University of Arkansas, Fayetteville

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Marketing Undergraduate Honors Theses Marketing

5-2015

The Future of Shrimp: Why Indoor Tank Farming Could

Revolutionize the Industry
Nicole M. Daniels
University of Arkansas, Fayetteville

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Daniels, N. M. (2015). The Future of Shrimp: Why Indoor Tank Farming Could Revolutionize the Industry.
Marketing Undergraduate Honors Theses Retrieved from https://scholarworks.uark.edu/mktguht/21

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 1

The Future of Shrimp: Why Indoor Tank Farming Could Revolutionize the Industry

By:

Nicole Daniels

Advisor: Sarah Jensen

An Honors Thesis in partial fulfillment of the requirements for the degree Bachelor of

Science in Business Administration

Sam M. Walton College of Business

University of Arkansas

Fayetteville, Arkansas

April 6, 2015
 2

Introduction

“The United States is currently importing 1.2 billion pounds of shrimp a year from Asia.

It is cheap to U.S. consumers, but it’s being produced in an unsustainable way. It will stop…and

when it does stop there has to be an alternative way to produce seafood” (Hourigan, 2013, p.1).

Because the shrimp supply crisis is growing exponentially, it is the job of countries like the

United States, who have resources and technology that less economically developed countries do

not, to find a sustainable alternative to the current destructive farming practices that are rapidly

damaging ecosystems and endangering human health. In order to pursue this goal of an

alternative shrimp farming practice, this paper will seek to provide answers to the problem

through research, with particular interest in a new method of growing shrimp that uses indoor

tanks and recirculating water to make a zero waste operation that produces domestic, healthy,

and safe shrimp in the United States, specifically the Midwest. This research will examine

environmental concerns of current shrimp production, health concerns with imported shrimp,

global and domestic consumption rates, and recent technology developments. At the conclusion

of this research, a business plan for a low resource farmer looking to begin an indoor shrimp

farm in Kansas, USA will be provided.

I. Environmental Concerns with Current Shrimp Production

The methods of shrimp farming that are currently prevalent in the US are raising

concerns because of the negative environmental impact. Coastal shrimp farmers clear an

extensive amount of mangrove forests to run their businesses. In fact, coastal shrimp farming

accounts for 38% of global mangrove loss, and if left unmitigated, “mangrove forests may at

least functionally disappear in as little as 100 years” (Polidoro et al., 2010, p.2). Mangroves

provide a necessary habitat for marine and terrestrial species, protect coastal human populations
 3

from erosion and tropical storms, and maintain the balance of nutrients and sediments in coral

reefs and seagrass beds. Loss of mangrove forests along coastlines has had significant effects on

coastal communities, along with a loss of wildlife species that rely on mangrove forests to shelter

them. The world was not planning on the rapid and unprecedented growth that the shrimp

industry experienced from the end of the 1980’s and into the early 1990’s (Béné, 2005), and it

resulted in the coastlines of countries becoming riddled with an influx of shrimp farmers that are

more concerned with profits than the environment. The problems they brought with them were

immense and also relatively ignored: the biological pollution, fish captured for fish feed, organic

pollution, chemical pollution (such as antibiotics haphazardly added to ocean waters), and habitat

modification (Goldburg, Elliott, & Naylor, 2001).

A troubling statistic from a study performed in 2010 estimated that across the globe,

“between 20% and 35% of mangrove area has been lost since approximately 1980… and

mangrove areas are disappearing at the rate of approximately 1% per year” (Polidoro et al., 2010,

p.2). Not only is the habitat taking a toll, the supply of shrimp in the ocean is decreasing rapidly.

Hollywood adequately portrays the dwindling shrimp industry when Forrest Gump tries to enter

the shrimping business and while Forrest Gump is fiction, it is an accurate description of the

overfished oceans in the present day. The United Nations’ Food and Agriculture Organization

(FAO) warned that the “shrimp stocks in the Pacific, Atlantic, and Indian Ocean [are] depleted,

overexploited, or fully exploited” (Gunther, 2012, p.2). The oceans are no longer a reliable place

to go for our shrimp; we need a sustainable solution that results in minimal damage to the

ecosystem and surrounding communities.

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II. Health Concerns Related to Imported Shrimp

The United States has strict requirements, inspections, and guidelines for domestic food

producers and distributors. This does not always apply to foreign imports; however, according to

Stonich and Bailey (2000), “99 percent of cultured shrimp are raised in the third world…and

virtually all are exported to industrial countries” (p.24). Figure 1 below is a chart demonstrating

the imbalance between US imports and domestic production:

Figure 1: US Supply of Shrimp

*Retrieved from the Supply of Fishery Products.

