t~IKt;ULATING COPY NJMSC-T-95-003 C3

E-192 LOAN COPY ONLY RUTGERS COOPERATIVE ·EXTENSION

NEW JERSEY AGRICULTURAL ExPERIMENT STATION

Model Business Development and Marketing Plan for Hydrolysate

Contract No. ST93.203-5630-06 July 1993 - June 1995

Report to National Coastal Resources and Development Institute 528 SW Mill Street, Suite 220 PO Box 751 Portland, Oregon 97207

Nona R. Henderson Marketing Extension Specialist Rutgers Cooperative Extension Blake Hall, Cook College, Rutgers University New Brunswick, New Jersey 08903-0231

Dan B. Strombom Agricultural & Resource Management Agent Rutgers Cooperative Extension of Cape May County 4 Moore Road Cape May Court House, New Jersey 08210

li£SIAIE UIIIIER5IIY CFI'I!N SR!E't RUTGERS

June 1995 ACKNOWLEDGEMENTS

This publication resulted from research sponsored by the National Coastal Resources Institute, pursuant to NOAA contract number ST93.203-5630-06; NOAA Office of Sea Grant, Department of Commerce, pursuant to grant number NA89AA-D-SG057 (Project# A/A-1); and the I993- I 994 Special Initiative in Solid Waste Management of the New Jersey Agricultural Experiment Station. The views expressed herein are those of the authors and do not necessarily reflect the views of NOAA or any of its sub-agencies. The U.S. government is authorized to produce and distribute reprints for governmental purpose notwithstanding any copyright notation that may appear herein: New Jersey Sea Grant Publication No.NJSG-95-322.

The authors gratefully acknowledge the contributions of our industry cooperators: Andrew Axelsson and Kirsten Axelsson of Axelsson & Johnson Fish Company and BEA, Inc., Cape May, New Jersey, and the research assistance of Sandy Shiffner and Marina Collins, graduate students, Graduate School of Management, Rutgers University.

Cooperating agencies are Rutgers, The State University of New Jersey, U.S. Department of , U.S. Department of Commerce, NOAA Sea Grant, New Jersey Sea Grant College Program, New Jersey Marine Sciences Consortium, and the Cape May County Board of Chosen Freeholders.

Rutgers Cooperative Extension provides information and educational services to all people without regard to race, sex, disability, bandicap, color, age or national origin. Rutgers Cooperative Extension is an Equal Opportunity Employer. TABLE OF CONTENTS

Page

I. INTRODUCTION I

II. SITUATION AUDIT 2

III. INTERNAL ANALYSIS 4

IV. ENVIRONMENTAL ANALYSIS 6 v. COMPETITOR ANALYSIS 7

VI. CUSTOMER ANALYSIS 9

VII. BUSINESS STRATEGY 11

VIII. TECHNOLOGY STRATEGY 13

IX. DEVELOPMENT STRATEGY 14

X. BENEFITS 16

XI. REFERENCES 17

X. TABLES 19 MODEL BUSINESS DEVELOPMENT AND MARKETING PLAN FOR FERTILIZER

I. INTRODUCTION

Research conducted during the past two decades has indicated that seafood processing wastes can be utilized for a variety products (e.g., Keller 1990, Otwell 1981, and Seafood Management Corporation 1986). One such product is liquid fish fertilizer (Stuiber et al 1986, Goldhor 1988). Research has demonstrated that liquid fish fertilizer can be used effectively in commercial production of a variety of agricultural and horticultural (Aung and Flick 1980, Aung et al 1981, Wyatt and McGouty 1990, DeMoranville 1988, 1989, & 1990, and Henderson and Strombom 1995a & b). There are a variety of fish-based on the market, and the expansion of fish fertilizer sales could help seafood processors resolve the costly problem faced of disposing of processing residuals (Fort Point Associates. 1986, Goldhor and Regenstein 1991, Henderson and Strombom 1995a).

BEA,Inc. of Cape May, New Jersey, a subsidiary of Axelsson and Johnson Fish Company, was formed in the fall of 1994 to manufacture and market Sea Sprout, an organic liquid fertilizer. This report formulates business, technology and development strategies to improve BEA's competitive position in agricultural and consumer fertilizer markets. These strategies are based upon a situation audit and customer, internal, competitive and environmental analyses. This plan may serve as a model business development and marketing plan for other seafood processors in other parts of the country in establishing a fish hydrolysate production facility and developing markets for their products.

Port of Cape May & Waste Disposal Problem

The port of Cape May/Wildwood is the largest port in New Jersey and the Mid-Atlantic Region. Annually, 95 million pounds of fish and shellfish valued at $40 million are landed in the port (NMFS 1992). Solid waste disposal is a major problem for the seafood processing industry in New England and the Mid-Atlantic Region (Fort Point Associates 1986), and is a major impediment to the expansion of New Jersey seafood processing operations (Henderson 1992).

