forget everything you think you already know about...
TRANSCRIPT
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Forget everything you think you already know about farm-raised fish.
Executive Summary ........................................................................................ 3
Mission Statement .......................................................................................... 5
Industry Problem .............................................................................................. 7
Sustainable Blue’s Innovative Solution .................................................... 8
Our Product ..................................................................................................... 13
Company History .......................................................................................... 14
Company Profile ............................................................................................ 17
Market Analysis ............................................................................................. 21
Growth Strategy ............................................................................................ 23
Evolving Market ............................................................................................. 24
Competitive Analysis ................................................................................... 27
Marketing Strategy ....................................................................................... 28
Key Milestones ................................................................................................ 31
Risk and Mitigation Strategies ................................................................. 32
Barriers to Entry Resolved ......................................................................... 33
Conclusion ..................................................................................................... 34
Table of ContentsWho knew sustainable innovationcould taste so good?
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A superior process for better seafood and a healthier environment
Executive SummarySustainable Blue, located near the Bay of Fundy in Nova Scotia,
is a Canadian producer of sustainably-raised fish of the highest
quality. We use our proprietary aquaculture technology to operate
an earth-friendly, land-based recirculation fish farming operation.
We’re committed to product quality, environmental responsibility
and commercial success through sustainable practices using our
total containment aquaculture system (TCAS).
For Sustainable Blue, the role of technology is simply to replicate
the natural environment of the ocean, which is constant and in
balance. By avoiding the fluctuations in water quality commonly
associated with all other forms of aquaculture, our fish perform
to the best of their natural ability. The fact we grow salmon in
saltwater results in superior taste.
Our focus on technology is in the pursuit of product quality,
environmental responsibility and company success. We believe
land-based aquaculture is the least intrusive solution to the global
depletion of wild fish stocks.
Mission StatementTo be a world leading, market-led producer of the highest quality cultured fish in a manner that complies with our collective responsibility to protect the marine environment.
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Industry ProblemThere is a large and expanding market for food fish. Wild fisheries
are generally either at full capacity or are overfished and in decline.
Aquaculture should therefore be ideally placed to expand into the
growing supply vacuum. However, within the developed world sea-
based fish farming is often viewed with suspicion because of its
perceived undesirable characteristics. These perceptions include:
• The release of organic pollutants into coastal waters causing
local problems with wild fisheries and natural animal populations.
• Escaped farmed fish can damage local populations of the
same species.
• The prevalence of disease in sea-based farms. Diseases
cause both financial loss and create an image of unhealthy and
therefore unappetizing fish with consumers.
• Fish louse, a parasite that affects many different species of
fish, has become particularly prevalent in salmon farms. It is
now commonly accepted that these salmon farms create such
a locally high concentration of the louse when they are at the
infectious stage that they are having a detrimental – some would
say disastrous – effect on wild salmon and trout populations.
• The treatment of sea louse often involves organophosphate
insecticides. The damage these have caused has led the World
Wide Fund for Nature to call for a ban on new fish farms sites in
its report, Bitter Harvest.
• Sea cages are open to damage from storms, plankton blooms,
daily or seasonal temperature variation, and marine accidents
such as oil spills. All can damage and/or kill fish in very large
numbers. The sea cage farmer has little or no defence against
these threats and typically has to allow nature to take its course.
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Sustainable Blue’s Innovative SolutionSustainable Blue’s water recirculation technology avoids these
contentious issues. Fish held in our recirculation farms are isolated
from the sea and therefore free from disease. Any water taken into
the farm is in such small quantities that it can be reliably sterilized.
Provided that all fish brought onto the farm are from a disease-free
source, our recirculation fish farms can continue operating free
from disease indefinitely.
Profits are more predictable and attainable in a disease-free
environment. A typical sea cage production cycle in an open net
farm would lose up to 25% of the fish that were initially stocked.
Such losses have a very significant effect on per-unit production
costs and therefore profitability. Losses in Sustainable Blue have
been restricted to approximately 2% and primarily were due to
non-performance of individual fish or physical injury. Losses from
major pathogens have been zero.
