We have just completed our bookkeeping for quarter 3, and 4 products (Arctic surf clam, American lobster, great Atlantic scallop and giant tiger prawn) stood out for the wrong reasons. Our product cost has always been much higher (35% - 40%) compared to the industry standard (25% - 30%); unfortunately for us, the frequent changes made to suppliers/supplies due to our pursuit for quality pushed our actual product cost for these products beyond 40%. Coupled with their seasonality pricing, we were hit with very low margins and this has impacted us financially.

With that, I have to increase the prices for these 4 products just to put their costs back down to 40%. Do trust that we will continue to monitor, negotiate and source for quality produce at a better deal. Whenever we get them, my commitment is to pass on the savings to you.

Ken Loon

The simplicity of our approach has led to some customers labelling us as pricey. They assumed that our minimalistic approach and self-service policy should equate 'cheap'. But what is their benchmark? Who are they comparing us with? Is it based on the exact same products; species, quality and size?

I would like to take you through how every step taken in bringing that plate of seafood to you plays a part in the pricing… let's start from the beginning.

Sourcing - selection of species 

Our main focus has been crustaceans and molluscs…, we decided to complement that with groundfish (demersal); fish that live on or near the bottom, sharing the same habitat as crustaceans. 

Within these three categories are some of the most expensive species in the market today… in fact, the majority of the groundfish species are valued higher than most of their pelagic counterpart.

To date, we have experimented with 18 species of lobsters, 17 species of prawns/shrimps and 21 species of groundfish. From this list, we have identified 5 species of lobsters, 9 species of prawns and 7 species of groundfish for our menu.

Sourcing - quality

The definition of quality is broad… it encompasses the country of origin, seasonality, sustainability, condition, harvesting method, size, treatment (if any) and logistics.

For The Naked Finn, quality crustaceans are defined as live or frozen onboard and wild-caught. Fresh (dead on ice), land frozen and farmed are typically much cheaper. Fresh is not really ideal as most would have been dead for a few days… crustaceans begin to putrefy on the fourth day. We avoid land frozen crustaceans; pre-treatment to freezing with chemicals is usually carried out with sulfites as the main agent, and the crustaceans would have been dead for quite a while.

We only focus on common sole (dover sole), turbot, angler (monkfish), lingcod and blue cod for our groundfish selection. Except for turbot, which is a label rouge product from France, everything else is wild-caught and most importantly, line-caught. Line-caught fish is often regarded as the highest quality, typically unbruised and so they cost more than trawled fish.

Next is country of origin. Importing from Europe and Australasia will definitely cost much more than getting shipments in from regional countries. On top of the higher air freight costs, certain countries impose high fees for certification and export documents.

Although the above criteria is clear, logistics, including packaging, remains the most crucial factor for us. We can stipulate the quality from the source, with a preference for day-boat fishing (boat that goes fishing and returns the same day), but if it takes longer from the country of origin to reach Singapore, quality will be compromised. We are working with 9 suppliers in Singapore, tracking the caught dates to arrival dates, right down to the inspection of their delivery trucks to ensure proper temperature and storage. This approach allows us to map out the exact species we can buy from each supplier to ensure consistent high quality of our shipments.

Storage

Apart from the standard chillers and freezers, we have invested in a modern live tank setup that can maintain the temperature at 6-8°C via a titanium coil. It is powered by a 12,000 BTU compressor running 24/7, and we only use purified seawater delivered to us regularly for every water change. The average monthly running cost for this live tank is $1,300… and that is only for one tank. Once we put in our second compressor, our monthly running cost should hit above $2,600.

Conclusions

We are obsessed about which species are the best-in-class, what are the optimum sizes, where are they from, when is the season to buy them, who to buy from, how long it takes to reach us, the equipment necessary to preserve them and how long will they last in this environment. We are obsessively protective about the ways we source our produce as this is the critical first step to achieving simplicity in our products. 

That is not to say that we are making a much higher margin just to buy and preserve quality. On the contrary, our cost (against selling price) for most of our products are between 35% - 40%, when the industry is hovering between 25% - 30%. 

I trust that this will help our customers understand what they are paying for. It is not an easy process but we believe in it wholeheartedly and will not do it any easier just to make more money.

Ken Loon
July, 2013

List of current products:

Sword razor shell (Ensis siliqua) - diver-caught, live, Scotland
New Zealand littlenecks (Austrovenus stutchburyi) - wild-caught, live, New Zealand
Great Atlantic scallop (Pecten maximus) - diver-caught, live, Scotland
American lobster (Homarus americanus) - wild-caught, live, Canada
European lobster (Homarus gammarus) - wild-caught, live, Scotland
African lobster (Metanephrops mozambicus) - wild-caught, frozen onboard, Mozambique
Giant tiger prawn (Penaeus monodon) - farmed, live, Singapore
Gamba rosada (Aristeus antennatus) - wild-caught, frozen onboard, Malta
Gamba española (Aristaeomorpha foliacea) - wild-caught, frozen onboard, Malta
Gamba carabinero (Aristaeopsis edwardsiana) - wild-caught, frozen onboard, Spain
Northern prawn (Pandalus borealis) - wild-caught, frozen onboard, Norway
Barramundi (Lates calcarifer) - farmed, fresh, Singapore
New Zealand blue cod (Parapercis colias) - line-caught, fresh, New Zealand
Angler "monkfish" (Lophius piscatorius) - line-caught, fresh, France
Common "Dover" sole (Solea solea) - line-caught, fresh, France
Turbot (Scophthalmus maximus) - farmed (Label Rouge), fresh, France
Lingcod (Ophiodon elongatus) - line-caught, frozen onboard, Alaska (USA)

After a few attempts, we managed to retain the natural sweetness of the live scallop...