Angel Seafood scales up oyster production as retail demand grows

Australia’s largest producer of Pacific oysters Angel Seafood (ASX: AS1) is boosting its production capacity as retail demand for its organic-certified and sustainable oysters continues to grow.

The company today announced it has acquired 6.25 hectares (62,500sq m) of “premium” water leases on South Australia’s Eyre Peninsula through leasing arrangements, with the ability to increase oyster production capacity “immediately” from 10 million to 12 million oysters per annum.

In addition, Angel has begun trials of a new bio-dynamic oyster farming method known as “FlipFarm” in its highly productive Coffin Bay waters at the southern end of the peninsula. The farming system has previously been demonstrated in New Zealand to increase oyster yields while requiring less labour.

Today’s news aligns with Angel’s three-pillar growth strategy to increase production and profitability through scale, innovation and price.

New acquisitions

The first pillar of Angel’s growth strategy is to increase scale through acquisitions with the aim of doubling Eyre Peninsula production capacity to 20 million oysters per annum.

The latest acquisitions – comprised of 4.25 hectares (42,500sq m) in Coffin Bay and 2 hectares (20,000sq m) in Cowell – are regarded as a strong addition to the company’s asset portfolio due to their “prime location”. Furthermore, almost half of the Coffin Bay water leases come with existing good quality infrastructure, meaning production capacity can grow immediately.

Angel founder and chief executive officer Zac Halman said the company is excited to expand its capacity under its multi-bay strategy.

“With two hectares of the new leases in Coffin Bay having infrastructure in place, this means that we can get straight to work and produce more Angel oysters from the start of 2021, while undeveloped leases are earmarked to be rolled out for our flip-farming trials,” he said.

The leases will be held under agreements with terms ranging from six to 15 years at a total cost of about $138,000 per annum. The lease costs will be funded through operating cash flows and the deals include options to buy at the end of the lease periods.

FlipFarm trials

In line with Angel’s aim to grow productivity through innovation, it is trialling the FlipFarm system, a semi-automated basket flipping process.

The technology is expected to increase productivity and lower operating costs, thus generating an attractive rate of return and short capital payback period.

According to Angel, this will be the first time the modern farming method has been trialled on the Eyre Peninsula.

“This modern bio-dynamic farming method has the potential to be a game changer for Angel’s productivity and perfectly aligns with Angel’s values of organic and sustainable oyster farming,” Mr Halman said.

“This method has been successful in international oyster farming, and we hope the broader industry can also benefit from our trials through more efficient farming methods and ultimate environmental care.”

Price improvements

Angel said its third strategic objective is to focus on premium brand positioning to improve its pricing.

The company has achieved strong traction with major retailers in the last month, selling into most key retail chains and benefitting from recent marketing campaigns including being featured in Costco’s Christmas catalogue and Drakes’ weekly catalogue.

Mr Halman said this is “testament to Angel’s growing recognition of its capability to guarantee supply of organic, sustainable and high-quality oysters from pristine waters in South Australia”.

The impact of the COVID-19 pandemic on the hospitality industry, particularly the extended period of restaurant closures, led Angel to reposition itself in the “relatively untapped” retail market.

As it turns out, this was a substantial growth opportunity for the company, which reported a record revenue of $5 million for the 2020 fiscal year despite the pandemic’s ensuing challenges.

“The combination of strong momentum in the retail channel and increasing patronage in the restaurant channel following the easing of COVID-19 restrictions, means Angel is heading into the peak Christmas period in a strong position,” the company said in today’s announcement.

In a separate investor presentation also released today, Angel said further opportunity exists to increase penetration with retailers since less than 20% of major retail stores currently sell oysters.

Mainly “bistro-size” oysters are sold through retailers, complementing and balancing demand for larger sized oysters by the restaurant channel and export markets.