Cod farming: difficult start, but bright future

Posted on June 18, 2009 by Christophe Pelletier

Sometimes success stories do not happen at once. This is my feeling about cod farming. Cod products are in good demand, and unfortunately, wild stocks are in serious trouble, which leaves a huge opening in the market.
Farmed Cod - Courtesy of Fiskeriforskning So far, farmed cod producers have not delivered good financial results and opinions diverge according to whom you listen. Culprit seems to be the “market”, but this is generally a very vague and inaccurate explanation.
Feed companies initiated cod farming, as an extension of the feed business, but not as a standout business. Moreover, the volumes that have been planned initially answered to a production driven approach, and not to a market-driven approach. Production was set up for quite significant volumes, without building up a solid sales plan from an already established market position for cod products. If you read my previous articles “Be always market-driven” and “The consumer must be the focus point of value chains“, you can understand why such an approach delivered poor results.
Recently, I was browsing through the web site of one of the farming companies and, although they claim to have set up a value chain, they have not quite done so. Their value chain needs to integrate much more strongly the marketing/customer end, and I think that they need to rebalance their bargaining position with feed suppliers and customers, in order to obtain a fairer distribution of profits. Today, there are people making good money out of cod farming, but the farmers are not.
Cod fillet Once they refocus their marketing mix to the right countries and the right type of customers, which they will have to do with a reduction of production volumes, then they can grow the business with and for the cod market by being in the driver’s seat.
Considering the demand for white fish and the depletion of the supply of the natural competitor (wild cod), cod farming’s future can only be bright. It would not surprise me if, in the future, cod farming could surpass salmon farming in production volumes. But first, one step back.

If we are what we eat, what will we eat in the future?

Posted on June 9, 2009 by Christophe Pelletier

The past 50 years have seen, at least in the Western world, the development of the consumption society. The emphasis has been on consuming always more, by having an apparently unlimited quantity of increasingly cheaper consumption goods available. This trend happened in the agriculture and food sectors just as well, and followed a rather simple patter, actually. Mass consumption has been coupled to mass production, thanks to intensification, technical and technological progress and, last but not least, marketing.

Technical progress improved yields and productivity, while marketing was aimed at creating more, and new, needs. Our food has become standardized, industrialized, and processed in a wide variety of forms. As the emphasis moved to lifestyle and convenience, which came along with the rise of mass distribution, cheap energy and suburbia, we lost the connection between ourselves, the origin of our food and nature. Food became just things you buy at the supermarket, already packed in plastic and cardboard.

Now, we have come to the realization that this high production of waste, be it packaging material, be it blemished product that do not look good anymore while still perfectly edible, be it the overproduction of manure and its minerals, or be it the massive use of antibiotics and pesticides is not sustainable. Of course, much progress has already done to reduce this waste and there is a growing trend towards organic and traceable, but at this stage it not clear yet whether this is a true change in our behavior or whether it has more to do with a social status and marketing issue.

However, what the current situation might be, the fact that we understand that we cannot keep on intensifying and wasting the way we did, will inevitably bring a more fundamental change in how we consume in the future.

Some people predict such changes as the astronaut diet made out of pills, the use of a computer to tell us what and how much of it we should eat based on our activity level, or the tissue culture to replace meat, and many other scenarios. Will any of those ever happen? Who knows?

Personally, I believe that food as a very strong psychological connotation. We associate food with experiences and, although there are differences between cultures, that emotional bond will stay.

Clearly, the consumption society with all its excesses is coming to its end, and maybe the current economic crisis, which also originated in the excess of having it all at any cost, could very well be the turning point.

The next evolution is probably going to be a balanced approach between consumption, which we need to some extent, and the necessity of preserving what keeps us alive. There will be different graduations of this balance between geographic regions, but sustainability is the only way forward, as I mentioned in my previous article (Sustainability: as natural as balance).

Intensification is showing its limitations, waste of manure and of packaging are also hitting a wall, energy is getting more expensive and makes the production and the transport of food more expensive, too. This will reshape how we want to consume our food, how and where it is produced, how it is presented to us.

Cattle feedlot We still are in a society where some people get obese by eating lots of food as quickly as they can, while they have less physical activity than the previous generations, thanks to automation. That food is produced on intensive farms and feedlots where the animals grow and fatten as quickly as possible, as they eat lots of food, while not having much physical activity. Similarly, in our society meat producers use hormones to boost growth and carcass quality, while body builders and sport professionals use steroids and growth hormone to boost their performance. Interesting similarities, don’t you think? We are indeed what we eat.

So, in a conservation society, should we expect the farms to be led by the need to preserve? This almost sounds like the farms we had at the beginning of the twentieth century. I think that there will be some of it, but the efficiency of production as well as the efficiency of preserving the environment will be much better, thanks to new technologies. We will have high yields, and at the same time, we will have highly efficient systems to use water, to recycle waste and preserve the fertility of our soils and the balance of our oceans.

An example of profitable sustainable aquaculture

Posted on June 6, 2009 by Christophe Pelletier

Here is an article (Sustainable Aquaculture: Net Profits) about a fish farm in Andalusia, Spain, which has a different angle than industrial intensive fish farms.

It refers to a number of arguments, such as feces contamination and lower densities, that I had mentioned in a previous article (The lessons of intensive animal husbandry to aquaculture). It also illustrates what I presented in Value chains are a great way to develop a niche, as they market their fish as the pata negra of sea bass at a premium price.

Of course, this farm is an example showing a very specific situation in a very specific environment, and providing seafood to the world population might require more intensive systems. Moreover, not everyone can afford to buy the pata negra category of food.

Canada’s meat, grain sectors eye EU trade

Posted on June 4, 2009 by Christophe Pelletier

This is an interesting article, that shows that when you want to be market-driven, opportunities will come your way.

Here is the story of Canadian beef that might be sold in the EU, if the producers are willing to change their production system (by going hormone-free). While this means higher production cost, the sales price that they get makes them actually make a higher profit margin.

Story at http://www.nationalpost.com/related/topics/story.html?id=1658785

The consumer must be the focus point of value chains

Posted on May 27, 2009 by Christophe Pelletier

The shopping cart: your ultimate target! Regardless which link in the value chain you represent, it is essential to always consider the “big picture”. In this picture, a key element is the end of the chain: the consumer.

As the final user, the consumer will always drive the activities and the profitability of the whole value chain. Although the interaction is left over to the retail sector, the consumer’s quality requirements will trickle down along all the links of the chain. If I take the example of meat for instance, what the consumer wants will have implications all the way back to genetics, and breeding companies know how critical it is for their survival to be able to anticipate these needs, as choices have to be made several years in advance. If you are a breeder, your end product is the consumer product, not just the animal that you produce. If you are a feed company, you do not simply produce feed for the farmer, you are an important element in the acceptance (or rejection) of your direct customer’s product. Your feed becomes eventually the consumer’s choice.

Understanding the consumer is what makes successful value chains, and there is very little acceptable concession from that statement. Many companies fail because they do not listen or understand the consumer market. Pretending to do so, with help from new product development, sleek communication or fancy marketing concepts may help for a while, but it will not stand the test of the consumer. This is why commodities always sell at market price: they do not represent anything to the consumer; therefore, the only differentiation with your competitor’s commodity is the price.

Your product will flow towards the consumer market, and your information must originate from there as well. When building a value chain, always spend time understanding the final link, because it is the strongest and most powerful link!