Investing in Regenerative Agriculture and Food
Investing in Regenerative Agriculture and Food podcast features the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems while making an appropriate and fair return. Hosted by Koen van Seijen.
Investing in Regenerative Agriculture and Food
349 Joseph Rehmann - Climate-positive fish is possible and its eggs are delivered by drones
A conversation with Joseph Rehmann, co-founder of Victory Farms in Kenya, with the mission to be the world's most sustainable fish business and provide high nutrition protein to the mass market in Africa. How do you go from being a happy but unfulfilled banker to co-founding one of the leading and largest animal protein companies in East Africa?
We unpack Joseph's journey into fish farming—specifically tilapia, a species indigenous to the region- and how he and his company are proving that it can have a net positive impact on the environment, people, and finances. Of course, Victory Farms' journey hasn't been without challenges. Feed is obviously a challenge and led to starting their own feed mill, reducing import of soy and maize from abroad and experimenting with local feed ingredients and cold chain and spillage. Managing the cold chain has been another significant challenge—especially in the East African context, where stable and clean electricity is notoriously hard to come by. Yet, they managed to figure out solutions using AI and machine learning and reduced spillage to under 1%, a remarkable achievement in an industry where losses often reach 30–40%.
We also dive into their bold decision to outsource a critical part of their value chain: the growing of eggs. By partnering with local village entrepreneurs who manage their own ponds, they’ve created a system where harvested eggs are delivered to Victory Farms using drones. This isn’t just a flashy gadget; but makes scale possible. A single drone carrying up to 500,000 eggs completes a trip in six minutes—a journey that would take a cooled truck two hours, assuming a road exists at all.
Get ready for a conversation full of surprises, insights, and stories of leapfrogging challenges in scaling an animal protein business in East Africa.
More about this episode on https://investinginregenerativeagriculture.com/joseph-rehmann.
==========================
In Investing in Regenerative Agriculture and Food podcast show we talk to the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems while making an appropriate and fair return. Hosted by Koen van Seijen.
==========================
👩🏻💻 VISIT OUR WEBSITE https://investinginregenerativeagriculture.com/
📚 JOIN OUR VIDEO COURSE: https://investinginregenerativeagriculture.com/course/
💪🏻 SUPPORT OUR WORK https://investinginregenag.gumroad.com
Thoughts? Ideas? Questions? Send us a message!
Find out more about our Generation-Re investment syndicate:
https://gen-re.land/
Get your tickets here, regular tickets are sold until Feb 1st
https://2025.ai4soilhealth.eu/
https://regenerativo.org/en/laris/
KOEN10 for 10% off
https://rfsi-forum.com/2025-rfsi-europe/
Feedback, ideas, suggestions?
- Twitter @KoenvanSeijen
- Get in touch www.investinginregenerativeagriculture.com
Join our newsletter on www.eepurl.com/cxU33P!
Support the show
Thanks for listening and sharing!
How do you go from a happy but unfulfilled banker to co-founding one of the leading and biggest animal protein companies in East Africa? We unpack the journey of our guest of today into fish farming tilapia specifically, which is indigenous to the region, how he and the whole company are shown that it can have a net positive impact on the environment, people and financials. Not without challenges. Challenges, of course. Feed is obviously a challenge, and it led to starting their own feed mill and reducing import of soy and maize from abroad and experimenting with local feed ingredients and cold chain and spillage. Cold chain is challenging for anyone dealing with fresh produce, let alone in the east african context, where stable and clean electricity is notoriously hard to come by. They managed to figure out solutions using AI and machine learning to reduce spillage to under 1%, which is unheard of in fresh produce, often hitting 30 or 40% of spillage. And we dive deep into their decision to outsource a crucial piece of their value chain the growing of eggs to pond partners, basically local village entrepreneurs who manage, with their help, their own ponds and send the harvested eggs to victory farms by wait for it drones. This is not just a fun gadget, but makes real scale possible a drone carrying up to 500 000 eggs will take six minutes for a trip which takes a cool truck container two hours if there's a road at. So be ready for a conversation full of surprises, leapfrogging, challenges and opportunities of growing a massive animal protein business at scale in East Africa.
Speaker 1:Take a deep breath, and another one. Every second breath we take comes from the oceans, and over half of the fish we eat is farmed. That's why we dedicate a series to explore the potential of regeneration. Underwater Oceans and other water bodies cover most of our planet and have stored most of the excess heat so far and at the same time, have some of the best opportunities to produce healthy food, mostly protein, store carbon, create materials, fuel, biostimulants and much, much more. Plus, create a lot of jobs in coastal communities.
Speaker 1:We have largely ignored the water-based farming aquaculture industry in this podcast until now. In these conversations we explore why aquaculture is so important for the future of our planet. If, if we get this wrong, we have a serious problem. And what are the risks and challenges with feed, the reliance on soy pests yes, there are pests underwater, antibiotics, microplastics, etc. What does it mean when you apply regenerative principles to aquaculture? What can soil-based agriculture learn from aquaculture and vice versa. And what should investors really know about water-based farming and what the potential is of regenerative aquaculture?