Solid wastes from seafood processing are typically disposed of in landfills. Landfill tipping fees in southern New Jersey counties, where seafood processing is concentrated, have increased dramatically in recent years adding significantly to operating costs (Henderson and Strombom 1992). Seafood processing waste is excluded from current county food recycling programs, and the singular landfill in Cape May County is scheduled to be closed in the next few years.

Fisb Hydrolysate

Fish hydrolysate, an existing product, is produced through enzymatic digestion of seafood processing residuals. The resulting liquid contains essential nutrients (nitrogen,phosphorus and potassium) and a variety of trace elements. Various product applications have been identified including use as a fertilizer.

I ll. SITUATION AUDIT

Axelsson & Johnson Fish Company

Axelsson and Johnson Fish Company (A&J) is a highly diversified seafood company located in the port of Cape May, New Jersey. A&J owns and operates a commercial dock where commercial fishermen land their catch. The company has processing lines for heading, gutting, filleting, and steaking of finfish, and freezing and cold storage capacity. A&J sells fresh and frozen finfish and shellfish wholesale hoth domestically and internationally. A&J also has a seafood market which sells fresh seafood at retail and prepared seafood on a takeout basis. In 1994, the kitchen and outside dining deck of the retail establishment were expanded to capitalize on the large summer season tourists in Cape May.

A&J began research and development of fish hydrolysate in 1990 as a means of reducing its solid waste disposal problem. A&J established a pilot-scale hydrolysate in 1992 and experimented with various formulations. A&J formed BEA, Inc. in the fall of 1994 to manufacture and market Sea Sprout.

Product

BEA, Inc. has selected the brand name Sea Sprout to convey both the marine origins of its product and its potential use to enhance plant growth. The Sea Sprout formulation has been standardized, field tested on several crops, and certified by the Northeast Organic Farming Association of New Jersey (NOFA-NJ) as an organic fertilizer. Like other organic fertilizers, Sea Sprout has slow release nutrient characteristics which provides sustained feeding and reduced stress for . In comparison to inorganic fertilizers, it is non-burning to plants and creates no harmful run-off as chemical fertilizers can. It is a liquid as compared to granular or solid fertilizer. Because of its liquid form and oil content, it can be used for foliar feeding, a method of applying fertilizer to the leaves of plants. The Sea Sprout formulation has a 2-4-2 nitrogen­ phosphorus-potassium (NPK) analysis which provides a balance of nutrients to a variety of plants.

A 32-ounce container made from non-reactive plastic has been selected. It has a self-measuring device which reduces direct contact by the user with the fertilizer. Accelerated shelflife studies indicate that Sea Sprout is shelf stable for up to 2 years if stored non-diluted within this container. A label has been designed which meets New Jersey fertilizer labeling requirements, contains the nutrient composition of the fertilizer, provides application recommendations; and contains a UPC bar code.

Distribution

In 1994, BEA's fish hydrolysate was produced and packaged in 30 gallon drums for commercial sale to production agriculture. Two NOFA-NJ certified organic farmers in Cape May County used Sea Sprout during the 1994 growing season. Additionally in 1994, I and 5 gallon containers of Sea Sprout were sold to consumers who inquired about the product after reading

2 about it in the Organic News. As of January 1, 1995, Sea Sprout is available in a 32-ounce container and can be ordered directly from BEA via "1-800-Sea-Sprt.'

Promotion

To date, BEA's promotion of Sea Sprout has been limited. A logo, which includes the brand name, the company name, the words "Natural Organic," and an image of a fish jumping out of the sea, has been developed. A fact sheet which includes product advantages, fertilizer analysis, usage directions, and order information is available for distribution to consumers.

An advertisement and article about BEA and Sea Sprout was published in the 1994 spring and summer issues, respectively, of Organic News, the newsletter of NOFA-NJ (Henderson and Strombom 1994a&b). These articles stimulated interest among home gardeners, and dozens of orders were ge_nerated.

A commercial booth was displayed at the 1994 NOFA-NJ Fair held in Pennington, New Jersey in September. The NOFA-NJ fair is the largest public education event related to organic held in New Jersey. Over 3,000 people attended in 1994. BEA provided 500 4-ounce free samples and the Sea Sprout fact sheet to visitors.

