Before you start a business, you should conduct a value chain analysis.
The general principle is the same for every business. Business owners first consider each stage which brings a product from its conception to the market. This is the value chain. They then analyse ways to increase efficiency in each stage of the chain. This is the value chain analysis.
However, there are many differences between each industry. Some industries have relatively compact value chains, like aquaculture, whilst others are hundreds of stages long, like the automotive industry. Here is a broad overview of the aquaculture value chain.
Aquaculture Value Chain
The most basic value chain in aquaculture has five stages if the product is sold directly to the consumer, or six stages if it goes through a restaurant or another business which adds value.
To conduct a value chain analysis, you need to first understand how each of these stages functions in your business.
1) Stock Collection
The first stage involves the selection and collection of stock. The stock is then bred, and the eggs are sent to a hatchery.
2) The Hatchery
The hatchery is where the eggs are hatched under artificial conditions. Both fish and shellfish can be hatched and cared for in hatchery tanks.
3) Larvae to Juvenile
The larvae are then grown on to be juveniles. The length of this stage varies considerably depending on the species. This stage often occurs at the same hatchery as the previous step, but not always.
4) Juvenile to Adult
The juveniles are then moved to a grow on facility where they go from juveniles to adults. At this point, the non-breeding stock is ready to be sold.
There are three options at this stage. Option one is to sell whole weight, which is common with large facilities who have enough stock to sell breed by breed.
The second option is to sell at farm gate, direct to the consumer. Although this is the most profitable option by weight, it is also the most resource heavy.
The third option is to sell with added value. For example, a salmon facility may wish to produce smoked salmon because it sells for twice as much.
Step six is optional. A facility may decide to sell small quantities or the entire stock to a restaurant. It all depends on where the market demand is.
An aquaculture business may also own their own restaurant as another way to add value to the product.
Small vs Large Aquaculture Businesses
Although the value chain has six stages, that does not mean there has to be six different businesses involved.
Some aquaculture businesses are start to finish businesses. They take the stock from selection and collection to sale. They require a different team, facility, and manager for each stage, but they are all under the same company.
However, start to finish businesses are costly. Each of the five teams needs a minimum of 4 people so that is 15-20 people for a small modular business. On scale, you would need 60-70 people which is a lot of capital for a start-up.
If you don’t have this much capital, the sweet spot is stages four and five: buying juveniles, growing them into adults, and then selling them whole weight. This is largely the fastest way for someone to get into aquaculture as a start-up.
Aquaculture Value Chain Analysis
A value chain analysis finds deficiencies in each stage of the chain and improves them. Each improvement will save time, money, or both.
Here are some the two most common problems to look out for in the aquaculture value chain. These issues can appear in any business that works with livestock.
Food waste is exactly what it says on the tin, food that is being wasted. However, the cause of food waste is rarely simple. It could be caused by too much food, the wrong food, or even a lack of mineral in the water that is lowering the animal’s appetites.
Equally, food waste could also be when your animals are eating too much. For example, if the normal FCR for your species is 2:1, but your FCR is 4:1, then you know something is going wrong.
One of the biggest problems in livestock markets, is mass stock loss. Fish are particularly vulnerable to changes in their environment and disease, much more so than agricultural animals, such as cows and sheep.
For example, there was a mass mortality event early last year at Atlantic Sapphire in Florida. The aquaculture farm lost around 500,000 salmon that were already grown. This monumental loss was caused by a minor flaw in the RAS (re-circulatory aquaculture system).
Avoiding this sort of loss is one of the primary purposes of a value chain analysis. Without stepping back to look at the big picture, it is all too easy to miss errors that may cost the business.