*Landings are domestic farms that either grow farmed shrimp or catch wild shrimp

Of these imports, only a small amount of shrimp is tested when it enters the United

States, which leaves a strong chance that diseases and chemical contamination can occur. The

US has restrictions on antibiotics, growth hormones, and pest controls that the majority of other

countries do not regulate (Jacobson, 2008). Also, it is not just production flaws that Americans

must be aware of. The shrimp – which are almost always transported in a frozen state—must be

kept adequately chilled or in sealed containers (Food and Water Watch, 2009). Another problem
 5

for shrimp farmers utilizing massive outdoor ponds or wild-caught shrimp is the prevalence of

disease. The World Bank “estimates that about $3 billion worth of shrimp is lost each year to

disease” (Food and Water Watch, 2009, p.2). Diseases in the ponds are so difficult to control that

it can wipe out an entire farm with just one cycle of shrimp. Due to the nature of the indoor

method in individual tanks, the risk of disease is infinitely lower, and easily contained if it

somehow makes it into the tanks. The bottom line is that shrimp grown in America is held to

higher standards than imported shrimp; domestic farming removes the guessing game of where

the shrimp came from and the conditions in which it was grown.

III. Global and Domestic Consumption Rates

From 2004-2014, global per capita shrimp consumption has increased by 200% (Wirth,

2014), which has led some experts to believe that aquaculture is the fastest-growing segment of

US agriculture (Goldburg et al., 2001). This growing demand must be matched by a reliable

supply. There is a large supply of frozen, foreign shrimp, but fresh shrimp is lacking, as

demonstrated by the Figure 1 above. As the organic and health trends take effect in the US, the

nutrient-dense and low calorie shrimp is growing in popularity. Farming shrimp in the US is a

lucrative business, “grossing more than $7 billion annually, one-sixth of all aquaculture trade”

(Béné, 2005, p. 585). Brandon Tidwell, a sustainability manager for Darden, predicts that “as the

human population soars this century…the demand for seafood is going to grow exponentially”

(Gunther, 2012, p. 4). The facts are clear: the demand for shrimp should be present for a

significant amount of time, so the supply needs to increase as well.

 6

IV. Recent Technology Developments

Existing research about new methods of shrimp farming, specifically in regards to tank

farming, is lacking; for instance, the research contained either complicated write-ups on

experimental shrimp tank designs or simply discussions on the problems with shoreline

shrimping. The industry is simply so new that the “best” method of indoor shrimping hasn’t

really been tested and proven yet. In fact, in March of 2014, NaturalShrimp announced that they

will be constructing “the first large scale shrimp facility in North America” (PR Newswire, 2014)

(PR Newswire, 2014, p.1). Its system “uses proprietary technology to reliably produce healthy,

naturally-grown shrimp without the use of antibiotics or toxic chemicals” (2014). One of the

goals of this report is to prompt an expansion of the industry, which automatically will lead to

more research and development. If America can come up with a simple farming method that is

profitable for the investors, the methods could be taken overseas to improve their methods as

well. This technology “could help tackle malnourishment while reducing environmental

degradation, and all at lower cost than current shrimp production” (Dobrovonly, 2014, p.1).
 7

Hypothetical Business Plan for Sunflower Shrimp

New Business beginning July 1, 2015

I. Executive Summary

Sunflower Shrimp is a business that has come forth in response to the growing demand for

fresh, high quality shrimp in geographic areas far from an ocean. There are no options for non-

frozen shrimp in Sunflower Shrimp’s target market. High initial capital investment and a lack of

research in this type of shrimping limit the ability of farmers to invest in an indoor tanking

operation.

Sunflower Shrimp will advertise their shrimp as a clean, reliable product with no added

chemicals, grown in a sustainable, minimal-waste system. This product will appeal to affluent,

health-conscious individuals, as well as restaurants and grocery stores looking to offer a safe,

unique product to their consumers. The reach of marketing will come mainly from word of

mouth, as well as efforts from social media, emails, and of course, publicity.

The shrimp itself will be grown in eight tanks, called grow-outs, and the shrimp will transfer

among tanks as they mature. The span from delivery of the shrimp fry until they can be sold is

roughly 4 months. Sunflower Shrimp is aiming to sell 18-22 count per lb, and at $15 per lb. This

is much higher than imported frozen shrimp costs, but they will be larger and clearly fresher than

shrimp from India or Vietnam.

The financial investment will be $180,000, with $106,000 of that total being provided by

loans. After year 2, the business will hit the breakeven point, and from there the profits rise

quickly. The owners are patient, thorough, and consistent, so the operation is in good hands. As

long as operations are continually improved, this will be a lucrative business.

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II. Market Analysis

The shrimp industry has been establishing itself since the beginning of the 1900’s, with

interest and momentum beginning in the late 1980’s and the early 1990’s. The existing methods

of shrimping include open sea fishing, coastline farms, inland ponds, and the newest of which is

growing shrimp indoors in tanks. This new development has come around as a result of the need

of a sustainable alternative to all existing methods of producing shrimp. Diseases, pollution,

shortages, and the environmental footprint have given these methods a short life expectancy.