3 ill. IN1ERNAL ANALYSIS

Strengths and Distinctive Competencies

BEA, Inc. and its liquid fish fertilizer, Sea Sprout, have numerous strengths. BEA's parent company, Axelsson & Johnson Fish Company, is a long-established, diversified, and stable company. BEA has reliable access to a supply of waste not only from the processing operations of Axelsson & Johnson, but from other seafood processors in Cape May/Wildwood and other ports. BEA has low production overhead; the hydrolysate facility is in a small room of the A&J retail store, and the man who runs the equipment is reassigned part­ time on an "as needed basis" from other A&J responsibilities. Sea Sprout is "certified organic" by the National Organic Farming Association of New Jersey (NOFA-NJ). It, therefore, meets the "organic" specifications required by certified organic farmers in New Jersey as well as home gardeners who choose to organically. The self-measuring, non-reactive plastic container used to package Sea Sprout for sale to consumers is unique among liquid fish fertilizer brands currently on the market.

Although there are several brands of liquid fish fertilizers on the domestic market, Sea Sprout is the only liquid fish fertilizer produced in New Jersey. The nearest liquid fish fertilizer manufacturers are in Massachusetts and Virginia. Liquid fish fertilizer is not commonly available through retail outlets in New Jersey (see V. COMPETITOR ANALYSIS). BEA is located within easy driving distance of New Jersey's largest production agriculture regions in the southern and central parts of the state and the large consumer markets of the Mid-Atlantic region. This proximity affords BEA lower transportation costs than its competitors in supplying these markets.

Weaknesses

BEA is a novice in the production of fertilizer. Sea Sprout is their first product entry in this market where competitors are well-established. Sea Sprout is BEA's sole product and a minor product in the diversified operations of A&J. Sea Sprout is a new product with no brand name recognition. BEA is unfamiliar with the retail distribution and marketing of organic fertilizer to both consumer and agricultural markets.

BEA currently has only 3 part-time employees. These employees have other responsibilities within the parent company of A&J. It does not have the resources for full-scale production, R&D, marketing, and sales. In order for BEA to expand production beyond the pilot-scale level, it will have to increase staffing to support production requirements.

Resource/Capability Analysis

BEA has a pilot-scale plant. Batches of hydrolysate have been produced for formulation development, laboratory testing, agricultural field trials, and sale to customers produced through ad hoc marketing. Production is accomplished by an A&J employee who is diverted from other tasks on an 'as needed' basis. Clearly, once agricultural and consumer customers are developed and production is increased accordingly, alternative staffing arrangements will have to be met.

4 A&J has been assisted by Rutgers Cooperative Extension and the New Jersey Agricultural Experiment Station in formulation of product, identification of potential applications, and market development. BEA has acquired sufficient skills to experiment with formulation modification if alternative markets with different NPK requirements emerge. In order to conduct additional crop field trials, BEA will have to pursue additional cooperative arrangements with academic researchers and funding arrangements, considering that this expertise is outside its core competencies. Expanded field tests should not be a major expense, however, as potential cooperating farmers have already been identified and the analyses are relatively simple.

5 IV. ENVIRONMENTAL ANALYSIS

Market Attractiveness

Several trends are increasing demand for organic fertilizers. Consumers are interested increasingly concerned about food safety and interested in purchasing organic produce. This has motivated more farmers to adopt organic methods. In addition, the number of home gardeners interested in gardening organically is growing due to rising interest in food safety and environmental protection.

Market Size

The use of fish hydrolysate has been tested and proven effective as a fertilizer in the commercial production of cranberries and organically grown tomatoes (DeMoranville 1988, 1989, and 1990, Henderson and Strombom 1995a & b). There are 3,300 acres of cranberry farms in New Jersey, and 33 certified organic farmers in New Jersey and Pennsylvania. NOFA-NJ has 500 members and 5,500 people interested in organic farming and gardening on its mailing.

Legislative Impacts

Fertilizers are licensed by state environmental agencies. Organic fertilizers must be certified by state organic farming associations. Federal regulations arising from public environmental concern constrain farmers' use of chemical fertilizers and have encouraged broader application of organic fertilizers. The current state and federal Republican administration may be less stringent in enforcing environmental regulations and thereby reduce regulatory incentive for going organic.

6 V. COMPETITOR ANALYSIS

The liquid fish fertilizers which are applied as a liquid after planting is a distinct product class from bulk fertilizers. such as manure and compost, which are turned into the soil as an amendment prior to planting. Direct competitors of Sea Sprout are other fish hydrolysate brands, fish emulsions, and soluble fish powder products. All are made from fish and are applied as a liquid. In contrast to fish hydrolysate, which is a liquid formed from enzymatic digestion of fish solids, fish emulsion is made from soluble nutrients obtained from fish processing waste water. referred to as stick water. which contains , blood, and small pieces of fish flesh in suspension. Soluble powder concentrates made from fish also are on the market. Product variations are fish hydrolysate, emulsions and soluble powders which contain seaweed. Seaweed provides additional desirable trace elements to the fertilizer.

Supplier Survey

To obtain information about national brands of liquid fish fertilizer, a total of 38 fish product fenilizer suppliers listed in The Organic Market Guide: New Jersey 1993-1994, the most up-to­ date and comprehensive list available, were sent a brief survey by fax. Information requested was: company name, location, telephone number, fax number, and brand names, NPK analysis, quantities available, and prices for all fish fertilizer products. Eleven suppliers responded (see Table 1).

