product, all of which have exuded potential for securing clients. -Website: create/modify existing BlueFood website -Facebook, Twitter, Blog: create and keep updated -University of Minnesota Alumni Donor Magazine -Miscellaneous other magazines, papers -Personal networks -Acara and other University networks -Restaurant networks -Local food network and industry BlueFood has a competitive advantage in a few different ways. Our market research indicates that few farms put considerable effort into marketing their products. By dedicating resources to marketing we will secure more clients than our competitors. Also, we are committed to making aquaponics a profitable business venture unlike many of our competitors who focus on the social and environmental benefits. We will focus on perfecting the process of aquaponics, increasing in the scale, and delivering a premium product. Finally, we aim to sell a premium product at a premium price in terms of both ethics and nutrition. Using only sustainably sourced inputs we will sell the highest quality plants and fish (i.e. by feeding fish insects rather than corn). Terms of Sale will depend on which customer we are working with. In a CSA (Consumer Supported Agriculture) the risk is built into the model by spreading it among CSA members and there are no contracts to uphold for delivery of products. If there were to be an problem with our production, the customer would simply see no delivery of product even though they were to have prepaid for the CSA share. In working with restaurants we will most often deal with impromptu and short term sales until our production is of a large enough scale to have a consistent delivery contract. All of our sales programming will be designated to a sales director who will earn an hourly wage. 6

8 Risks & Assumptions Given the strength of the market demanding BlueFood s premium products, the biggest risk lies in the operational side. More specifically, the biggest risk is not identifying flaws in our system or operational procedure during our pilot phase that would subsequently reduce profits when scaling up our system to its full size. Our pilot phase will allow us to test our biggest assumption, which is that we can successfully install and operate an aquaponics system. Our individual talents and commitment to this venture, matched with an exhaustive research of precedents and current aquaponics ventures, will lead our team to create and operate a successful system. Through the pilot phase we will learn best practices for operations and areas to improve the system as to make an economically viable and scalable system that will achieve financial success. Pilot Phase Operations & Management Pilot Study (Phase I) The pilot study will be 3-4 months long from May-August The first month will be designing and installing a small scale aquaponics system in a small warehouse or space. We plan to purchase supplies such as fish tanks, pumps, tubing, fingerlings, plant seeds, fish food, lights, bio filters, etc prior to beginning the pilot study. We expect these items plus garage space to cost $5000. We plan to build a very simple style of aquaponics farm called a raft system. This is a soil less system in which plants float on a raft on top of the water that is take from the fish tank. There will be one tank of fish several beds of plants. The fish tank will be a 275 gallon food grade plastic tank. The plants will also sit in smaller food grade plastic tanks, which can be cut in half so that one take equals two plant beds. We will grow different lettuces in the tank. The fluorescent lights will be placed above the plants. There will be a filter system set up outside of the tanks to take solids out of the fish water before it enters the plant tanks. One pump will be necessary to pump the water throughout the system. Throughout the summer we will operate this system and build our knowledge on how to raise fish and plants. We will sell food produced in a small scale CSA model, to friends and family. The primary purpose of this pilot study will be to gain hands on experience raising fish and plants in an aquaponics system so we are able to make experience based decisions when designing an larger scale system. We plan to increase the scale of the farm incrementally as aquaponic farming can truly be done at almost any scale, small or large. Although our end goal is to design a vertical system, we want to start with this simple raft system as it will be most suitable to our time constraints. We want to be able to spend at least 2.5 months working with fish and plants rather than using our time to set up the system. Goals for the pilot study are as follow: o Secure a small space in which to operate an aquaponics farm (i.e. small garage or unused warehouse space) o Obtain supplies such as fish, plant seeds, fish tanks, piping, etc, necessary to operate an aquaponic farm o Successfully operate a small scale aquaponic farm o Gain hands on experience working with fish and plants o Sell food to family and friends only Operations of this pilot study have been explained in a previous but will need to occur at a smaller scale, in line with a pilot. Such activities will include tank cleaning, feeding fish, planting and tending to plants, water chemistry analysis 7

9 Financial Analysis see Appendix Conclusions The Minneapolis food scene is strong, healthy, and growing. It is pushing the envelope of sourcing food sustainably and locally as customers and chefs alike are paying premium prices for premium products. Given the Midwest s seasonal constraint on farming and geographical constraint on sourcing commercially grown fish, there is a high demand for what BlueFood has to offer. We at BlueFood have the talent and commitment to make aquaponics work in Minneapolis but we are still lacking the resources. With your help we will be able to test our assumptions and successfully operate a small-scale aquaponics system. From the knowledge we learn through our pilot phase, we will go on to build a full size aquaponics system, giving Minneapolis the sustainable food sourcing it wants, right in its backyard. 8

10 Financial Analysis, Full- fedged system Below is a simple financial analysis for a full- fledged system, wth a 32 ft^2 footprint. This system is larger than our pilot study, and is the smallest system that is financially viable. The business can be expanded by increasing the number or size of these systems. Capital expenses Tank, lumber, PVC, lining, & pump $5,000 Tools $600 Fridge $200 Freezer $100 Delivery coolers $150 Unforseen / Misc $2,000 Total capital expenses $8,050 Annual expenses Rent $3,000 Energy $1,800 Water $180 Labor $5,000 Fish stock $5,600 Fish food $1,080 Seeds $50 Insurance, taxes $3,000 Unforseen / Misc $2,000 Total annual expenses $21,710 Revenues We split our product evenly between restaurant sales and CSA shares. Estimate for product value comes from calls to local chefs. Product Square feet Pounds per ft^2 Harvests per year Pounds per year Price per pound Yearly revenue Fish $16.00 $16,640 Lettuce $7.00 $7,644 Herbs $16.00 $11,424 Specialty Greens $10.00 $10,920 Total potential revenue $46,628 appendix / 9

11 Revenue through restaurant sales Product Pounds Price Per Pound Yearly Revenue Fish 520 $16.00 $8,320 Lettuce 546 $7.00 $3,822 Herbs 357 $16.00 $5,712 Specialty Greens 546 $10.00 $5,460 Total restaurant revenue $23,314 Revenue through CSA shares We split the year into two seasons: summer and winter. Summer shares incude only greens. Winter shares include also fish, as we coordinate production so more fish are available in winter. Season Price Shares sold Pounds fish Pounds greens Seasonal revenue Summer $ $ 7,500 Winter $ $ 14,000 Total CSA revenue $ 21,500 TOTAL YEARLY REVENUE $ 44,814 appendix / 10

12 Financial analysis, pilot To test our ability to run a full- fledged system, we will first build a smaller pilot system. The costs here are mostly in startup capital and material costs. Supplies Price Quantity Total 275 gallon plastic food grade tote $125 4 $ gal food grade plastic barrel $80 3 $ L buckets $5 3 $15 1 lb lettuce seeds $20 1 $20 Breeder colony $350 1 $350 Mesh netting (for bio filter) $20 1 $20 Fish net (large) $15 1 $15 Fish net (small) $5 1 $5 Fish Food $150 1 $150 Fans $20 3 $60 Fluorescent light tube $20 12 $240 Tubing $3 15 $45 Biodegradeable foam board (4' X 12')-10 pack $200 1 $200 PVC piping $100 1 $100 Bubbler $80 1 $80 Small pump $200 1 $200 Fish stock $1,000 $1,000 Rent $1,000 $1,000 Misc 1000 $1,000 TOTAL $4,740 appendix / 11