Speaker 1:A series of interviews with the people putting money to work entrepreneurs and investors in this crucial and often overlooked sector. We're grateful for the support of the Nest family office in order to make this series. The Nest is a family office dedicated to building a more resilient food system through supporting natural solutions and innovative technologies that change the way we produce food. You can find out more on thenestfocom or in the links below. Welcome to another episode Today with the co-founder of Victory Farms in Kenya, with the mission to be the world's most sustainable fish business and provide high nutrition protein to the mass market in Africa. Welcome, joseph.
Speaker 2:Thank you very much for having me Kun.
Speaker 1:And to start with a personal question, we always love to ask and in this case it's probably even more true how come you spend most of your time thinking and acting in this case, around protein? It was probably not the career you envisioned or imagined you had when you were smaller, and probably there are many easier paths you could have taken. So, in this case, how come you spend most of your awake hours thinking around fish conversion ratios, around sustainable protein sources, around feeding a lot of people? How did you end up building one of the biggest tilapia and fish farms in Kenya?
Speaker 2:Yeah, thanks for asking. Surprisingly, I do have a lot of passion that stems from very early in my life around regenerative agriculture I can probably thank my dad for that and many years spent doing different types of animal and plant farming as a kid. That being said, I spent five years in investment banking after college, so I was very much kind of this internal poll that I have a very strong view that food systems can be net positive for the planet and net positive for communities, and I didn't know what way or shape or form that would take. I certainly couldn't have imagined it being fish all those years ago.
Speaker 1:Do you remember where that came from, that strong conviction? Because many probably don't believe that to be true. Many are on the let's make it slightly less bad, make it slightly less dirty, let's make it. But it could never have. And that's why I think regeneration is such a strong pool that it is that positive potential, like we have the potential to do so, but the narrative to the, the anti-narrative there is very strong like don't, don't bother with this, uh, this, this cute stuff, and we have to to figure a way to to reduce the impact, but we'll never be on a positive side. Do you remember where that notion came from?
Speaker 2:yeah, I mean, you're kind of characterizing the, the abate debate um, which I'm strongly against, like we've. We've got to flip this argument around, and I'm sure you're right that the collective narrative is still around reducing bad Um, you know, I I guess I can't put my finger on it, other than maybe many, many, you know small life lessons learned in the programming era of your childhood, um from my, you know, from my folks, but also from farmers um around where you know where I just I kind of saw example after example. We of course did all organic farming Um and and now we would call it regenerative farming, where reforestation was a part of the equation, and um and I love the word regenerative to replace sustainable, because it's exactly what I'm passionate about. But I can't pinpoint when it happened. Maybe it was a long parental programming.
Speaker 1:That's a good point. And then, what led you to leave investment banking and end up in FISH?
Speaker 2:Yeah, so the leaving banking.
Speaker 2:I was a happy banker, but I wasn't like a fulfilled banker.
Speaker 2:So it really was a big leap for me to go and take an MBA, and I think it is for a lot of people who go for one or any sort of degree where you're hoping to pivot in one's early career. And so my business school essays and everything else or application were all around kind of trying to discover my own purpose on this journey toward regenerative ag in Africa. Of course I would have called it sustainable ag back then, and so I think I was just very lucky to, amid all of my traditional interviews you know, get a chance from a mentor to go work on a fish deal in Africa and then, rather than returning to the kind of safe world to finance, I had an opportunity to stay at that business. And then, you know, then I became very inspired about how powerful the impact can be if we build the platform in an intentional way and this kind of idea where where sustainability is at the core of the business, so that every incremental unit of growth is driving your incremental units of your environmental KPIs.
Speaker 1:Which is and what makes Phish so uniquely positioned to be there. I think we anyway end of question Like how did you roll into? Because you've for sure analyzed a lot of different sectors, a lot of different spaces. I mean, you were lucky enough to work on a fish deal to see it firsthand. But just for people that are more, and we've been doing this whole Rejet Aquaculture series to expose our community as well to the world of farming in water and underwater. But for the people that haven't caught up with that series yet, just why is fish so interesting and why did it really pulls you, pulled you in and basically kept you there?
Speaker 2:yeah, for me that's characterized very well the the. I think you've got the quantitative components which are intellectually compelling. That's it's a cold-blooded animal it's it doesn't fight against gravity, which makes it a very efficient converter of inputs into fish biomass. The fact that it's an omnivore means we can convert it almost completely and we've proven now completely into a vegetarian. We don't include insects in that calculation but effectively it can be. So I think there's these quantitative elements where, if you do the math, you do the whiteboard and you do that analytical exercise, the potential impact on global climate or global CO2 is enormous for the African diet and how big that is today and how big it's going to be. But I think then there's also the non-quantitative, let's say kind of the heartstrings pull and food.
Speaker 2:Our traditional foods as humans are an important part of who we are, it's a part of our family story, it's a part of our community. And I also came to realize that tilapia in Africa many parts of Africa, not all of course, but tilapia is an important historical traditional food and it's almost completely gone from wild sources due to overfishing and illegal fishing, intensification all the stories we know and so that's had an impact on communities which have had, they would eat fish every day. That those days are gone. Fish is far too expensive and scarce to be a daily food, and so part of what I get really motivated about, too, is kind of restoring communities to their historical and traditional foods, which is also can be done in a climate positive way.