Results of the supplier survey indicate that there are a number of liquid and powdered fish fertilizers on the national market. The suppliers closest to New Jersey are Ocean Crest of Gloucester, Massachusetts. Necessary Trading of New Castle, Virginia, Hy-Trous of Woburn, Massachusetts, and North Country Organics of Bradford, Vermont.

Ocean Crest manufactures Neptune's Harvest. a fish hydrolysate with a 2-4-.5 NPK analysis. Neptune's Harvest is available in 5, 55 and 4500 gallon quantities. Ocean Crest also sells a fish and seaweed fertilizer blend in the same quantities. Necessary Trading manufactures SeaMix, a fish emulsion with seaweed with a 3-2-2 NPK analysis. It is available in pint, 1 gallon, and 5 gallon quantities. Necessary Trading also produces Folia-Fish, a concentrated fish powder with a 12-0-1 NPK analysis. No information was received regarding quantities and prices for H y-Trous and Squanto' s Secret.

Although almost all brands of fish fertilizer are available through mail order, only Alaska, Fertrell, and Ortho brands were carried by at least one of the 24 New Jersey retailers surveyed. None of these three are hydrolysate; all are fish emulsions.

The national fertilizer industry is well-developed and includes several large, well-established companies such as Ortho and Fertrell which already liquid fish fertilizers. These companies can martial significant marketing resources.

7 Retail Survey

To determine which brands of liquid fish fertilizer are available at retail within New Jersey, a sample of retail stores geographically distributed throughout the state were selected from the yellow pages of telephone books. A national agricultural supplier chain - AgWay, two national home improvement chains - Home Depot and Channel Home Center, two fertilizer suppliers; and thirteen independent garden centers were contacted. The stores were contacted by telephone. Information was obtained from 24 retail stores. (see Table 2). Results indicate that only Alaska brand (5/1/1 NPK analysis) is readily available in New Jersey. The brand is carried by independent garden centers but not by Agway, fertilizer suppliers, or home improvement centers.

Threat of New Entrants

Although there is always a threat of new entrants into the Mid-Atlantic organic fertilizer market, BEA's competitive situation is promising. New England seafood processors are experiencing severe fish supply shortages and have higher transportation costs than BEA to service the Mid­ Atlantic market. Other New Jersey seafood processors have not acquired hydrolysate technology and expertise, and BEA has a lead in developing New Jersey agricultural and consumer markets. Seafood processors in and near the port of Cape May are not likely to enter the market due to BEA's competitive advantage, particularly if BEA accepts their solid fish wastes and, thereby, provides them with a disposal alternative to landfill.

8 VI. CUSTOMER ANALYSIS

Commercial Agricultural Applications

The primary target agricultural markets for Sea Sprout in New Jersey are for commercial production of cranberries and organically grown vegetables. Fish hydrolysate has been proven effective by research conducted by the University of Massachusetts and Rutgers Cooperative Extension (DeMoranville 1988, 1989, & 1990, and Henderson and Strombom 1995b). Fish hydrolysate has been used as a fertilizer in commercial cranberry production in Massachusetts since about 1990s. Sea Sprout was used in commercial organic tomato production in New Jersey during the 1994 growing season.

The primary advantage of using fish hydrolysate in cranberry production is that it can be applied, because it is a liquid, via sprinkler systems and. thereby, save on costly aerial application. Likewise, fish hydrolysate can be applied via drip irrigation to tomatoes and other vegetables as a side dressing during the season.

Fertilizer formulation requirements are diverse in agricultural markets. Commercially grown crops require specific NPK formulations, rates and timing of application. Farmers select fertilizer products with specific formulations depending on the specific crop grown and soil conditions. Farmers conduct soil tests relatively frequently to assess nutrient availability in the soil and strive to provide an appropriate nutrient balance for their crops through selection of appropriate fertilizer formulations and application rates.

Home Gardeners

In contrast to the organic farming market, home gardeners tend to purchase a standard fertilizer for a broad range of applications such as vegetables, flowers, or lawn. They conduct soil tests relatively infrequently and, in general, are poorly inforrned regarding nutrient requirements of specific plants and the NPK analysis of the fertilizers they purchase. They tend to rely on the application rate recommendations provided on product labels.

A survey of organic home gardeners was conducted in November 1994 to identify potentially important consumer attitudes and buying behavior relevant to liquid fish fertilizer (Henderson and Strombom 1995c). The results suggests that increasing market share for liquid fish fertilizer among home gardeners would require considerable effort to raise awareness of the product and overcome buyer resistance due to lack of experience. The dominant use of bulk fertilizer indicates that pre-plant application of fertilizer is the general practice; yet liquid fertilizer is most often used as a side dressing. Moreover, even gardeners purchasing fish fertilizer had almost no brand awareness.