Disease-free fish are also drug free. This can be a marketing
advantage at a time when the public is concerned about having
antibiotics and other residuals in their food. Differentiation in
the marketplace by offering natural fish allows for entrance into
undersupplied markets with a premium price.
A Sustainable Blue farm allows the fish farmer to trade off all of the
unpredictable and uncontrollable risks associated with the sea-
cage environment for the single risk of mechanical malfunction
in the largely controllable environment of our recirculation farm.
The risk of mechanical failure is well understood by modern
industry and can easily be mitigated by the use of quality materials,
preventative maintenance and the inclusion of redundant
components in the farm’s design.
Fish production costs are directly affected by the fish’s growth
performance because more fish can be produced from a farm
when the fish are growing quickly. Fish performance is in turn
affected by the quality of the fish’s environment. Sea cages force
the fish to stay in a confined area of the sea. They are then
obliged to endure the variable conditions that are typical of the
coastal environment, whereas a wild fish would vacate
inhospitable conditions.
In a Sustainable Blue farm, the environment is under the control of
the farmer and the conditions are set to best suit the requirements
of specific fish species. The result is much faster growing and
healthier fish in a clean environment. The difference between the
performance of fish in the open sea and those in a Sustainable
Blue farm is marked. For example, our Atlantic salmon will grow
to market size in 11 to 12 months. In a modern cage farm in the
North Atlantic, the same species takes 22 months to reach the
same size. The biggest reason for this difference is because the
cage farms see little or no growth during the cold months of the
year. The fish in our recirculation facility do not have a winter and
grow continuously as a result. Fish of a similar stock grown in
an environment that doesn’t change will also be of a consistent
quality, which allows for a reliable and reputable offering to
the marketplace.
Our farm is a proof-of-concept facility and has demonstrated
without compromise that land-based fish farming is technically
feasible. The farm has operated for up to 14 months without
the need to import water from the sea and has been a 100%
containment farm. Any discharges from the farm during the last
five years have only been as a result of changing fish species
and the consequences of the emptying and filling of the farm
that this has required.
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In addition to the capability for total containment, the Sustainable
Blue system has several other features that have very important
practical benefits, particularly when compared with other land-
based operations. Perhaps the single most striking feature is the
taste of the fish as they leave the grow-out tanks. It is generally
accepted within the land-based farming industry that fish coming
from the production system will taste muddy or have an off flavour.
This is a result of the presence of a compound known as geosmin,
produced in the system and absorbed by the fish. The Sustainable
Blue system and the fish growing in it are geosmin free. The water
treatment system inhibits the formation of geosmin and removes
any that might be formed. This ensures Sustainable Blue fish
maintain their excellent reputation for superior taste and texture.
Sustainable Blue’s system provides consistently clear blue water
for the fish. All organic waste is held on land. All incoming water
is sterilized, so the fish lead a disease-free life, which means the
fish lead a drug-free life. Water parameters are customized to the
optimal values for each species, which ensures precious resources
such as food are used in the most efficient manner.
Sustainable Blue believes its proprietary process for farming
salmon is unique and world leading, and allows the company to
assist in solving a global fish problem.
Someone buying a fish reared in a Sustainable Blue farm can do so
with a clear conscience because its production has not damaged
the marine environment. They can also be sure that the fish are
free from any drug residuals. The increasingly well-informed
consumer appreciates these points, will actively seek out such a
product and pay a premium for it.
SaltwaterReservoir
FreshwaterReservoir
Biological Filtration
Mechanical Filtration
MechanicalFiltration
Biological Filtration
MechanicalFiltration
Biological Filtration
Removal of solid and dissolved waste, addition of oxygen.
Removal of nitrate and phosphate.
Removal of ammonia, nitrite and carbon dioxide.
Removal of solid and dissolved waste, addition of oxygen.
Removal of ammonia, nitrite and carbon dioxide.