Speaker 1:Yeah, and I think it's important to emphasize here also the protein deficit or the gap, at least recently, because we used to be able to eat fish every day on the continent and not anymore, and so a lot of that. Like we need these protein sources, the animal protein sources, to a certain extent. It cannot be fully replaced. I mean you can, but it's tricky. I'm getting all the emails from vegetarians now by plant sources. But what's your argument there when people say, why are you farming actually animals on the continent and not just go for a vegetarian approach?
Speaker 2:But by almost any metric. You know Africa if I can generalize a bit because it's different by country, but Africans are already the world's leader at consuming plant protein as a primary source of protein. So you know, and if we look at WHO statistics, as you said, it's not easy, and especially for a low-income citizen of the world, it's not easy to supplement the last bits of one's diet where you know certain amino acids or micronutrients or minerals are missing, diet where certain amino acids or micronutrients or minerals are missing, and fish does offer a very robust range of those amino acids and other nutrients. And so I think to make an assumption that we shouldn't have those products for already the world's leading population on sustainable consumption, I think that's to me that's a bit of an oxymoron or a backwards logic.
Speaker 1:Yeah, no, fair enough. And then. But then it really, really, really matters how you do it. So when you worked on your first fish deal in Africa and now, like what you've been building with the team at Victory Farms, like what, what has been the approach, what have been the principles? What would, let's say, land-based farming and food companies recognize from their play? What are the principles? You've been building this machine, basically In the good sense of the word. I'm not saying the industrial sense, but a big platform, as you mentioned before.
Speaker 2:Yeah, no, I think the how is critical. And oftentimes I'll hear you know aquaculture, let's look at you know Atlantic salmon in the Pacific and maybe not surprisingly of course I agree that we should not be farming fish outside of their home regions All sorts of unintended consequences. It's basically just a farming shortcut. But I think if we take shortcuts in almost any industry we're going to have problems, whether it's environmental or societal or labor safety. It can be any number of things. So aquaculture, like any industry, can be done very sustainably or even regeneratively, or it can be done in a way that really damages ecosystems, and we have examples of both. And what we're trying to build with Victory and what I really bought into on day one was that sustainability and now of course I would definitely call it regenerative has to be a core principle. It cannot be a bolt-on. Let's do that when we're profitable, let's do that when we have more time and bandwidth, let's do that when our scale allows us to, because kind of like the profitability quest and I'm a capitalist and I believe that there's space for all sorts of institutions, ngos and everything else. I don't think one should favor one group over another, but I don't have anything against capitalism, but if you allow profitability to be the primary value of the company, it can have a lot of unintended consequences, even if you mean well. And so when we put regenerative principles at our core, it has created lots of positive unintended consequences. And so I'll share one with you on.
Speaker 2:I had a personal ambition in my life to plant a million trees. I thought that might offset my own life and maybe a bit extra. And I embedded that principle in the company, which is how can improving biodiversity? So I kind of reframed it. But how can improving land-based and water-based biodiversity if that is a core goal of the company? How can we structurally achieve that? And then, if I fast forward the statistic, I'll share the second half with you in a year, but up until now, in my back weekends and working with a couple of staff members, we've planted 3,500 trees in the first nine years.
Speaker 2:Now that we've run feed we've I can walk you through this whole thing later, but basically we use indigenous crops with our wastewater and community members can harvest these indigenous crops. We've put them into our fish feed. We've achieved two indigenous crop discoveries which were not known to the industry before and those are now getting structurally put into our feed. So we have a plan now to plant next year a half a million trees, so going from 3,000 to 500,000. And because this is directionally positive, it creates thousands of jobs, lowers the cost of our feed, obviously creates a climate positive. It's sinking carbon while improving biodiversity All of our core regenerative ambitions.
Speaker 2:But all of these economic outcomes for the company converting our input costs from US dollar to local currency, keeping jobs in our community instead of soybeans, wherever they come from. And if this plays out, which I expect it to, we're going to need 25 million of these trees and shrubs planted in our broader community over the next two years. Trees and shrubs planted in our broader community over the next two years. So I feel like when you embed these principles in the core, it allows you to then have kind of a compounding or, let's say, system-wide impact rather than an individual one.
Speaker 1:And this touches upon a very, very important topic in the aquaculture space feed. We've discussed it in salmon in previous episodes. We've discussed it in mussels. Obviously, that don't need to feed Like. This is a crucial one where probably the environmental impact and also the nutritional impact of aquaculture can, like it can make or break through feed. So what did you start with and how far have you become now? I mean, you're talking about local ingredients, mostly vegetarian or fully vegetarian fish. What's the approach until now?
Speaker 2:Yeah, so the approach has been our compass is set, we want to replace maize and soy with indigenous and local crops. That's the regenerative at our core. But we aren't religious, if I can use that word, liberally or openly. We aren't excluding existing practices and everything else. What we're saying is like, look, we need to make progress, iteration after iteration, toward our compass, toward our core goals, but we aren't big enough or smart enough or well-resourced enough to change everything with one brushstroke. And so, when we started, we had purely conventional feed and we imported that from Imported.
Speaker 1:Just in the world it didn't exist in.
Speaker 2:Kenya. So we would have had to spend another 10 million on a feed mill after we raised 375,000 in our seed round. So we had to be practical but directionally. That's why I think that core is important, because if your core is there, you will get there through your through, through an iterative approach.