All consumers surveyed placed a high importance on the organic characteristics of the product and on the product being environmentally safe. Convenience factors, such as ease of application and availability of the product through local gardening centers were important. The survey indicates that organic gardeners are interested in new products and sharing of information.

9 The organic gardeners surveyed had all joined NOFA-NJ, a statewide association of farmers and home gardeners interested in organic methods. They report that they are more likely to seek and give gardening advice than others they know. Personal experience, word-of-mouth communication, and articles in organic gardening magazines are important sources of information. These gardeners are more responsive to education than to commercial promotion of products. This suggests that suppliers of liquid fish fertilizer should utilize organic gardening associations and expert testimony in respected organic gardening magazines as means of increasing sales rather than advertisements to promote their product.

Direct mail is not an important means of fertilizer purchase. This is most likely because organic home gardeners primarily buy and use bulk fertilizer for pre-planting soil preparation. The gardeners look to purchase in their local home gardening centers. To increase liquid fish fertilizer sales, suppliers should consider increasing availability through local gardening centers.

Organic home gardeners do not appear to be particularly price sensitive for a product that is organic and environmentally safe.

10 VII. BUSINESS STRATEGY

A&J's initial business strategy was to solve a waste disposal problem in the company by establishing a small-scale fish hydrolysate plant. As the company has become more familiar with the product and potential markets, it saw an opponunity to expand the scope of its business by developing the fish hydrolysate operation. A&J established BEA in the fall of 1994 to manufacture and market Sea Sprout. BEA has the potential to become the dominant supplier of organic fish hydrolysate to organic farmers and home gardeners in the Mid-Atlantic region if it exploits its competitive advantage as the closest supplier to this target market.

Product

BEA manufactures a single product, Sea Sprout, but markets the product in different quantities. Home gardeners require relatively small, easy to handle containers. BEA's 32 oz. container meets this need and provides the additional feature of being self-measuring. On the other hand, farmers require fertilizer in bulk quantity. BEA's 30 gallon drum is appropriate for the small to medium-scale organic vegetable farmers and cranbeny growers in the Mid-Atlantic region.

BEA is well-positioned to produce a product that meets the needs of its customers. Sea Sprout product features, which include being organic, non-odorous, non-polluting, and easy to apply, satisfy key organic gardener needs (Henderson and Strombom 1995c). Organic farmers are interested in fenilizer which is organic, has the NPK analysis appropriate to their crops, and is easy to apply. In cranbeny production, there is a cost advantage to using liquid fenilizer which can be applied to large acreage through an established sprinkler system rather than being applied aerially as is the usual practice.

Pricing

Organic farmers are price sensitive and seek to minimize input costs. Because of its close proximity to Mid-Atlantic markets, BEA has a relative advantage over competitors with respect to transponation costs. Because of the liquid volume and weight of hydrolysate, transponation costs are a major component of overall costs. BEA is the only fish hydrolysate producer in the Mid-Atlantic region. Given its low production overhead and close proximity to the Mid-Atlantic market, BEA should be able to meet or beat its competitors' prices. As live stock operations continue to move out of the Mid-Atlantic region, the availability of manure in bulk will decrease as well.

Pricing for the home gardener market, on the other hand, need not compete primarily on price. Preliminary research by Rutgers Cooperative Extension suggests that organic home gardeners place greater emphasis on environmental and convenience factors than on price when selecting fenilizer products (Henderson and Strombom 1995c).

BEA could lower its cost of production, and, therefore, product price by using non-organic sources of phosphorus and potassium which are less expensive than those currently used by BEA to produce organically. The use of non-organic nutrients could enable BEA to lower production costs and, therefore, product price. However, this would involve a radically different target

11 market and promotion strategy. It also would bring BEA in direct competition with other inorganic fertilizer producers which tend to be large-scale companies with highly competitive prices. Market recognition of hydrolysate and willingness to pay a premium price are higher in the organic sector than in the inorganic sector.

Distribution

BEA delivers the 30-gallon drums directly to farmers which makes it convenient for farmers to use the product. Distribution to the consumer market is currently limited to 1-800 telephone sales. According to the 1994 Rutgers Survey, organic home gardeners prefer the convenience of purchasing gardening supplies, including fertilizer, through home gardening centers (Henderson and Strombom 1995c). Therefore, the company should consider expanding distribution to home gardening centers. Marketing efforts should focus on sales to larger gardening centers.

One means of expanding marketing and distribution is through a strategic a!liance with a local supplier of organic fertilizers, such as Ho!lytone of Cumberland County or Fertre!l of Pennsylvania. Both companies have a knowledgeable sales force and established retail distribution. Such an a!liance would enable BEA to focus on manufacturing rather than trying to develop expanded marketing and distribution capabilities.

