Zambian tilapia operation Yalelo is embarking on an ambitious growth path this year, after securing a $10.5 million loan from Dutch development bank FMO.
While the funding should help it more than double its production volumes this year, another big focus will be furthering its processing and retail footprint, Adam Taylor –CEO of FirstWave Group, Yalelo’s parent company – told Undercurrent News.
At present the Lake Kariba-based firm produces and sells just over 1,000 metric tons of tilapia per month. With this additional funding, sales should double, Taylor said.
“We have the hatchery ponds and production pens necessary to double production, but that’s a relatively minor part of the picture; fish pens are not a high-cost item.”
“Doubling sales depends on a wide range of functions across the firm, from recruiting and training several hundred new staff, additional boats, trucks, warehouses and retail shops, maintaining and securing each of those and launching dozens of new retail locations. Developing scalable systems such that we can do that in a controlled manner has been a significant area of investment over the last 18 months.”
With its plan in place, Yalelo should be able to grow sales by around 7,000t per year, he said. Sales in 2019 should lift to 1,600t per month.
Laying a strong foundation for scale has been necessary when it comes to Yalelo’s retail side.
“There are a lot of things that were simple with a handful of retail shops, however now that we operate 50 shops, growing towards 100, it is a sizeable business in itself and one of the larger cold-chain footprints in East Africa,” said Taylor.
“There are many factors in operating a successful retail chain in such a challenging environment, from data analytics to operations auditing.”
As well as its own retail shops, Yalelo also sells through most of Zambia’s major supermarket chains.
In each supermarket a Yalelo merchandizer staffs a fresh fish concession.
“Additional processing is an important focus for us this year. We see an opportunity to leverage our existing distribution to the 40 fresh fish supermarket concessions we operate to also include frozen retail packaged products, such as gutted and scaled family packs,” he said.
“Frozen product can also be distributed into additional third-party retail locations which, unlike fresh fish, does not require full-time merchandizers at each location.”
The firm already produces a moderate amount of frozen product, sold in bulk 10-kilogram packs for export markets such as the Democratic Republic of Congo and the foodservice segment, but now it is investing in gutting, scaling, filleting, and consumer packaging for formal trade across the region, he said.
Most of its tilapia is currently sold as fresh – that’s where it has the competitive advantage over smaller, frozen, glazed fish imported from Asia – but there is a niche for higher-margin processed products, he feels.
Another good opportunity to sell the extra volumes lies across Zambia’s borders.
That country, Yalelo says, is a 180,000t-per-year market, while the region – the Congo, Kenya, Malawi, South Africa, and more – is much larger.
He specified that exports and packaged, processed products should represent an increased revenue share over time, naming supermarkets in South Africa and further wholesale in the Congo as high priorities.
“Zambia will naturally continue to be Yalelo Zambia’s primary market, but there are some great opportunities in cities in other countries to attract higher-margin sales,” said Taylor.
“Prices in neighboring countries can be materially higher, more than enough to justify the additional transport costs.”
In each of those markets, as in Zambia, Yalelo will look to sell larger, higher-quality fish, attracting a price premium relative to Asian imports.
“We do charge a quality premium relative to Asian imports which are smaller-sized with a high glaze, but we’ve found this is a premium our customers are happy to pay.
Brand loyalty is high, even in these very price-sensitive markets. Our current retail pricing is $2.10/kg, relative to imported product at $1.70.
Lake Kariba, of course, is enormous. Africa’s “inland sea” is 223 kilometers long and 40km wide at its extremes, and has a surface area of 5,580 square kilometers.
The Netherlands’ Wageningen University is in the process of establishing the lake’s tilapia farming capacity, but internal analysis suggests the figure could come out at well in excess of 100,000t, said Taylor.
“Assuming the carrying capacity of the lake isn’t a near-term limiting factor in aquaculture — and the addressable regional market is upwards of 500,000t and growing — what might be?
For an individual farm, biosecurity and health management are important considerations, along with diminishing economies of scale above a certain point. Eventually, multiple locations are required, both from a production risk management and distribution perspective.”
For Yalelo, the limiting factor, for now, is managing growth.
“Yalelo Zambia has the same challenges as would be experienced by rapidly growing companies anywhere in the world, plus the added challenges of Africa.
Issues such as increasing headcount while maintaining the company’s culture; more refined delegation of authority across diverse functions; standardization of processes without stifling innovation; and ensuring management information systems are suitable at 2x and 10x today’s complexity of activity,” he said.
“This is the case across each of our group companies, and we’re fortunate to have a deep team of senior professionals leading our development. In this environment, having the right team with a clear direction is 90% of the answer – everything else follows from there.”
The only other major aquaculture operation on the lake is Lake Harvest, which has operations both in Zambia and Zimbabwe, but the majority in the latter.
Its website states it produces 9,000t per year.
There’s also very little smallholder farming on the lake, Taylor said, despite Yalelo trying to encourage it.
“Unfortunately, it’s not really taken off on Lake Kariba. Through our company Horizon Aquaculture we are trying to make fish farming more accessible to smallholder farmers by providing feed, fingerlings, and equipment in a one-stop-shop concept,” he said.