Speaker 2:So we started conventional. We worked with our feed suppliers. They've invested in the region. We were able to slowly convert our feed to at least being produced locally, although a lot of the inputs are still imported the maize and soy. Then we eventually built our own feed mill and I think one of our biggest core moments was we decided to put the feed mill on top of a geothermal. Well, right before a huge energy price spike. And then Ukraine and everything else, and Kenya is not exactly linked to global markets, but of course there's some relationship in energy costs, and so we signed this deal for a long term PPA on on renewable power, even though the overall project purchase and the overall cost of the project was more than if we put it on conventional power in a different location.
Speaker 2:Well, fast forward, 24 months before we'd even turned the mill on and we had a $5 million competitive advantage over everyone else in energy cost alone, through all of the energy prices we've seen in the spikes we've seen in the last three, four, five years. So that played out extremely well in our favor and it also kind of reminded us that we do things at our core for these values. Sometimes they pan out and sometimes they don't. Of course some investments don't pan out, but if we keep making investments that are directionally aligned, we think that as climate conditions worsen, as risks increase, as regionalization increases versus globalization, we think that net-net, we're going to be a beneficiary financially from these decisions too, beneficiary financially from these decisions too.
Speaker 2:And then, if I take it one step further, now that we have a substantial stake, we have an equity partner, but we're a substantial partner in our equity sorry, in our feed mill. Now we have the ability to control our formulation. And so in the last 12 months, all of my backyard work but I also work with some experts and stuff too, of course on feed formulation We've got a couple of PhDs who we work with. We've been able to try three novel ingredients, two of them indigenous to the area and, like I said before, both of those two novel ingredients outperformed soybeans Nobody was using no one was using and nobody was using them Both outperformed soybeans.
Speaker 2:We don't know what the cost of these ingredients are because no one in the world is producing them at scale. In fact, no one's producing them even at small scale, except for us. So we're incredibly excited about the potential. One of the ingredients is a favorite food of giraffe. So, of course, planting these things alongside Kenya's big national parks create boundaries between human-animal conflict, sink carbon, improve soil because it's a nitrogen fixer, and give the community members thousands and thousands of jobs to go harvest the leaves from this small shrub. So the potential upside is enormous. And then, of course, the business impact is to convert our fish from a soy maize-eating fish to a local and indigenous crop-eating fish will transform the cost structure of the industry.
Speaker 1:And going back to that meal, is it fully incorporated? Not incorporated, but working for you as well? Were you at the size that you could absorb that much feed, or are you also supplying to others? Others does having even a larger impact on competitors. Slash colleagues we?
Speaker 2:it's a good question. We took a decision to make it a commercial mill, in the sense that it's independent from from us, we um and so we don't have any special pricing. So effectively, uh, the mill produces feed for us, which is half or so of of its total output. But the mill also serves the East African region.
Speaker 1:And which, of course, has a potential to reshape. Just because in terms of size, let's spend a second on that. How big are you in terms of production, if you're comfortable sharing exact numbers, otherwise ranges are fine and also, how does it compare to what Kenya produces in general in tilapia, and maybe the region as well? Just to give a bit of size in terms of production, in terms of staff, in terms of what are we talking about?
Speaker 2:This is not a backyard fish farm, yeah, and so look, in order to achieve impact, we see scale as a critical part of it, like if we had the world's most regenerative fish business and we were selling 10 fish per day. You know, it's a nice hobby, but there's no impact. And I'm not discouraging people from running, you know, backyard aquaponics operations, by all means do, but in terms of, you know, driving a single digit change in climate, that's never going to have an impact. So, no, happy to share size and scale. So today we're at about.
Speaker 2:We have three businesses a Kenyan fish business, a Rwandan fish business, operating on Lake Victoria and Lake Kivu. The Rwandan business also serves the Eastern DRC or Congo markets. And then we have a feed mill, and the feed mill is quite large. It's the biggest in East Africa for fish feed and that's about 25,000 tons per year and, like I said, that's serving both us and the broader aquaculture market. In terms of employees, those three companies have 1,500 employees. In terms of total annual production, it's about 20,000 tons of total production, which is, with feed and everything else, whatever 60, 70 million dollars of revenue.
Speaker 2:And then with growth, because I think, you know we're scaling extremely quickly. So we're, you know, we're doubling in size this year, 2024, will be a banner year for us, but we expect to double in size again in the next 18 months. And so we don't. You know, we don't see any real limitations to the market need, which is, you know, if we you know WHO numbers would be East Africans are eating 10 to 20% of the animal protein that would be recommended for a healthy diet. If we extrapolate that, then we're looking at, you know, if we multiply that by the cost of fish, you know you're looking at a multi-billion dollar market in East Africa alone. So we see a lot of room for growth. We see room for, you know, competitors of course are coming in to make it kind of a balanced industry, but it's definitely, you know, we're trying to reach a relevant size and scale to also have kind of a globally positive impact.
Speaker 1:And in terms of space to grow, just to give us an understanding of where you're farming the fish. There are massive lakes in your region. How much space is there? How much challenges are there in terms of zoning, space, pollution, climate as well? How much room do you have to do those things in the next 18 months or the next years?