Experts predict that while global seafood consumption increases, “harvests from natural fish

stocks will probably remain static or decline… and nearly all of the [global demand] increase

must come from aquaculture” (Diana, 2009, p.28). In fact, in 1999 the U.S. Department of

Commerce (DOC) called for a five times increase in the United States aquaculture production by

the year 2025 (Goldburg et al., 2001).

Though this suggested increase encompasses all forms of aquaculture, shrimp farming

makes up one-sixth of aquaculture trade in the US (Béné, 2005). The outlook for the domestic

industry is overwhelmingly positive, and entering an industry using a method that will soon

become absolutely necessary for shrimp production leaves less risk on this production operation,

Sunflower Shrimp. Specific to the type of farming Sunflower Shrimp will do, there is an even

brighter outlook on the industry. Karlanea Brown, VP of operations for RDM Aquaculture which

has been established since 2009, says that “restaurants are putting in requests for as much as 300

pounds of shrimp per day, far more than the nascent Midwestern aquaculture industry can

provide” (Rotenberk, 2013, p.4). The small, yet growing, number of indoor shrimp farms cannot

yet produce enough shrimp to meet the demands.

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Target Market.

Sunflower Shrimp will be targeting individuals aged 40-75. Due to geographical location,

the most likely consumer will be those around retirement age, who have health at the forefront of

their minds and who also have the means to buy quality shrimp. According to Consumers 19

Shrimp Purchasing Preferences in 2014, after administering a survey to 5,000 participants, they

found that “the heaviest consumers of shrimp tend to be well-educated, affluent adults in the 35-

55 age range” and they are not primarily Caucasian (Wirth, 2014, p.184). Though Sunflower

Shrimp’s target market is slightly above this age range, it is also offering a premium product that

is selling above the price of supermarket shrimp. The consumers will need to have more

discretionary income to use on higher quality shrimp.

Another demographic group that will be targeted is the environmentally conscious

consumers who will appreciate a sustainable option. These would be people who would prefer to

shop at a farmer’s market, who value local and organic and who are skeptical of processed foods.

According to Food and Water Watch, “increasingly conscious consumers are searching for

shrimp with fewer negative impacts on their health, the environment and indigenous

communities” and even companies such as Red Lobster are going to “partake in environmentally

responsible sourcing of shrimp” (Food and Water Watch, 2009, p.9).

Sunflower Shrimp will attempt to develop a relationship with chefs from local restaurants

too. Though initially this shrimp operation will not have enough production to supply an entire

restaurant, it is a future goal. Chefs will be drawn in by the look of the head-on shrimp, which is

more visually appealing to use in dishes. Peter Howard, a 40-year old veteran says top Boston

chefs prefer to cook whole shrimp instead of the more common imported product that is headless
 10

and frozen (Wood, 2013). For testimonies of chef’s who have tried this product grown in indoor

tanks, please reference section IV, Product Line Strategy.

Market Trends.

As stated prior to the business plan, shrimp consumption is increasing at a rapid rate. In

the United States, the “projected per-person increase in consumption should lead to a total

increase of 1.5 million to 2 million metric tons by 2020” (Diana, 2009, p.28). This growth is

good for companies like Sunflower Shrimp looking to enter the market. Shrimp is also the “most

consumed seafood species in the United States” (Wood, 2013, p.2), indicating that Americans

support this industry. Currently there are no indoor fresh shrimp farms in the middle of the

country, especially not in Kansas. The business is growing in the upper Midwest, stemming from

the expansion of a few bigger farms in Indiana. Consumers don’t currently have an option for

shrimp like Sunflower Shrimp, so this is an excellent chance to fill an unmet need.

Purchase Behavior.

Purchasing of shrimp across the entire United States population is still not extremely

frequent, despite it being the most purchased seafood. It is estimated that Americans eat 4

pounds of shrimp per person per year (Gunther, 2012), with the majority of that being the frozen,

imported kind of shrimp.

How to Gain Market Share.

Geographically, Sunflower Shrimp will have sole ownership of the market share. There

are no competitors within a reasonable distance or delivery time frame. If new companies were

to enter the Kansas area – which is likely due to the strong theme of agriculture in Kansas – then

Sunflower Shrimp will still have the first mover advantage, and will have hopefully have already

established a loyal customer base.

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Pricing.

For an operation that sells the same shrimp as Sunflower Shrimp that is produced using

the same methods, prices typically range from $15-$20 per pound. The larger the shrimp (i.e. the

fewer shrimp per pound) will almost always sell at a higher price due to a longer grow-out phase.

Sunflower Shrimp will sell 18-22 count shrimp, which classifies these shrimp as “jumbo.”

