Great

The market perspective of Arapaima Gigas

opportunities for
Made by Jesse Hol (WV6A), Anna Homan (WV6Y) and Irsa Ooijevaar (WV6Y)
Mentor Miss Velzeboer
Subjects Biology, Business Economics, Economics

a big fish

10/02/2021
Contents
Contents 2

Resume 3

Preface 4

Introduction 5

1. The German market for fish 6

1.1 Description of the current market situation 6
1.2 Characteristics of popular fish species 7
1.3 Ongoing shifts 8
2. What are the characteristics of Arapaima and how does this influence the costs for
production? 10
2.1 What parts of the fish can be used/sold? 10
2.2 The current price 10
2.3 Housing costs 10
2.4 Transportation and breeding costs 12
2.5 Butchering 12
2.6 Distribution costs 12
2.7 Marketing 13
2.8 Labour costs 13
2.9 How can the price be lowered? 14

3. What is the demand, based on costs and positive/negative external effects? 15

3.1 Possibilities 15
3.2 Advantages 15
3.3 Target customers 16
3.4 Replaceable 17

4. What quantities and how many companies? 18

4.1 Production capacity 18
4.2 Demand 18
4.3 Break-even point 18
4.4 Entry barrier 19

Conclusion 21

Discussion 22

References 23

2
Resume
Nowadays, the oceans are largely overfished, which leads to the extinction of species.
Therefore, it is necessary to find alternatives. One of these alternatives is farming fish in
captivity. The Arapaima Gigas is a fish with a seemingly high potential of becoming an
environmentally friendly alternative for wild-caught fish. Based on this expectation, this paper
investigates the market potential of Arapaima in Germany. The needs of Arapaima have
been examined, as well as the costs of meeting those needs. Furthermore, the German
market for fish and the potential demand for Arapaima have been analysed, as profitability is
the most important issue for companies looking to produce a new product.
It has been found that, while the costs for farming Arapaima are relatively low, high
investment costs are involved. Yet, the demand for Arapaima on the fish market and the
selling price seem to be significant enough to make it appealing for companies to enter the
market. These results lead to the conclusion that Arapaima can be grown and sold, while
delivering profit to the companies working with the fish.

3
Preface
Even though none of us really like fish, we decided to do research on the market perspective
of Arapaima. Why? Because we were interested in the market perspective and the biological
aspects of bringing a new species on the food market. Especially because this fish could
contribute to the solving of overfishing and environmental damage.
Who are we? ‘We’ are three students from Tabor College Werenfridus. This research
serves as closure for our final year. During the long hours we spent working on this paper,
we learned a lot with regard to doing research and finding reliable sources. This research is
intended for anyone who would like to know more about Arapaima or has plans to work with
this special fish themselves.
Finding the answers to all questions involved with this research would not have been
possible without Manich founder N. van der Post and restaurant owner L. Broekmeulen. We
are very grateful for their cooperation and enthusiasm in answering all of our questions.
Furthermore, we would like to thank miss Velzeboer for her constructive feedback.

We hope you enjoy your read,

Anna, Jesse and Irsa.

Hoorn, 10/02/2021

4
Introduction
The scales on their backs are dark green, blending in with the colour of the water. Their
bottom scales have lighter colors like sand or calming white. Their tails include hints of brown
and red. Arapaima is one of the biggest sweet water fish to roam this planet. They commonly
reach a length of three metres and weigh up to two hundred kilograms and live in the lakes
and rivers of the Amazon rainforest. The diet of these big fish is omnivorous; they mainly eat
smaller fish, but their diet also includes fruits, seeds, insects or unsuspecting birds.
Unfortunately, Arapaimas are hunted for their great meat quantity and because they are easy
to catch. This results in these rare creatures being overfished and thus being endangered in
the wild. Therefore, it is better to farm Arapaimas rather than hunt them to extinction.
Arapaima is just on the doorstep of being introduced to the European market with
only a single company taking their first big step towards discovery and maybe even profit.
This pioneer company is Manich Food Innovations GmbH. This company is located in
Germany and was founded in 2019. The main reason for founding was the need for an
alternative way of bringing fish to the consumers, that is better for the environment, people
and fish than catching Arapaima in the wild. Manich currently has a capacity of 4000
kilograms of fish meat per year. They have plans to upscale to 880 tonnes per year within the
next few years.
This research will focus on the impact of the introduction of products extracted from
Arapaima Gigas on the German market for fish. The main question that this paper targets to
answer is: ‘What is the potential for the introduction of Arapaima Gigas on the German
market for fish?’. Essential subquestions to come to a conclusion on this are: ‘What is the
current situation on the German market for fish?’ as well as ‘What are the characteristics of
Arapaima and how does this influence the costs for production and entering the market?’,
‘What is the demand for the arapaima, based on costs and positive externalities?’ and ‘What
quantities could be brought into the market with profit and how many companies will
participate in delivering this?’
The hypothesis is that there will be potential for companies to enter the German
market for fish with profit. However, the impact on the market is expected not to be very
significant at first, because it will take many years before the Arapaima is bred on a large
scale, since there is currently only one company in Europe that breeds the fish. Furthermore,
it will likely take some time for consumers to start buying the fish on a larger scale because it
is not widely available and known.

