BioMar - Piecing together a fragmented market
Itself an entity formed through years of consolidation, BioMar expects to see increasing consolidation in the Turkish aquaculture market and wants to be part of that process.
by CHAN Ngai Meng
Turkey's aquaculture production in 2012 exceeded 210,000 tonnes, making it the second largest aquaculture producer in Europe. However, this quantity still pales in comparison to the more than one million tonnes achieved by Norway, Europe's top producer.In terms of aquafeed processing, 15 different feed companies, mostly local players, vie for a share of Turkey's market, according to Carlos Diaz, who is taking over as BioMar's chief executive officer after serving as the company's Vice President of BioMar Continental Europe, BioMar Americas and Business Development. In contrast, three major global players, including BioMar, easily claim the large chunk of the much larger Norwegian market.
Feeding growth in innovation
As individual Turkish players have to each make do with a smaller market share, investing in R&D is much less possible for them as they have to get a return on their investments in a much smaller market, according to Diaz. This leads to a vicious cycle, resulting in the lack of progress in feed development in Turkey.
BioMar wants to change things by bringing in their expertise in feed development to the country. "We have also for several years had export activities to Turkey, but in recent years import barriers and logistic challenges combined with the growing potential of the Turkish aquaculture business have made this a less attractive solution," says Diaz. These were some of the factors which prompted the company to recently sign the final agreement for the establishment of a joint-venture feed company and a fish feed plant near Izmir in southwest Turkey.
"We want to play a major role in the Turkish market, but in order to be competitive in the feed market in Turkey you need local presence. We also expect to see an increasing consolidation in the Turkish market and we want to be part of that process."
The other party of the joint venture is the Sagun Group, a leading Turkish company involved in aquaculture. President of the Group, Ahmet Tuncay Sagun, says, "The know-how of BioMar within areas like fish feed development, sourcing, and feed manufacturing will benefit both us and other fish farmers in Turkey."
The signing ceremony between BioMar and Sagun
At a time when many fish feed processors are jumping on the sustainability bandwagon to produce 100% plant-based fish feed products, BioMar is quick to emphasize that intensive R&D remains as one of the company's core competencies. "We do not deliver a specific combination of feed ingredients - we deliver a feed with a set performance potential. Our task is to make sure that the fish farmer obtains stable, predictable, and strong production results independently of what happens in raw material markets," Diaz stresses.
Diversified raw material sourcing from vegetable, marine, and processed land animal products also protects the company from fluctuations in raw material markets. "This enables easy switching between ingredients in the feed without compromising feed performance, an essential feature in highly volatile raw material markets."
An example of BioMar's raw material consumption in 2013 from the Norwegian market. The consumption profile varies significantly from year to year and between markets.
Diaz adds, "In the preparation for the new feed company we have done several benchmark trials, and we see a significant performance gap between feeds used in Western Europe and Turkey. This is particularly so in the trout sector. Most Turkish feed producers still use quite traditional recipes and farmers experience too large a variability in feed performance."
How the joint venture came to be
BioMar has in fact been present in the Mediterranean for over a decade; their Greek factory set up in 2001, supplies countries on the Balkans as well as the eastern Mediterranean.
Since Diaz's appointment four years ago, the company has seen strong results for the Continental Europe region. It holds a very solid market position across the continent, which it is now using as a platform for further expansion. The current market trend is towards consolidation among its customers in particular, including those in the Mediterranean area.
"Many customers have seen difficult times with a long period of low fish prices, but that has somewhat eased in the last year. Greece is a case of its own with an urgent need for restructuring. However, we continue to see a big potential in Greece, once the necessary restructuring of the Greek aquaculture sector has been carried out," Diaz describes.
Marine farms for Turkish aquaculture, located primarily in the Aegean Sea (part of the Mediterranean Sea) where geographical and hydrographic conditions suit the species cultured, enjoy similar favourable natural conditions as those of Greek farms. Good market access for the exports of aquaculture products to the European Union, Russia and the Middle East is an added incentive offered by the Turkish aquaculture industry.
With a strong reputation and network in the industry, Sagun was a choice partner which brought to the table the agility and ambition needed for growth. Diaz comments, "We have for many years been involved in successful joint ventures in both Chile and Costa Rica, and we know the importance of good chemistry with a joint-venture partner. No negotiation for a joint venture is ever easy, but we have from the beginning seen a strong commitment from Mr Sagun and his family to this joint venture as well as a will to resolve differences of opinion." Sagun company is also planning the construction of a processing plant for sea bass, sea bream and trout alongside the new feed plant.
Partnering for growth, targeted for growth
An entity formed through years of consolidation, BioMar was first established in Denmark in 1962 by a group of Danish fish farmers under the name Dansk Ørredfoder A/S. In 1988 the company was taken over by the crops and animal feed company Aktieselskabet Korn- og Foderstof Kompagniet (KFK) - a subsidary to the Norwegian group Norsk Hydro - marking the beginning of global expansion for the company.
In the early 1990s Dansk Ørredfoder A/S took over fish feed producers Aqualim S.A. in France and BioMar AS in Norway, and the three companies merged in 1994 under the name BioMar A/S.
The expansion continued with the establishment of a factory at Grangemouth in Scotland in 1995, and the acquisition of 50% of two fish feed factories in Chile in 2000. In 2001 BioMar established production in Greece, and in 2002 BioMar took over the remaining 50% of the two factories in Chile.
