Coming Out of their Shells
Newly hired as president a month earlier to turn around the financially struggling Kona Bay Marine Resources, Brian Goldstein stood in the pouring rain in Kona in the wee hours of the morning in December 2002, helping the staff race against time to load live shrimp broodstock for shipment. Soaked to the skin and wearing a plastic garbage bag as makeshift raingear, the former software executive from Silicon Valley asked himself, “What am I doing here?”
By December 2004, Kona Bay Marine Resources had been named the Governor’s Exporter of the Year for doubling its sales each year for two years and exporting more than 90 percent of its product sales. What’s even more amazing is that Kona Bay had only been exporting since 2003.
Founded in 1996 by University of Hawaii professor Jaw Kai Wang, a renowned aquaculture engineering expert, Kona Bay today supplies a global market as a leading producer of certified disease-free hard-clam seed, as well as specific pathogen free (SPF) shrimp broodstock. The company is among the state’s leading aquaculture enterprises, which have boosted Hawaii’s aquaculture sales to $27.65 million in 2003, a phenomenal 10 percent increase over $25.18 million in 2002 and the largest year-to-year percentage increase of all Hawaii’s ag products.
Kona Bay’s remarkable turnaround may be a textbook case of taking advantage of technology, tactics and timing, says Goldstein, reflecting on his company’s achieving profitability last year, with sales of about $1 million.
The company is the patent holder for a proprietary production system, developed by Wang and based on the symbiotic relationship between shrimp and clam seed stocks. “It’s based on a simple ecosystem: shrimp effluence and sunlight make algae. Clams eat algae,” explains Goldstein. This puts Kona Bay way ahead of its competitors, with big savings on clean-water use and discharge cleanup.
Between the two species, Goldstein saw greater business development opportunities with shrimp, which had a larger international market, fetched higher prices and was dominated by a single species. In 2002, he moved Kona Bay’s primary marketing focus from seed clam, a highly fragmented market with several regionalized species, to SPF shrimp broodstock (worth $15 to $25 each) and shifted production away from less profitable food shrimp ($10 per lb. market price). Today, seed-clam stock and shrimp broodstock each account for about half of the company’s sales, he says. Kona Bay plans to expand seed production of other bivalve species, particularly Kumamoto Oysters, for a poly-culture operation, to mitigate market risk.
The shift to shrimp was also well-timed. About four years ago, a genetically based disease afflicted Black Tiger, the dominant species for shrimp worldwide, and threatened the survival of the shrimp industry, the world’s top seafood, valued at $10 billion annually. Kona Bay saw an opportunity to aggressively market the Pacific White Shrimp broodstock, a specific pathogen-free shrimp breed developed in Hawaii by the Oceanic Institute in the mid-1990s. The company rode the massive industry shift from Black Tiger to Pacific White over the past three years, which saw 100 percent of China’s shrimp growers and 90 percent of Thailand’s switch to Pacific White. Today, Kona Bay is a major shrimp broodstock producer for Indonesia, Thailand, China, Vietnam and Taiwan. It holds one of only three licenses for broodstock granted by Indonesia, the world’s largest producer of food shrimp. Goldstein estimates Kona Bay holds 30 percent to 40 percent of the market for the world’s shrimp broodstock.
The company closed on $1.5 million in financing in February and plans to double its production capacity and triple its acreage at the state-run Natural Energy Laboratory of Hawaii Authority (NELHA) in Keahole, Kona, this year.
“There is no place more deserving of success in aquaculture than Hawaii,” says Goldstein, who has raised more than $1 million in venture capital for Kona Bay, about half from new investors. “Shrimp is already a ‘Hawaii Brand’ in the rest of the world,” he says, noting that shrimp growers in Asia tout that their best products are based on Hawaii Shrimp. “It’s become [Hawaii’s] first global agricultural brand since Kona Coffee.”