Unit Economics and Round Financials

Unit Economics of Pesky's Model

Core Objectives:

  • The ambition of Pesky's economic model is to use transparent markets to generate the fairest price between fishermen and buyer, while delivering in the lowest cost value chain. As a result, we are able to return as much value to producer and consumer, while ensuring intermediary profit is distributed to where the effort is made.

  • To do this, we operate a simple unit economic model, involving a series of revenue shares with port based businesses who have the assets and capacity to fulfil at an industry low price, while Pesky generates its profits from providing the market and product infrastructure to link all of the components of the value chain together.

  • As a result, Pesky will not own fixed assets involved in the value chain, nor will it own the liability of the stock being sold through it.

Cost model of distributing a £10/kg fish:

  • Market Price: £10/kg 

    • Port auction business provide all of the resource to prepare fish for trade, specifically, weighing, grading, boxing and packing.

    • In the traditional business model of a port, they charge a fixed fee for this service of 5%-8%, which is taken off the fishermen as a fee to market the fish.

    • Should the fish be sold in the market via the Dutch Auction, this 5% will be retained by the auctioneer and Pesky will take no fee.

    • In this instance, the fishermen will receive £9.50/kg

  • Wholesaler Price: £11.50/kg

    • When selling further up the chain to wholesalers, we apply a 20% fee on the fish and set a minimum of 25kg from each port.

    • However, this fee is split 5% off fishermen's price (as if sold through dutch auction) and 15% added onto wholesaler.

    • To a wholesale customer, this fish now costs £11.50/kg to a wholesaler.

    • Out of this 20%, we split the fee 50:50, with the auctioneer business has a take rate of 10% to cover all of the physical requirements of preparing the fish for sale as well as packing boxes for onward distribution. This represents double what an auctioneer would traditionally receive and should become a profit generator for them as it will almost exclusively require the use of their existing physical and labour resource. 

    • Pesky retains 10% to cover the central costs of product development of the market platform.

  • Restaurant Price: £13.50/kg

    • When selling to restaurants, more handling is involved to process and generate smaller consignments as well as package into transportable materials.

    • As these costs are almost exclusively independent to the value of the fish - instead heavily based on labour and packaging - the incremental charge is based in £/kg, specifically £2/kg.

    • To a chef, this fish now costs £13.50/kg which is likely to be cheaper than the industry standard 40% mark up.

    • As with the wholesaler price, we split our fee 50:50 with our packing partner in the port.

    • All of the costs required to prepare a consignment for delivery are covered by the £1/kg fee 

    • Pesky then retains £1/kg to cover the central costs of product development as well as channel management.

  • Delivery is always added on

    • Within the industry, it is standard for a wholesaler to pay £1/kg for distribution ​and for restaurants to pay for courier charge on top of the value of the fish. Therefore, these costs will be an addition to the fish prices represented above.

How big could this be?

Our Path to Profitability

In order to achieve the potential of this model, there are three essential components that we must achieve - enabling us to not only become the infrastructure of the industry but a highly profitable, capex light business:

  • Ability to scale supply through our port operational product. The more ports and producers we can bring into the chain, the more revenue generating throughput can come through the platform.

  • Ability sell direct through our wholesaler market platforms, enabling Pesky and port businesses to move stock further up the chain where it generates a higher take rate. 

  • Commercialisation of data services by utilising the largest data set of every fish landed and traded through our platform to support market, regulatory and conservation requirements.

Why and where we are investing to achieve our next strategic milestone

  • Tech team - £550K - With a clear focus of developing our two core products to scale, namely the Port Operational Product and the Wholesale Market Platform. By the end of this period, we will be able to scale our supply footprint as well as our added value buyer network across the country.

  • Central team and operations - £425K - Investing in the team and operational base within London to manage the operations, nationwide, as well as develop the sales channels - both restaurant and wholesale.

  • Operational management of Looe Market - £120K - while in the future model, Pesky does not physically manage or operate any fixed infrastructure within the ports, in order to  develop the p

  • Torbay micro-port fit out - £100K - Equipping the Torbay port with the equipment and team to test our Port Operational Product ahead of rolling out to our second market. It will also provide the initial supply liquidity to support the early development of the wholesale channel before adding additional stock to the network.

Round financials

Key Points:

  • January '20 - April '20:

    • Complete recruitment of team,

    • Develop Torbay site ahead of testing MVP of Port Operational Product through February-April

    • Begin national wholesale and restaurant distribution from February,

    • Steady increase in volumes, fuelled by inshore vessels around Brixham.

  • May '20 - December '21

    • Take over management of Looe market in partnership with the PTA, inheriting the operational overhead. This is what drives the increase in operating costs from Q2 2020.

    •  This is also what drives the considerable growth of throughput in our chain, as we inherit the total availability with £2m/year of fish supply to complement our existing network.

  • Jan '21 - June '21

    • Having demonstrated the commercial uplift in Looe, we will look to agree terms to integrate our product into our first £15m+ port, most likely Plymouth. Our aim is to be operating within the PTA by September 2021 at the latest.

    • During this period, growth is unlikely to be as accelerated as Q3&Q4 of 2020 as we will unlikely be bringing on additional ports during this period - meaning we have a finite supply to sell to our wholesale and restaurant customer base. 

    • Begin raise during this period to help invest in the product architecture, accelerate our footprint of supply and demand as well as begin the first major development of our data services.

  • You'll observe that beyond October 2020, our burn begins to reduce as the incremental revenue of selling in our market platforms generates larger revenues to offset our fixed cost base. 

  • Between June '21- December '22, our ambition is to integrate the landings of the following UK ports and producers into our network:

    • Brixham: £40M 

    • Newlyn: £29M

    • Plymouth: £18M​

    • North Shields: £5m

    • Lowestoft: £2m

    • Wester Ross Fisheries: £4m

  • With just the 10% take rate from the wholesale platform alone, without any restaurant take rate, Pesky could earn £9.8m revenue from £98M of fish landings.

  • If Pesky could then integrate with just the two largest fish markets in Scotland, that would generate £20.1m of revenue from £201m of fish landings.

  • Therefore, once the products are in place to enable the network effect of supply and demand, Pesky's model can become profitable very quickly at scale.

For the full financial and cost model, please see our data room.