5
1. The German market for fish
1.1 Description of the current market situation
The complete German market for fish can best be considered a market with monopolistic
concurrention, since the many different fish species are different in the eyes of consumers.
The market for one specific fish species can however be different. For most fish species this
market is one with nearly perfect competition, since there are a lot of producers and the
means of production are fairly equal. However, for species that have only recently been
introduced to aquaculture, the market for the farmed fish is usually more similar to a
homogeneous oligopoly.
In 2018, the total consumption of fish in Germany was approximately 1,2 million
tonnes (Statistisches Bundesamt (Destatis), z.d.). Figure one shows the market share of the
most important fish species. In figure two, the prices of dressed (meaning that viscera, head,
fins and scales have been removed) fish, when sold to retail operators are depicted for the
most sold fish types in the German market. Most fish are sold to the retail operators being
whole or gutted but because Arapaima is usually sold dressed, a predicted price for
‘dressing’ of the other fish has been made. Arapaima price has been deducted from the
average import price of Southern American Arapaima to Europe, according to the Food and
Agriculture Organization (FAO, 2012). From the figure, it can be concluded that there are
three main fish price categories, namely the fish with a kilogramme price below €5, those
with a price from €8 to €12 per kilogramme and those with a price above €20 per
kilogramme.
From the fish farmers or catchers, the fish are brought to consumers either through
direct marketing, wholesale operators (that offer to all interested parties) and/or retail
operators (that sell directly to consumers). Retail operators can be divided in retailers
(supermarkets, fishmongers) and caterers (restaurants, etc.). In Germany, more than half of
the fish purchases are from supermarkets and discount outlets that lack fresh fish counters.
The mentioned price categories decide where the fish is mainly sold. Herring, Alaska
pollock, cheap tuna and sardine are mainly sold canned, in supermarkets. Catfish, hake,
salmon and mackerel are sold in supermarkets too, but higher quality fish are more likely to
be sold on markets or by fishmongers. Some of these fish are sold in restaurants, especially
salmon. Trout, cod and tuna are almost exclusively sold in horeca and by some higher priced
mongers. Though cod is also sold by cheaper caterers, for instance in fish and chips.
As researched by the Eumofa (2018), the annual consumption of high-priced fish in
Germany is around 500.000 tonnes. The most important species in this price category is
salmon, with 300.000 tonnes per year. Fresh tuna also has quite a large market share, with

6
80.000 tonnes per year. Circa 180.000 tonnes of high-priced fish are produced in Germany
itself, chiefly trout, char and scallops.

figure 1: fish consumption in Germany

figure 2: price of dressed fish in Germany

1.2 Characteristics of popular fish species

The following fish species fall into the same price category as Arapaima: Salmon, Tuna,
Trouts, Char and Cod.
Bui (2017) argued that Atlantic Salmon is one of the fishes with an average taste. It is
neither very strong nor very soft. Salmon can be generally used in households and

7
restaurants when eating ‘real fish’ instead of fish sticks as the taste is just strong enough for
the average consumer.
An article written by Buchanan (z.d.) said that Bluefin Tuna is the most expensive
tuna and maybe the most expensive fish that is eaten by the general public with limited
availability the whole year round. It has a solid texture and a strong taste. The Bluefin Tuna
has made its name in the seafood industry and is sought after by nearly every seafood chef
due to its rumored exceptional taste. A report written by McKew & Covey-Smith & Burton &
Murphy, (2018) states that a downside to Bluefin Tuna is that the mercury levels of Pacific
Bluefin Tuna exceed The European Commision threshold guidelines of 0,5 ppm.
Shirvell (z.d.) claimed that the Steelhead Trouts texture is flaky with a delicate taste
similar to Salmon. Yet, Steelheads have a less ‘greasy’ feel. Steelheads are not known for
any particular qualities, other than having slightly more omega-3-fat than the more widely
farmed rainbow trout.
An article ("Arctic Char Taste & Flavor Profile", z.d.) argued that the Char tastes
similar to salmon. However, the taste and texture are both quite a bit milder. This however
can be a good thing; loads of people dislike too strong tasting fish, especially when they do
not eat fish very often. Arctic Char, however, are the sole contender when it comes to living
in the cold northern freshwater lakes.
"Know Your Cod: Atlantic Versus Pacific" (z.d.) is an article that claims the taste of
Cod is extremely mild. The fish's mild taste gives it opportunity to be used in a wide range of
different recipes.

