Reference no: EM132253911

The grey North Sea shrimps are transferred from the fishing boat to the professional fish market where they are sold to Belgian, Dutch, German and Danish fish processing companies. A fishing boat catches on average 1.000 kilo of shrimps a day. The fresh catch is sold on the fish market to seafood companies. The shrimps are loaded in trucks for transportation to Morocco. Transport occurs by road and by sea to cross over from Spain (Tarifa) to Morocco (Tanger). The distance between both port cities is about 40km. A regular truck for refrigerated transport has a maximum load capacity of 14.500 kg. These trucks are diesel powered. A loaded truck consumes 36 l of fuel per 100 km. An empty truck consumes 27 l of fuel per 100 km. Trucks are always fully loaded for transport in order to be cost efficient.

After the shelling process, the shrimps return back to the country of origin and lost two third of their weight and volume. Heads and tails are forbidden to return to the European Union as these parts are processed abroad. It is treated as waste in Morocco. The hand-peeled shrimps return by truck. This whole process of transport, shelling included, to and from Morocco lasts approximately six days. This journey takes about 2.700 km. Once back ‘home’, the shrimps are packed and frozen or cooled. The fish processing companies sell the seafood to national and international distributors. Finally, the shrimps are consumed. The total European consumption amounts to 35.000 tons annually. 54% is for the Belgian market.

The journey of a shrimp takes about 10 days from being caught in the sea to the supermarket. A regular supermarket chain asks for deliveries of at least 13 tons in packages of 100, 200 and 500 grams. In order to guarantee the quality and ‘freshness’ of the product, companies add preservatives to the shrimps such as benzoic acid, also known as the E-numbers E210, E211, E212, and E213. With the help of benzoic acid, these shrimps remain consumable for six weeks.

A local supply chain

If Footstep would engage in a local supply chain, the journey of a shrimp would be very different. Footstep assumes that processing an annual volume of 35 tons would be feasible. The fresh shrimps are bought at the fish market and loaded in a refrigerated van for transportation to Footstep’s factory in Bruges. The van’s maximum load capacity is 3.400 kg. This diesel fueled transport uses 14 l per 100 km when loaded. An empty van consumes 11 l diesel per 100 km. After arrival in the factory, the shrimps should immediately go to a specialized cold room where they remain until the peeling process starts.

Local employees peel the shrimps in a factory building that has walls with an insulated panel system. These walls enable a constant temperature between -25°C and +40 °C. Shrimps, if not frozen, require a temperature between 0°C and 4°C. Once the shrimps are peeled, they transfer to the packing machine which produces packages of 250 and 500 grams. These packages return to the cold rooms before being delivered to the distributors who collect the hand peeled shrimps directly in the factory. Next, these distributors deliver the shrimps to the local restaurants and fish merchants. Their vans also include other fish products that were ordered by the customers. As Footstep aims to keep the product ‘fresh’, no preservatives would be used. A package of processed shrimps should therefore be consumed within five days. The journey of a shrimp, following a local supply chain, takes about three days from being caught in the sea to the restaurant or fish merchant. Overall, the shrimps are transported over a maximum of 25 km. It takes about 25 km from fish market to factory.

Setting up the business case

Geert explains: “As we now have detailed information about both supply chains, we should check the feasibility of our business model. We need to figure out whether we can create a viable business with our delicious North Sea shrimps. I did some research myself and I found that labor costs in Morocco equal to 9 euros per kilo processed shrimps. In contrast, labor costs at our company would be around 16 euros per kilo. Because we receive governmental subsidies for our social enterprise, labor costs will not be higher than 16 euros per kilo. I also had a call with a leading North Sea shrimp supplier. They explained that shrimps of different sizes can be bought. Small shrimps are less expensive than bigger shrimps. As the Gaussian distribution would show, a minor quantity of the fished shrimps will be big compared to the others. Small unpeeled shrimps cost 5 euros per kilo. These shrimps are sold in the supermarket at 25 euros, after peeling. Big unpeeled shrimps cost 7 euros per kilo. Prices are around 50 euros per kilo after processing.” Whereas supermarket shrimps that follow an international supply chain are typically small, Footstep is in favor of using high-quality big shrimps for its rather luxury market segment. Footstep aims to set its selling price at 65 euros per kilo.

Footstep owns a building that might be suitable for the shrimp business. In the past, this infrastructure was used for chocolate production. In order to fulfill the required temperature needs for chocolate production, part of the building already contains Isocab panels. The costs to get started include the Isocab panels for the full building, air conditioning, packaging machinery, stainless steel tables and chairs for the employees.

As hygiene is crucial in the food industry, the workspace has to be cleaned daily. Work clothes should also be washed on a daily basis. The largest cost will probably be electricity consumption. Electricity use in the local shrimp processing business is on average 0,597 kWh/kg. In case of an international supply chain, electricity use equals to an average of 0,728 kWh/kg abroad and 0,300 kWh/kg locally. This month, electricity costs 0,18 euros per kWh. This cost is included in the overhead costs. In sum, overhead is assumed to be 8,45 euros per kilo processed shrimps. Package involves 2,40 euros per kilo processed shrimps. Footstep targets to deliver at least 10 tons peeled shrimps per year.

Footstep has a tradition of delivering both high service and product quality to our customers. As a for- profit social enterprise, Footstep has an important social role too. Footstep focuses on both business and social goals. “With all this information, we can develop our business case and take a decision about our business idea” Geert explains.

1. Would it be feasible to expand the idea of creating local shrimp supply chains?