Business Proposal

DIAMOND AQUA LEADS

To develop and enhance the

Ornamental Fish Industry by culturing

the fresh-water fisheries and treating

all Fish Disease, and providing proper

Fish Food in order to gain/ enhance

the growth of the fish, and pigments.

Mrs. P. Nishanthi Senevirathne

No.15/1, Woodland Mawatha Kohuwala – Nugegoda

+94 78 7370137 (mobile)

+94 78 5165676 (hot-line) +94 71 1146461 (hot-line)

+94 11 2809646 (work/ fax)

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Table of Contents

1. Executive summary ................................... 04 1.1 Introduction ................................... 04

1.2 Enterprise Description ................................... 04

1.3 Mission / Success Vision ................................... 06

1.4 Critical Success Factors ................................... 06

2. Overview of the World Ornamental Fish Trade ................................... 07 2.1 Market Analysis .................................. 07

2.2 Import and Export ................................... 08

2.3 Advantages/ Disadvantages of Breeding .................................. 08

2.4 Diseases ................................... 08

3 Business/ Enterprise Overview ................................... 09 3.1 Product Description ................................... 09

3.2 Business Planning and Marketing ................................... 09

3.3 Marketing Plan ................................... 10

3.4 Development Plan ................................... 10

4. Business Management ................................... 10 4.1 Short and Long-term Benefits Management ................................... 10

4.3 Community engagement ................................... 10

4.2 Risk management ................................... 11

4.4 Price Management along the Trade Chain ................................... 11

5. Financial Plan ................................... 11 5.1 Summary of Financial Projections ................................... 11

5.2 Assumptions and Financial Drivers ................................... 12

5.3 Funding and Funding Requirements ................................... 13

5.4 Security/ Collateral Offered ................................... 13

Objective of the Business Proposal ................................... 13

Costing and Pricing ................................... Annexure-I Initial Start-up Costs ................................... Annexure-II Average Sales Forecast ................................... Annexure-III Cash-flow Statement ................................... Annexure-IV Forecasted Working Capital Requirement ................................... Annexure-V Capital Budgeting – Return Over Investment ................................... Annexure-VI

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1. Executive summary

1.1 Introduction

The fish-keeping hobby is believed to be started in China 1000 years ago where it

spreads’ to England in time due to rapid technological advances with the advent of air

transport popularised it. Aquarium fish keeping began in 1805 though, the first public

displayed aquarium opened at Robert’s Park in England in 1853. The world’s best

aquarium is in San Francisco where the aquaria are placed in 10 levels; one above other.

Tropical ornamental fish comprise a varied list of fishes, each with their own peculiar

requirements for commercial production, and market for these fishes are as varied as

the fish themselves. A considerable amount of prior knowledge is recommended to

anyone who wishes to enter the field since it is extremely difficult for new producers to

get faire information on how to produce tropical fish; many production techniques and

management skills required, the specific methods for production for given species are

closely guarded secrets.

However, ornamental fish keeping is becoming popular as and stress relieving hobby. In

general, about 7.2 million houses in USA and 3.2 million in European Union have

aquariums and this figure is increasing day by day throughout the world. The fact is that

USA, Europe and Japan are the largest market for ornamental fish but for more than

65% of the exports rooted from Asia. This is a encouraging news for developing

countries like us that more than 60% of the total world trade rely on it.

1.2 Enterprise Description

Diamond Aqua Leads (Ornamental Fish and related businesses) of Kohuwala, Nugegoda

is to start a green business based on the rich ornamental fish resources all around the

country and know-how to better benefit local fish collectors and small-median

companies who display ornamental fish tanks at their companies by providing cultured

Fishes, improved healthy Fish-food, unique/ special Fish-tanks with filters (hassle free),

consultations/ technical support, Imports & Exports.

This initiative evolved a long-term research by Mr. Dumil Peiris (my husband) who has been studied fish ecology and socioeconomics of fishery for nearly two decades which we felt that the moment is ready to use our knowledge and contacts with the outside world to develop a venture business with fish-farmers and small traders, and small-medium fish collectors, and to involve in export trade. The Diamond Aqua Leads is aimed to put a fair trade system in place through remote of fish-farmers in Sri Lanka to the demand of local and international fish collectors in view of getting foreign exchange in to the country.

