© 2019 Pesky

Market Platform Model 

The global supply chain we are replacing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The foundations of our market platform

Pesky's market platform will become the world's first food chain where a producer can sell to every buyer in the chain - starting with the most valuable. By aggregating supply and demand into one platform, we are able to help the industry allocate its resources of produce, labour and fulfilment in the most effective way. 

To deliver this, our marketplace will be built on 6 founding principles:

1. Aggregated supply across all ports - Currently, all port markets operate in isolation of each other, with their own, individual dynamics. This leads to inefficient pricing of fish in the chain, with up to 40% arbitrage from one port to the next. However, by aggregating all the supply and demand in the chain under Pesky's platform, fishermen will receive a price that fairly reflects the requirements of the market.

2. Selling to the end of the chain, first - On our market platform, fishermen can generate the greatest value for their catch by selling to the most valuable point in the chain, first. Through various daily buying windows, any stock that isn't sold to the end of the chain will then sequentially be made available to the stages below until the full stock is sold. As above, this helps fishermen receive better prices, while reducing waste within the chain by selling as close to the end as possible. Importantly from a buyers perspective, it has always been prohibitive for smaller buyers to source from port markets given that fish is sold in 30-50kg quay boxes. However, through Pesky's platform - where every fish is individually weighed and graded - it will be possible to break a catch down to the smallest denomination of a single fish, opening up access for anyone to buy directly from the boat.

3. Universal quality grading - In the majority of today's ports, fish is presented to the market with a breakdown of species, size and availability, but no reference to the quality. As a result, the best fish has its price anchored down by the rest of the supply in the market - leading to considerable loss of potential value. However, with supply and price becoming port-agnostic on Pesky's platform - ridding us of the unnecessary local dynamics - we will introduce a universal quality grading system so that buyers have access to choice to source the quality of fish required for their business and pay the fair price for it. This will also be supported by a feedback loop from buyers who can consistently rate the quality of their fishermen's catch to help us build profiles by boat that will eventually drive more effective pricing.

4. 5-day catch forecast - In today's markets, all buyers make daily purchasing decisions based on near-zero visibility of what might be landed in their port in the days to come. As a result, they can make inefficient decisions. With our 5-day forecast and the phenomenal data set that enables it to, Pesky will revolutionise the decision making process for all buyers by helping them determine whether to buy today or wait until tomorrow. 

5. Dynamic Pricing - while not an immediate feature of our market platform from day 1, the price of the fish landed through our chain must be able to flex to match the daily varying volume of supply and demand. Therefore, supported by our web/app interface, we will launch our first dynamic price mechanism in 2020, as we collect the rich data of supply and demand.

6. Nationwide next-day delivery from port - Through the use of our franchise port operators, it will be possible for every customer to receive fish from several ports within 24 hours or less of being sold. Alongside the ability for buyers to have the added advantage of buying from the boats directly, this short time window should not only make new species available but provide a considerable extension of shelf life to the fish - dramatically reducing waste in the chain.

 

 

 

 

 

 

 

 

What do we need to build in order to deliver the market platform at scale?

Alongside the landing of fish, we are able to deliver this chain through the addition of two new elements to the industry:

1. Pesky's Technical architecture - Enabling every single fish to be recorded, sold, packed and delivered in one integrated and 100% transparent chain - delivered through Pesky's platform. For more information, please click here

2. Franchised port operation network - Through our model, it is economically more effective to deliver catch directly from the port directly to buyers. To enable this, we have been building the franchise model to enable local businesses and contractors to provide all of the services from consolidation through to fulfilment, using the latent resources and legacy skill of the local workforce. Alongside the technical architecture, we will roll out this franchise model across all the ports n the UK and then the world.

Daily operations of Pesky's market?

1. Record availability - Through our port franchise operators, boats will land their catch to Pesky at the local port where every single fish will be weighed, graded (size and quality) and recorded into Pesky's availability dashboard.

2. Market - The majority of product, particularly in our early years, will continue to be purchased in bulk by wholesalers and early stage buyers – necessitating the requirement for a daily auction structure, where supply can have a fair price set by aggregated demand.  

 

  • First Buyers: Added value customers - However, customers who previously have never had access to purchasing directly from boats (e.g. a high street fishmonger in the Midlands, a London-based restaurant, or a national gastro-pub chain) will have the option to purchase stock directly at a fair price, prior to this auction taking place. Through the day (24h, 5 days/week), landings into Pesky ports will be graded (where fish is weighed, counted, and quality graded) – and this info will be immediately made available to purchase on our platforms, for next day fulfilment to any location in the UK.  The fixed price will be set daily by our market analysis, at least at the anticipated maximum that could be achieved in a traditional auction market.

