KALES S COOPERATIVE

Jessica Rudder

Jason Cowin

Justin Bare

Kate Doughty

Rory Jack

Laura Moser

2014 Business Plan Competition

Foster School of Business

University of Washington

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Skales Cooperative is a producer-owned urban agriculture cooperative

that utilizes aquaponics technology to supply fresh, organic, locally grown

produce and fish to Seattle-area restaurants.

The Problem: Why Do We Need Aquaponics Now?

In Seattle, organic urban farming has the potential

to address the problems associated with current

food production practices (see box at right).

However, no cooperatives currently exist that work

to simultaneously contribute local organic produce

while practicing sustainable aquaculture in an urban

setting. At this time, there is an undeniable

opportunity for aquaponics farmers to form a

cooperative that meets restaurants’ and businesses’

growing demand for locally-produced, healthy food.

We have already partnered with True Blue

Aquaponics located in Seattle to start the

cooperative and share marketing expenses.

The Skales name references three features of our

aquaponics system: scales from fish, a system that is

scalable to fulfill a market demand, and kale to

reference local, healthy food that will be supplied

commercially.

Microgreens flourishing in an aquaponics system

(photo courtesy of True Blue Aquaponics)

The Problems with our Current

Food System:

It is heavily dependent on non-renewable fossil

fuel energy in the form of synthetic fertilizers,

petroleum based agricultural chemicals,

refrigeration, irrigation, diesel powered

machinery, and an oil-dependent distribution

system – all of which increase greenhouse gas

emissions.

Soil based agriculture is a major user of ground

and surface water in the United States,

accounting for approximately 80 percent of the

Nation’s consumptive water use and over 90

percent in many Western States (USDA).

The world’s fish stocks are severely threatened

by overfishing. According to the World Wildlife

Foundation, the global fishing fleet is double to

triple what the oceans can sustainably support.

53% of the world’s fisheries are fully exploited

and 32% are overexploited, depleted, or

recovering from depletion.

One of the most significant difficulties with

organic urban farming is maximizing food

production for the limited amount of land

available in an urban setting like Seattle. Soils in

many of the underutilized spaces in urban areas,

such as industrial districts and abandoned lots,

are often contaminated with lead, arsenic,

Polyaromatic Hydrocarbons (PAHs), or other

chemical additives left over from industrial leaks

and spills.

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The Solution

Aquaponics is …

Aquaponics is a sustainable food production system that combines recirculating aquaculture (raising

aquatic life) and hydroponics (gardening without soil) in a symbiotic environment. In this closed-loop

system, bacteria convert fish waste into nutrients for plants which then help clean the water to cycle

back to the fish (see diagram below). Our urban farming cooperative uses technologically innovative

aquaponic systems to produce quality, organic and nutritional vegetables and fish for human

consumption—with the goal of creating a cooperative network of profitable urban fish and vegetable

farms.

… Environmentally Sustainable Aquaponics uses 90% less water, plants grow up to 50% faster, is 100% organic, and can produce up

to 300,000 pounds of food per year in just 1 acre of space.

… Economically Efficient Aquaponics systems save space and can be built in underutilized urban spaces or abandoned

structures – bringing new economic life to previously empty spaces. This, in turn, keeps prices

competitive by driving cost savings from lower-cost rents, utilities, and transport.

…Scalable and Innovative We identified labor and monitoring as a major constraint for existing aquaponics farmers. To solve

this problem, our team engineered new software that will enable automatic control that can be

monitored remotely.

The Skales Prototype includes (from left to right): a 200 gallon tank where tilapia are raised, a grow bed with gravel

media and microorganisms to process the fish waste into fertilizer, and a floating raft bed ideal for growing micro-

greens and herbs. A recirculating pump will return the water to the fish tank.

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Our Technology:

In order to increase the efficiency of

aquaponics systems, we developed software

that monitors system performance and alerts

managers to problems using a web platform

accessible by smart phone technology. This

system will check important values like pH,

temperature, and water levels and use that

data to control the pumps and heaters to

maximize the efficiency of the system.

This innovative technology will increase labor

efficiency and therefore reduce overall

operating costs. This data will also be available

using Wi-Fi technology so that the managers

are able to change certain parameters

remotely. It will alert managers when

hazardous situations arise, like leaks, power

outages and malfunctioning equipment. This

will give enough time for the manager to react

and solve the problem before wellbeing of the

fish is compromised. This is just one addition

that will make our system stand out from the

competition.