1.3 Ongoing shifts

Over the last decades, the price of fish meat has increased way more rapidly than the price
of other meat and food products. This makes it less appealing to consumers. However, not
all fish species go up in price as quickly. According to the FAO’s price index (2020), the
average price for wild fish nearly doubled between 1990 and 2012, whereas the average for
farmed fish rose by only a fifth.
Reasons for increasing wild-catch prices are for instance decreasing fish stock levels,
as well as quota, that keep the permitted number of fish caught equal or lower, while the
world population rapidly increases. The limited room for productivity growth if the consumers
want high quality plays a role too, as well as high oil prices.
On the other hand, the farmed-fish industry continues to make productivity
improvements, for instance using lower quantities of (caught) fishmeal as feed, handling
diseases better and having become more energy efficient.
FAO (2020) also states that the amount of wild fish captured has risen with only 14%
from 1990 to 2018, while the total fish consumption increased with 122% and the aquaculture
production increased with 527%. In 2018, the ratio aquaculture : capture fisheries was only
1:1,17. The total fish production is expected to expand from 179 million tonnes in 2018 to
204 million tonnes in 2030. Aquaculture production is projected to reach 109 million tonnes in
2030, an increase of 32 percent (26 million tonnes) over 2018. Farmed fish is expected to
dominate the market in the future. There is also an ongoing trend of an increase in organic
fish farms, which is expected to further develop.
In the highest price category on the German market for fish, the prices of the imported
fish will surely rise, following the above-mentioned world trends. Especially the price for
frozen, fresh and chilled fish fillets have recently already shown strong increase in Germany,
according to the Fisch-Informationszentrum (FIZ, 2020). These increases were respectively

8
6,8% and 4,5% in 2019. For the import, mainly salmon and tuna play a role. High-priced tuna
is highly endangered, so prices increase rapidly, while production decreases. Salmon is
common in aquaculture, so the market share will most likely remain stable or even increase.
Trout, some char and scallops can be farmed as well, resulting in an expectedly stable
market share.

9
2. What are the characteristics of Arapaima and
how does this influence the costs for
production?
2.1 What parts of the fish can be used/sold?
The production yield of aquaculture farmed Arapaima is about 65% of the body weight. 20%
of the body weight consists of belly fillet, 22,5% of saddle fillet and 3,5% can be used for
carpaccio and the like. Skin, as well as scales and other sellable parts make up 6,7% of the
body weight each.

2.2 The current price

Currently, Manich sells the fish for a price of €30/kg for the saddle fillet, €20/kg for the belly
fillet and €4/kg for the remnants. The leather that can be made from the skin of Arapaima is
sold at a yet unknown price. It seems impossible to calculate the price given the available
information.

2.3 Housing costs

Since Arapaima is a tropical fish species, they should be housed in heated halls. For cost
limitation and higher efficiency, the tanks need to be easy to clean. Considering this, there
are two possible types of tanks: raceways and circular tanks.
Firstly, raceways are long rectangular tanks, where water flows from one short side to
the other. Waste is collected at the end of the raceway, that is devoid of fish. A disadvantage
of this method is that the water quality varies within the tank.
In circular tanks, the water flows from the edges to the center, as a sort of slow
vortex. The water outlet, as well as the waste disposal pipe is situated in the bottom center of
the tank.
According to research (Demir & Eseceli & Akbulut & Demir & Özcan & Çelik & Kalmiş
& Saygi et al, 2014), both raceways and circular tanks are best made of concrete. Circular
tanks require thinner walls, because the circular structures are stronger. However, circular
tanks are harder to equip with feeders.
Another advantage the raceways have over circular tanks is that fish can be grouped
and harvested easier in the raceways. Overall, the circular tanks are the best way to keep
Arapaima Gigas since the only two downsides are just little annoyances.
Circular tanks are often 10 to 30 meters in diameter and have a diameter to depth
ratio of 3:1 to 10:1. Since Arapaima are big fish and like to swim a minimal amount of 4000
litres of water is suggested. For example, a tank with a diameter of 10 metres and a depth of
2 metres should be big enough for multiple fish. The amount of fish is an estimation, since
the most viable stocking in tanks for Arapaima has yet to be found. However, using average
stocking rates from INJAF (z.d.), which is one centimeter per two litres, it can be calculated
that the previously mentioned tank can hold 785 fish(see appendix 1).
The fish have to be cared for. Generally, fish foremost need equipment for food,
oxygen and hygiene. Each of these will be discussed below and the best options will be
chosen. In the wild, the diet of Arapaima consists mostly of meat. They only have to eat 1
kilogram of food to grow 0.9 kilograms. Contrary to the wild, when kept captivated, they
aren’t given meat due to high protein meat replacements being cheaper. One example of a
vegetable containing high protein levels are soybeans. Other high protein meat replacements

