Joe Cardenas is a numbers guy, and to him, the numbers look good for Florida-farmed pompano.
On 16 August, Cardenas formally opened Aquaco Farms, a 20,000-square-foot recirculating aquaculture facility in Fort Pierce, Florida. The opening of the USD 2.5 million (EUR 2.3 million) project, capable of growing 10,000 pounds of pompano, a species that is both local to and popular in the U.S. state of Florida, is the culmination of many years of work for Cardenas.
Four years ago, at age 42, Cardenas retired as the head of the commercial lending arm of BB&T Bank, a midsized regional bank in the Southeast U.S. Looking for his next gig, the Florida native began checking into industries being promoted in counties nearby his home in Palm Beach County.
“The 16 years I spent in banking was a lot of fun. I got to know so many different industries, and I became an expert of none. But seeing how operations worked in the sectors I studied, like agriculture, sugar, and citrus, to me it was always intriguing,” he told SeafoodSource. “The commercialization wheel kept spinning in my head … and I eventually decided I wanted to see Florida’s portion of the aquaculture pie, which is super-thin now – I wanted to see it grow.”
Cardenas describes the next six months of his life as “very boring,” mostly spent hunched in front of a computer or on the phone, crunching numbers and reviewing case-studies.
“I went right to what didn’t work – studying the failures. And there was no shortage of them,” he said. “But it wasn’t a 100 percent failure rate. So then I wanted to find out, why is aquaculture working for some and not for others? And fortunately, the aquaculture sector has a very open culture. People were very friendly compared to other sectors and were willing to have a good conversation. It was very interesting to me, people their sharing trials and tribulations.”
As Cardenas got further into his evaluative process, he became obsessed with calculating the cost of producing one fish, taking into account building costs, equipment, utilities, and feed.
“It irked me to death I couldn’t figure out that question. No one had an answer to it, except maybe some of the bigger players, who weren’t going to tell me. The smaller ones didn’t really have it figured out,” he said. “Long story short, I got my arms around that number, and then I looked at species that at least on paper could double that margin.”
Looking at market prices, demand, and existing commercial offerings – often dealing with buyers and sellers who preferred to keep that information private – took Cardenas an additional two months. In the end, the list of species meeting his qualification was short.
“It was both promising and disheartening that there weren’t many,” Cardenas said. “I looked at native species. I’ve caught and eaten a lot of Florida pompano, and they’re delicious. That one kept jumping to the top of the page. But I wanted to be sure it was ready for aquaculture now – I didn’t want to start a big R&D project. Once I knew I could keep them alive at density, that’s how I chose pompano.”
Knowing he would need help for the build-out phase, Cardenas sought out and hired consultants biologist Nick Brown and aquaculture systems engineer Paul Hundley to design the RAS.
“We had to build from scratch, and Nick and Paul were the only two who were as pessimistic as I was, which to me was a sign I was on the right track,” Cardenas joked. “I knew they would be honest with me.”
Based on aquaculture’s “preferred industry” status in Saint Lucie County, which gave him advantages in utilities fees and costs and fast-track permitting, the team decided on an eight-acre site in Fort Pierce, bordering a couple of saltwater lagoons. Contrary to nightmares he had heard from others about the permitting process, Cardenas said he had no problems.
“Florida and Saint Lucie County did their best not to roadblock development and link us with other agencies, which made our lives a heck of a lot easier in streamlining conversations that advanced the project,” he said.
Cardenas brought on Dan Farkas, who helped start up Open Blue’s hatchery in Panama as his first employee and the team set to work on designing and engineering the new facility.
“It was a dangerous approach to democracy – all of us around the table, no egos, and we somehow managed to all agree on our approach on every step,” Cardenas said. “I challenged the team not to settle for out-of-the-box solutions. From studying the numbers, I knew the only way to our profitability was to keep our [capital expenditure] costs within reason.”
Built for USD 2.5 million (EUR 2.3 million) with little change from the original 3D plan, the facility has no ground injection for waste treatment and recirculates 97 percent of the water it uses. Fish feces is collected and sold for fertilizer. The building is insulated and equipped with de-gassing technology, so water temperatures can efficiently be maintained at 80 degrees, which is pompano’s ideal growth temperature, according to Cardenas.