The Market: The Skales system addresses the market

demand for efficient solutions to increased

local production of organic food, improving

upon the already unique technology of

aquaponics. The crops selected include Sweet

Basil, Microgreens, Yukina Savoy, Maribor

Kale, Mizuna, Arugala, and Wheatgrass, and

for the fresh-water tilapia fish. Criteria for

plant selection included compatibility with the

aquaponics system, local demand and market

gaps, ease and speed of growth, and pounds of

food produced. Tilapia were selected due to

their speed of growth, wide tolerance of

environment, and usefulness to local

restaurants.

Produce Grown in the Skales System

Which foods? Why those?

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The Skales team setting up the prototype system in the Washington Park Arboretum

Market Research Direct farm sales in King County is over $2.5 million annually.

2,027 restaurants in King County that spend an average of $370 million on food purchases annually.

King County residents spend an average of $715 per person at restaurants annually.

60% of organic food purchasers in Washington State reported that buying local is a high priority.

Locally-sourced produce has been the top restaurant trend since 2009, according to the National

Restaurant Association’s annual chef survey.

Go to Market Strategy Traction

Step 1: Research food prices for restaurant suppliers, and the factors that contribute to these prices. Reach out to local restaurants with the resulting general sumary of Skales

produce and pricing projections.

Step 2: Finalize produce availability and prices, based on initial growth of crops and restaurant

feedback. Follow up with interested restaurants, advertising Skales' schedule of

specific produce availability and prices.

Step 3: Establish temporary (six month) contracts with restaurants for committments

to buying and delivering produce.

Step 4: Based on feedback from restaurants over first six months, alter contract details or

delivery practices as needed. Establish permanent contracts and develop relationships

with consumer (restaurant) base.

Market Finalized: Long term contracts are established with local restaurants, with regular

growing and delivery shcedules. Prices are relatively constant, only increasing as more

restaurants enter market or existing restaurants expand.

Partnered with True Blue Aquaponics, the only Seattle-

based aquaponics farming company as founding

members of the aquaponics cooperative.

Received $2,000 in prototype funding from the 2014

Environmental Innovation Challenge.

Communication with local restaurants has confirmed

that chefs are frustrated with a lack of year-round,

reliable, local produce in Seattle. Chefs showed interest

in purchasing our product.

Built a working prototype in the UW Botanic Gardens

with support from the UW Farm, Washington Park

Arboretum, and UW Department of Comparative

Medicine.

Designed and developed monitoring and controls

software.

Launching a Kickstarter campaign to raise $10,000 in

mid-April, 2014.

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The Cooperative Business Model

Our business model will be a large-scale producer-owned cooperative that caters to local restaurants.

Each separate aquaponics operation will be considered an individual producer in the cooperative. The

governance within each producer will be established independently, but the cooperative governance

will be democratic, with each producer having an equal voice in decisions about the business. Profits

will be re-distributed according to the contribution of vegetables and fish for sale by each producer,

and a portion will be set aside to re-invest in urban agriculture businesses in Seattle. Skales will attract

small and large-scale impact investors eager to find business solutions that address social problems.

Organizing aquaponics growers into a

cooperative will negate the need for a large

centralized growing facility, while at the same

time producing sufficient volume of produce to

reliably supply local restaurants.

The chart below shows an analysis of key

competitors in the food-supply market for

restaurants in Seattle. It highlights the

advantages and disadvantages of each

competitor and specifies what makes the Skales

Cooperative model unique and competitive.

Notably, Skales advantages are that it provides

year-round production, saves water and space,

and has lower distribution costs.

Competitive Analysis: Advantages (+) and Disadvantages (-) of Competitors

Aquaponics

Farm C

Local Restaurant

A

Local Restaurant

B

Aquaponics

Farm B

Aquaponics

Farm A

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Economic Viability

An initial investment of $100,000 will allow

the team to invest in 12 grow beds, pay one

full-time farm manager, and two part-time

employees to operate the system:

The table shows an estimate of profit

and loss for the first three years. Based on

conversations with other urban growers

and chefs in Seattle, we anticipate high

demand for our produce and will be able to

sell 100% of production.

Based on labor, price, and yield

information gathered from other

aquaponics growers, one full time

employee and two part time employees are

needed to operate and maintain 12 grow

beds that require three fish tanks.