10
are algae and single cell proteins. Any of these options can be chosen as long as it does not
affect the mortality rate and keeps the same 10:9 food to weight ratio. To properly feed the
fish a feeder is advised. It feeds fish exactly the amount of food chosen and is in the long run
the cheapest. Manual feeding can be done too but with an automatic feeder it is only
necessary to pay for electricity and the food itself, instead of paying salary to someone who
feeds the fish.
Oxygen for most fish can be cared for by buying machines that release oxygen into
the water. However, Arapaima is an exception. Arapaima is a special fish that breathes
similar to land animals due to a modified swim bladder that acts as lungs. It goes to the
surface, takes in air and can be submerged for up to twenty minutes before needing to
breathe again. Machines to bring oxygen into the water are therefore not necessary.
Lastly, hygiene should be discussed. Hygiene is very important for fish to thrive. Bad
hygiene is the cause of a higher mortality rate and higher stress levels in the fish. The most
important part of keeping water clean is replacing it often. When looking at Arapaima, it is
essential to replace at least 15-20% of the water in the tanks weekly, but replacing more
water keeps Arapaimas healthier. Other measures include removing waste and dead fish
from the tanks. Most of the waste is removed by being washed away through the water outlet
out of the tank, but part of the waste sticks to the bottom. Therefore, tanks should be
completely emptied and cleaned in between fish harvest and new young fish delivery. Dead
fish can be removed during fish growth by making the waste disposal pipe larger, putting a
barrier in front of the pipe and lifting the barrier up once a day just high enough to let dead
fish pass through.
Important other things to consider during the farming of Arapaima are the grading of
fish and harvesting of fish. The grading of fish is an important step in increasing the size of
fish and it is something many farmers do to create a higher profit. Grading means: to
separate fish during growth into different size categories. Many fish bully smaller ones which
leads to stress and a decrease in growth of the victimized fish. By grading fish in different
sizes bullying will be reduced as fish will be less likely to bully fish the same size as them.
Next to that, it is possible to deliver fish of a specific size rather quickly when needed.
Grading is not very expensive. The only thing necessary is a revolving grader in the tank
system. Harvesting fish costs nearly nothing. The only needs are seine nets.
All of this has costs. Firstly, initial costs: the circular tanks with feeders and graders.
They, together, cost €84.375 per tank, say disclosed sources. Following this are nets.
According to ‘Collins Nets LTD’, small seine nets cost around €620 and since the tanks aren’t
that big, small nets are enough.
Annual costs need to be discussed as well, for example food. Research ("Purchasing
Commercial Fish Feed [Link] Feed locally", z.d.) shows that food or fish feed is in the
industry priced at €690 a ton. Arapaimas eat a lot. Adult fish can eat up to a kilogram a day.
Since it is not profitable to grow them fully to their adult life stages, it can be assumed only
half of this is needed. Following this logic, aquacultural kept Arapaimas eat around 180
kilogram of food every year. This would mean that their annual food intake costs is around
€120. Other annual costs are energy and water. The annual water costs can be calculated to
be around €2014,26(see appendix 1). Next to that, after every harvest the tanks need to be
completely emptied once so that the walls and floor can be cleaned. This costs around
€215,2. The costs for electricity are unknown, there are so many unknown factors when
calculating electricity usage in theory that the number will easily be more than double off than
the numbers calculated and/or assumed.

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2.4 Transportation and breeding costs
The young fish are currently bought by Manich in Bangkok, where they are bred, for a price
of €10 per fish. As one fish delivers 15 kg, the price per kg is €0,67. This includes the
transportation costs from the fish farm in Bangkok to Manich. This will of course differ greatly
when the fish would have been bought in another country. Eventually Manich plans to breed
their own fish, which means that the transportation costs will become irrelevant to them, but
not necessarily for potential competition. Assuming most starting companies do not have the
necessary knowledge, nor the financial means for building hatchery facilities, only the costs
for buying fish abroad are taken into account.

2.5 Butchering
Since Arapaima grows very quickly, the fish are harvested when they are 10 months old. At
that moment they weigh about 15 kilograms. The harvesting happens sequentially.
Therefore, it is possible to deliver the fish all year round. The fish can grow even heavier.
However, the extra weight gain does not weigh up against the extra costs, as they grow
slower the older they become. The harvesting happens with nets and is very easy, because
the fish are very curious and show no sign of stress, so they just swim into the nets.
Arapaimas are shot through the head as soon as they are on land. This is a painless and
stressless death. Next up, a hook is put through their mouths and they are hung on a rack.
Their tails are cut off so the blood is drained from the body. After this, Arapaimas will be
transported to the slaughter house in cylinders. When they arrive at the slaughterhouse, their
guts are taken out first, after a saw went through their skin. Next, their spine with all other
bones are cut out while they are suspended from a hook. Because Arapaimas don’t have
intramuscular bones, all bones can be taken out easily. This happens via their backs. The
fish is now cut into two halves. The scaly skin is separated from the meat with a special
machine. The meat is cut into pieces and vacuum packed by yet another machine. The skin
undergoes another few steps to be processed and coloured.
Next to the equipment that is seen throughout the process, other things are needed
for (food) safety, like coveralls, plastic overshoes and cleaning material.
The building of an abattoir with equipment costs roughly €250.000,00. Most of this is
spent on the building.