Promotion

To date, BEA's promotional and sales efforts have been minimal. Advertisement, which highlight organic, non-po!luting, non-odorous, slow release and ease of application product features, should be placed in key organic gardening publications such as Rodale's Organic Gardening and the NOFA-NJ newsletter, Organic News. The 1994 Rutgers Survey indicated that word-of-mouth and magazine articles are more important than advertisements as a source of gardening information (Henderson and Strombom 1995c). Therefore, close co!laboration with the Cooperative Extension Service and NOFA-NJ are likely to be effective vehicles for increasing home gardener awareness of the availability of Sea Sprout. Promotional strategies should include distribution of free samples to influential organic gardening experts with the intention of producing testimonials in organic gardening publications. BEA should consider staffing a commercial booth at the annual NOFA-NJ fair as this is the most widely attended regional forum for organic gardeners and farmers.

12 VIIT.TECHNOLOGYSTRATEGY

Sourcing

BEA's manufacturing operation is based on established technology described in published literature. Used equipment was employed in the small-scale hydrolysate plant, with the major investment being in retrofitting a store room with appropriate plumbing and flooring support for the digester. The Sea Sprout formulation of 2-4-2 NPK is a modification of a standard fish hydrolysate formula developed using fish available in New England and the Great Lakes regions (Goldhor 1988, Stuiber 1986). Using the types of fish wastes available in the port of Cape May, BEA produced an initial 2-4-.5 formulation. This formula was augmented to produce a 2-4-2 composition suited for commercial cranberry production, the original target market. The specifications established by NOFA-NJ for organic fertilizer certification were taken into account in formula modifications in order to position the company to exploit the organic farming and home gardening markets. BEA has obtained, through practical experience, sufficient expertise to produce a standard NPK formula, and has established procedures to control the NPK content of Sea Sprout.

Timing

BEA is a product and technology follower rather than leader, but expects to attain a competitive advantage by exploiting its proximity to the large Mid-Atlantic organic home gardening and farming markets.

R&D Spending

BEA's operating capacity is approximately 2,000 gallons/day. Because of the scale of this operation and because BEA is a relatively small component of A&J's total business, BEA's spending on R&D will be low. Modifications in technology and formulation will be driven by market, or pull, forces rather than R&D, or push, forces. As markets are developed for Sea Sprout, BEA will make such modifications in its manufacturing technology and product extensions as are warranted by emerging demand.

Product quality control and product formulation variations will require capabilities to chemically evaluate the nutrient levels from different batches. To date, BEA has relied on independent laboratories for testing. This would be quite expensive for frequent sample analysis. Therefore, BEA should examine the feasibility of establishing an in-house laboratory. Technologies developed for continuous monitoring of nutrient levels in hydroponic farming may be readily incorporated into the production line.

Recommendations

Strategic alliances with researchers at Rutgers University and Rutgers Cooperative Extension agents would provide an economical means of recognizing and exploiting opportunities for technological change in application methods for agriculture and home gardening.

13 cr. DEVELOPMENT STRATEGY

New Products

Product extensions with the highest potential are through the diversification of NPK formulations which meet specialized customer needs for different crop applications. In pursuing the development of new products. BEA will have to take into consideration that product formulation requirements for agricultural markets differ from those of home gardening markets.

For the home gardening market, BEA can rely on its 2-4-2 standard Sea Sprout formulation. However, it should make efforts to monitor emerging industry trends. One such current trend is the addition of kelp in fish hydrolysate to add trace elements. For agricultural markets, custom blending could provide a competitive advantage considering that all other hydrolysate on the market have standardized NPK formulations.

Custom blending is feasible at the small-scale of BEA's operation for a relatively large order from mid- and large-scale cranberry growers or larger organic vegetable growers. Different formulations can be achieved by varying the amount of phosphorus and potassium added per quantity of fish. BEA should evaluate the costs and benefits of providing custom blending.

New Process Technologies

BEA is not likely to radically change the manufacturing technology and process. Instead, it will make minor modifications as market demand warrants. The basic hydrolysate manufacturing process allows for formula modifications and product extensions. BEA should consider the feasibility of adopting batch control technology from the hydroponic industry which would improve quality control and make product customizing less expensive.

Project Agenda

BEA does have structured procedures for project execution and management. An aggregate project plan is needed that will specify the types and mix of development projects; provide a capacity plan for development efforts; select a set of future development projects and allocate resources to them; and expand development capabilities through strategic alliances.

Organizational Structure

BEA has two primary employees: one is responsible for production oversight and the other for market development. Both perform these functions on a time available basis while simultaneously fulfilling other roles in other A&J enterprises. The salaries of these employees are paid by A&J. Actual production is conducted by another A&J employee who is assigned to the task as needed. BEA does not employ anyone in R&D.