ATLANTIC SALMON HATCHERY
Atlantic SalmonEggs
ATLANTIC SALMON GROW OUT FACILITY
Atlantic Salmon Smolts
Freshwater Fish Tanks Saltwater Fish Tanks
SECONDARY FILTRATION
PRIMARY FILTRATION
Solid Wasteto Landfill / Agriculture
Closed Containment Land-Based Aquaculture System
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Our ProductSustainably farmed fresh Atlantic salmon is one of nature’s
healthiest choices. It’s an ideal source of protein that is low in
saturated fats, high in Omega-3 fatty acids and essential vitamins –
and it tastes great!
• Average weight is eight to ten pounds.
• Flesh can be pink or orange; texture is medium-firm and has
large flakes.
• Mild to moderate flavour.
• Excellent source of protein, thiamin, niacin, vitamins B-6 and B-12.
• High in Omega-3 fatty acids.
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Company HistoryThe project began in the early 1980s with Dr. Jeremy Lee during
his post-graduate studies in Scotland where he researched the
water-chemistry challenges associated with closed-containment
aquaculture in saltwater environments. He quickly realized
technology solutions that would deliver a viable closed-
containment aquaculture system did not exist commercially
at the time.
As a result of his studies, he developed technology and started
a commercial enterprise that designed and installed specialized
equipment that utilized the water treatment processes he had
identified. The shareholders of Sustainable Fish Farming (Canada)
Ltd. (SFFC), a company registered in Nova Scotia, Canada currently
own the North American intellectual property rights associated
with this technology.
The first major commercial application for the technology came
from the public aquarium industry in the 1990s. By 2005, the
project turned its focus to aquaculture. The decision was made
to relocate the project to North America under the name of
Sustainable Fish Farming (Canada) Ltd. (SFFC). Nova Scotia was
selected for a number of reasons, including:
• Solid regulatory environment.
• Access to large metropolitan areas in both Canada and the
U.S.A.
• International reputation for fishery and aquaculture and
favourable heritage.
• Proximity to U.K. point of origin for founders.
Project development, design and fundraising began in 2007 and
the facility was stocked with its first commercial fish, European sea
bass, in 2010. In 2012, SFFC conducted market and client research
to determine viable options for new species. Client feedback was
overwhelmingly for responsibly and sustainably-farmed Atlantic
salmon. The company determined the best strategy was to
construct a new, state-of-the-art freshwater hatchery at its existing
site in Nova Scotia. Construction work began in 2013 and the first
salmon eggs were introduced in early 2014.
The company went to market with its Sustainable Blue Atlantic
salmon in September 2015. This first batch sold out quickly and
the selling of subsequent batches is planned for February 2016
with continuous production thereafter. Sustainable Blue Atlantic
salmon has been received with excellent review and feedback.
Many discerning consumers note its unique taste and flesh quality,
drawing favourable comparisons with wild salmon.
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Company ProfileJeremy Lee Ph.D. President Dr. Lee initially trained as a marine biologist and chemist. Most of
his professional life has involved developing water purification
systems and installing them in aquaculture facilities and some of
the world’s largest public aquariums.
He developed his first salmon smolt farm in the U.K., which is
believed to be the first to rely completely on water recirculation. He
ran both the production and administrative sides of this business
for three years from 1992 to 1995.
At that time, the largest and most successful salmon producer in
the world was Marine Harvest International, then part of Unilever.
Marine Harvest approached Lee to buy the smolt-production
freshwater technology for its own use. Recognizing a promising
business opportunity, he relocated to a more accessible area of
England and started a design and manufacturing company where
he served as founder and managing director.
The company became involved in both aquaculture and the
public aquarium market, initially designing and supplying water
treatment plants, and later project managing entire projects up
to $25 million USD.
Fish farming presents the largest market and opportunity, so from
2005 Lee has focused entirely on rolling out the water recirculation
technology into the fledgling land-based aquaculture industry.
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Kirk Havercroft BSc (Hons) CEO Havercroft has worked with Dr. Lee in a financial and managerial
capacity for most of his post-graduate career. His principle
responsibilities have been to design, implement and develop
financial management information systems to meet the
management reporting needs of stakeholders.