2.6 Distribution costs

Manich wants to distribute their products using sales partners, online partners, direct sales
and their website. As a startup company, direct sales are most efficient, as marketing has not
yet been seen by enough people to be efficient. This means that the customers of potential
sales partners have not heard of Arapaima yet. Therefore, these sales partners would not be
able to make any profit. Thus, they will only be a means of distribution once Arapaima is
known to the wider public. After a while, sales partners and online partners can start selling
the fish in the name of Manich, which will increase the market share. Eventually customers
will have heard of Arapaima and might take a look at the website and order some for
themselves. For direct sales and sales via a website, the only costs are the transportation
costs and the costs of hosting a website. The use of sales partners will be significantly more

12
expensive, as administration costs and profit margin are added to the transportation costs.
Manich estimates the costs of distributing the fish to their customers to be €1,50 per kg.

2.7 Marketing
Quite some marketing is needed to bring the fish on the market, as it is an unknown species.
Manich uses the push strategy in order to persuade restaurants to buy their fish. This means
Manich approaches restaurants to ask them whether they want to sell Arapaima. The
restaurants are given free samples to try. With this strategy, Manich only has to do marketing
among restaurants. The marketing to customers is done by the restaurants themselves. The
costs of this way of marketing can only be estimated as they can vary a lot. The costs mainly
exist of handing out the free samples and gaining popularity among restaurants by
advertising in magazines made for fish selling restaurants, like Fischmagazine, a German
fish magazine. Advertising in this magazine costs €2140 per edition for a whole page in black
and white. The coloured version would cost €3200. (2020) In order to be effective, this
advertisement should stay in the magazine for quite some time.
Currently, Manich gives away 80% of their fish for free to restaurants as marketing.
For now, 9000 kg has been sold or given away. The average price is €25 per kg so that
should give €225.000 in total. 80% of this was given for free, and can therefore be counted
as marketing costs. This is €180.000.
Manich has reserved €50.000 for marketing in 2020. This is exclusive of the costs for
free fish. For later years, the costs will probably become higher, eventually reaching
€1.000.000 in 2024 and 2025 estimated by Manich. According to Manich, most of the
marketing will be done through opinion leaders. These are people who are professionals in
forming an opinion about a product, and are therefore able to help others form an opinion as
well.

2.8 Labour costs

Manich has made an estimation for the human labour costs for different production
capacities. This can be separated into management & administration, hatchery, butchering,
and sales. The two given production capacities are 440 and 880 tonnes. All costs listed in
table 1 are per year and based on 36-40 hours a week.
The increase of labour costs at a capacity of 880 tonnes means that, when the
capacity doubles, the total labour costs increase by 34.3% As this is significantly below an
increase of 100%, which would be expected by a capacity growth of 100%, it can be
concluded that the company has economies of scale. Therefore, it is hard to calculate the
labour costs for each capacity.
To compare, the average annual salaries for a capacity of 440 tonnes in case the
same amount of employees are employed as Manich has with this capacity are listed too.
Salaries vary a lot with the age, experience and education. This is why it is only possible to
give a range of salaries. Manich’s payment lies in the range, so it can be argued that they

13
pay their employees as much as other companies would also have to pay their employees,
which means other companies have the same labour costs.

Department Manich with a Manich with a Average with a

capacity of 440 capacity of 880 capacity of 440
tonnes tonnes tonnes
(Paylab, 2020)

Management €180.000 €250.000 €61.548 - €315.120

Hatchery €130.000 €160.000 €65.376 - €256.428

Butchering €90.000 €160.000 €54.780 - €228.144

Sales €95.000 €95.000 €47.148 - €221.376

Total €495.000 €665.000 €228.852 -

€1.021068
table 1: annual labour costs per capacity

2.9 How can the price be lowered?

Manich expects to be able to lower the price of saddle fillet to €20 per kg and the price of
belly fillet to €15 per kg. That is mainly due to the fact that the investment costs first need to
be earned back and the capacity needs to enlarge for economies of scale.
It has been checked whether water could be cheaper when not recycled as can be seen in
appendix 1. This, however, proved not to be the case.

14
3. What is the demand, based on costs and
positive/negative external effects?
3.1 Possibilities
In terms of preparation, Arapaima seems to have endless possibilities. According to Manich,
these are the ways Arapaima can be prepared: it can be placed in the grill or oven, it can be
boiled (au bain-marie), roasted, baked, poached or marinated. It can also be eaten raw, for
example as sushi or in the form of carpaccio.
The leather is of premium quality. Currently Arapaima leather is already (illegally)
used for boots, but there are many more options such as bags, shoes, wallets, purses, belts,
lampshades, wall decorations and more. It can also be prepared on the fish, giving the fish a
crunchy bite.

