South Australia-based Angel Seafood (ASX: AS1) is an example of a company that is able to flex with a changing sales environment, with the COVID-19 pandemic opening up a “significant” growth opportunity in the retail market for its organic and sustainably produced oysters.
As COVID-19 swept the world and Australia, Angel found its traditional oyster trading channels stunted and reduced demand from its restaurant customers.
The company used this unique situation to test retail waters, where it found an insatiable appetite for its oysters among consumers.
Angel founder and chief executive officer Zac Halman told Small Caps the slowdown in its restaurant market due to COVID-19 had actually provided the company with a “significant opportunity”.
He said the situation paved the way for Angel to fast-track its plans to gain traction and build sales in the retail space.
“To shore up demand, Angel made the strategic decision to pivot from traditional trading channels to supermarkets and retailers, recently cementing relationships with Costco and Drake’s,” Mr Halman explained.
To forge its penetration further in this space, Angel has already established relationships with national supermarkets Woolworths and Coles.
The company’s oysters were also recently featured in CostCo’s and South Australia-based Drake’s December catalogues ahead of the peak Christmas season.
“Our pacific oysters have been particularly popular, providing faster growth cycles, larger oyster size and low bio risk which work favourably for supermarkets which are looking for a guaranteed continuous supply of high-quality stock,” Mr Halman pointed out.
Angel is already the largest sustainable and organic-certified pacific oyster producer in the Southern Hemisphere. It also one of only two sustainable and organic oyster producers worldwide.
Shorter growth cycle
Prior to Angel’s retail success, large supermarkets had struggled to source oysters due to a requirement for uniform quality and scale across all stores.
Unlike other producers, Angel’s unique multi-bay strategy enables it to generate high-quality oysters at a faster rate.
According to Angel, the growth cycle of pacific oysters is stronger and quicker – making it easier to predictably supply retail avenues.
To boost its capability even more in this area, Angel locked-in a further 6 hectares of water leases within the Eyre Peninsula.
The company estimates this will increase oyster production from 10 million a year to 12 million.
Additionally, the company’s Haslam facility can be expanded to enhance production.
Eyeing year-round sales
To further increase production, Angel is also trialling summer oysters, which will build stock and potentially enable year-round sales to retail channels.
The summer oysters are expected to extend Angel’s selling season by two months and are predicted to potentially lead to 15% more sales each year.
Angel is using summer oysters because regular oysters are usually gritty and inedible during the November to March spawning period.
“If [this] trial is successful, we will have [oysters] available for sale throughout the entire year, which will help further cement our relationships in this channel, and grow our reputation for supplying high-quality, organic seafood,” Mr Halman said.
As well as the summer oyster trial, Angel is evaluating a new bio-dynamic oyster production technique known as FlipFarm.
This trial is underway in Angel’s Coffin Bay waters and is anticipated to increase productivity while lowering operating costs.
Angel noted this was the first time FlipFarming will be used in the Eyre Peninsula.
“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,” Mr Halman added.
Angel’s strategy is to double its Eyre Peninsula oyster production to 20 million each year.
Another record quarter in Angel’s sights
With the additional demand from the retail sector, combined with restaurants reopening and traditional channels, Angel is heading into a very busy Christmas and New Year period which is a key time for oyster consumption.
To make the most of this demand, Mr Halman said in the lead up, the company had expanded its operations and implemented growth initiatives such as those mentioned above.
During the September 2020 quarter, Angel sold 2.7 million oysters which was an all-time record and 78% higher than the September 2019 quarter.
The company’s retail strategy underpinned $408,000 in positive operating cash flow for Angel during the period.
Shoring up Angel’s strategy is its three-pillar plan to double production, while increasing productivity and cutting costs, which will ultimately generate an improved price per oyster.
In addition to building its retail presence, Angel is targeting higher export volumes to South East Asia.