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Ganesh S. Nagarsekar

@gsninvest
2 years ago ~2310 views
The economics of shrimp feed - the mastery behind your macchi!

Unlike most industries in India, the shrimp feed market is highly organized, with organized players capturing 80% of the
market.

Given that most of the aquaculture shrimp are exported (India is the #2 exporter of shrimp in the world), there is a strong emphasis on quality of the shrimp, and consequently the feed.

In this extremely organized competitive market, the market leader in shrimp feed stands out with a 48% market share. How does it manage this? - Let's find out!

1. Best in class FCR: One of the major needle movers in the feed business is FCR(feed conversion ratio) - i.e. How many grams of feed you need for a 1gm growth in weight of the shrimp. Given the scale of the operations, a small improvement here can have a massive impact on the farmer's profitability. The market leader in India stands out here with an FCR of <1.2x vs competition that is still at 1.5x+

Continued in comments.
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Ganesh S. Nagarsekar

@gsninvest
2 years ago ~70 views
2. High switching risk: Feed faces a natural stickiness because switching to another feed risk the health, survival rates, and size of the farmer's shrimp. The leader in the Indian market further strengthens on this advantage with their Technical after sales service(TASS) team comprising of fisheries graduates that aid farmers with optimizing their production.

3. Move to integrated: Spotting a natural pain point in its customers of subpar shrimp seed, the firm has moved into the hatchery business to provide high quality shrimp (40cr larvae per year) seeds to farmers. The firm is also present in the shrimp processing segment thereby positioning itself to get optimal control over the entire shrimp supply chain.

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Ganesh S. Nagarsekar

@gsninvest
2 years ago ~410 views
4. Strategic partnerships: Given the importance of R&D and the latest developments in the business - the firm struck a financial and technical partnerships with one of the leading Global seed food companies across its feed and processed foods divisions, which gives it access to the leading edge developments in the feed & processing business.

The result of all of this is not only a sticky and high market share, but also better credit terms & margins! While most competitors offer a 30-45 day credit period, the market leader collects in cash - and the higher PCR and scale give the firm better margins, all of which translates into stronger returns for the leader.

With growing competition from international markets, especially Ecuador, Vietnam and Thailand - how do you think Indian shrimp farmers will go about maintaining and enhancing competitiveness - and how would that impact other players on the value chain?
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