3.2 Advantages
The fish is not caught in the wild, assuring there will be no overfishing. The use of water and
energy is very efficient. The production chain is short. Because of the quick growth rate and
high production yield of Arapaima, much less food is needed for their production. The fish are
fed with plant based proteins. This all means that the environmental impact is not very high.
According to Manich, the fish does not dehydrate during preparation, meaning the
mass decrease is negligible. Furthermore, it does not fall apart during preparation. The fish
that is delivered to the restaurant is already fishbone free. Because of the way the fish is
bred, it does not contain a lot of stress hormones and will therefore taste better. There are no
antibiotics, microplastics or added hormones. The fish can be delivered throughout the entire
year. The fish can be kept in the fridge for up to 10 weeks. This means the taste is better
preserved, as freezing can deteriorate taste.
Fish leather is about nine times stronger than for instance cow leather, because its
fibers crisscross (Timmins, 2019). It can be produced in many different varieties. Soft and
bendable or stiff, with or without scales, et cetera. The carbon footprint for making Arapaima
leather is lower than for regular leather and the chemicals that are used contain no heavy

15
metals, nor damaging chemicals. Lastly, all organic waste can be used as compost
materials.

3.3 Target customers

Considering the high price, the target customers will most likely be richer people. The fish will
therefore be sold by restaurants, hotels and catering businesses. Arapaima might also be
sold at event locations. The restaurants will also be higher segment restaurants.
In relation to the rest of Europe, Germans are less sensitive to a high price (42%
opposed to 68%), as seen in figure 3 below. Therefore, Arapaima has more chances in
Germany than in the rest of Europe.

figure 3: Germany in the EU

Consumers are willing to pay more for a product that is better for the environment or
for the people who produce it (Doove, 2020). In order for this to work, the producer has to be
transparent about why the price is higher, and why the product is better than regular
products. The consumers have to believe that your product is better than others, instead of
brushing it off as a marketing strategy. This can be done by the use of reliable hallmarks, so
the company can benefit from the reliability of the hallmarks. As seen in the figure above,
German people seem to be relatively sensitive to hallmarks (38% opposed to 23%).
Environmental impact is also more important to Germans than to the average European
(25% instead of 17%). As Arapaima is bred as eco friendly as possible it might apply for a

16
hallmark. This could raise the sales, as the hallmark and the reduced environmental impact
are very important to Germans.
Die Verbraucher Initiative e.V. listed in 2019 the following possible German or
European hallmarks: Fairtrade, Bio-Siegel (only to be used when made in Germany, not
mandatory), and EU-Bio-Logo (mandatory when biological and wrapped, made in the EU).
As Arapaima has not undergone genetic manipulation, it can wear the hallmark VLOG, a
german hallmark that assures consumers that the product has not been genetically modified.
Almost all restaurants are positive about the fish because it’s new. New products can
make a restaurant special. Furthermore, Arapaima has a lot of possibilities, meaning
restaurants can all give it their own twist.

3.4 Replaceable
An article (Cebula, 2014) claimed that Arapaima has a very mild taste similar to the taste of
cod mentioned in the ‘Characteristics of popular fish species’ section and it has a strong
texture. This taste and texture makes Arapaima perfect for replacing the cod. It may be able
to replace other fish’ species but only in numerous years. Other fish are currently more well-
known and their brand name will carry a mark that will be hard for Arapaima to combat. In
conclusion, after Arapaima is introduced to a wider market, as it gets known better under the
broader public and when the production prices decrease, it could replace Cod and later
maybe even more fish.
The replacement of cod would also be possible when looking at prices, since the cod
is already more expensive than Arapaima’s belly fillet currently is. When Arapaima’s
production is at full capacity, there might even be a larger price difference.
Considering the shifts in the market that have been described in the first chapter, Arapaima
could be replacing tuna’s and part of trout’s market share.

17
4. What quantities and how many companies?
4.1 Production capacity
The annual production capacity of one tank can be calculated to be around 14 tonnes of fish,
using all previously presumed data in ‘Housing Costs’ and presuming the fish will only be
kept for the first ten months, the time in which they grow the fastest for the full calculation see
appendix 2. Continuing with this data, the production capacity for smaller companies, who
only have 16 tanks, is 224 tonnes of fish. Larger companies (with 32 tanks) would be able to
produce 448 tonnes of fish. Companies like the pioneer company Manich who have 64 tanks
should be able to produce 896 tonnes of fish annually. Of course, companies will always be
able to grow bigger if managed correctly. These bigger companies will follow the pattern
explained.