Sunflower Shrimp will charge $15 per pound, so the shrimp will be sold at a premium. The

similar operations that have provided details to Sunflower Shrimp have never had a lack of

demand, so the business is confident that $15 per pound will not deter the majority of customers

from making a purchase.

Resources for Finding Information about Consumers.

Finding data about customers will come mainly from market reports and Sunflower

Shrimp’s own observations. To build a network, they plan on collecting information from

customers to join an email list, as well as to gain geographical data about how far the awareness

of Sunflower Shrimp is reaching. Demographical information, such as income and age, collected

from nearby cities will be useful to see if there is an untapped market that Sunflower Shrimp has

not entered.

Media to Target Customers.

Sunflower Shrimp’s media used to target customers will consist of:

Word of Mouth

Word of mouth is critical in Sunflower Shrimp’s advertising, especially since the

business will be located in a small town. Kansas is a state where people talk, and with this being

such a novel and ironic operation, word will hopefully spread quickly. There is even a successful

shrimp operation in Massachusetts called Sky 8 that doesn’t even have a business sign; it just has
 12

a small, round logo on a side door of their building that depicts a shrimp (Arenberg, 2013).

Interest in its business is from people talking about it, and Sunflower Shrimp has a goal to create

as much buzz about this operation as possible. Early on, the company will start to establish

relationships with local restaurants and grocery stores. Though these will not be potential clients

until the production of shrimp becomes large enough, laying the foundation will make the

business relationship easier in the future.

Newspaper Advertisements

Every company has success company has success when they are interviews through local

news stations or papers, because this is something that gets people talking. While this is a novel

idea, it is one that appeals to small town news sources because a new business is exciting news.

In an interview with Northern Iowa Shrimp farm owner Matt Weichers, he said that “it’s such a

big deal raising shrimp here in Iowa that the newspaper did a real nice story and immediately I

sold out of everything… we’ve been able to sell out of everything we’ve grown before my next

batch is ready” (Fiorillo, 2014, p.2). Through the word of mouth mentioned previously, Sunflower

Shrimp will build a customer base to ensure adequate demand at all times of year.

Company Website

The company website will contain all of the information that customers could hope for. It

will have a description/pictures of the facilities and the product, it will describe the daily

operations, pricing information, location, contact details, customer reviews, and a history of the

business and how it started, as well as providing recipes for shrimp preparation. The website will

be aesthetically appealing, easy to use, and extremely professional, to reassure customers that

Sunflower Shrimp takes pride in its product.

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Social Media

Facebook will be critical for updating customers about the availability of shrimp. Many

times, there will a gap in the production schedule where the growing shrimp have not reached

market size. Sunflower Shrimp wants to be perceived as reliable, and for customers with long

commutes, up to date information is necessary.

Instagram will be an easy way of giving customers a first-hand look at daily operations.

Part of the appeal of this product is that consumers know where there food is coming from.

Taking photos of the shrimp as they grow and of the processes used every day will reassure

customers and help gain trust and brand equity.

Emails

Since many Americans get an excess of emails, this will be used on a less frequent basis,

mainly to notify customers when a new shrimp harvest is ready or when the business is out of

shrimp. This will connect with the older people who do not use social media, or those busy

middle-aged customers who do not frequently check Facebook.

Competitor Analysis.

Main Competitors

Most of the aquaculture facilities in the United States tend to be small companies

(Goldburg et al., 2001) which is consistent with the dynamics of the indoor shrimp industry.

There are a few main competitors who are driving the growth of this new shrimp segment of

aquaculture:

Marvesta Shrimp Farms: Beginning in Maryland in 2003, Marvesta was one of the first

to enter the industry, struggling for more than 2 years to develop the ideal growing conditions to

keep their shrimp alive. They are the true innovators of the industry, and their initial
 14

capitalization of the market has paid off. Marvesta is thriving, with aggressive expansion plans in

the future. In 2013, they announced a partnership with RDM Aquaculture, in which the two

businesses help new farmers begin shrimp farms, and the farmers in turn supply shrimp for

Marvesta’s many restaurant contracts (Wolinsky, 2014). The last known production number was

from 2008, when they had aggressive expansion planned that would allow them to produce

120,000 pounds of shrimp per year (Jacobson, 2008). At that time, they were supplying directly

to consumers who showed up at the door. But now, they have closed-off their operations and

deliver directly to consumers, including restaurants. In 2008, restaurants were paying anywhere

from $8-$16 per pound depending on shrimp size, plus shipping costs (Jacobson, 2008).