Speaker 2:Yeah, so it's a really good question. So I mean in East Africa, with the splitting of the continents and everything, there are a series of what's called the Great African Lakes and they're very large. So Lake Victoria, by surface area, is about the same size as Lake Superior in North America. And then some of the other lakes in the region Lake Tanganyika and Lake Kivu, are a kilometer deep, so by water volume they're comparable with Lake Baikal, which is the world's largest freshwater lake in Russia. So this water system is the largest in the world. It's all tropical, so warm, warm freshwater, and if we go back 50 years, these were pristine bodies of water. Now a couple of them are still pristine, which is great.
Speaker 2:But human intensification, livestock agriculture, runoff, has intensified the nitrogen or nutrient load in these lakes, causing them to be less and less pristine, if you will. So mankind is an impact on these lakes. It's predominantly through agricultural activities and livestock included. And so what's the impact of aquaculture? Undoubtedly, aquaculture has an impact and we track it. We work with Conservation International on both the biodiversity impact as well as the biomass load impact as of now in the most recent studies that have been completed, and we want to continue these victory farms in Kenya.
Speaker 2:Lake Victoria has been shown to have a positive impact on biodiversity, and the reason for that is we work with our local communities. We've set up a no illegal fishing zone at their permission and request, and we've now policed an area of water in partnership with our communities for nine years and according to Conservation International, it's a biodiversity hotspot in the lake. So what it shows is that aquaculture communities and nature can create systems that regenerate, and so I'm very, very excited about that and we want to create more of these. Community conservation areas is the term. As far as the biological load, we track it, but I think a useful statistic is according to biologists, lake Victoria used to have something like 2 million tons of biomass Due to overfishing, illegal fishing. We've reduced that by half and we've also eliminated about half of the endemic species which are thought to be extinct, so massive damages to the lake's ecology.
Speaker 2:Aquaculture from Victory Farms has added 5,000 tons of biomass versus a reduction of 1 million. So I look at it as, of course, our systems are more intensive than nature, so it's not a one-to-one comparison, but I think the magnitude sheds a bit of light. You know, even if our system is three times as intensive as nature 15,000 versus a million so I think there's a lot of space for aquaculture if it's zoned correctly, with governments and communities so spaced out, dedicated space for nature and a dedicated space for artisanal wildcatch. We don't want to see that cease, we just want to see it become sustainable, which it's not today. So I think there's a way to get all three systems working in a way that produces enough fish protein to feed the region.
Speaker 1:And on the agriculture runoff side. Is that something that's a risk for you, as these lakes are getting, uh, simply less full of life and algae blue? I don't know if that's an issue at all, but we we've seen, like the parasites, uh, like you're operating in a lake, uh, you're not shielded off it, like if the lake deteriorates or a lake deteriorates, there's not too much you can do. How do you look at those risks from basically the outside, just as a farmer on land would look at the risks of a neighbor doing certain things and spraying and water pollution and all of that Like what's, what's that in your, in your playbook?
Speaker 2:I think you've nailed it. I think one of the biggest risks to food security in the region assuming that we can put aquaculture back where Wildcats used to be 100 years ago as able to supply the primary protein to the population I think the primary threat to that is actually land-based agriculture and the runoff that's created from that, both plants and animals, impacting negatively the water quality which, as you say, creates these blooms, and these blooms create fish mortality events, definitely for aquaculture, but also for wild catch. So there needs to be a more holistic view. We work with an organization called Misingi it's also called Gatsby Africa and they've been a great leader in trying to get a couple different international organizations, together with regional organizations, to try to start mapping the lake's health.
Speaker 2:And then I think, like many things, step one is just understanding how bad is the problem and how quickly is it getting worse. I don't think we have a crisis in five years. I think we have a crisis slowly playing out over the course of decades, but it is directionally getting worse and so and so I think it absolutely requires attention one for aquaculture, because I think it's an important part of food sustainability in the region, but absolutely for biodiversity in the wild ecosystems. So, but a much more holistic program, and Victory would absolutely love to be a part of it because we have some ideas on how we can help. But from a macro standpoint these problems are, you know, there's three countries on the lake. There's, you know, the agricultural policies. The countries are trying as hard as they can to get fertilizers into the country at affordable costs and subsidize those fertilizers for farmers to address the food security concerns of the country. So there's a lot. You know those are all valid positions for government and farmers. So you know we can't be against those national interests.
Speaker 1:We need to be in support of those national interests, but we do need to work with conservationists to find ways to counterbalance these negative influences and then basically, if I hear you correctly, let's say, the lake's health, unless some, some really massive, urgent thing happens, is not a huge threat at the moment. It definitely needs to be addressed, but it's not a five-year threat, or it doesn't seem to be, at least that you're close to any kind of tipping, a tipping point which, of course, is always easy to look backwards like. It's very difficult to see the tipping point when you're looking at it in terms of health, so, and in terms of competition or others around the lake. How quickly? I mean, these are massive, absolutely massive lakes, but how quickly are good spaces filling up? Is that a thing? Is that not necessarily a threat to the business or, let's say, a challenge?