4.2 Demand
Potential customers in the high-price segment are for instance sought in restaurants, hotels,
venues and catering facilities. In Germany, there are about 6.000 restaurants with high
quality gastronomy that are potential customers in the first place (Koptyug, 2020). About
2.200 hotels are eligible. About 750 event locations in Germany are potential customers. In
the first step, i.e. 1.500 caterers are approachable.
All restaurants approached were interested in selling Arapaima. Therefore, it can be
assumed that there is nearly as much demand as there are expensive restaurants in
Germany.
As indicated, there is plenty of space in the production part of the market for
Arapaima. In addition, Manich’s initial planned production of Arapaima, in 2022, will reach
200 tonnes, only being about 0,04% of the German high-priced fish market share.
Quadruplication in 2024 still means negligible proportions 0,16% of the German market.
Manich is currently, and in the plans for the upcoming five years, unable to fulfill all
possible restaurants, therefore there would be enough demand for more companies to enter
the market.
In the middle long run, it can be assumed that international regulations for the
preservation of tuna populations will only allow half of the current fish catching, which would
result in an empty hole in the market of around 40.000 tonnes. Considering the fact that
many other fish species in the price category of Arapaima are produced in aquaculture, this
gap will supposedly mainly be filled up with these species. However, it is absolutely
reasonable to assume that Arapaima will have the potential for a market share of at least
5.000 tonnes. This could allow at least 4 companies to enter the market at full capacity.

4.3 Break-even point

As seen in appendix 3, the break-even point would be on a production of 124.145 kg of fish
per year. However, considering the fact that there are step based costs per 13.750 kg, the
minimum quantity would more likely be 137.500 kg annually. Due to many uncertain factors,
the break-even point calculated is an estimation and probably not fully correct. Furthermore,
the costs used for the calculation of the depreciation(see appendix 6) are detracted from the
estimations Manich has made for a building with a capacity of 440.000 kg per year, meaning
that these costs would be lower for the quantity of the break-even point. That means that the
break-even point might be even lower. However, considering the fact that there are most
likely costs that have not been taken into account, like further development of the company,

18
this would be compensated. Anyways, this estimation seems reasonable, since Manich
already expects to make profit in the first year where they produce a reasonably large
amount of fish, being 300.000 kg.

4.4 Entry barrier

Manich expects that 12% of all sales will be profit, excluding tax, when they sell 440 tonnes
per year. Once 880 tonnes are sold, this margin will increase to 48%. The average margin in
the food industry is 13,81% (“EBITDA MARGIN”, 2019), so this company would be very
profitable.
Given the high ebitda margin, it is quite likely that multiple companies will want to join
the market. As seen earlier, there will most likely be enough demand for entry. However, the
potential companies will have to deal with some entry barriers. These may include
technology challenges, government regulations, patents, start-up costs, education and
licensing requirements.
The total necessary estimated investment costs are €5.887.500,00 for 32 tanks and
the other facilities needed. In appendix 4 this has been split up in different categories in order
to provide more detailed information. The approximated entry barrier parts were based on
this, because it was the lowest amount of tanks that Manich provided information on.
Firstly, facilities and installations need to be built. This makes up the largest part of
the investment costs, namely €5.425.000,00.
Secondly, there are many licensing requirements, because the company's business
concerns food for human consumption. The European Union as well as the German
government and the Bundesländer (German provinces) have strict rules for this. This is
regulated with the LBP Measurements (LBP = state institute for natural resources and life
sciences). The costs related to this are approximately €25.000, disregarding how many tanks
a company would have. In addition, a certain extent of safety measures need to be taken,
this costs approximately €125.000 for a hall with 32 tanks and all extra facilities.
Thirdly, the building of an abattoir costs Manich around €250.000. Other companies
don’t necessarily have to make this purchase, but considering the fact that Arapaima has an
uncommon body type that is not slaughtered in other facilities yet, it could be better to have
an own slaughterhouse.
Lastly, Manich has their own water source, a kind of underground well out of which
water will be pumped, which reduces their costs for water consumption significantly.
However, the investment for this does cost Manich €10.000. As this investment only has to
be made once, the water source gives Manich advantage over potential competitors.
Namely, the other companies would have higher water costs, which would outweigh the
investment Manich did.
Only considering the part of the investment costs that can be measured in quantities
of money, the payback period of a company with 16 tanks would be 8,13 years, as can be
seen in appendix 5. As a side note, the investment costs used in that calculation were those
for 32 tanks. So, though this appears to be quite a long time, it does prove that it is possible
for such a small company to pay their investments back. For a company with 32 tanks, the
calculated payback period is only 2,47 years. However, there are some factors that increase
the entry barrier, such as listed below.
Firstly, the patent on the known name of “Redkilau'' in Germany could be part of the
entry barrier. Redkilau is a German interpretation of the name Arapaima. This patent is in the

