AquaChile: Creating our first sustainable fish source.
Our demand for fish is far outstripping what our oceans can supply. AquaChile is a leader in developing sustainable and environmentally friendly ways to breed and grow fish.
The oceans cover three quarters of our planet and contain over eighty percent of all life on earth. Worldwide fishing fleets harvest two to three times the amount of sea life our oceans can sustainably create on a yearly basis. With an estimated 82% of species being exploited or collapsing, wild fishery captures have seen zero growth in the last twenty-six years even though demand has risen by 67%. Aquaculture, or the breeding and raising of fish, is a way to address this problem. AquaChile has been one of the pioneers in this $12b industry.
AquaChile was founded 25 years ago in the fertile waters of the South of Chile. I would define the company’s business model as developing and applying aquaculture technologies in order to sustainably supply the world’s fish. Raising fish in a pen can seem easy, but in practice it is very difficult. In the wild, fish migrate through thousands of miles. Once you confine their range, diseases can develop and spread rapidly since fish don’t have strong immune systems. In 2008 there was a major virus that almost bankrupted the entire Chilean aquaculture industry. In addition, unlike with meat and poultry where we mostly consume herbivores or those animals towards the bottom of the food chain, with fish we tend to like predators such as salmon, tuna or snapper, fish that pretty on other fish. A salmon for example will eat on average 100 pounds of other fish before reaching maturity, giving the aquaculture a bad reputation amongst conservationist since it appears to not solve the problem of depleting our fisheries.
Throughout the years AquaChile has developed an operating model that addresses these issues. By not only raising the higher value predatory fish, but also fish that will eat vegetable material such as tilapias, AquaChile can feed the tilapias to the other fish. At their fish pens in Chile, the company filters their water, reducing the chances of viruses and at the same time minimizing the amount of discharge into the surrounding waters. This has allowed the company to be a leader in the industry. Revenues have increased by 10x over the last twenty years to a current yearly run rate of $800m. The company is the world’s largest supplier of Atlantic Salmon and given their high quality, demand originates globally with 42% of their fish going to the US, 18% to Europe, 9% to Asia, and the majority of the rest to Latin America.
Looking ahead, AquaChile could further align their business and operating model by vertically integrating. In order to truly sustainably develop aquaculture, the company needs to ensure they address the problem of sustainable food and water sources. The company recently created a JV with a food producer in order to find better food sources. Other opportunities for cleaner water could include finding better filtration systems or the recycling of fish waste. By doing so the company would reduce the impact their fisheries could have on the surrounding environment while at the same time further reducing disease instances in their populations.
Student comments on AquaChile: Creating our first sustainable fish source.
Interesting post, thank you Manny!
This is a really exciting topic. As I think about the world in 20 years, I can only foresee aquaculture playing a much bigger role than it does today. Some questions about AquaChile: 1) Why Chile in particular?, 2) Could vertically integrating (my read is this means establishing a food chain?) make the operation more vulnerable to disruptions in part of the food chain? 3) Maybe an outside-the-box question, but is there any way to immunize fish / any companies that do this? Enjoyed the post, good choice.
Great post, Manny. Actually, my previous employer, Mitsubishi, just acquired salmon wholesale company. Although its headquarters are based in Norway, it has a large operation in Chile. This means Japan imports a lot of salmon from Chile!! My question would be upon its scalability. Although the business model is very compelling, it seems to be difficult for the company to duplicate its business model in other regions because the effectiveness of aquaculture must be affected by surrounding environment. Can these obstacles be overcame by adjusting its operational model?