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In order to keep the fresh-water fishery viable amongst an increasing amount in remote

villages in Sri Lanka, fishes bred in captivity outside the region where they couldn’t find

a reasonable market for it, we have to find a solution for problems of fish-farmers.

Through this venture we can effectively advocate a socio-environmentally responsible

“green” ornamental fish industry.

Ornamental fishes are one of the few natural resources that can be extracted from the

country’s mud-ponds with no significant impact to its environment. Since the 1950s as

favourable local climate conditions, ample availability of perennial fresh water source

throughout the country, promotion of small scale ornamental fish breeding as the

livelihood of the household in the country and the ever growing global market for the

ornamental fish have been the driving forces to exist in this trade. Annually, 300 million

small tropical fishes are caught which can export to worldwide aquariums that could,

generate over 8 million USD revenue of foreign income. In reality, the revenue might be

up to 10 million USD high if the Government facilitated/ funded for this trade, since the

world trade of ornamental fishes has reached more than 500 million USD, and is

growing at around 10% per year.

The traditional trade system has experienced no significant change since the rubber

boom in the 19th century. However, in recent years, village folks have started to

question whether they receive a fair share of the fishery. They have taken the initiative

to organize a union and some sort of cooperative and demanding a fair trade system,

but they do not have the means to establish different trade processes.

We have been encouraged by fisheries board and international ornamental fish

organizations and traders to develop a fish trade catering to a specialty fish market. We

have already tested this niche market for two years, and can further develop it with an

organized CO-OP in the future as we still scratched the export market though. We are

going to start by establishing small family production units (buy-back), providing

training on ornamental fish care and encouraging entrepreneurships which led to

ecotourism. This is especially important because the families involved will act as

environmental protection agents, as their income is directly linked to the preservation

and well-being as a proud Sri Lankans which favours the “Mahinda Chinthane”.

Directly buying the fishes from the villages does not impact the export price, but

relocates part of their gains along the trade chain back to them. Using the existing

system, the start-up cost will be low and potential benefit can be high. One step at a

time, they will learn trading skills and improve product quality, since our goal is to

include all villages in the region towards a sustainable trade practices.

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Diamond Aqua Leads also facilitates Testing and Disease control which could be dealt

with through our range of fish-medicines, Breeding, Nursering, Brooder management,

Grading and Selection facilities, Culturing and Export preparation, Cement Ponds/ Glass

Tanking and Mud ponds with the use of suitable technology together with research

findings and the best practices in the country. Further, our franchise farm networks will

others to supply variety of ornamental fish, aquatic plants and other aquarium products.

This analysis also develops criteria to assess whether development for ornamental

species should either be cautiously approached, or avoided all together, after all, our

aim is to enhance exports with well planned and perfectly scheduled production, as last

year or so we have studied the industry with several pilot projects in order to ensure its

competitiveness in line with several aspects. However, Diamond Aqua Leads should

focus to build the sustainable and greener Aquaculture Industry in Sri Lanka.

1.3 Mission / Success Vision

Our Mission is to establish a viable, fair and sustainable trade system that can replace

the century’s exploitation in the Country.

Our Success Vision is to help rural fishers to sell more fish and be fairly compensated for

it. In partnership with fishers´ and participating traders, we are building a niche market

for ornamental fishes based on innovative technologies and a socio-environmentally

responsible fishery. Diamond Aqua Leads is aimed to build a fair trade system through

the partnership of fish collectors, traders and public institutes to offer specialty fishes to

add market value of ornamental fishes by providing proper fish-food and reliable

fish-medicine.

1.4 Critical Success Factors

This Project has already made thorough studies on ecological and economical aspects of

the ornamental fishery and start export since 2007. Rural areas have immigrated to the

urban centre often moved to the municipal town, in order to obtain better education for

their children and health care for elders. This is mainly due to the fact that ornamental

trade and tranships point. Maintaining a viable ornamental fish industry in the region is

a small investment to preserve social and environmental integrity.

