© 2019 Pesky

The New Global Supply Chain

How a fish goes from catch to plate in today's model

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The two challenges of today's model:

1. Complex, opaque an value chain

 

  • A fish will often be traded up to 5 times between boat to plate, with limited or no transparency of where it has come from or how long it has been in the chain. 

  • Out of those 5 people, 3 of them serve exactly the same function of consolidation - resulting in vast levels of replicated fixed cost infrastructure throughout the chain.

  • At each stage, a fish needs to be refrigerated, handled, packaged and redistributed - compounding in cost as it moves up the chain.

  • In addition, with each consolidator maintaining an inventory of stock, there is considerable leakage of wasted fish - the cost of which has to be factored into their margin.

  • Result: Every one of these costs is ultimately pushed to the two ends of the chain in order to sustain the businesses of the intermediaries - with prices suppressed for fishermen, while they inflate for consumers. The total cost of this chain limits a naturally efficient market for producer and consumer. The real world consequence is a continuous decline in the number of fishermen.

2. Lack of accessible marketplace

 

  • Only local buyers can purchase fish directly from fishermen through the port auctions.

  • While, in theory, any buyer could join a port auction, they have to purchase in units of 30-40kg boxes - making it impossible for the majority of buyers to access.

  • In addition, every port market operates in complete isolation to the others, resulting in multiple prices for exactly the same commodity on the same day, depending on the hyper-local supply and demand within that port.

  • Finally, this lack of access is the primary driver for such significant export/import rates (80% in UK; 90% in US) as first buyers monopolise stock at market price and profit heavily from trading to high value export customers.

  • Result: Without being able to offer their landings to all buyers in the chain, a fishermen is limited in their ability to reach a market high for their catch, while buyers further up the chain end up paying a disproportionately higher price to reflect the cost of any and all intermediaries.

The new global seafood supply chain - Powered by Pesky's Infrastructure

1. One single market​ where any fishermen can sell to any buyer with 100% transparency

  • Every boat landing to one market - No longer selling in their local port auction, the landing of every boat and producer is aggregated into Pesky's single, transparent network of availability.

  • Every buyer sources from the boat - Chefs, fishmongers, fish merchants and retail consumers are able to source fish directly from the boat through Pesky's platforms, with the highest paying customers at the end of the chain given first access.

  • Data driven purchase decisions - With a short, medium and long run catch forecast available at the point of purchase, buyers are able to make decisions based on what is due to land tomorrow and the day after, rather than exclusively what is available today.

2. The most efficient value chain in the world

  • Aggregated port fulfilment network - Auctioneers across the world transform into a network of port based fulfilment centres - managing the landing of every boat to prepare it for trade, as well as packing it for distribution to customers nationally and internationally. By combining the functions of auctioneer and packer within the port, Pesky's model saves time and money - returning the incremental value to boats, buyers and port-based businesses. 

  • Standardised size and quality grading - By operating a single, repeatable model in every port, we can standardise the offering for buyers in order to make their decisions easier

  • Lowest cost value chain - By selling to all points in the chain as well as distributing directly to them from the port, Pesky's value chain removes vast amount of replicated costs and resources vs traditional model. 

3. The most sustainable food chain in the world

By using technology and the transparency it enables, Pesky will move the seafood industry towards the conditions of a perfect market - where every buyer is able to access every supplier with perfect information. The consequences of these changes are:  

  • Fairer allocation of value - Pesky will remove the excessive cost incurred by middle men in the chain as a result of removing their need within the value chain. Fishermen will receive a price that reflects the total demand in the market, rather than what the first buyer is willing to pay, while consumers will receive a better quality product at a fair price that reflects the least possible effort to transport from catch to plate.

  • Lower industry impact - By removing the unnecessary steps between catch to plate, we can dramatically reduce the amount of resource used within the global industry to move a fish from catch to plate. 

  • Data driven sustainability - With the record of every fish landed and sold through Pesky's chain, we can use the corresponding data set to not just fuel effective market allocation, but to support all regulatory and conservation challenges - helping us transform the industry into both economically AND ecologically sustainable. 

Pesky's products to deliver this value chain at scale

 

 

1. Scaling Supply - Port Operational Product

Who is the customer: 

 

3600 Port auctioneer businesses across the world. 

What they do: 

 

Currently, every fishing boat across the world lands their catch through one of these port auctioneers - acting as a central point of consolidation for multiple producers to sell to the first buyers in the chain. Specifically:

  • Landing Fish: Monitoring when fishing vessels are coming into port, as well as supporting them to get their catches from the boat into the market buildings

  • Recording Fish: Weighing and grading the landings of each boat ahead of the market, putting into 30-40kg boxes.

  • Auctioning Fish: Selling the landings within the daily market, either through shout auction or digital auction to first buyers, enabling them to take their fee from the fishermen.

  • Distributing Fish: Once sold, the team move boxes of fish across the market halls to be prepared for distribution.