19
hands of Manich. Therefore, new companies have to start all over again with the marketing,
they cannot use the marketing Manich did.
Furthermore, since knowledge about the process of keeping and butchering of
Arapaima is only known inside one company, it will be necessary to make costs for research.
This could be done by, for instance, building a research facility or buying the knowledge. In
line with the specific knowledge that is required, it is necessary to find, employ and train
enough skilled employees. This could prove to be challenging, due to the fact that Arapaima
is not well known and requires a specific butchering method.
Lastly, any new company would have a disadvantage in the field of knowledge, since
Manich, even though they know enough to successfully produce Arapaima, is still doing
research to optimise their conditions. Because of the head start Manich has as well as the
research facility they own, they can innovate better and faster than their competitors.
Something that could lower the entry barrier, is the government. The German
government hands subsidies to companies for starting up an eco-friendly business like this
one. This subsidy can vary between €100.000 and €1.200.000. Requesting the subsidy takes
a lot of time and the subsidy can only be received if the company has not started building yet.
The break-even point of 137.000 kg of fish per year requires a site with only 10 tanks.
As this is not very much, it can be assumed that the break-even point lowers the entry
barrier.
Taking all this into account, the entry barrier appears to be low enough for more
companies to enter the market. The payback period is reasonable, the break-even point is
low and subsidies are available. This outweighs the investment costs, and other
disadvantages companies would have compared to Manich.

20
Conclusion
The German market for fish consists of different price categories. Arapaima belongs to the
most expensive price category, that has an annual demand of about 500.000 tonnes. Other
fish species that fall under this category are salmon, tuna, trout, char and cod. Prices of wild-
caught fish are on a constant rise that is expected to continue, resulting in the market share
of farmed fish to increase. In the highest price category, this will most likely result in a
(partial) disappearance of tuna from the market.
Arapaima needs to be kept in heated halls, increasing energy costs. However, it does
not need air in the way most fish species do, which reduces the housing costs significantly. A
great advantage of Arapaima is that they need only 1 kg of food to grow 0,9 kg in weight,
meaning they need a relatively low amount of food.
The current price can be lowered due to scale economies, but it seems impossible to
lower it by improvement of techniques, which limits the amount of potential customers.
Arapaima products are very diverse and the consumption of Arapaima has relative
advantages for both the consumer and the environment. This makes it attractive for the
target customers: high segment restaurants. Considering the similarity in taste, it would be
easiest for Arapaima to replace Cod.
There could be plenty of demand for Arapaima for at least four companies to enter
the market with a large capacity. The estimated minimum amount of fish to be produced at
the break-even point is quite low. This together with the investment costs that are relatively
low, results in an overcomable entry barrier. Due to the beneficial height of the expected
Ebitda margin, it can be expected that other companies would want to enter the market.
However, the fact that Arapaima is unknown to many people could cause issues. Besides
that, Arapaima does not seem to have any other burdens that stop it from entering the
market.
Taking everything into consideration, it can be concluded that Arapaima has the
potential to enter the market. There is even the possibility for multiple companies to do so.
Once brand awareness has increased, the market share could rise further. Since the amount
of companies that is expected to enter the market is very insignificant compared to the entire
German market of fish, the result is in line with the hypothesis.

21
Discussion
The hypothesis that there would be a possibility for companies entering the market, but that
the amount of companies entering would be insignificant was met. Due to lack of existing
knowledge to refer to, the hypothesis was vague in the defining of a specific amount of
companies that would have the possibility to enter the market. This lack of exact numbers
was a reoccurring factor in this research, because of several factors. Firstly, there was only
one company that could be analysed, so this might not be entirely representative.
Furthermore, the large amount of factors that play a role in entering a market and the
impossibility to put a number to the influence of several of these factors make it impossible to
calculate an exact number of companies that can enter the market. The results of this
research are therefore based on assumptions and estimations.
The use of sources for this research is arguably reliable. For the market research,
recent information by multiple internationally appreciated sources has been combined. The
information about the needs of Arapaima has been deducted from a research by several
professionals. The costs for the housing of the Arapaima resulted from the analysis of a
research facility unit.
This research unfortunately did not manage to reach all the initial investigation goals.
Due to issues with finding information on the reproduction of Arapaima and the costs of
processing leather, the current research lacks considerations about these topics. These
components are of importance to the realistic introduction of Arapaima to the market, since
the breeding of Arapaima within the company would further decrease the environmental
impact of the fish and the selling of leather would increase the profitability of the company.
Therefore, it is highly recommended to do more research on this topic in the future.
In short, it can be assumed that the overall conclusion, that there is a possibility for
companies to enter the German market for fish with Arapaima, can be considered valid.
However, the exact amount of companies should be considered an indication rather than an
exact calculation.

22
References
Experts
In order to gain information, we have had regular contact with the following experts:
Manich founder N. van der Post.
Restaurant owner L. Broekmeulen from restaurant De Bourgondiër (Hoorn).

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