© 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 and analogue 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​ of all boats and buyers

  • Every boat landing to one market - Instead of being traded in local port auctions, 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.

  • Standardised size and quality grading - With every fish being traded from the base of the chain, Pesky's market not only standardises size grades but enables buyers to source at different quality levels at the source.

  • 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.

  • Result: 

2. Direct-to-Buyer Supply chain

  • Port based fulfilment - By networking all auctioneers 

  • Lowest value chain cost of fulfilment - Centralising fulfilment requirements to the ports, our

Timeline drawing

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

Port Operational Product - 

Wholesale market platform - 

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.

 

 

 

 

 

 

 

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.