Since, the Diamond Aqua Leads still holds the monopoly market over Fish-food and

Fish-medicines through Sri Lanka’s leading supermarket chains like Cargill’s, Keell’s and

Arpico, only the awareness/ marketing programme to be carried-out.

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Guppy

2. Overview of the World Ornamental Fish Trade

2.1 Market Analysis

The global trade in the ornamental fish that people like to see, floating around glass

tanks in homes, officers, hotels and public places.

The global trade in ornamental fish is estimated to be USD.300 millions, while Singapore

and other South East Asian countries accounted for 80% of the global trade. Sri Lanka

figures in the fringes with USD.10 millions, core exports.

The main markets are USA, UK, Belgium, Italy, Japan, China, Australia and South Africa; with its tropical climate, Sri Lanka can become a key-player. However, Sri Lanka is waking-up to yet another business opportunity – aquariums as Sri Lanka is among the major suppliers of marine varieties; other countries are Philippine, Singapore, Indonesia, Caribbean, Kenya and Mauritius.

There are more than 100 regularly exploited species for the

export market, one verity, Cardinal Tetras (Paracheirodon

Axelorodi), and other one is Guppy fish (Poecilia Libestes

Reticulata) which are absorbed over 80% of the total fish export,

and also the harvest as well.

Out of which that the Guppy has been deliberately set free in

several Asian countries (including Sri Lanka) in an attempt to

combat Malaria, though they originates in South and Central

America.

These fishes have are easy to breed and they will often spawn without any extra

encouragement, and some have already replaced the fresh-water supplies in the market.

As in captivity bred they become an economically viable alternative, where other

fresh-water fishery may be threatened in the near future.

All the different fish species require different food types, and the feeding of fish and

their nutrition is one of the most important factors in keeping them healthy. Fish are

very diverse in their habits and in their eating patterns too. Some fish are bottom

feeders, while others feed mid-water, most of fish are strong surface feeders, and some

fish enjoy eating plants. Due to the lack of knowledge, most collectors used surface

fish-food and moreover, imports such fish-food (like pellets) though we manufactures

proper fish-foods, thus the market for the Fish-food is not in satisfactory level.

Cardinal Tetra

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Ornamental Fish-medicines are to cure diseases and infections like bacterial infections,

fungal infections, and external or internal parasites in fishes. Theses medicines are cure

external cotton wool, like growth on the surface of the fish and also to reduce the nitrite

toxicity in fish tanks, and cure skin haemorrhages, pop eye/ eye related infections,

Protrusion of scales etc. A Market for the ornamental Fish-medicines are in a better

level than the Fish-food for an expensive fish ranges, since the collectors who have

expensive fishes are well-informed.

2.2 Import and Export

The problem in exporting tropical fishes is air connectivity to the markets from the breeding point. Other major issue is the licensing of brood stock imports, Liberal imports will provide greater boost to the industry instead.

However, most of the foreign fish varieties are exports/ brought in to the world trade

from Sri Lanka.

2.3 Advantages/ Disadvantages of Breeding

The history of the fish breeding goes back as far as 1163 but in the year 1841, M. Ward,

a natural scientist, at the time introduced this ornamental fish keeping as a hobby, to the

common people through the construction of an aquarium with fish.

An ornamental fish production unit may be of three types; a breeding unit, rearing unit

and combined breeding & rearing unit. The profit depends on the carrying capacity,

specific species and infrastructure. Marginal farmers who breed or rear the fish have to

sell them earlier stages due to the lack of proper equipments and which is less

profitable, better-off farmers rear the fish to an optimum size and which is more

profitable though.

Advantages Disadvantages

Less water requirements High initial investment

Production throughout the year Complexity

Ability use existing buildings Sub-lethal effects of ammonia carbon

High yields per gallon of water Lack of successes needed for funds

Improved feed conversion rates Inefficiencies in filtration

More control over the business Expensive filtration

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2.4 Diseases

Except for species – specific viruses, all major diseases of food-fish aquaculture, occurs

in the ornamental fish industry plus a few unique to the tropics. Since, the ponds and

tanks in which ornamental fish are kept tend to be small, and of the large variety of fish

in any one facility, disease management takes a considerable amount of a manager’s

time.