RDM Aquaculture: RDM Aquaculture began in 2009, and it has a large operation in

Fowler, Indiana, population of 2,200. RDM only produces about 3,600 pounds of shrimp per

year at $15 per pound, but its business isn’t driven from grown shrimp sales. Its true profits come

from selling pL’s (baby shrimp) to operations such as Sunflower Shrimp who are not advanced

enough to operate a nursery yet. RDM also offers consulting for the first 12 months of an

operation, which includes ordering the correct equipment, helping with set-up, daily water

testing, and delivery of the pL’s. Since the beginning of its business, it has helped start more than

22 farms (Wolinsky, 2014), ranging from Indiana to an account in Switzerland and Egypt. One

notable feature of its operation is that it has a 90% survival rate, which is the best in the business.

Because of its widespread reputation and its superb consulting services, Sunflower

Shrimp has decided to invest in RDM’s help. Sunflower Shrimp will retain RDM on a fee basis

to help get the business started smoothly, as well as help to reduce the risk of failure. The first 12

months will be a huge learning curve, and Sunflower Shrimp can avoid the struggles that other

companies have had, such as mass shrimp losses and unproductive practices. Getting the correct
 15

water levels, temperatures, and pH is complicated, as is the transfers between tanks and the

feeding regime.

Sky 8: Located in Massachusetts, this is a productive facility that has made some

incredible innovations. Since their induction in 2012, they have constantly focused on research

and development. They are working on developing an alternative to fish meal, as well as trying

to improve productivity. Sky 8 has four main employees, one of which has family in Vietnam

who run an unsustainable farm. He has the experience and drive necessary to improve the

methods currently used by the indoor shrimp farming industry (Wood, 2013). Sky 8 ships

roughly 15,600 pounds of shrimp annually to high-end customers at $15 per pound (Tabuchi,

2014).

The University of Missouri: The only farm that is geographically close to Sunflower

Shrimp is a research facility at the University of Missouri. There, Professor David Brune has

begun researching methods of indoor shrimp farming (Vance, 2014). Brune’s system is designed

to produce 25,000 to 30,000 pounds of shrimp per acre per year, though in 2013 he was only

operating about 1/15th of an acre (Hourigan, 2013). Though his facility is not nearly the size of

the other three competitor operations, it is the closest operation to Kansas. One interesting aspect

of his operation is his pricing: as of 2013, he only planned on selling his shrimp for $4 of $5 per

pound.

Indirect Competitors: Of course, the shrimp industry as a whole has many competitors

outside of SS’s niche market. As a small-scale operation, Sunflower Shrimp is competing against

foreign imports – which have the advantage of economies of scale, cheaper labor, chemical

additives prohibited in the US, and already established shares of the market. Foreign competitors
 16

will always be more visible than a farm like Sunflower Shrimp, since their products are the

majority of seafood in supermarkets and local grocery stores.

Weaknesses of the Competition.

The direct competitors of Sunflower Shrimp, those dealing specifically in indoor

shrimping, have some weaknesses that could prove to be a disadvantage for them in the near

future.

The main problem those competitors face is oversaturation of the Indiana/Northeastern

US market: since companies like RDM and Marvesta have been so intent on expanding the

industry, there is now an abundance of shrimp operations in the mid-northeast section of the

country. This is not a problem for anyone yet, but as more companies enter that same

geographical market, it could result in a decreasing rate of demand growth.

Many of these businesses are run by former agriculture farmers, who did not need to

necessarily market and sell their product. A commodity like wheat or corn can always sell,

without necessarily needing to establish a reputation or a brand name for itself. A lack of focus

on the customer relations side could harm businesses if the market gets large enough for

consumers to have more than one viable source for their fresh shrimp.

A third weakness that the bigger companies could soon face is the commoditization of

their shrimp. At the scale they are reaching, wholesaling is the next step. At that point, they lose

the competitive advantage of being a transparent source of shrimp and a small town, family run

business. It loses the charm of what a special product this is that local farmers are producing.

They will also have to compete almost directly with the foreign imports, due to the size of their

productions. Though these larger companies have done well at navigating their expansion thus

far, it is a risk that could cause major problems for them.

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Barriers to Entry.

There are some significant barriers to entry into this specialized industry. It is so new that

there are few guidebooks or instructions on how to jump in to the market.

Possibly the biggest barrier to entry is the high initial capital investment. According to

the journal Food and Water Watch, these operations are “still an anomaly in the industry, in large

part because they require more start-up capital and do not generate immediate profit” (2009, p.1).

Sunflower Shrimp is okay with waiting for a Return on Investment, because they have a detailed

long-term financial plan, which is outlined in the Financials section at the end of this document.

There is limited research on specific methods that do and do not work. There are no

proven studies about the profitably or efficiency of one method of indoor shrimping over the

other, which can make it difficult to want to invest in a risk like that.

A lack of knowledge of the science and lab techniques necessary to raise shrimp, as well

as a lack of product knowledge, can greatly increase the risk of failure.

Existing Patents Related to Indoor Shrimping.

Texas A&M is so far the only entity that has patented its indoor shrimp farm design.

