June 6, 2011 | Robert Puro

Eight miles off the shores of Panama, past the horizon line in 220 feet of water where 15 – 20 foot seas are the norm, sits one of the most unique and sustainable open ocean aquaculture operations that Seedstock has ever come across. Run by US-based aquaculture startup company Open Blue Sea Farms, the operation currently consists of a number of technologically advanced offshore pens in which a fish species known as Cobia is harvested carefully and humanely in pristine ocean waters. For reference, Cobia is a white meat fish that resembles a small shark in appearance and can grow to a maximum length of 78 inches and weight of 150 pounds.

The company compares its sustainable approach to farming Cobia offshore in the open ocean to that of raising free-range beef, poultry and eggs. Open Blue Sea Farms is a vertically integrated business that manages every aspect of its aquaculture operation from hatchery, ocean growout and harvest to processing, marketing and sales.

I recently had the pleasure of interviewing Brian O’Hanlon, President, Founder and Director of Open Blue Sea Farms, to learn more about the origin of the company and its operations, business model, sustainable practices and long-term objectives.

The Interview:

Q: Where did the idea for Open Blue Sea Farms come from?

Brian O’Hanlon: I am actually three generations in seafood. My family has been in seafood wholesale and distribution since the 1950s in New York in the Fulton Fish Market and now in other parts of the country. Back in the ‘80s and the early ‘90s, I remember that they were beginning to have problems sourcing high quality fish, especially marine species and that the farming was really focused around just a few industrialized species of fish. So from that combined with the negative press that was out about farms, I developed an interest at a really young age into aquaculture and looking at the future of aquaculture.  I was a fish in the ocean and just personally love spending time on the water so naturally I was attracted to this whole concept of farming in the ocean, offshore.

Q: When did Open Blue Sea Farms have its first harvest?

O’Hanlon: This started for me in Puerto Rico. We had a demonstration project there for seven years. So our first harvest was in 2003 on a very small scale, but that was a small three-cage demonstration project. We didn’t actually start operations in Panama on the full commercial scale until 2009. We had our first harvest in Panama in 2010.

Q: Why did you choose to base the company out of Panama?

O’Hanlon: One of the biggest reasons is transportation. We move a lot of raw materials in order to build the farm and feed the farm, and we also want to have low costs and numerous options of transportation to market. Panama is unmatched in this region in terms of its availability of container freight and airfreight incoming from all over the world, but also directly to the US. The Panama Canal is the epicenter of transportation in this whole region. No country in this region can compete with us in transportation costs and availability.

There are other reasons: the lack of hurricanes is a big one, the stability of the government is a big one, and the pro US relationship that Panama has had for a long time is important. The availability of species for diversification here is huge.

Q: What is your company’s business model?

O’Hanlon: We have built a platform here that can produce many different species. That’s one unique thing about the way we’re doing it. It’s unlike most farmed fish where it’s a very unique species-specific production platform.  We can actually move dozens of different types of fish through the system, so we’re trying to build an umbrella brand that we can next year and the year after introduce new species through that pipeline.

Q: What role does sustainability play in your company’s operations?

O’Hanlon: Well, it’s big. A big reason why we’re going so far offshore is to get out into an environment that is essentially like the desert of the sea away from highly senstitve ecosystems, away from corral reefs, away from mangroves and seagrass beds. We’re out in an environment where the currents are strong and brisk and we never see the same water twice.  There’s no accumulation of any waste.

One of the first reasons to move out offshore was environmental, but along with that came social impact. We’re using parts of the ocean that no one uses, so we don’t have that issue with fisherman, we don’t have navigational issues, we don’t have recreational conflict. We don’t have conflict with any stakeholder because we’re so far out using a piece of the ocean that no one’s ever used before and because it is a desert, because it is just nothing out there, flat bottom, featureless, there’s no fishery in that area so it hasn’t been a targeted spot for fishing.

Those are the underlying reasons why we went offshore is for environmental and social reasons, but the biggest benefit that we’re finding is for the fish. You know the fish, this is just where there supposed to be. We’re growing these big pelagic marine fish that aren’t supposed to be cooped up in little cages in a bay with little water circulation. They have evolved to live in deep clean open ocean waters and that’s where we’re putting them, that’s where we’re growing them. The fish never see the same water twice, the currents are just strong, the volume of the water in the cages is replaced every few minutes. The fish are really reacting extremely positively to it. They’re growing extremely well, very efficiently, zero health problems. I think that’s one the big advantages of going offshore, just how well the fish do in that environment.