The current benefit and risk analysis of the aquaculture industry focuses on the

fish-food production sector. Only a brief overview is given here since numerous review

articles have been written, and the benefits and risks are still being widely debated.

Benefits that are less discussed include, food conservation, and research into life history

characteristics particularly of the early stages. The risks of fish-food aquaculture include

nutrification value and the fish-foods which gains natural colourings of the fish where

water bodies, addition of anti-biotics and other chemicals to the ecosystem,

introduction of non-native disease, user conflicts.

3 Business/ Enterprise Overview

Name : Diamond Aqua Leads Location : No.15/1, Woodland Avenue, Kohuwala – Nugegoda (Western Province)

The initiative applies to practice the bio-ecological and socioeconomic studies of the

Project started in 2007, and aims to develop a fair and greener trade for ornamental

fishery, which is deemed as an alternative means to export conservation.

3.1 Products Description

We provide cultured fresh-water ornamental fishes to the world market and develop

new technology to enhance fish quality. Those fishes are small with a short life span

(around 2 years). The fishing grounds cover less than 5% of the habitat, which means

that fishing can be done sustainably without affecting the ecosystem. Ornamental

fishery provides subsistence-level income to rural folks, and keeps them from engaging

continuously where they’ll receive fair amount of money.

We have all types of Fish-foods (locally made and imported) for bottom/ mid-water/

surface feeders which are nutritious and helps gain fishes’ colour.

Diamond Aqua Leeds provides comprehensive answers to all fish disease through range

of medicines through years of researches, only the awareness project to be carried-out.

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3.2 Business Planning and Marketing

We have made a successful pilot export venture business with several foreign fish

collectors, few international distributors (City Aquarium, Muiveyo, Eureka Aquarium at

Maldives/King Fish at Qatar), and further we have identified principal bottlenecks along

the trade chain. Diamond Aqua Leads will further develop the proven market with the

rural farmers and improve local collectors’ facilities to guarantee a steady supply and

good quality products.

Our marketing strategy is first aimed at meeting existing market demands and secondly

at supplying new varieties of fishes to the export market like to Maldives, Qatar. The

rural folks/ farmers will receive special workshops/ trainings and nursing of

ornamental fishes. We will purchase their fishes directly from the (leaving out the

intermediary), and then sell such to the local and international buyers/ collectors and

distributors

3.3 Marketing Plan

First to establish a couple of specialty fish trade module, which may include 5-7 Cardinal

Tetra families, one or two exporters and one importer. Trade unit can compete for

quality and novelty fish supply that would encourage entrepreneurship.

Our first target market is China and other Asian countries where we double the sales

and targets through our existing international partner and contacts.

3.4 Development Plan

The proposed trade model, from farmers and small collectors’ for the local and

international market has been already tested, getting them into the trade chain, and is

done by organizing members in small community based production units. These units

are then linked to the Diamond Aqua Leads.

Our strategy is to maintain the current price, but to substitute the intermediaries which

would result in them to receive substantial amount of money in their hands that would

encourage them to engage in the ornamental fish trade continuously and will encourage

entrepreneurship among local stake holders.

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4. Business Management 4.1 Short and Long-term Benefits Management

The short-term goals are to add new products (varieties of fishes), improve quality of

traditional products and maintain the export price stable. Through our partner traders,

some fish collectors will benefit immediately.

In the long-term, the Geographic Origin Indication is thought to generate additional

revenues, which will be reinvested in local social and environmental causes.

It is too early to specify the benefits management, but we will emphasize that our

partner traders must follow the socio-environmental responsibilities mandate through

a democratic process to benefit local communities.

4.2 Community engagement

We have long-term contact with rural communities, and co-management workshops

have been offered where the collectors have participated in a personal productivity

register. The Geographic origin indication will further require members to follow a

socio-environmentally responsible protocol for the ornamental fishery, and fair trade

chain will allow collectors to make business decisions.

4.3 Risk management

This project is aware of the major risks that are encountered by the enterprise and has

taken measures to mitigate these. Among the major risks of the enterprise are the high

mortality rate of live fish, the unstable supply of specialty fishes, and irregular

productions.

