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Improving Aquaculture production with bioactives from olive oil processing by-products.

Periodic Reporting for period 1 - AQUOLIVE (Improving Aquaculture production with bioactives from olive oil processing by-products.)

Reporting period: 2017-02-01 to 2017-06-30

AQUOLIVE PROJECT: Summary of the action context

WHO WE ARE? Natac Biotech S.L. (hereafter called NATAC) is the R&D division of a group of 8 companies (Natac Group S.L.) with headquarters in Spain and international presence in LATAM and the USA. We are a leading biotechnology company specialized in the extraction of high added value bioactive ingredients from agriculture products to serve the needs of different industrial sectors. Since the company foundations and to date, we can be proud of having 7 international patents, +20 countries importing our extracts, +50% international sales and +1.500 tonnes production capacity in our own factories. The success achieved so far ca be ascribed to our rapid entrance and consolidation in the pharma, cosmetic and human nutrition markets. In our effort to continue innovating and expanding, the AQUOLIVE project was initiated a couple of years ago and it has become the most strategic project for us, as a way to become also a leading player of the animal nutrition market.

WHAT IS THE AQUOLIVE PROJECT ABOUT? The AQUOLIVE project is aimed at offering the aquaculture sector a feeding solution based on our patented formulation of bioactive products obtained from olive oil production biomass (isolation and processing method also patented). This solution will help Fish farmers to increase their productivity and profitability, while reducing the aquaculture environmental impact in line with current industry needs.

WHY IS AQUOLIVE A HUGE BUSSINESS OPPORTUNITY? Wild fish stocks are being removed faster than they can replenish themselves, and populations are dwindling meanwhile world population continues to growth and demand more fish meat. By 2030 it will be necessary to increase by 46.4 M metric tons fish production to supply population needs. Fish farming could be a viable alternative but unfortunately it comes with its own challenges.
The main challenge is triggered by the critical need for improving fish meat availability, which directly affects aquaculture that should double its production by 2050. At the same time, the area available for aquaculture is facing competing uses from agriculture, tourism, recreational and residential development. With land being a major factor limiting aquaculture growth, employing higher stocking densities and thereby intensification of culture practices will become more prevalent. Here is where fish feeding becomes critical.
Fish feed is important for aquaculture production because it usually constitutes over 50% of the production costs and it has a significant impact on the quality, safety and nutritional value of farmed fish. However, certain aspects of feed can cause environmental impacts such as nutrient runoff and overexploitation of resources. Paradoxically, the most extensively used feeding products come from marine resources and consist of fishmeal and fish oil as an additive, as this combination provide the necessary proteins and complements to achieve optimal growth. However, since production from wild fisheries is stagnating and competition for fishmeal and fish oil by other sectors is increasing, fishmeal and fish oil are therefore only available in limited quantities. It is estimated that the amount of fish used in feed to produce one unit of output have to be reduced by at least 50% from current levels for aquaculture to be sustainable in 2050.

HOW DO WE INTEND TO EMBRACE THIS BUSSINESS OPPORTUNITY? The solution proposed in the AQUOLIVE project to increase fish farming productivity is a patented feed additive produced from of olive oil production and processing biomass (alperujo).
In previous studies performed by NATAC in salmon aquaculture, we have demonstrated that AQUOLIVE improve FCR (food conversion ratio) by 10%, besides reducing the amount of feeding products by 9% and increased premium quality meat ratio by 8%. Thanks to these observations, we estimate significant feeding costs savings and increase in meat quality (higher market value of farmed fish), thus resulting in an increase of fish farmers’ profitability by more than 15%, which will make our clients willing to pay for AQUOLIVE due to its proved cost-efficiency.
Moreover, as our product will reduce the use of marine resources in fish farming and it is generated from agriculture by-products, it will not have a negative environmental impact by overexploitation of natural resources, complying with the EC recommendations for a Sustainable Aquaculture. This will make AQUOLIVE also attractive for other key stakeholders. Therefore, we see in the AQUOLIVE project a clear investment opportunity, in which we seek entering the fast-growing aquaculture feeding market (estimated to reach €123 Billion by 2019).