In 2011, Havercroft was appointed to the position of CEO for
Sustainable Blue to build a strategic framework for production,
financial and operational control. Under his tenure, the company
built and operated a production management information system,
which aligns operational responsibilities with strategic planning.
Havercroft has also been responsible for developing the go-to
market strategy for the Sustainable Blue Atlantic salmon product
launch, including pricing and channel partner selection. He has
developed a number of relationships with key partners and will
be looking to expand the client base as production increases
throughout 2016.
Jim Lawley Director James Lawley was born and raised in Halifax, Nova Scotia and grew
up fly fishing for wild salmon in the rivers of eastern Canada. The
fly fishing experiences of his youth evolved into his lifelong love for
wild Atlantic salmon, their rivers and their long-term protection.
Lawley is the general manager of Scotia Fuels Limited and he
also sits on the board of two publicly-traded companies, Killam
Properties Inc. and Redishred Capital Corp. Mr. Lawley is a partner
in several world-renowned Atlantic salmon fishing lodges in Canada,
including Camp Bonaventure and Salmon Lodge in Quebec, and
camps on the Hawke River and Flowers River in Labrador. He is a
lead investor in Sustainable Blue.
Lawley is an active member of the Atlantic Salmon Federation
(ASF) Canada Board of Directors and a recipient of the T.B. (Happy)
Fraser Award for long-term contributions to wild Atlantic salmon
conservation.
Thane Stevens P.Eng., BSc (Hons) Director Stevens has a thirty-year career primarily spent in the construction
supply and construction industry. He is currently the President
of the Stevens Group of Companies whose major business
interests are involved in the supply of concrete and aggregate
materials in the Atlantic region, general contracting and real estate
development. He has worked in the earlier part of his career as
a structural engineer and later as a project manager and then
general manager for many of the companies now comprising the
Stevens Group.
Stevens became an investor in Sustainable Blue in 2010 and
has been involved in meeting the challenges of the company
as it refined its technology and processes for its land based
aquaculture operations. His experience in the construction field
and the Stevens Group’s business and construction abilities have
been accessed for Sustainable Blue’s existing facilities as well as
the planned future projects.
Stevens continues to be involved with the sourcing of additional
investors and capital as well as providing continuity on the
companies’ legal responsibilities and shareholder communications.
Company Profile
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Market AnalysisAtlantic salmon is the largest fin fish market in North America.
Pressure from non-governmental organizations and parts of the
general public have generated a demand for salmon not produced
in net pens. While the demand for alternative salmon exists, the
only supply available to this market is currently from modified net
pens and a small number of niche, land-based producers. The
market preference is for fish grown in a land-based system. To
date, the land-based industry has not had the capability to produce
salmon in commercial volumes. Sustainable Blue is therefore well
positioned to provide an alternative source of farmed Atlantic
salmon for a public that is increasingly looking for it.
The Atlantic salmon market in 2009 for North America was pegged
at 342,000 tonnes per year of whole salmon by the 2010 Salmon
Farming Industry Handbook. Although the size of this market
has remained relatively constant for several years, there is an
increasing demand for more sustainably-grown salmon products
– and an expectation that premium prices will be offered for such
products if it is available.
Sustainable Blue will take advantage of this growing demand.
Although this expansion is sizable for Sustainable Blue, it is
worth noting that Sustainable Blue’s projected 500 tonne annual
production is less than 1% of the North American market. The
opportunity is there to create and grow a premium-priced niche
market inside the salmon market.
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Growth StrategyThe company sees its best opportunity for growth from licensing
the saltwater recirculation technology to other groups interested
in making an investment in aquaculture. Sustainable Fish Farming
(Canada) Ltd. (SFFC) is currently in discussion with a number of
groups or individuals who have expressed an interest in this
model. The proposed 500-tonne salmon farm project on the
existing SFFC site in Nova Scotia will be the first such facility built
under license from SFFC.
The principle benefits to investing in a fish farm built under license
from SFFC are:
• Access to established and proven technology.