In 2005 the Danish industrial holding company Schouw & Co. took over 68.82% of BioMar shares, and it was not long before Schouw & Co. bought the remaining shares from BioMar Group in 2008.
At about the same time, a major milestone in BioMar's growth process was the acquisition of the fish feed activities of Provimi Aqua, the world's fourth largest supplier of high quality fish feed. The acquisition enabled BioMar to be one of the leading suppliers of fish feed in the world today.
Despite the numerous changes to its leadership, BioMar remains true to its mission of providing healthy and sustainable growth for its customers and shareholders by creating innovative feed solutions to develop aquaculture worldwide. "We want to continually improve the efficiency and profitability of farming activities for our customers by delivering innovative and sustainable feed solutions and outstanding technical support to ensure our customers get the most out of their feed," Diaz emphasizes.
On innovation and R&D
As described by Diaz, BioMar has a geographically decentralised R&D strategy, meaning that market feedback from say, fish farmers in Turkey, are received promptly by their technical support team in Turkey. This strategy facilitates direct collaboration with customers for R&D projects in their respective countries. These projects are underpinned by the four pillars of fish nutrition, fish health, raw materials, and process technology, with a team of dedicated experts supporting each pillar.
BioMar will also be bringing to its Turkish joint venture its extensive experience in working with external research institutions all over the world. Diaz highlights: "As examples I will only mention a few: we are the only feed manufacturer involved in the largest EU-financed aquaculture project so far - the ARRAINA project. Focussing on identifying specific requirements in fish nutrition for a multitude of species it involves universities and other research institutions from all over Europe as well as a selected group of business partners."
"We also have a close collaboration with the Danish Technical University's department for aquatic resources DTU Aqua - with them we work on both feed for recirculation farming systems, eel reproduction, and several other projects. We also run projects with institutions in countries such as Norway, France, the United Kingdom, Brazil, the United States, Chile and Indonesia," Diaz adds.
New feed types are tested either at BioMar's own facilities in Denmark, Chile and Costa Rica, or in collaboration with its external partners such as GIFA and FFH in Norway and GIA on the Canary Islands. Final testing of new feed types is often performed in consultation with farmers in commercial farming facilities, as fish might experience different types of stress on the farm than in a controlled environment, so these tests add valuable knowledge.
Sustainability should not be a catch-all
The current buzzword in the feed and livestock industry, sustainability is often used too loosely, according to Diaz.
"Even minor improvements in environmental performance are often denominated as 'sustainable solutions'. It is important to remember that sustainability is about the broader balance between environment, economy and society. When we talk about sustainability we look at very complex systems. This always opens a possibility of differences in interpretation and some degree of subjectivity - and this is often misused. We believe it is important to strive for the most comprehensive understanding and to try to measure and give comparable values to the consequences of our actions. Then we can take informed and responsible decisions. This we will of course also apply in our Turkish business," explains Diaz.
For example, the company's BioSustain programme is the most advanced level of its efforts to improve sustainability in fish farming. The programme, based on methodology from BASF, allows it to perform eco-efficiency analysis on its products as well as the whole aquaculture value chain. BioSustain has also been certified by world-leading certification body Det Norske Veritas (DNV) under its new standard ProSustain.
The programme is built upon four levels named Legislation and Regulations; Fundamental; Relevant; Optimised.
The BioSustain pyramid
Sustainable sourcing of raw materials from certified origins, among other laws and regulations, fall under Legislation and Regulations. At the Fundamental level, BioMar has received the ISO 9001, 14001 and 22000 certifications, which refer to quality management, environmental management and food safety management respectively. The relevance and significance of these different standards and analyses for raw materials are assessed by the BioMar Sourcing Review Group at the Relevant level, and the Group then approves raw materials for the company. At the Optimised level, an environmental and financial impact assessment is conducted, with resource and energy consumption, spatial area utilisation, emissions, and potential toxicity and risks taken into account.
Sustainable breakthroughs
BioMar was the first feed company to introduce probiotics in fish feeds, and today it enjoys global exclusivity of the only probiotic approved by the European Union for reducing both deformities and mortality in fish. The probiotic reduces the need for antibiotics significantly. The company's probiotic products are used in numerous feed types including larval and fry diets, broodstock diets, and various grower diets targeting specific disease types such as gastroenteritis and other bacterial diseases.
Launched last year, the LARVIVA Pro range for marine hatcheries is another major breakthrough for the company. "This product line solves one of the major issues in the marine hatcheries - the large amount of deformities experienced in marine fish larvae. At the same time it simplifies and reduces risk in hatchery production by significantly reducing the need for live prey such as artemia in the larval stage," Diaz elaborates.
"For sea bass we recently launched EFICO Kappa - a high-performance diet focussing on improving the nutrient absorption in the gut, where sea bass is well known to be less robust than sea bream. EFICO Forte for sea bream was introduced last year. It focuses on reducing infestation and the negative effects of external parasites in sea bream and strengthening the general health status of the fish when challenged by parasites," Diaz adds.
Apart from sea bass and sea bream, which are two of the three main species (the other being trout) that BioMar's new Turkish factory will be producing feed for, the company also plans to include fish feed for more species in its product programme for the factory.
"The capacity in the first phase will be about 50,000 tonnes, and all our new factories are designed for growth. The major share of the production will go to the Turkish market, but we will also target some other markets predominantly to the east of Turkey, as we already have our Greek factory supplying to the countries in the west, on the Balkan Peninsula," Diaz concludes.
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