To have continuous year-round

production, it is necessary to stagger

planting and install one new grow per

month for the first year. As such, the

company is expected to experience a loss of

$63,200 the first year that will be recouped

in the second year, resulting in a profit of

$28,950. In the third year, we plan to invest

in 8 more grow beds, resulting in profit of

$15,050.

Time to Invest Our cooperative has great potential for success in cities like Seattle. With a high concentration of

progressively-minded citizens, there is much demand for food that has been produced in a sustainable

manner. In turn, restaurants are keenly interested in catering to customers who care about

transparency in their food system. Skales Cooperative will satisfy growing demand by providing local

urban restaurants with fresh fish and vegetables produced without the use of synthetic fertilizers or

pesticides.

Y1 Y2 Y3

REVENUES

Micro greens 9,000$ 28,200$ $ 31,000

Herbs $ 27,000 84,600$ $ 91,200

Kale 2,300$ 7,050$ $ 7,650

Fish 1,500$ 3,600$ $ 4,400

Total REVENUES 39,800$ 123,450$ $ 134,250

EXPENSES

Compensation

Farm Manager 48,000$ 48,000$ $ 48,000

Hourly PTE 9,600$ 9,600$ $ 14,400

Subotal Compensation 57,600$ 57,600$ $ 62,400

Operating Costs

Maintenance and Utilities $ 8,400 $ 12,900 $ 13,600

Fish food 2,200$ 3,600$ $ 5,300

Seeds and Starts 600$ 600$ $ 800

Marketing 700$ 1,200$ $ 1,200

Distribution 900$ 3,000$ $ 3,300

Rent 6,000$ 6,000$ 6,000$

Fish 600$ 3,600$ $ 3,600

Fish Transport 500$ 6,000$ $ 6,000

Subtotal Operating Costs 19,900$ 36,900$ $ 39,800

Start up costs

Grow Beds 18,000$ - $ 12,000

Fish tank 1,500$ - $ 1,000

Grow Lights 6,000$ - $ 4,000

Subtotal Start up Costs 25,500$ - $ 17,000

Total EXPENSES 103,000$ 94,500$ $ 119,200

Gross Profit (Loss) (63,200)$ 28,950$ $ 15,050

% Gross Margin -159% 23% 11%

Income Statement: 12 Grow Beds

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The Skales Management Team

Jessica Rudder – Planning and Operations Lead Jessica is a graduate student in Public Administration at the Evans School of Public Affairs. She has a B.A. in Business Administration and has three years of experience working in Panama on business development and agriculture projects. She currently works on agriculture and food policy for the Evans School Policy Analysis and Research group.

Jason Cowin – Construction and Engineering Lead

Jason studies Mechanical Engineering focusing on Mechatronics. He works with control systems and enjoys making projects with Arduinos for fun, making him invaluable to the design and implementation of the system controls technology.

Justin Bare – Controls and Software Development Lead Justin is a PhD student in computer science. With strong programming skills and experience in farming, he has provided key contributions to many aspects of the system design. He wrote the software for the controls system.

Rory Jack – Treasurer and Urban Agriculture Specialist Rory studies Environmental Science and Resource Management with a focus in urban horticulture. With sustainability on his mind, Rory brings a strong background of biology and experience in gardening and construction.

Kate Doughty – Farming Practices Specialist Kate is an environmental studies major, with a specialization interest in urban and sustainable food system. She is the lead coordinator for the Mercer Court farm at the University of Washington and has extensive knowledge about produce and agricultural practices.

Laura Moser – Water Resource and Project Management Lead Laura studies Civil and Environmental Engineering with a focus on water resources. In addition to knowledge about the fresh water aspects of the system, she brings experience in professional writing and team leadership.

Advisors & Sponsors Alex Currier is the founder of True Blue Aquaponics. After graduating from University of Washington he traveled south to Central America where he studied permaculture and appropriate technology for a year and a half. He manages a team that runs an aquaponics system at Central City Farm in Seattle. The partnership with True Blue has provided key planning and operation insights for the Skales team. Sarah Geurkink is the on-staff manager of the UW Farm. In previous roles, Sarah has managed an organic farm in Michigan, and a commercial incubator kitchen. She was the initiator of this project and serves in an important advisory capacity on farm management practices. Nick White holds an MBA from the Foster School of Business. He competed in the Business Plan Competition in 2012, and leveraged the experience to launch an internet start-up. He advises the team on financial modeling and business planning.