Gro-Grouper.com

 

Gro-Grouper, Inc. is a proposed marine aquaculture enterprise being formed for the purpose of providing fresh, DNA-certified, authentic, black grouper on a next-day basis to selected upscale restaurant groups, fresh markets, and on-line retail customers, anywhere in North America.

When its state-of-the-art production plant is completed, Gro-Grouper® will be the only facility in the world that provides a renewable source of black grouper – fish that are spawned and raised in the company’s own recirculating marine aquaculture tank (RMAT) facility in an environmentally-sound, ecologically-sustainable manner, and processed, packaged, and distributed through a dependable, on-demand, next-day replenishment system.

Annual Rated Output (lbs.) …. 3,600,000
Investment $22,000,000
Annual Revenue (Yr. 4) $21,243,040
Gross Income (Yr. 4) $13,815,276
Gross Margin (Yr. 4) 65.0%
Net Operating Income (Yr. 4) $12,620,276
NOI Margin (Yr. 4) 59.4%
Annual Return on Equity (Yr. 4) 57.4%
Yield (IRR) Yr. 1-7 53.2%

 

It is a $22 million all-equity investment, paid-in in annual stages over a four-year period, and produces annual Revenue, Gross Margin, Net Operating Income, Net Margin, and Return on Equity of $21.2 million, 65.0%, $12.6 million, 59.4%, and 57.4%, respectively. In terms of investment yield, the IRR calculated for a seven-year holding period is 53.2%; the more conservative MIRR is 40.7%, using a 2% finance rate and a 4% reinvestment rate.

This business plan contemplates a 3.6 million lb facility, which is considered a plant size that will not distort markets, or lead to price elasticity of supply and demand.  However, Gro-Grouper® will work at a wide range of plant sizes and investment amounts. As the business plan demonstrates, RAS, specifically what is termed Recirculating Marine Aquaculture Tank Systems (RMATS), is so modular, so scalable, that Gro-Grouper® worked very well across six initial investment scenarios, and two subsequent investment scenarios, ranging from 700,000 lbs. per year to 4.9 million lbs. per year. 

This is an investment that can be structured in a variety of ways – with different capacities, different combinations of debt and equity, different investment arrangements;  the business plan represents one approach.  Regardless of the approach used, we have the concept, we have the team,  we have the technology, and we have the expertise; we have those attributes from a production standpoint, from a supply chain standpoint, from a business standpoint, and from a technical standpoint. 

The following excerpt from the Gro-Grouper® Business Plan provides the essence of the economic justification for this venture:

The breakeven price per lb for Gro-Grouper® processed portions of black grouper filets and loins is $5.96 per lb, delivered to the customer.  By comparison, the UB COMTELL Grouper (Whole, Fresh, Black, Domestic, FOB Mid-Atlantic) average price per lb in January 2013 was $5.98 per lb.  The four-year (2010-2013) average UB price is $5.27 per lb; the eight-year (2006-2013) average UB price is $4.69. In this comparison, the Gro-Grouper® price is the delivered price for processed portions, while the UB price is the price at the dock for non-portioned whole fish (headed and gutted, Mid-Atlantic port of entry).  The best adjustment method for reconciling the comparative prices is to adjust the UB price to reflect the processed yield, and to adjust the Gro-Grouper® breakeven price to deduct the cost of shipping, which would compare the prices for processed portions before shipping. 

Working from the UB price side, the price already reflects an H&G (headed and gutted) fish, so 60% is probably a reasonable and conservative processing yield.  That brings the January 2013 price of $5.98 per lb for whole fish to $9.97 per lb.  From the Gro-Grouper® perspective, at an average of $1.80 per lb of shipped weight, shipping is the single largest line item of direct, variable cost (Cost of Sales).  Deducting the cost of shipping lowers the Gro-Grouper® breakeven price from $5.92 per lb to $4.12 per lb.  In other words, a wholesaler would buy a whole (H&G) fish at the dock for $5.98, which would yield processed portions (filets and loins) at a wholesale cost of $9.97 per lb, before packaging and shipping.  By comparison, Gro-Grouper® achieves breakeven at $4.12 per lb for processed portions of black grouper before packaging and shipping, the equivalent of a wholesale dock price for processed portions (FOB Mid-Atlantic). 

With the RMATS production plant it intends to build, Gro-Grouper® achieves price breakeven at a price point for processed portions that is below the cost wholesalers pay at the dock for whole fish, and 60% below the equivalent equivalent cost wholesalers would bear at the dock for processed portions.

Since 2006, UB black grouper wholesale prices have increased by 60%; given the trend line over the past seven years, and the declining natural harvest of black grouper, there is no reason to believe that this trend is going to reverse itself. 

This is the wisdom and benefit of focusing a recirculating marine aquaculture production and supply chain system on high-value marine finfish.  

For the executive summary, investment proforma, and full business plan, please contact:

Fletcher L. Groves, III
Vice President
SAI Consulting, Inc.
PO Box 1755 Ponte Vedra Beach, FL 32004
(904) 273-9840
flgroves@saiconsulting.com