• Access to design, construction, commissioning and
staff training expertise.
• Access to the established Sustainable Blue brand.
The principle benefits to the market for producing Atlantic salmon
in facilities built under license from SFFC are consistency in:
• Product taste and quality.
• Responsible production methods.
• The diet used in fish production.
All farms operating under license from SFFC will employ the same
practices, will use the same feed and will produce fish of the same
quality, freshness and taste.
Evolving MarketThe market is likely to become more informed and demanding
regarding production methods and sustainability features. There is
already differentiation within the premium salmon category where
the following attributes can mean higher or lower price points:
• Is the product produced on land?
• Is it produced in a closed-containment facility or one that is fully
or partially open?
• Is it produced in a saltwater or freshwater environment?
• Is the product antibiotic free?
• What is the source of protein used in the feed? Is it
marine sourced?
• What happens to the farm’s effluent?
• Does the product taste clean and free of geosmin?
Sustainable Blue is setting an industry
benchmark for salmon. Through the
application of technology, our mission is
to meet all of the sustainability criteria listed
above while delivering fish of the highest
quality, freshness and taste. Of all the producers
of premium salmon, other than Sustainable Blue,
none to the best of our knowledge can claim to have
resolved all of the issues listed above. This presents
a great opportunity for Sustainable Blue to position its
fish at the very top of the premium category, commanding
the highest price within the sector and setting production
techniques for other producers to aspire to.
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Competitive AnalysisNo other land-based fish farm to our knowledge has mastered
100% saltwater recirculation. Sustainable Blue has a proven track
record of being at capacity with clean and clear water with 100%
disease-free fish.
In addition, the production methods and protein source for the
feed have resulted in a product that has a signature clean taste
and firm texture. Clients are making very favourable comparisons
between the taste and texture of our fish and that of wild Atlantic
salmon. We think this is unique in the market for farmed Atlantic
salmon and we can think of no better compliment.
The 100% saltwater recirculation platform allows future Atlantic
salmon farms to be built well away from coastal areas and closer
to the metropolitan markets they serve. This has the following
key benefits:
• Reduced transportation costs, particularly on high margin,
low-volume orders.
• Increased freshness at point of delivery.
• Adherence to the increasingly popular consumer initiative
of buying local.
• Development of closer ties between the consumer
and producer.
Marketing StrategyThe Sustainable Blue brand was established in 2010 when
the company first began selling fish in Canada. The brand has
become known not just for quality, but also for offering unique
and otherwise unavailable products. The brand will reflect unique
production methods that allow for 100% saltwater recirculation,
without compromising the clean, fresh taste demanded by the
most discerning clients.
Sustainable Blue has identified four channel opportunities for the
supply of premium Atlantic salmon and estimates total production
will be divided as follows:
1. Wholesale –60%
2. Retail –30%.
3. Direct to restaurants –5%.
4. Direct to the public –5%.
1. Wholesale
Our company has carefully selected wholesale seafood partners
within Canada who are able to demonstrate a focus on responsibly
sourced seafood. These wholesalers typically sell to high-
end restaurants with demanding standards for sustainable and
responsible production methods. Sustainable Blue is currently
sitting on a number of active inquiries within Nova Scotia and the
Toronto area for supply in 2016.
2. Retail
Sustainable Blue has aligned with smaller, independent retailers
who tend to have close relationships with a loyal customer base.
3. Direct to restaurant
Sustainable Blue has legacy relationships with certain key high-end restaurants
both within Nova Scotia and outside the province. These restaurants provide dining
experiences of the highest calibre.
4. Direct to public
Sustainable Blue has received great support from members of the public who see
its land-based technology as a major breakthrough in salmon farming for the future.
The company is well positioned to service these requests as it operates a sophisticated
ordering and distribution system that can easily accommodate high margin,
low-volume orders.
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Key Milestones1. Increasing production at the Sustainable Blue facility in Nova
Scotia to 185 metric tonnes per year by December 2016.
2. Adding production through a proposed 500-metric tonne
per year Nova Scotia facility during FY2018.
