Pete Bevington

11 April, 2008

IT SOUNDED like a great idea. Wild cod stocks under threat? Why not grow the fish in cages…organically to cash in on the green consumer who holds sway in the modern supermarket.

“No Catch…Just Cod” - a great marketing slogan boosted by a ferocious publicity campaign which saw the company win no less than 14 awards after the brand was launched in May 2006.

Business sounded good with press releases boasting No Catch cod was hitting the shelves of 640 supermarkets in Switzerland and being sliced up in Japanese sushi bars in London.

But the dream of “the world’s first sustainable white fish” came crashing down on 19 February when the administrators were called in, confirming rumours circling for months throughout the islands that this firm was in big trouble. Debts of £40 million. No cash.

The company was set up in March 2005 after city investment firm Milestone Capital financed a £21 million management buy out from Vidlin salmon farmers Angus and Ivor Johnson in the middle of the crisis when salmon prices were collapsing and companies were going broke.

Former windsurf entrepreneur Karol Rzepkowski had brought in City financier Laurent Viguié to help him, even though neither had any fish farming experience.

Rzepkowski had hit on the idea of growing cod after seeing how well some Texan customers had received a consignment, which the Johnsons had looked after on behalf of some aquaculture students at North Atlantic Fisheries College, in Scalloway.

They raised another £15 million and pledged to grow 30,000 tonnes of cod by 2012, satisfying 10 per cent of UK demand, while earning green credentials from the Organic Food Federation, Friends of the Sea, the RSPCA and the Marine Conservation Society.

Listening to joint administrator Daniel Smith it sounds like No Catch were ahead of themselves, failing to understand the scale of the challenge they were taking on. “There is no doubt they tried to run before they could walk,” he confided.

No one had grown cod on this scale in the UK before; no one had grown cod organically like this anywhere.

No expense was spared to make the cod’s life as happy as possible, feeding them choice off cuts from local fish factories and giving them plenty of room to move around their cages…they even had “toys” to play with!

They bought the NuFish cod hatchery at Broonie’s Taing for £3 million, with the help of £750,000 from the Shetland Development Trust, and Danny Watt’s old fish factory was picked up and converted using £300,000 from Shetland Islands Council. (In total the company borrowed £2.8 million from the development trust, all but £1 million has been paid back.)

It was an enclosed “egg to plate” operation which sounded wonderful on paper – complete control from hatchery to fish cage to factory to supermarket shelf bearing the company label all the way.

But there was a catch…a fatal one. It was a very expensive operation. In the first year the company lost £3 million, rising to £7.5 million and finally £10 million, three times their £3.4 million turnover last year.

When the administrators walked in shortly after St Valentine’s Day they were confronted by an “enormously complicated” situation. They wanted to sell a company, an idea, a brand, that no one was interested in. Farmed cod had no takers.

Big boys Hjaltland and Scottish Sea Farms were only interested in the assets so they could grow even more salmon in Shetland, even though Hjaltland’s owners Grieg Seafoods are one of the major players in cod farming in Norway.

It turns out there are far too many uncertainties growing Britain’s most popular fish in a cage. They take three years at least to mature, they lose weight when they spawn and mortality rates are high.

The market is difficult. The environmentally concerned consumer seeking to avoid politically incorrect wild cod from the North Sea is confused. She faces other alternatives such as line caught cod, or Pacific cod, making it hard for No Catch to gain the necessary premium.

And premium was badly needed when the only part of the fish being sold was the “loin” (an unusual industry term for a creature without legs). That meant no less than 80 per cent of every fish was wasted.

In the end No Catch cod was being sold at more than twice the auction price of wild caught cod. In truth, it was very unsustainable.

“They did produce a fantastic product, but ultimately the price it needed to be sold at and the volumes just weren’t there. They really didn’t sell that much of it,” Mr Smith confessed.

That much was not lost on the staff working in the factory at Scalloway who could see that while the company policy appeared to be “no expense spared” – 10 hour Sunday shifts at double time, for example – they weren’t producing enough fish to cover the wages bill.

Mr Smith optimistically says that cod farming today is at the same level of development as salmon farming was 25 years ago, when the pink fish took more than three years to grow and had trouble putting on weight no matter what they were fed.

“Now it takes half that time and you hardly have to feed these things. They’ve got it down to a fine art, and you can only do that with a bit of investment, trial and error.”

But no one is taking up the challenge, in Shetland at least. Mr Smith is confident of selling the rest of the business piece by piece – the trout, the mussels, Grading Systems with its unique way of sorting large fish from small for harvesting, and the hatchery, which has built up an impressive “intellectual capital” in the business of producing codlings.

Sales of most of these elements of the firm are expected in the next two weeks, and the jobs will probably be retained in the islands “because they are not easy to move”.

But the losses are huge, with the salmon firms admitting to paying just £7 million for the fish farm equipment and licences.

Both Hjaltland and Scottish Sea Farms talk of boosting production by 2010 and will probably soak up the cod farming staff working at sea. Already many of the mostly East European factory workers have walked out of No Catch and into the salmon factories where job security is higher.

Administrators Grant Thornton still have nearly 400,000 cod to grow and sell over the next year. After that the fish farm sites will transfer to their new owners, the cod factory will cease operating and organic cod farming will become another tried and failed venture in these oil rich isles so desperate to find new forms of business to keep them financially afloat in the years ahead.