Speaker 2:There are a lot of new entrants coming into the space, not just in Lake Victoria, but we see it in some of the other lakes and I think overall this is a positive thing. I think the concern I have is not so much that the space will fill up or the number of good sites will be taken I think there's quite a few good areas to technical areas that would be good for fish aquaculture. I think I'm more worried about the government. Will the governments in the area be able to get ahead of the zoning? And zoning is just really easy to see after the fact what should have been done, but before the fact it's really hard, because governments and counties and local administrators are trying to attract investors and create jobs, and those are all healthy pursuits.
Speaker 2:Unemployment in our area is 90%. I mean, it's a staggering statistic. So we're the largest employer. I think we're the largest agri-employer in Rwanda now and in Kenya we're certainly the largest employer in the county where we operate, but we're probably one of the largest in the half of the country where we are. So this job creation is important. But can governments work with new entrants and existing entrants like us? Can we work together to create the zoning that we need for those three interest groups, which is nature and biodiversity, local communities and artisanal fishing and the development of aquaculture, and I think right now, kenya's made some excellent steps toward that. I think in Rwanda, I'm very impressed with the government's initial steps, but quite a bit more work is going to be required to create a system that's sustainable. Bit more work is going to be required to create a system that's sustainable.
Speaker 1:And and then, beyond the the farming side of things, you've done a lot of innovation on the cold storage, a lot of innovation of how to get fish from the lake to people's plates just to walk people through. What are the stages there and what are the steps that the this protein will go through until it ends up on a plate of someone?
Speaker 2:Yeah, I quite like the imagery that there's a high income consumer in Nairobi right now enjoying a salmon toast which arrived highly unsustainably through a very expensive cold storage function and in parallel, you know that fish was fed chemicals and whatever else not all of them. Some of the salmon's done very well, but some of it was certainly done with question marks and at the same time there's someone you know, there's a lady in Kibera or in one you know, an informal market. Someone might call it a slum, I would just call it a market. But there's a lady in a market today eating our tilapia. Her income is five dollars a day and that's a fish that you know didn't have any antibiotics, had, no, didn't have any chemical treatments and it's uh, you know, no, no, no, it's just been a completely natural um upbringing and then from a, from a um mark you know what you're saying now kind of from farm to plate, it took 36 hours, whereas the Whereas the lady having the salmon is perhaps that took six months. So the quality of what we're providing to markets is extremely high. It also supports our growth story, which is consumers of all income levels want high quality products. They especially want high quality and fresh foods, and I've found across income levels, people want food safety. They may not know how to find it, but across all income groups the demand is the same and the awareness of the problem is similar, although there's different news being digested by different groups. So I find that incredibly encouraging that kind of there's a general human trend toward natural and sustainable and healthy and tasty products, and so for us the way we do it.
Speaker 2:So, from harvest we process the fish, which is just removing the guts, we put it into a cold chain which then distributes the fish across Kenya or Rwanda and then we have from when it leaves our cold chain facility, it goes to one of 100 branches 90 in Kenya and 10 or 15 in Rwanda and in those branches there's no electricity. So we basically have cooled the fish, we have them in a cooler box and we have 48 hours to sell those fish. So, using predictive algorithms, we've predicted across many, many dozens of towns in Kenya and Rwanda. We've predicted how much fish that town will consume tomorrow. We stock 95% of that volume and we sell a lot of fish every day, and so the whole system including trucks that turn over or any problem you can imagine that whole system produces less than 1% spoilage. So, compared to statistics, you might have heard around 30, 40, 50% post-harvest losses.
Speaker 2:In fresh industries like ours. We're achieving less than 1% and we're using a largely non-electrified cold chain, which is, of course, a much lower carbon footprint too. So it's kind of the ability for Africa to leapfrog. The West is often talked about about, but the ability for us to do it at a lower carbon, especially around phones, and electricity, and yeah, a lot of a lot of it doesn't mean that all industries can leapfrog and that africa is going to be, you know, in some amazing place in 10 years.
Speaker 2:I think africa has a lot of challenges in the next 10 years, but there are areas where we can leverage technology and capabilities to achieve a lower cost system which is also lower environmental cost to be able to serve consumers. So that's in a nutshell. That's how our cold chain works.
Speaker 1:And so how do you predict Like, what's the like? How did you, or how did you even think about or develop that predictive engine? Let's say, was it when you had a bit of spillage before, or what triggered you developing that and pushing that number down to 1%?
Speaker 2:If I pitched this to myself back in 2017, I would never, ever believe that we've achieved what we've achieved, because, to be honest, it's pretty almost. It's almost hard to imagine it, but it's kind of like. The necessity is the mother of all invention. We were super capital constrained. Building cold chain everywhere was way too expensive, fuel theft and all this other stuff which happens everywhere. But all of that is basically impossible to control. You can't even control what people put in the fridges or freezers, you know. You don't even know if it's your own fish, let alone chicken or milk or whatever, let alone chicken or milk or whatever. So it was kind of the. It was we engaged with our market ladies. They were market ladies. I'm generalizing a bit, but let me take kind of the most average one in our system.