Texas A&M created a vertical raceway type system that has been patented to expand into mass

production (Samocha, 2012). This will only restrict the largest of companies who will now have

to create different systems of production. This should have a minimal impact on Sunflower

Shrimp’s design and operations.

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III. Marketing Strategy

Market Penetration Strategy.

The best way for Sunflower Shrimp to penetrate the market is by spreading awareness

and understanding of its product and methods of production. There is a strong pull for reliability,

and since this product is not available in Kansas markets, a clear description of the benefits will

be necessary. Consumers must understand the value of a small, family-run business that provides

a healthy alternative to unsafe shrimp.

Strategies for Growth.

Sunflower Shrimp will lean heavily on social media to grow interest in the company and

the product. The management must present itself as reliable, consistently updating customers on

the status on the shrimp stocks, as well as constantly developing a long-term relationship with

each customer who comes through the door. The limited supply at the beginning will help drive

demand, because the product will only be available at certain times.

The future expansion plans are steady, with the goal being to add one additional building

each year. The operations will need to continually get more efficient, the marketing will need to

reach more potential customers each year, and R&D will become a huge part of the strategy once

enough profit has been built up to sustain costs associated with R&D.

Distribution Channel Strategy.

Initially, Sunflower Shrimp will rely on people coming directly to the farm to purchase

shrimp. That alone has sustained certain other competitor operations for 5+ years. But when

Sunflower Shrimp gets a large enough supply, the next step would be to make short-distance

deliveries directly to the consumers. Short deliveries will require an insulated tank on a truck,

which would require additional investment and experimentation on transportation timelines and
 19

survival rates of the shrimp. Delivery would allow Sunflower Shrimp to target seasonal farmer’s

markets, which would be an easy way to sell a lot of shrimp and to reach new customers.

Sunflower Shrimp is located about an hour from the large city of Wichita, which would be an

ideal distance and location to expand the business. Deliveries to chefs and restaurants would also

be a progressive step, once supply increases. There is also a potential of pairing with smaller

grocery stores or meat markets to gain brand awareness.

Communications Strategy.

The points of contact will come through on-site interactions and social media, email, and

print. The frequency of emails will be less than the social media updates, to avoid annoying

customers. Before shrimp are even available for the first sale, Sunflower Shrimp will begin to

educate and invite people to join the Facebook page. This will hopefully spread the word and

make for a good first turn out, establishing a customer base early. Promotions will be focused

around holidays such as Thanksgiving and Christmas (when shrimp is in higher demand). The

goal of promotions will be to simply get people excited about the shrimp when it is in stock.

Public relations are an intangible, yet overly important aspect of an operation like this.

The product should be enough to attract a solid amount of customers, but the experience those

people have while at the farm will influence how often they return. Sunflower Shrimp will

present itself as friendly, hospitable, fun, environmentally conscious, reliable, and trustworthy.

This requires a genuine interest in each person who shows up at the door, and a cohesive front

among the family involved in the operations. The goal is a constant, consistent networking push

to make the experience for the customer as pleasant and memorable as possible. There aren’t

many new events and activities for families to attend, so coming to the shrimp farm and basically

taking home live shrimp is an exciting new experience.

 20

Sales Strategy.

The actual act of selling the shrimp will involve the customer requesting a certain amount

of shrimp, the worker going to the tanks, fishing out the correct amount of shrimp, weighing

them, packaging them, accepting payment, and sending the person off with a wave and a smile.
 21

IV. Product Line Strategy

Description of Product.

Shrimp fry (baby shrimp) are grown in hatcheries and then subsequently transferred to

tanks to grow to market size. Shrimp is a versatile protein choice because “their sweet, mild

flavor and firm texture holds up to almost any cooking style from boiling to grilling” (New

England Aquarium, 2015). Using a recirculating system also makes it possible to filter out waste

and undesired nutrients to reuse as fertilizer for Sunflower Shrimp’s operation, or to sell to

customers to use for their gardens.

Sunflower Shrimp’s plan is to sell the shrimp at 18-22 count per pound, which will

require a 4 month grow out period from the time the pL’s are delivered. By the end of year 3,

Sunflower Shrimp will be able to produce the shrimp faster, needing only a 3 month grow out

period. The way the business will achieve this is through innovations in their production

methods and through research being conducted by outsiders about alternative feed methods. The

shrimp will be bagged on ice for the customer to take home, ensuring the product stays fresh, and

also alive until cooking time.