In the future, if BEA outsources R&D, marketing, and customer monitoring through strategic alliances as has been recommended, the organization will remain very lean. However, expanded markets will require expanded production and a greater commitment of time on the part of the three employees currently involved in the business.

14 While BEA can readily accommodate expanded production from the technical side, product market support will require more dedicated effort. It is recommended that a person be trained in potential applications of the product so that BEA can provide technical support to existing and potential customers.

Capacity Management

BEA has not emphasized time to market in the production of Sea Sprout. The amount of Sea Sprout manufactured is dependent on current market demand. To date, demand has been less than plant capacity. Current production is well below that which would fully utilize the waste generated by A&J. The remainder of the waste generated is disposed of in the county landfill.

As market demand increases, BEA will more fully utilize existing manufacturing capacity and available seafood processing residuals. Additional processing waste is available locally from other seafood processors.

Optimally, BEA would produce fish hydrolysate year-round in order to utilize highly perishable fish waste as it is generated. The market, however, is seasonal with demand concentrated in spring and fall. Planning will have to be done to allow for stockpiling of product inventories.

Capabilities

Customer sensing will be an important function in future product development. It is recommended that BEA establish formal and visible ties with Mid-Atlantic NOFA organizations and their certified organic farmers. Organic farmers and gardeners consider themselves outside the mainstream, and they embrace other people with organic credentials.

Research into application methods and rates should be expanded. While organic growers have relied heavily on recommendations and experiences of other growers, there is because little research was conducted on organic methods. Research-based knowledge can improve the productivity of this sector.

BEA does not have in-house capability to conduct needed research on alternative crop applications. It is currently relying on research conducted at the University of Massachusetts and Rutgers University for crop-related research. BEA should continue to foster such arrangements. Acquiring crop related research capabilities would be a radical shift from BEA and A&J core competencies. It should continue to outsource crop-related research. BEA should continue to work cooperatively with academic researchers and agricultural agents in the Mid­ Atlantic region.

In order to expand production, BEA will need more dedicated time from production employees. Because the formulation is standardized, there is no need for highly trained personnel. Because the technology is relatively simple, BEA can increase capacity in a relatively short time by adding digesters and bottle fillers and other readily available equipment.

15 X. BENEFITS

Financial

The primary financial benefit to BEA of producing and successfully marketing Sea Sprout is the resolution of its solid waste disposal problem. To the extent that BEA channels residuals to the production of Sea Sprout, it reduces landfill tipping fees which have been rising rapidly in recent years.

Expanded markets and manufacturing capacity utilization would bring BEA closer to its goal of fully utilizing its solid waste. A commitment to acquiring in-house marketing capabilities to grow the business would entail a significant financial investment. If, on the other hand as recommended, BEA utilizes a strategic alliance with an organic fertilizer supplier in the region to build market share, it will be able to expand the business rapidly without a major investment in increased personnel. This strategy would move BEA more rapidly in the direction of becoming the dominant supplier of fish hydrolysate in the Mid-Atlantic region and could make the BEA operation a profit center for A&J.

Strategic

Active involvement in the New Jersey chapter of the Northeast Organic Farming Association would be an excellent investment in terms of goodwill, customer identification, sensing of emerging customer needs, and establishment of product name recognition. It's expected that organic farmers and gardeners will respond favorably to visible efforts by BEA to support the "organic cause."

One strategy for expanding markets is custom blending, at least for large customers. The adoption of batch monitoring technology would improve product quality control, facilitate custom blending, and increase BEA' s competitive position.

If BEA acts aggressively to build product awareness and market share through strategic alliances with NOFA and a regional organic fertilizer company and adoption of quality control technology, it is likely to discourage the entrance of other fish hydrolysate producers in the Mid­ Atlantic region.

16 XI. REFERENCES

Aung, L. and G.Flick. 1980. The Influence ofFish Solubles on Growth and Fruiting of Tomato. HortScience 15:32-33.

Aung, L., G.Flick, G.Buss, and H.Bryan. 1981. Fish and Seafood Wastes as Nutrients for Agricultural Crop Fertilization in Seafood Waste Management in the 1980's: Conference Proceedings. S.Otwell (ed.). Florida Sea Grant College Program. Report #40.

DeMoranville, C. 1990. Fish Fertilizer: Lessons for Low Input Production. Cranberries.56 (3): 12-13.

DeMoranville, C. 1989. Fish Silage Fertilizer Potential for Selected Northeastern Agricultural and Horticultural Crops. Vol.l & II. R.P. Athanas (ed.) New England Development Foundation. Boston, MA.

