Chinatowns the world over will come alive this week for Chinese new year, with highly prized abalone one of the delicacies that will be enjoyed by a lucky few during the festivities.
Augusta producer Ocean Grown Abalone is one of the businesses that benefits from Chinese largesse during the festivities.
The newly listed company sells itself as the first sea farm for greenlip abalone in the world. Other farms are not located in the wild, rather they are commercial aquaculture facilities.
Its first shipment of retail-ready Ocean Grown Abalone arrived in Guangzhou, China on 31 January, just in time for Chinese New Year, which is an important time for abalone sales.
The crustacean is a luxury product used in celebrations and gift giving.
Asian clients love Ocean Grown Abalone so much, one of its Shenzhen clients released a how-to video as a Chinese New Year promotion.
In fact, demand is so great from the Asian market the business is doubling production at its sea ‘ranch’ farm at Augusta from 100 tonnes to 200 tonnes a year.
“That's our main project. We've managed to secure harbourside land to build a processing facility and some associated abalone tourism. It's really exciting,” says Brad Adams, managing director of Ocean Grown Abalone, who is a third generation fisherman who has been fishing abalone for more than a decade.
“Now, we’re really targeting the growing Chinese, Singapore and South-East Asian market,” he explains.
Ocean Grown Abalone raised $10 million in an initial public offering last year to fund the expansion of its production facility. The company made a net loss of $1.75 million at the last financial year, on the back of $744,713 in sales. According to its most recent market update, sales were up 161 per cent for the first half of the current financial year compared to the previous corresponding period.
At the moment the business – which benefits from not having to pay for food for the animals and having negligible power and infrastructure costs – is fully focused on developing its operations to cater to demand from Asian markets. Exports account for 93 per cent of sales.
“We've produced a fantastic product that’s sustainable and we have a strong outlook with the rise of China’s middle class, for whom abalone is a revered luxury food. You go over there and start talking abalone and their eyes light up,” Adams adds.
“We're one of the few aquaculture businesses that can truly claim to be a wild catch product. Other producers feed them pellets and they've got them caged. Whereas all we're doing is creating a really healthy environment by building our own reefs and letting the abalone go free range,” he says.
According to the Sydney Fish Market’s figures, abalone retails for around $100 a kilo, with Ocean Grown quoting wholesale prices of $US50 ($63) a kilo. The wild abalone Ocean Grown produces is worth more than abalone raised in aquaculture farms.
“Our inventory is sold as soon as we can harvest it and buyers pay for the product before it leaves our shores,” he explains.
While vertical integration may be on the cards down the track, at the moment management is focused on growing the abalone and building the reef on which they live.
“There are potential opportunities in the future to either build or acquire hatcheries, but we have a very good relationship with the only hatchery in Western Australia at the moment and have secured an exclusive supply,” explains Adams, who orders baby abalone two years in advance.
This requires a certain amount of planning, but Adams says a strength is the board’s understanding of the long-lead time business model. He says directors are open to pursuing opportunities as they arise.
Risk management is essential in aquaculture, as NSW Fisheries discovered when it recently allegedly inadvertently released 20,000 famished fish into local waters.
A similar disaster is unlikely to happen to abalone given they move only very slowly. But risks such as the threat of disease have to be managed on an ongoing basis.
“We work hard to mitigate risks. Abalone coming into our ranch from the hatchery go through significant quarantine procedures before they're released. They must travel with certified fish health authorisation. It's in our interest to make sure the abalone going into the world are the healthiest possible. It's a very healthy, pristine environment here where the two oceans meet. You couldn't ask for a better place to be growing abalone,” Adams says.
While it’s all about abalone at the moment, the business also has opportunities to expand into other products for Asian export markets.
“We want to grow this to be a diversified seafood business that has a strong presence in the market, particularly in South East Asia,” he adds.
No doubt its Chinese customers are wishing Ocean Grown Abalone a very happy new year indeed – and vice versa.