Since Sunflower Shrimp has not personally grown any shrimp yet, they do not have much

of an idea of how the product tastes. The business is relying on reviews of other companies who

produce the same products using the same methods. The reviews have been very positive, and

customers love the product. Some of the comments about the indoor Pacific White Shrimp are:

-“I thought it was a remarkably clean product, great shrimp flavor”

– Chef Gjerde (Jacobson, 2014, p.1)
-“Meatier, larger and fresher-tasting than shrimp bought from the Gulf or frozen shrimp shipped
in from as far away as Asia”
– (Rotenberk, 2013, p.4)
 22

-“They were delicious – the best shrimp I’ve ever eaten”

– customer of Steiner Farms (Rotenberk, 2013, p.4)
- “It’s just this magnificent, sweet, pure shrimp flavor, and they are beautiful, like almost
translucently clear”
– Chef Eric Cooper (Arenberg, 2014, p.5)
-“Indoor shrimp farmers could turn shrimp into a ‘perfect protein,’ delicious and sustainable”
– (Arenberg, 2014, p.1)

These reviews, along with the popularity of this product, reassures Sunflower Shrimp that

indoor tank shrimp farming produces a great-tasting shrimp that will represent the company’s

values and ideals well. Since this is a new product that many Kansans will not have seen before,

each shrimp order will come with instructions on how to cook the shrimp properly, expiration

details, and how to deal with the head-on aspect of each shrimp. Sunflower Shrimp will also

provide recipes for free in the lobby, changing them seasonally and perhaps monthly to help

customers fully enjoy their shrimp.

In addition to shrimp, the company will produce gift shop types of items to promote the

logo and brand and help build awareness for the company. The best product will be an insulated,

reusable cooler with the logo on the side. The idea behind this is to replicate reusable grocery

bags, so the customers will bring their coolers with them each time they come to buy shrimp

from the farm. A product like this will be a great way of obtaining repeat visitors. Sunflower

Shrimp will also have t-shirts, shrimp skewers, and pens for sale, all with the company’s logo

printed on them.

Benefits of the Product.

Shrimp is a healthy fat that is an excellent source of protein. There are no additives,

simply shrimp that have been fed fish meal and have grown up in a secured environment. Shrimp
 23

is extraordinarily easy to cook as well, with many options for variety. It is convenient for a quick

and healthy dinner, and also easy to cook in mass quantities for a family or a dinner party.

Competitive Advantage.

As Michael Ziebell – general manager of Ralco Company’s shrimp division – put it best,

indoor shrimping allows farmers to “grow shrimp in a confined environment, with a greater

ability to control disease and provide a predictable supply of fresh shrimp” (Fish Site News Desk,

2015, p.1). This is what recirculating systems have that foreign competition does not have.

Sunflower Shrimp’s primary competitive advantages are:

-Fresh shrimp, never frozen

-Locally grown, allowing customers to see exactly where their shrimp is grown

-Less risk of crop failure due to external elements being a non-issue

-Lower cost of preparation

The costs of preparing shrimp “as headless, deveined, or tailless is not possible for many

small firms. Therefore, the simplest and most value-value filled choice for these farmers is to

market whole, live, head-on shrimp” (Wirth, 2014, p.183). Simplicity will be a benefit for both

management, due to the saved time and headache of processing the shrimp, and for the customer,

who will save money and get the freshest shrimp possible.

Operations Plan.

The total size of the building is 4,320 square feet. The building will contain 9 tanks, a lab, and

the marketing/selling area. A sample building format is shown below:

 24

Figure 2: Potential Building Layout

Over the 4 month grow-out time, the shrimp will be split into different tanks to ensure

adequate room to grow. Assuming a 100% survival rate (unattainable, but simpler to demonstrate

capacity), the 14ft tanks will generate 518 pounds of shrimp annually over the three cycles. An

18ft tank will generate 1,283 pounds of shrimp in that same amount of time. Eventually,

Sunflower Shrimp would ideally have more 18ft tanks to hold grown shrimp, as it is a more

effective use of space and resources.

Each day, the water will be tested, the shrimp will be fed, and the equipment will be

adjusted. Each tank contains a Biofloc system which uses bacteria to produce feed for the

shrimp, while also converting the waste back to a useable form. Each tank will also have air

stones that are critical for keeping the water moving and oxygen flowing. When ready to harvest,

the shrimp will be scooped out with a net and weighed, then sent home with the consumers.
 25

Development Stage of the Product.

As of April, 2015, Sunflower Shrimp is in the groundbreaking phase. The loans have

been obtained for the building, and the excavation should begin this month. The first delivery of

shrimp is expected to be delivered by RDM Aquaculture by the end of June, 2015, barring any

weather or other kinds of delays in construction. The first harvest should be ready to sell by the

beginning of November, 2015. This will let Sunflower Shrimp capitalize on the increased

demand for shrimp that comes about during the Thanksgiving and Christmas holidays.

Product Life Cycle.

The product life cycle of a Pacific White Shrimp grown indoors is composed of the

following three stages:

-The first larval stage, lasts 3-4 days in a hatchery

-The post-larval (pL) stage, start to resemble adult shrimp, moved to grow-out tanks after 20

days in the hatchery

***This is the stage that Sunflower Shrimp will receive the pL’s from RDM Aquaculture.

-Shrimp are in grow-out tanks for 4 months, or until they reach market size of 18-22 count per

pound (Sun, 2013).