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18 TABLES

19 Table 1. Liquid Fish Fertilizer Suppliers

Company Fertili- Location Brand NPK Quantity Price 32oz Name zer Type Name Analysis ( $) Equivalent Nov. 94 Price

BEA, Inc. H Cape May,NJ SeaSprout 2-4-2 quart na na Ocean Crest H Gloucester,MA Neptune's 2-4-.5 5 gal 17.50 1.75 Harvest 55 gal 137.50 . 63 4500 gal 7875.00 .44 Hy-Trous H Woburn,MA Hy-Trous Soz. na na Protein H Astoria,OR na na na na Recovery Alaska E Renton,WA Alaska 5-1-1

NJ Retailer: Obal's Market Princeton,NJ 5-2-2 pint 4.39 8.78 quart 6.09 6.09 Distributor: Orol Ledden Sewell, NJ na pint 3.99 7.98 quart 5.98 5.98 gallon 10.49 2.62 New Earth Shepherds- 5-2-2 quart 6.95 6.95 ville, KY gallon 13.95 3.49 Ohio Earth Hartville,OH 5-2-2 pint 3.95 7.90 quart 5.75 5.75 gallon 12.95 3.24 5 gal. 50.00 2.50 Garden-Ville Austin, TX 5-1-1 8 oz. 3.19 12.76 pint 4.39 8.78 quart 6.39 6.39 gallon 14.69 3.67 5 gal. 73.49 3.67 --

H = hydrolysate, E = emulsion Table 1. Liquid Fish Fertilizer Suppliers

Company Fertili- Location Brand NPK Quantity Price 32oz Name zer Type Name Analysis ($) Equivalent Nov.94 Price Fertrell E Bainbridge,PA Liquid 4-1-1 Fertrell 1 Distributor: Oral Ledden Sewell, NJ pint 4.99 9.98 quart 2.99 2.99 gallon 9.99 2.50

Ortho E San Ramon, CA Ortho Natural 5-1-1 pint 4.92 9.84 Fish Fert.

San Jacinto E Houston, TX Ocean Harvest 4-2-3 gallon 28.00 7.00 Environmental 5 gal. 124.00 6.20 Supplies fish emulsion 5-2-2 gallon 10.50 2. 63 North County E Bradford,MA Squanto's na pint na na Organics Secret bulk Necessary E* New Castle, VA SeaMix 3-2-2 pint 5.75 11.50 Trading gallon 19.99 5.00 5 gal. 65.00 3.25 Fertrell E* Bainbridge,PA Liquid na Fertrell 3 Distributor: Oral Ledden Sewell quart 5.99 5.99 gallon 16.49 4.12 Ocean crest H* Gloucester,MA Neptune's 2-4-.5 5 gal. 21.25 1. 06 Harvest 55 gal. 178.75 .81 4500 gal 11250 .63

-- -

H= hydrolysate, E = emulsion, * = seaweed or kelp added Table 1. Liquid Fish Fertilizer Suppliers

Company Fertili- Location Brand NPK Quantity Price Name zer Type Name Analysis ($) Nov. 94

Necessary p New Castle,VA FoliaFish 12-?-? 4 lbs 24.75 Trading 40 lbs 135.00

San Jacinto E Houston, TX Fish 12-1-1 5 lbs 25.00 Environmental 10 lbs 40.00 Supplies 40 lbs 150.00

H= hydrolysate, E = emulsion, * = seaweed or kelp added Table 2. Retail Availability of Liquid Fish Fertilizer in New Jersey

Store Location Carry Brand NPK Quantity Price Liquid Fish Analysis Nov. 95 Fertilizer Agway Berlin No Agway New Egypt No Agway Mt .Holly No

Agway Columbus No ' Unique Fertilizer Deptford No

Milford Fertilizer Swedesboro No I I A&M Farm Market Robbinsville No Amato's S.Brunswick No De Vries N. Brunswick No Obal Garden Market Princeton Yes Alaska 5/1/1 pint $4.39 quart $6.09 Peterson's Princeton Yes Alaska 5/1/1 pint $4.39 Schwarz Rocky Hill No Creative Gardens Upper Saddle River Yes Alaska 5/1/1 pint $4.39 Franklin Lakes Nur. Franklin Lakes Yes Alaska 5/1/1 pint $4/39. I Nature's Best Garden Hackensack Yes Fertrell 4/1/1 pint na Skie's Garden Ctr. Paramus No Country Mile Gardens Morristown Yes Alaska 5/1/1 na na Coviello Bros. Madison No Bulk's Garden Center Freehold Yes Rockland na pint na _. ___ ,_ - " ' - Table 2. Retail Availability of Liquid Fish Fertilizer in New Jersey

Store Location Carry Brand NPK Quantity Price Liquid Fish Analysis Fertilizer Channel Home Lawrence No Home Depot Milltown No Home Depot E.Hanover No Home Depot W.LongBranch No Home Depot Paramus No I