3. Adding production sites built under license within Canada
and the U.S.
Nova Scotia throughout its history has always been a major
player in supplying fish products to domestic and foreign markets.
Growing a successful total containment aquaculture system (TCAS)
business in Nova Scotia and developing global expertise for this
new industry will allow the province to continue its proud tradition
of meeting global fish market demands.
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Risks and Mitigation StrategiesTechnology – a recirculating aquaculture system (RAS) system
behaves like a living organism. While we believe we have
encountered and overcome all of the challenges presented by
this form of aquaculture, it is not possible to know of any long-
term operational challenges. The new grow-out module under
construction will be an evolutionary development of the current
module. While we are confident that technology enhancements
have been made based on sound operational experience of
the existing saltwater grow-out unit, it is not possible to know
whether new, unforeseen challenges will emerge from a new water
treatment system. This risk is managed by the application of sound
science, logic and design from the most experienced professionals
in the RAS industry globally.
Mechanical – the Sustainable Blue TCAS system is managed
and monitored by a sophisticated automation system. One of
the key safety features of the automation system is the alarm
function, which alerts staff to problems in the farm. While levels
of redundancy have been built into all alarm and monitoring
functions, it is not possible to reduce the risk of mechanical failure
and fish losses to zero. This risk is managed by the application
of experience over several decades of water treatment system
design and by partnering with highly-qualified professionals in the
field of control and automation.
Production / disease – while a TCAS farm operates as a sterilized,
isolated unit, it is still possible to bring disease into the farm from
other sources. A disease would present a potentially significant
interruption to the production cycle. As such, this risk is managed
by strict bio-security protocols.
Barriers to Entry ResolvedSaltwater recirculation aquaculture presents technical and
scientific challenges. This is evidenced by the fact that most,
if not all, other technology platforms for land-based salmon
aquaculture rely on either partial recirculation or the use of
freshwater instead of saltwater where the water chemistry
challenges are more easily overcome.
Sustainable Blue’s participation in North American conferences
on RAS systems suggests no other group has found a complete
technical solution to the challenges other than Sustainable Blue.
We make it feasible for others to enter the market using the
technology we have invested years in developing.
ConclusionWith wild fisheries generally either at full capacity or overfished and
in decline, responsible land-based aquaculture is ideally positioned
to help fill part of this growing supply vacuum.
Sustainable Fish Farming (Canada) Ltd.’s proprietary, 100% closed
containment saltwater aquaculture recirculation system meets this
need by eliminating the negative ecological risks associated with
sea-based aquaculture, while providing a product that is superior in
every way: taste, texture, quality and ecological footprint.
Our company is aware of no other land-based producer of Atlantic
salmon in North America that operates on a 100% saltwater
recirculation operation.
For investors, our product commands a higher price because
clients want a top-quality product with maximum freshness that
has been sustainably farmed. As well, because our technology can
be set up anywhere, it gets the fish closer to market – resulting in
reduced transportation costs – and can be marketed to consumers
whose preferences are increasingly geared toward buying local
products.
Worldwide, fish consumption is split almost evenly between
aquaculture and wild stock. The Food and Agricultural Organization
of the United Nations projects that aquaculture production
will rise to 62 per cent by 2030 “as catches from wild capture
fisheries level off and demand from an emerging global middle
class substantially increases.” It says that responsible aquaculture
production “can generate lasting benefits for global food security
and economic growth.”
Our company’s technology provides an opportunity to meet
that growing global demand for healthy protein and offers the
most sustainable fish products available today, while being built
on a solid business case that succeeds on both economic and
environmental platforms.
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NOVA SCOTIAHALIFAXHALIFAX
ST. JOHN’SST. JOHN’S
MONTREALMONTREAL
TORONTOTORONTO
BOSTONBOSTON
NEW YORKNEW YORK
OTTAWAOTTAWAMONCTON
259 Red Bank Road, Centre Burlington, Nova Scotia,
Canada B0N 1E0
T: 1 902 757 3796 F: 1 902 757 3114
SustainableBlue.com