Speaker 2:They all struggling from the same problem. They wake up at four o'clock in the morning. They don't know if there's going to be any fish in the market. They don't know if it's going to be at a price that they can afford or a quality level that they can trade. So they have more than one job. They go to the market. They may or may not buy fish that day. Let's say they buy fish, they fry all of it immediately because, one, the quality was probably already at the brink of passing the sniff test and two, they have no cold storage. So they fry all the product fast forward six hours or one or two days. Then the customer buys the product, they deep fry the product again to give it a refresh, and so the average fish being consumed before we came in was two deep fries was normal. Three deep fries was possible. So it was just this, not a high quality product by anyone's imagination.
Speaker 1:Very good nutritional value. I see some seed oil people now cringing when they listen to this no, but out of necessity, try, try, try living without cold storage in in our comfortable global north um for for a day or two, and let's see how that that goes. So this was absolutely necessity, but you came in and then, and then what?
Speaker 2:so. So we, so we engaged these ladies, tried to understand, like, how can we better serve you than the current system? And so we set up a couple of pilots where we brought the fish to their backyard not literally, but within walking distance, 500 meters and they started coming to our branches and then very quickly became dependent on our branches. And so we then realized that, as long as we get the fish within range, over the course of six months they stopped trading multiple products. Most of them adopted our product as their primary source of income, and these ladies deserve a huge amount of credit for being fantastic entrepreneurs.
Speaker 2:So once they know that they're going to be able to access 10, 20 kilos of fish from us, every day, they go build customer bases, little restaurants and hotels, single customers, and so, of course, on an individual market lady basis, you don't know if she's going to buy eight kilos or 15, because it's highly driven by her relationships. She's not stocking excess inventory, she's selling exactly what she knows she can sell. So she's previewed with her 10 customers who's going to buy what. So, but on an aggregate basis, once you have thousands of market ladies like, any sort of model becomes highly predictive. And so what we found is that actually, as soon as we get to a certain volume, we can use statistics to determine what the actual volume is going to be next tomorrow and then.
Speaker 2:So then we just started to test it and it started to work. You know, we started off with two percent spoilage, relatively quickly got to one%, and this year we're tracking to, I think, a half a percent. So we won't get lower than zero, but we've already gotten it to a range which is super efficient and it's about being a reliable partner for the market, ladies. And then they have come to learn that we do sell a lot of fish, but that most of the time they can buy most of the fish that they want.
Speaker 1:And where does like? Do you incorporate any other predictabilities in terms of weather, season days, historical data Like how does? Where does the AI come in?
Speaker 2:Yeah, so I told you the front half I'm asking for the tech people in the back.
Speaker 2:I told you the front half, which is the bit I developed, and then it got taken over by our team and one of our co-founders is a Stanford guy and anyways, it got taken to a machine learning professor which they ran. This was kind of pre-AI, so we ran it through a couple iterations of machine learning so we got much, much smarter. So this kind of human algorithm turned into a machine like basically a code, a simple set of codes that could then do that, and then we layered AI in earlier this year and that we did. We actually did it ourselves. We brought an AI person in house and this was the first project, but we then used AI to do the distribution of the fish and that has been much, much more. So we actually got to 0.1% spoilage in the last couple months with AI. So we went from one to kind of a half with machine and then now we're at 0.1, which I don't want to say too publicly because bad news can strike.
Speaker 1:But it's been another quantum leap in efficiency by letting the ai drive the, the allocation decisions so, basically, the, the software ai, is now deciding or suggesting where to bring to all of your 1000 or of your your locations, how much fish to bring when, and and basically, um limiting spoilage. Do you also measure, like the satisfaction of the market, ladies? Because of course you can limit spoilers by selling out really badly um every day and having a lot of unhappy long-term, long-term customers or long-term buyers.
Speaker 2:That's what the ai got really wet really well. So the ai doesn't do the deciding. The ai wrote the code, that then does the decision and then we rerun the AI to improve the code and so that's been going on now for like six months, but the impacts have really been noticeable in the last three or four months. It's been huge. But that bit that you said at the end is actually what the AI got better than the humans to a substantial degree, which was avoiding stock outages. So humans are kind of like stock outage. I get to go home early and that was our policy. Sell a lot of fish and go home. Everybody works hard, go home when you can. But the machine was sorry. The AI then looked at it and said, ah, we had a 20%. The probability is very high that we actually missed 20% of our revenue which was not being um quantified. So basically it went and quantified the value of missed revenue. Put that into the district because you could never know.
Speaker 1:Like, how would you, how would you have predicted you didn't know which market days would show up?
Speaker 2:I mean, yeah, it was a different incentive the ai looks at the time of sale, so it's what we didn't do as humans, because it's a lot of detail with like millions of transactions. The ai looks at the time of sale and then can calculate the probability of additional missed.
Speaker 1:And that's a massive. The spoilers went down and the sales went up. That's what I'm hearing as well.
Speaker 2:In fairness. I mean it's worth celebrating as a business, but of course, in conjunction with the success of our market, ladies, but it's also improved margin.
Speaker 1:They found less empty. They found less empty. They found more fish they could buy, because for sure there were a few every other day that just missed out because of time.
Speaker 2:So, market, lady comeback rate like within one week. Comeback rate's always very high, but comeback rate within one week significantly increased, which means that they were comfortable topping up their inventories and for us it allowed us to charge a little bit more margin on the best selling sizes, which which allowed us to also capture more margin from the same equation. So in some sense we rebalanced a little bit of the margin sharing with the market ladies selling sizes which allowed us to also capture more margin from the same equation. So in some sense we rebalanced a little bit of the margin sharing with the market ladies but also enabled them to have more volume.