The Diamond Aqua Leeds can solve these problems by working with them developing

the skills to practice live fish management to improve fish health; we thus provide local

training on techniques/ packaging methods and how to choose sustainable and new

target species. To manage the uncontrollable risk of irregular production, we can

improve the living standards of the Fishermans and the small collectors by improving

their income.

4.4 Price Management along the Trade Chain

Fish Collectors like us receive USD.6.00 to USD.8.00 per thousand Tetras(half Guppy

prices), and from Exporter’s Representatives or Patron, who discount 20% fishes to

compensate mortality (Fish collectors actually receive USD 5.00 per thousand).

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To export we pay USD.13.00 to USD.15.00 net for a shipment (800-1,200 fishes), where

we sell at USD.50.00 to USD.70.00 per thousand to International customers, who also

pay the freight cost. Thus, we can make USD.30.00 to USD.50.00 per thousand Tetras.

Aquarium fish hobbyists pay USD.0.25 to USD.1.00 per Cardinal Tetra in Asia, USD.2.00

to USD.3.00 or more in North America and Europe.

5. Financial Plan

5.1 Summary of Financial Projections

As a small and medium start-up business, we project a 60% growth from 2013 to 2014,

based on our market experience in 2010 and 2012. We will train members of villages

and small collectors to use simple spreadsheet calculating, and then use accounting

software. From empirical experience, we have estimated that 50% successful sales

(living fish) can make some profit or break-even. Additional analysis needs to be carried

out.

5.2 Assumptions and Financial Drivers

In addition to real market experience since 2007, our projections are also based on over

decade of onsite experience and professional readiness of partners. A projected 60%

annual growth is explained by a steep learning curve of rural villages and small-medium

collectors/ suppliers.

Sri Lanka has been in the market since 1950s, the most popular/ viable fish now being

Cardinal Tetra. Europe, North America, Japan and other Asian countries are four major

markets; each market has a different and constantly shifting preference. We assume

that “green fish, nutritious Fish-food and Fish-medicine” trade will be of growing

importance globally. Our ad hoc test has shown that a Cardinal Tetra with five pennies

surcharge was preferred by 50% consumers in UK and among US hobbyists, still

Fish-food and Medicines imported to Sri Lanka though. Asian consumers usually prefer

cheaper popular fish, but are willing to pay high price for rare or “illegal” species.

First, we will introduce new varieties of under exploited fishes along with common

species with a Geographic Origin Indication to establish a functioning specialty market

with trade partners. The financial advantage is that the production cost is extremely

low and a good management can bring in good profits.

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The enterprise will need modest investment initially, it has potential to grow and

revolutionize the centuries old exploitation trade systems. The financial benefit is

there; local entrepreneurship needs a boost.

5.3 Funding and Funding Requirement

The start-up enterprise is an extension of ongoing Project, which has provided service

and fund to local partners.

LKR.4.00 million, as a long-term loan with a grace period of 6-months (only to serve

interest during the grace period) repayable over 96 months, to purchase idyllic place

for the business where we are presently reside; No.15/1, Woodland Avenue,

Kohuwala – Nugegoda.

Another, LKR.1.00 million to invest working capital for extra Tanks/ Brood stocks,

repayable over 60 months.

LKR.2.00million. as a Permanent Overdraft since initial investment is minimal; our

priorities are to upgrade existing infrastructures of export market and support

initial costs.

5.4 Security Offered

Mortgage over land and 3-storied building at Woodland Avenue, Kohuwala – Nugegoda,

assessment No.15/1, land called Millagahawatta, in extent of A:0 R:0 P:7.3 depicted as

Lot No. 2B in Survey Plan No.3267 dated 25/05/2002 by D. U. J. Nanayakkara Ls. &

estimated Market Value will be approximately LKR.15.00 million.

Objective of the Business Proposal

The objective of this report is to explain in detail and introduction to the Ornamental

Fish Trade and to evaluate the project in 4 different aspects i.e. Technicality,

Marketability, Managerial and Financial feasibility of the project, which expands the

business locally & internationally by providing infrastructure facilities to the

Ornamental Fish Trade locally and to take initial preparations to enter the export

market which enhanced the job opportunities in the country.