Their value to Pesky:

 

Access to the existing supply, demand and data of every boat within a port, as well as the fulfilment capacity to market, pack and distribute to any buyer in the chain, directly. They become our biggest point of defensibility as, by integrating into their operation, Pesky becomes the infrastructure that the rest of the chain becomes dependent on.

 

What are their challenges:

 

  • 'The only thing that keeps me up at night is that in 4 years time we may not be able to open our doors unless we can find other ways to generate money'. - David Pessell, Managing Director of the Plymouth Trawler Agents, the 3rd largest fish auction in England.

  • Fish auctioneer businesses operate exactly the same business model around the world - charging a fixed % on the landings of fish (typically between 4-8%) for the service of preparing fish for the market. This fee is taken off the fishermen's price, after sale and therefore the value of the fish is paramount to their revenue.

  • However, they are under increasing pressure with fishermen demanding them to increase the value of their catches for fear of going out of business, while local buyers encourage costs to be lower to offer the greatest opportunity for mark up.

  • Many auction companies are now setting up Aucxis digital auctions to can expand their buying network, increase the average price of fish and make their businesses more sustainable in the process. 

Where Pesky can add value their businesses:

  • Access to higher paying markets - By integrating the landings of the port, Pesky is able to help market their catch to higher value customers further up the chain - increasing their take rate from 5% to 10% while also increasing the base value of the fish. A double financial benefit.

  • Attraction of boats - By generating a higher value market for the boats, this provides extra incentive for boats to move their landings if they expect a better return. More landings at a higher value provides incremental revenue for the auctioneer businesses.

  • Benefit from fulfilment rather than just auctioneering - By providing the opportunity for their team to operate as packers within the port, these businesses can utilise their fixed assets more effectively in order to generate better returns.

  • Remove requirement to manage auction cash flow - By migrating the responsibilities for auctioneering and trade of fish to Pesky, these businesses can remove the administrative costs involved in managing payments of their existing buying network.

  • Greater financial sustainability - By diversifying their revenue opportunities as well as marketing the landings of the boat's catch to higher value customers, these port based businesses can reverse the industry trend in order to thrive and grow.

Our Product:

Hardware/Software warehouse package that helps them digitize and standardise all of the 4 processes mentioned above, specifically:

  • Recording fish: Standardised grading processes and equipment that automatically generate digital records of each boat's landings - both in sizing and quality. This information would link into Pesky's network availability in order to be sold on our market platforms.

  • Space planning: Instructing where stock should be located within the market halls in order to support effective fulfilment.

  • Market platforms: Using Pesky's Chef's Market, Wholesale market platform and Aucxis digital auction to sell through the landings of the entire port to new and existing buyers.

  • Packing Slips - Creating specific packing orders and processes to help move and pack landed stock into customer specific consignments.

  • Automated delivery service integration: Creating automatic orders with existing cold chain distribution network, couriers and exporters.

Success after 12 months:

How we plan to scale:

 

 

 

 

 

 

 

 

 

1. Develop in controlled environment - operating out of our micro-port in Torbay, we will test all of the processes and equipment required to support the end to end process detailed above.

2. Expand into real auction and first fish producer - Once successfully developed in a controlled environment, we will expand the product into two existing ports - Looe and Amble - where we will learn and iterate from the larger scale operations while proving the commercial uplift generated from our activity. This will also include integration with one of the larger UK salmon producers.

3. Expand across UK auction network - With a strong business case and simple integration, we will roll out our product to the three largest English ports - Plymouth, Brixham and Newyln - to integrate their landings into one network of supply. 

4. Expand network internationally - Having successfully built the largest supply network in England, we will expand into Scotland and internationally where existing import/export channels are strong, helping to grow Pesky into the largest fish market in the world. 

Challenges we must overcome:

1. Resistance of local buyers: In the event that Pesky begins to take considerable access away from local buyers, there is threat that they find ways to disrupt our relationship. Our solution: In the first instance, we won't haemorrhage considerable levels of stock away from local buyers - instead we will look to take only as much supply as required to fuel the chef's market and wholesale market platform (<20%). For the remainder of the stock to be sold, we will use the Aucxis dutch auction market that is being used across all of the ports in the UK who have migrated to digital auctions.

2. Complexity of product: The majority of the users of our product will not necessarily be highly technically proficient. Therefore, simplicity of use is more valuable than breadth of features. Our solution: We have chosen for our engineering team to be led by a head of product. As the majority of the tech we are developing is relatively simple, this approach allows us to focus on the user experience in order to make the transition as simple as possible. 

2. Scaling demand - Wholesale Market Platform

Who are the customer:

 

4,000 UK fish merchants servicing a £3.4Bn restaurant demand, as well as tens of thousands of fish merchants internationally

What they do

 

Buy and trade fish to support the demands of restaurant, retail and export businesses, specifically:

  • Source catch: Calling, faxing and emailing agents and wholesalers in the various port markets in order to source stock to meet their anticipated customer needs. 

  • Hold inventory: Permanently maintaining a stock level in their warehouses, as well as the fixed infrastructure required to manage it.