AQUOLIVE: Objectives of the action

The ultimate objective of the Phase 1 project was to assess the feasibility of our business innovation project, with a significant focus on the commercial and technical feasibility, in order to go to the next stages of our innovative AQUOLIVE project under the minimum risk scenario.
Therefore, the specific objectives of the action were as follow:

- To perform an in-depth market study in order to select the most important high value cultivated fish species as those to include in the AQUOLIVE project studies.
- To define the most optimal channels to reach the widest number of clients in the aquaculture sector at international level.
- To search for the right partners, we need to include in the AQUOLIVE project for performing the trials and studies with the selected species.
- To analyse the key aspects we should consider for industrializing the production method withy the minimum costs and the highest quality.
T- o prepare and update 5-year business plan for the commercial exploitation of the AQUOLIVE product.
In the course of Phase 1, the first step performed was the assessment of the feasibility of the project focusing on the commercial and technical points of views. The work accomplished and principal achievements are:

- COMMERCIAL FEASIBILITY ASSESSMENT: The work performed during the action and the main achievements have been the following:

1) Execute an in deep market study to get the information needed for the success of our business plan. The market study performed has covered an extensive study of the aquaculture industry in different regions, the analysis of the aquafeed market and the market for feed additives. Based on the market study, we have defined our preferential strategy for commercialization of AQUOLIVE.

2) We have determined the boundaries and possibilities of different go-to-market strategies. We have analyzed two possible strategies to introduce AQUOLIVE product in the market:
- Direct Market Access Strategy (DMA). While using the DMA strategy the product will be presented to big Feed Producing companies in order to improve AQUOLIVE brand prestige achieving higher profit margins, while setting agreements directly with them and avoiding intermediaries in the process.
- Non-Direct Market Access Strategy (NDMA). Introducing AQUOLIVE as part of the formulation of Feed Additive producers, with a view to improve desired health or growth parameters.

- TECHNICAL FEASIBILITY ASSESSMENT: The work performed during the action and the main achievements have been the following:

1) Identification of the right partners in Europe and the rest of the world, to perform the trials and studies to prove the AQUOLIVE efficacy in the selected species. The partners will be mainly fish farmer’s experts in the geographic regions of interest shown in the Market Study, who eventually would become our first customers, right after the project.

2) Focus on the features to scale-up the patented process for AQUOLIVE industrialization. The internal production has to be increased till 1500 tonnes/year with the minimum costs.

- FINANCIAL FEASIBILITY ASSESSMENT: The financial feasibility study was planned for this Phase 1 as a way to analyse the funding requirements for the AQUOLIVE project and to determine the financial barriers as well as determine the project profitability (Return of Investment, R.O.I.). The work performed during the action has been the following:

- Calculation of the financing needs to conclude the AQUOLIVE project: All the funding requirements to reach the go to market stage.
- P&L and Cash flow projections for the following 5 years of AQUOLIVE commercialization. The projections are developed under three different scenarios.
AQUOLIVE appears in the market place as a good option to cope with the world population demand, becoming an essential tool to secure sufficient supply of fish meat. As fish demand is estimated to increase a 30% by 2030 aquaculture production will need to increase by 50% from the present level by 2050, it is estimated that the amount of fish used in feed has to be reduced by at least 50% from current levels for aquaculture to be sustainable in 2050. After looking at this perspective, it is easy to understand why focusing on making aquaculture sustainable has become a major opportunity to many companies in the world. Natac Biotech has embraced this opportunity and the successfully commercialization of AQUOLIVE product is expected as another step forward to fulfil the aquaculture necessities during the next decades.
Through the AQUOLIVE project, we seek positioning our company as one of the leader’s players in the Aquaculture industry, which is expected to reach €209 billion by 2020, representing an interesting perspective for us. In relation to the expected impact of the AQUOLIVE project, under a societal & environmental point of view it might be huge, because the AQUOLIVE product is meant to improve the quality of the farmed fishes while decreasing the food needed to reach this point. Improving the health parameters and therefore the immune system of fishes will help to decrease the usage of antimicrobial chemicals and antibiotics. This will contribute to compliance with current and future EU regulations in the use of hazardous chemicals in fish farming, like for example the most recent prohibition of Ethoxyquin as of June 2017.
This decrease in the use of antibiotics will impact in the general welfare of the fish and improve the quality of our society feeding parameters, giving to the farmers the possibility to buy non-expensive, seafood products grown in a healthier way.
The expected impact of the AQUOLIVE Project under our company’s growth perspective is also enormous, as the successful achievement of the project objectives will make us play an important role in the aquaculture market. Besides, the development of our technical capabilities will enlarge our production capacity, necessary to fulfil our future commercial goals.