The newly-minted Aquaco Farms received its first batch of 10,000 fingerlings around four months ago, with their nine-month grow-out cycle scheduled for completion in January or February. Cardenas hopes to build up to harvests of around 10,000 pounds, which is enough to supply around 35 to 40 restaurants, he said. He has just begun talking with distributors and negotiating purchasing agreements. Aquaco will sell only whole fish and will not do any processing, he said.
“It helps a lot to have local distributor to pick up the fish and do the processing. It saves us quite a bit on our costs not having to do any boxing or prepping any kind of processing,” he said.
Aquaco now has a standing order for 15,000 fingerlings per month from nearby hatchery ProAquatix and has established a relationship with Pennsylvania-based feed manufacturer Ziegler Feed. Relying on outside vendors, especially for fingerlings “was the most nerve-racking part of the whole project,” Cardenas said, but thus far, “quality has been great.”
“They’re delivering what we’re asking for,” he said. “I had a heart attack making that decision but I’ve been happy with the results.”
He said everything is lining up so his initial investors will recoup their investment within three years, especially as word has spread in Florida about his product soon becoming available.
“Just based on what I’m seeing and hearing, I don’t think I can produce enough to even be close to meeting the demand even locally,” Cardenas said. “I don’t even think I’ll have to start peeking my neck out of Florida, even though I’ve gotten interest from outside the state, including from Louisiana, Georgia, and the Carolinas. The two big hubs around here, Orlando and the West Palm Beach/Fort Lauderdale areas, seem to have no shortage of demand. Chefs seem to love the flexibility of having the option of fillets or whole fish, which has plate-size to it. And at the end of the day, pompano is a good tasting fish, which is why I chose it. I’m probably not as good of a marketer as I am a financier – I didn’t want to spend half my time convincing people it’s a good tasting fish versus them knowing that already.”
Getting close to tasting the fish he has spent years of his life learning about and now growing, Cardenas said he’s relieved “the pain of the last two years is nearly over.”
“I’m naturally pessimistic and I tend to worst-case things. I just want to hit expectations. But so far, results have been great. The fish are growing faster than we thought – the feed conversion has been better than we thought,” Cardenas said. “I’m looking forward to stretching our marketing wings. It’s frustrating because we’ve gotten lots of inquiries but we’re proceeding cautiously, because lots of projects go way too fast, way too quickly, and oftentimes those projects end up in the ‘did not make it’ pile.”
That doesn’t mean Cardenas isn’t thinking big. A planned second phase of expansion will scale up the Fort Pierce facility from producing 120,000 pounds annually to 500 tons and add a hatchery at a cost of USD 7 million to USD 7.5 million (EUR 6.2 million to EUR 6.6 million). Unlike the first phase, which was funded by Cardenas and mostly local Floridian investors, debt will account for 30 to 40 percent of the second fundraising round, he said.
“We stayed away from any type of debt for the first round, because it wasn’t practical in my eyes. But now that we’ve got a proof of concept done, a market we’re selling to, and assets, it gets easier to make USDA-backed lenders comfortable with debt-funded growth,” he said.
Longer-term, Cardenas has even bigger plans.
“If we get to the stage where our phase two is successful, we’ll have a blueprint model for land-based aquaculture and then we do want to scale past that to multiple sites, producing thousands of tons a year. Opening another location would mitigate risk operationally and there’s a lot of logic in shared costs of one major headquarters, one hatchery and nursery,” he said.
Opening three or four more sites – not necessarily farming only pompano – would take Aquaco from a USD 10 million to USD 12 million (EUR 9.1 million to EUR 10.9 million) operation to more than USD 100 million (EUR 91 million) in annual revenues, Cardenas said. But that’s at least five to seven years away, and a lot has to go right before those dreams become reality, eh said.
“We can always expand if things continue to go well for us. But one of the things the aquaculture industry has to do is take a breath, get some winners out there, and show people this is doable and that this is a profitable industry,” he said. “There are not enough winners operating at any scale. Scaling up is more investor-driven than operator-driven – if you want to scare an operator to death, tell them to scale. Somewhere in the middle is the right answer, and that’s what we hope to find.”
Photo courtesy of Joe Cardenas/Aquaco Farms