Q: Who are your customers and how do you market to them?

O’Hanlon: My family has actually been heavily involved in the sale of the fish and I am pretty much on my own with the farming. They have really been helping a lot on the marketing side with the connections and the channels that they have established, but right now we import everything through my uncle’s facility in Miami and then he redistributes around the country mainly to white table cloth restaurants and high-end outlets.  Our volume is still small. We’re only harvesting about 12,000 – 15,000 pounds a week. So we keep it in the premium market right now. As our volume grows we expect to be getting into more retail and restaurant chains and other type of channels as well.

Q: How do you build awareness for Cobia and drive customer trial of the fish?

O’Hanlon: In terms of getting awareness around Cobia, because it’s not a very well known fish, the key is just consistency. The key is keeping the fish on the market in the customer’s hands, because between us and the actual consumer of fish there’s often two layers or three layers; so we have to pitch it to the distributor, who then sells it to the restaurant, who then sells it to the consumer.  For the distributor to get the restaurant to buy it, it’s not going to work if you only have it occasionally. Maybe they’ll buy a little bit, but they’re not going to buy a lot. And then for the restaurant to sell it to the consumer, you know they’ll come in and buy it as a special if it’s on the menu occasionally, but they’re not going to become regular buyers of Cobia if it’s not on the menu regularly. Right now it’s just keep it consistent, keep our volumes growing slowly and the fish gets out there, people try it, they like it, they order it again and again. We just have to keep the product flowing.

It’s a really great fish. It’s a very mild flavored fish, but it really retains its moisture. It’s big, flaky meat, and it’s firm, but as soon as you put it in your mouth it just kind of melts in your mouth. It holds up on the grill.  It holds up to various different ways of cooking but it’s still very nice soft flaky meat and it’s very mild, very versatile so you can pretty much do anything with it.

Q: Are you growing based on market demand or capacity to produce the fish?

O’Hanlon: No. The market is there.  The seafood market’s huge. There’s a giant demand for quality white fish on the market. We are growing based on capacity, on production targets that we know we need to hit for profitability. We’re still an early stage company and we know that there’s certain threshold and output that we need to get to. Any type of farming business whether you’re a premium product or a commodity product there’s a certain volume you need to hit to cover your overhead. We’re producing about 400 tons this year and we’re trying to grow over the next 24 months to about 2000 tons before we take a step beyond that. We’re not growing based on the market; we’re growing based on capacity, production, and the operation of the business. The market is there.

http://www.youtube.com/watch?v=lXX9EHC8Fpw

Q: What are some of the challenges to scaling your operation?

O’Hanlon: The scaling requires a couple different elements to be built and expanded. We have small hatchery, we just bought property to build a bigger hatchery. We have a port that can handle small boats, but now we’re driving bigger boats so we need to upgrade the port and build a bigger pier. The infrastructure needs to catch up with this. The challenge in scaling – for us right now it’s just about this momentum that we’ve got and just keeping it going in this direction.

Q: Where do you hope to see Open Blue Sea Farms in 5 – 10 years?

O’Hanlon: In five years we expect to have this Panama platform scaled to a point even beyond profitability.  We expect profitability in about two, but I expect the five-year time frame is going to have more to do with diversification here in Panama, and to be able to offer our customers and our channels two, three, even four different seafood products that would complement each other. Every customer we have ever had has asked us: “What else can you grow? Can you produce anything else?” We can easily sell somebody 100 pounds of Cobia and they’ll buy 100 pounds of snapper from us if we have it. We want to leverage that side more than leveraging the farming and production side of the business. So the five-year time frame is all about diversification in terms of products.

The ten-year time frame is more about diversification in terms of geographic diversification and perhaps looking at different markets and different parts of the world to build farms. I think one of the great things about the way we farm in these highly exposed environments is that we have more of the ocean to farm and we can actually move the farms closer to the markets and move the farms closer to major centers of transportation. With the Panama sites we target the US market and this regional market, because this is what’s close to us. But I think in the ten-year time frame we’d probably be looking at targeting other markets overseas and perhaps building farms closer to those markets.