  • Trade fish: Sell fish onto customers at a mark up.

Their value to Pesky:

These buyers present a highly fragmented market of added value customers that we can pool into a network in order to to sell the boats catch to. By doing so, this will help us drive up price and value for both skipper and auctioneers.

What are their challenges:

  • 'Our access to good quality English fish is so rubbish. We get it twice a week. One day it can be good, the other it's stinking. If I could source directly from the boats through you guys, I'd move all our business over.' Jason Sinsac - Manager of John Vallance Seafoods, Glasgow

  • These buyers currently have limited to zero access to fish directly from the boats, either because they are not set up on the port markets or cannot justify a 30kg box of one grade within a species. Instead, they are entirely reliant on agents and wholesalers in the ports to communicate daily availability and offer smaller denominations, who then charge an average mark up of 20%. However, with no transparency of the original source, supply can be variable in both volume and quality.

  • Given their requirement to hold an inventory, they are therefore highly reliant on the freshness of the product arriving from their port agents. This can lead to considerable levels of waste and cost or a need to freeze the produce - leading to yet more cost and resource involved.

  • In order to create a point of difference to their competitors, fish merchants will use provenance and sustainability credentials in customer communications, but this is hard to validate, with many customers often sceptical of claims.

Where Pesky can add value to their businesses:

  • Unprecedented access to better quality fish - A single platform with live availability to fish landed across the country at fixed prices and next day delivery. They are also able to buy in smaller denominations, rather than 30kg box - as long as the total box from the port is >25Kg

  • More effective inventory management - With the knowledge that the fish was landed on the day of trade, as well as a standardised quality grading across all the Pesky ports, merchants receive a better quality product that they can store for longer without the threat of wastage - saving them thousands of pounds each year.

  • Better informed buying decisions - With Pesky's catch model providing a forecast of landings over the upcoming days, merchants no longer have to make snap decisions based exclusively on what stock is available today. As well as buying at a fairer price, it could allow them to operate smaller inventories - again helping to reduce risk of waste.

  • Provenance info to sell to customers - Every fish in every box they receive will be traceable to the boat and skipper that caught it. This would provide a huge advantage over their competitors if they are able to demonstrate a greater 'conscientiousness' to their sourcing as a result of 'buying through the Pesky market' 

Our Product:

​A single digital market platform where all buyers can log in ahead of the morning markets and purchase fish at a fixed price for delivery the next day, specifically:

  • Live multi-port availability ahead of morning port markets: All of the landings available across the network of Pesky ports and producers on one platform, with access to buy ahead of the other port based markets starting.

  • Fixed prices: Rather than having to source at a dynamic price within the port market, fish on Pesky's wholesale platform is fixed, with transparent fees between boat and buyer.

  • Source individual fish within a port: While a buyer must source 25KG from one port, they are able to buy individual fish within a grade, rather than having to source 30-40kg of the same species. This is enabled by our Port Operational Product that allows packers to pick out stock within a box to service an individual order, prior to the morning market starting

  • Universal Quality Grading: Customers can choose various levels of quality to buy within a species, helping the best quality product generate the highest price, while low quality, commodity fish is able to be bought by processors for cheaper. 

  • 5 day forecast: A traffic light system of availability of a specific grade and species within the Pesky network, based on historical landing and environmental information. 

  • 100% traceability: The name of every boat labelled on the side of the boxes for every fish ever bought 

  • Next day delivery: Supporting 95% of UK addresses.

Success after 12 months:

How we scale:

1. Controlled test: Launching with a small handful of fish merchants in London and Scotland in order to test processes and distribution methods.

2. Expand to major cities: Once in our 2nd port and with a greater allocation of stock, we will expand to major cities where there are strong existing distribution links in the cold chain and well as overnight courier network.

3. Expand nationwide and export: With the expansion into up to £100m of fish supply, we will enable next day delivery across the network as well as expand into export where there is a strong existing trade and distribution link

4. Expand footprint globally: With our base of port operations expanded internationally in order to create the largest fish market in the world, we will be able to service the majority of the needs of fish businesses.

Challenges we must overcome:

1. Building trust: With any form of innovation in the industry, it is likely that our market platform will be met with scepticism in the first instance which could stifle participation. Our solution: We'll take two steps to counter this. Firstly, from launch, we will look for consistency of delivery over rapid scaling - working with a handful of strategically important customers in the first few months as we refine our offering. Once successful, we can then use these test cases as a platform to expand our customer base nationwide. To further support this, we are hiring a Wholesale Manager who will be an ex-buying manager/director from within the industry - acting as the support to these customers as they transition from analog to digital. 

2. Focussing on simplicityWhile our customers will be individually quite tech savvy, they will not be used to buying fish through a digital platform, given that they've spent generations with phone calls and faxes. We therefore have the potential to deter them from participation if the experience is too complex. Our solution: It will be tempting to add a load of 'value-adding' features, but our focus must be on the core elements to make transaction as simple as possible. Again, this is emphasised by our choice to put a head of product as the lead of our engineering team.