John Illingsworth shares his business story growing OceaNZ into New Zealand's largest paua farm at the 2015 Innovation Forum.

1. OceaNZ Blue
Our story
John Illingsworth
July 2015

2. Wild abalone decline creates an opportunity
WildCatch
1970 1980 1990 2000 2009 2015
Tonnes 25000
SAfrica 8% 20000 SAfrica 0%
USA 6% USA 0%
Mexico 30% 15000 Mexico 0%
SKorea 2% SKorea 0%
Japan 30% 10000 Japan 20%
New Zealand 3% 8000 New Zealand 10%
Australia 21% 5000 ? Australia 70%
100% 100%
Wildcatchis rapidly declining
Only threefisheries remain open in theworld

3. Aquaculture seeks to fill the space
Cultured abalone
Tonnes 1970 1980 1990 2000 2009 2015
50,000 ?
China produces abalone to 60mm (Tropical species-40 per kilogram)
China satisfies domestic low value markets $US17 per kilogram
Non Asian abalone are 90mm (cool water species-9 per kilogram)
Sth Africa, NZ and Aust abalone price range of $US32 to 36 per kilogram
30000 Asia 80%
Non Asian 20%
15000
10000
5000
1000
Abalone farming has passed the pioneering stage now the industry will consolidate
China is the biggest producer 10,000 - 2.5 tonne farms (Volumes are anecdotal) But they have had farming issues
including cold virus's, post larvea failures (Inability to abtain stocks of spat), vibro diseases and red tide failure

4. This is what production was in 2010
World wide production by size of abalone
Live abalone
Canned abalone
Frozen abalone
Metric tonnes
24000
22000
20000
18000
16000
14000 Total approx 40000
12000 22500
10000
8000
6000 7500
4000 8000
2000
1000 1000
500 500 500
mm 50 to 60 60 to 70 70 to 80 80 to 90 90 to 100 125
grams/piece 23 38 58 85 119 270
China China South africa Australia
Taiwan Taiwan Australia Japan
Korea Korea Chile New Zealand
New Zealand

5. International Abalone Markets
1970
25000 tonne
2009
46000 tonne
2015
55000 tonne
Feral25,000
Feral5,000 Farmed50,000
Feral8,000 Poached8,000 farmed30,000

6. You have the vision
• This is an industry that has high intrigue and thrives on vision
and passion
• Despite this the failure rate is 9 out of 10
• Paua farming is like “Stepping up to the plate in a game where
you don’t know all the rules and hitting a home run on the first
ball”
• The missing ingredient is often business skills

7. OceaNZ Blue Abalone

8. Water quality is key

9. The Nurseries

10. The abalone farm today

11. Funding –figure it out upfront
• Family, friends and fools
• Angel investors – Get investors with skills - Business
Management, Engineering, Accounting etc.
• Venture capital – Generally only interested after you are proven
“The biggest reason for failure is a lack of funds”
$ $ $

12. Risk is Real
Think hard about your project risk

13. Risk mitigation strategies
• The site has a full seawater recirculation capability to 1200 litres per
second (We could shut off a potential algae bloom)
• 650 KVA of back-up power generation capacity. (Automatic start up on
power failure)
• 100% UV seawater sterilization (Maintaining seawater bacteria levels
below 40 parts per million)
• Cooling tower technology which reduces the incoming water
temperature 2 degrees in warm weather

14. These things should not be forgotten
• You will underestimate the time it takes to get to full production
• You will underestimate your production cost
• Capital spend will be higher then you think
• You will overestimate the selling price you will get in the market
“Two things will happen – it will cost more and take
longer “

15. We thought we could have our own brand
But the Chinese have their own brands

16. State of the art processing facility
• Cryogenic freezing capability (36 month shelf life)
• Improvements in baseline production rates are achieved through accelerated
heat reduction resulting in a marked increase in product yield due to less
dehydration.
• Microbial growth and related oxidative reactions are reduced improving product
safety and better texture retention - (sashimi grade)
• It is a reasonably simple task to add a cannery onto the existing facility
• Certification secured for Japan, USA, Europe and China

17. The processing plant

18. Frozen abalone has big potential
• The natural product for European chefs

19. You cant just sell the product
You have to sell the sizzle
abalone_advert.wmv

20. Don’t under-estimate the Asian production
capability
They can do most things faster better and cheaper then we can so
make sure you understand your competitive advantage

21. The Chinese have a lower cost of production
THEMARKET(Wetfishmarketprices with15%discount)
length Weight No/kilo Price/piece Price/kilo Price/kilo
mm grams Rmb Rmb $US
65 38 26
70 47 21 6 120 $17.1 Fujainabalone
75 58 17
80 71 14 15 170 $24.3 OceaNZBlueRange
85 85 12 15 170 $24.3
90 101 10 19 185 $26.4 Darlianabalone
95 119 8 24 200 $28.6
150 467 2 200 400 $57.1 Australianblacklip

22. The exchange rate was our biggest enemy

23. Create new ways of thinking

24. Enlightened attitudes to failure are essential

25. The cost of production requires scale
Can OceaNZ Be the low cost producer ?
$32.00
$30.00 Exchange rate 1$US-$0.76NZ
$28.00
$26.00 Oceanus worlds largest producer 2057 tonnes
$24.00 $15.9 $US/Kilogram
$22.00 Maximium size 70mm
$20.00
$18.00
$16.00 $27.07
$14.00 $21.44
$12.00 $18.70
$10.00 $17.59 $16.56
$8.00 $15.99 $15.56
$6.00
$4.00
$2.00
$0.00
100tonne 150 tonne 200 tonne 250 tonne 300toone 350tonne 400 tonne
Kilograms 100000 150000 200000 250000 300000 350000 400000
CCOP $19.47 $16.37 $14.90 $14.55 $14.03 $13.82 $13.66
OH $7.60 $5.07 $3.80 $3.04 $2.53 $2.17 $1.90

26. Creative challenge is essential
“All good thinking begins with a Question”
“It is not foolish to ask why?”

27. Fun can help foster lateral thinking
A joke can make an unexpected connection
Humour is an important part in creating an innovative environment

28. Create the right environment
“The real voyage to discovery consists not of seeking new lands
but seeing with new eyes”

29. Enthusiasm spreads
• Create a committed enthusiastic team that won’t give up until
the problem is solved
• Don’t make rash assumptions about ideas

30. Innovation is not a right nor is it constant
To be creative we sometimes have to unlearn the past
“Yesterday does not guarantee tomorrows success”

31. Maybe John West is right
My Movie.mp4