 

  • Second and last buyers: Wholesale customers - Any fish that is not sold by the early hours of the morning will be prepared for the wholesale auction, which will take place approx. 6am (the standard time for auctions, when most wholesale traders have an idea of their demand requirements and are ready to purchase).  The auction will be a Dutch format, accessed via web/app interface, where a high initial price is offered, and gradually falls in real time. Buyers are able to purchase at any point, at a price reflecting their need, until all the stock is gone. In recent years, enabled by computerised systems, this has become a popular auction method in more progressive ports, resulting in higher prices for boats.

3. Packing - Once all the fish in a port has been purchased, our port operators will receive packing slips to prepare customer ready boxes, ready for distributions, in an F1 speed process.

4. Distribution - All customers have access to overnight delivery from the ports - with larger customers fulfilled using the existing cold chain network, while smaller <20kg boxes for fishmongers, restaurants or eventually homes would use the nationwide courier network.

5. Record feedback - As it has been impossible to maintain a feedback loop between catch and plate due to the complexity of the existing chain, quality has always been an anecdotal after thought and almost never reflective of the quality of the fish when it is landed by the boat. However, with a closed loop, 100% transparent supply chain,  a customer can rate the quality of fish landed 24 hours before arrival - helping to develop unique quality profiles for each fisherman.

How does we commercialise our market platform?

Pesky will make two fees from within the market:

1. 10%-20% market fee charged to wholesale buyers - Within this fee, 10% will be attributed to 'platform fee' that will go directly to Pesky to cover overhead of operating the team and technical architecture, while the other 10% percent is given to our port franchisees to cover port operation costs of consolidating and packing for wholesale distribution (20kg+).

2. £2+/kg additional fee charged to added value customers (restaurants, fishmongers) - Dependent on the position in the chain, Pesky will charge an additional £/kg premium to customers such restaurants and fishmongers who will be buying smaller volumes and therefore requiring additional fulfilment and distribution costs in the port. 

For more detail on the unit economics, please click here

What will continue to drive participation of supply and demand onto our market platform?

Fishermen (who have traditionally had one price available to them set by the handful of buyers in the port), will now be able to market their catch to a much broader spectrum of buyers, and receive the respective prices paid. It may be feasible for some species ranges that fishermen become price-setters rather than price-takers. They will be able to see a breakdown of what proportion of their catch has been sold at what value to different customer segments, whilst receiving prompt payment.

 

By selling product under the brand of a boat/skipper – fishermen will be able to command better prices by practicing better handling, enabling increased quality of product. As each landing will be independently graded by Pesky for quality, and boats will be able to build ratings from reviews – buyers will learn to confidently commit to the quality and price-point they require.

 

Today, buyers in the latter stages of our chain (restaurants and fishmongers), are constrained to primarily buying from agents and wholesalers, selling through inventories with limited visibility to the products’ origin and age.  To allow these small purchasers to access product directly from the producer (at a similar price-point to wholesalers) and receive within 24 hours is a game-changing proposition that has never been possible for them before. We have demonstrated and proven this participation through our trade to date.

How we will roll out our Port Operation Product to existing auction companies, enabling us to scale at speed.

 

A significant key to our success will not be to become burdened by assets and infrastructure in ports around the world, but rather to incentivise port-based businesses to operate our physical trade requirements on a contractual basis.

 

The fish processing industry is labour intensive, with manual handing required at multiple stages in the ports:

  • Landing – As boats arrive to the quayside, boxes must be craned off, potentially re-iced and stored under refrigerated conditions to preserve quality.

  • Grading – In order to present fish for sale, the total counts of each weight category must be confirmed and a quality assessment of the product conducted.

  • Fulfilment – Once fish have been allocated to orders, they must be prepared for the purchasing customer. This might include filleting, weighing, icing, boxing and labelling to high presentation standards ready for onwards distribution.

 

In today’s port setups, landing and grading operations are undertaken by one party (the auctioneers), and fulfilment is carried out by local wholesale companies that have purchased fish off the market for onwards sale.

When our marketplace has been fully developed and is operational in our own ports, we will launch the franchise model, which will allow port auctioneers to replace their current transaction method (shout bidding) with our platform. They will be incentivised to do this by the potential sales uplift of catch value (resulting in higher sales commission returns, usually approx. 6-10%), along with pressure from fishermen.

 

Fulfilment will be contracted out to carefully assessed and selected port partners, who will be remunerated on a £/kg processing fee for their services to pack and dispatch orders to specification.  These businesses will likely be traditional wholesalers, who are well versed in packing and dispatching to customers. This fulfilment arrangement is currently in place in most of our operational ports today, with local businesses demonstrating a keen willingness to operate on these commercial terms, without inheriting the risk of fish value as inventory as they would have previously.