Even when a hatchery is introduced to Sunflower Shrimp’s operations, the timeline will

remain the same. The hatchery will run independently of the grow-out operation.

Partnerships.

As mentioned previously, partnering with RDM Aquaculture will ensure that the first

twelve months, essentially one full round of shrimp, will be monitored correctly and produced

efficiently. Sunflower Shrimp owners visited RDM in October 2014, to tour the facilities and

learn about their process. RDM have knowledgeable staff members who are eager to help.
 26

Though this is a significant extra cost, it is a risk management tactic that will keep Sunflower

Shrimp from wasting valuable resources and product.

Sunflower Shrimp’s Research and Development.

Research and development for Sunflower Shrimp will not truly begin until the funds are

available to risk experimentation. Observations will be made from the beginning of the business,

along with detailed recordings of daily operations. But future R&D will be a major part of the

expansion, because the main goal of this business is to continue to improve operations, which

could help improve the entire industry. When predicting future improvements of Sunflower

Shrimp’s facilities, one must take into account the following: cost estimates of innovations,

efficiency increases, adding a nursery to decrease purchase price of pL’s, and overcoming the

initial capital investment. Figure 3 below shows the estimated increase in productivity by year,

after taking into account each of these factors.

Figure 3: Forecasts

Annual Productivity Projections

$30.00
Cost and Margin per lb
$25.00

$20.00

$15.00

$10.00

$5.00

$0.00
1 2 3 4 5 6 7
-$5.00

-$10.00 Years

-$15.00
Cost of Shrimp Sold per lb Gross Margin per lb
 27

Each year, the cost of shrimp sold should decrease and the gross margin (revenue minus cost of

shrimp sold per pound) will increase.

Industry/Competitor Research and Development.

The industry is growing, it is new, and there is no proven “best” way of producing shrimp

indoors. Therefore, most companies are experimenting and expanding. One of the most

noteworthy expansions is NaturalShrimp in south Texas. As of March of last year, they were “in

the process of raising $3,500,000 for the construction of the first large scale indoor shrimp

facility in North America” (PR Newswire, 2014), which the company expects to produce 6,000

lbs of shrimp each week. This is the first time a business has been actively seeking investors,

showing that they are pouring any resources into R&D of their facilities.

Though operations like NaturalShrimp are rare, they will become more common each

year. This will help the shrimp industry as a whole become more sustainable, because the more

America produces domestically, the less they will import from overseas. Americans need an

alternative to the frozen, foreign shrimp, and the more people involved in improving the method

of indoor recirculating shrimp operations, the more advanced the industry will become.
 28

V. Funding Requirements

-Current funding requirement is $180,000. Sunflower Shrimp has received $106,000 in

loans to start the business. The remaining $74,000 has been provided by the owner, Robert

Daniels II. Therefore, the business will be funded with 41% equity and 59% debt. Included in

this initial estimation of $180,000 is:

-Building/Electricity/Site Preparation

-Shrimp pL’s/Tanks/Water/Feed/Testing Equipment

-Consulting Fees/Logo Design/Promotional Materials

Having that high of debt can be risky, but for a start-up project it is not uncommon. For

the next 7 years, there are no plans to borrow more money, unless an expansion becomes

possible. The debt is only going to be used on long-term assets, which encompasses the cost of

the facility. The time period of the debt request will be a 40 year term. The initial capital

investment is large compared to sales, but not when the plan is to have a long-term productive

facility. The payback period for the initial investment will be 4 years.
 29

VI. Financial ProFormas

Year 1: Quarterly Pro Forma Statements
 30

Years 2 – 7: Annual Pro Forma Statements

31
 32

Analysis of the Financial Statements.

-This operation is not one that will see returns quickly, so a certain level of patience is

required. The costs are high initially, but SS spent more money on quality buildings and

equipment that will last a long time. The hardest part is getting started, but after the first three

years, the return on investment should begin to be steady and substantial.

-Decreased costs will occur as the efficiency of operations improve. Currently the year by

year survival rates account for management’s lack of experience and for the mistakes that will be

made as the operation is in the beginning phase. Figure 3 below shows the expectation Sunflower

Shrimp has for survival rates of the shrimp:

Figure 3: Predicted Survival Rates of Shrimp

Year 1 2 3 4 5 6 7
Survival Rate 50% 75% 80% 85% 80% 85% 85%

The initial survival rate is predicted low to avoid expecting returns that will not be there. Overall,

many business people today would not partake in this project, due to the high Internal Rate of

Return and the risk associated with a new type of production. But the management at Sunflower

Shrimp has experience in agriculture and learned the patience that comes with raising crops.
 33

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