Speaker 1:Fascinating. I wouldn't have imagined we went to AI market balancing in a Tilapia interview interview, but it shows the power and potential of yeah, so many data points and and just not, yeah, we're not made to um, as humans, we're not made to to oversee that and and drive any meaningful conclusions from it no, of course not any other plans with it?
Speaker 2:well, I think the the so not on the ai side, but on the tech side. So we've got, we've got our first drone team, um, which we built over the last 12 months, um, and so this has been a. So we, we, um we've just now.
Speaker 1:I'm curious where you're going for delivery.
Speaker 2:Delivery for observation so like, as we look to scale the business, our biggest bottleneck is is land. So you know, of course we need to access capital, but but we have been able to do that when at least to some extent. And we also need talent and building talent and sourcing talent and all that. So we have some of the traditional bottlenecks, but practically it's more eggs into the system, more fish eggs into the system to create more fish to supply more customers, and the production systems are pretty rapidly scalable and the route to market….
Speaker 1:You mean the production systems in the water, in the lakes. But the egg side, of course, is….
Speaker 2:Yeah, so our real bottleneck is eggs, which is a land-based function, because the broodstock create eggs in a pond, as they would in the wild. They would do it in the shallow waters, so we replicate that environment and then they produce fertilized eggs, and then we take those eggs and hatch and grow and sell them. So in order to address our biggest bottleneck to scale, a couple years ago we started to play with the idea well, what happens if? This is kind of me breaking out of my I don't know like a Western mindset, which is we should control everything. And so what happens if we integrate our community into it? I pitched it to investors and they were of different opinions, and I pitched it to some industry groups, luke.
Speaker 1:Ward, luke Ward.
Speaker 2:And I pitched it to some industry groups and they thought it was a terrible idea to lose control over the supply chain. But I view it as a great de-risking, risking. So instead of owning land and producing eggs on our own land and in which case to grow, we need to grow from 50 acres to 100 or to 300 acres, which comes with all sorts of community issues and such, because land is very densely populated what if we could train our community to source, to produce our eggs for us, and we source from them? And so, again, it's a bit of a radical idea. We tested it out with one partner. It went really well. And then we tested it out with a couple partners. It went really well. We got a little bit of grant funding to help us cover the civil costs. Long-term, we think it can all be commercial financing, but we got some risk capital to help us.
Speaker 2:And then the next bottleneck we faced was well, we can only service partners on roads, otherwise we can only service partners on roads, otherwise we have to build roads and that's that's too expensive. And so what we? What? We decided to pilot. We hired a local company here with a couple drone pilots. We also hired a couple of our own drone pilots and we said well, what would happen if we could fly to the small holder, to the let's call it a pond partner? What would happen if we fly to the pond partner with a drone, pick up the eggs and bring them back to our central hatchery?
Speaker 2:And so we we've tested it and it's. It is much cheaper and much faster. And then, instead of having only, let's say, five percent of land be available to us because that's roadside, we now have a hundred percent of land. And so, to put that into numbers, we put in a water system to support the, the pond partners, and there's maybe a dozen or two that could sign up because they're roadside. Now that we've introduced a drone, there's 1,000 partners that can sign up, because most land holdings are landlocked, they're not adjacent to a road. And then you look at a practical element it used to take us two hours to get to the road pond partner. Now with the drone, it takes us six minutes. So the impact on egg quality, fish health is all much, much better.
Speaker 1:So, wait, we have to walk through this. So, basically, your pond partners are local partners that have a pond that grow these eggs. So they get the mini eggs from you and they grow them slightly bigger, like what do they exactly do for you? And then how many? Like how do they get them mini eggs from you and they grow them slightly bigger? What do they exactly do for you? And then how many? How do they get them in a drone? How many then travel back to your? Do they hatch them? What exactly is their role in the value chain? Yeah, great question.
Speaker 2:So the starting point is so the broodstock, the parent fish. They need a little bit of space to, you know, for reproduction, so they get very low density stocking in ponds and then, once per week, a technician can go and physically collect the eggs from the fish. And then those eggs are extremely fragile and they need to be in very highly controlled conditions in order to hatch, and that's, of course, an incubator. An incubation system would replicate the natural environment to enable them to hatch. But then in our business, if we're going to have a pond partner two kilometers away growing the eggs for us, we now have a transportation function which, if the pond was adjacent to the farm, which is how we started, it's not an issue. But now that we want to expand it and grow by 10x, then it's a major issue to get across roads in rural Africa. And so effectively what's happening is a technician is going to the pond partner. We've set up an irrigation system, or whatever you want to call it, a water supply system, using the grant funding, and the partners are individual entrepreneurs. We call it community, collectively, but it's indeed bilateral contracts with entrepreneurs who own the land. We then co-operate the pond with them. So we say, look, we'll send our technicians every day to make sure water quality is right, feed rations are right. Eventually the partners will learn all of this because our employees are all locals, so eventually this will all become osmosis for learning. But at the beginning we control it to make sure that the revenue cycles are high, and so the fish produce eggs. We pay a royalty based on the productivity of the fish, which is quite predictable, and so the pond partner gets something in the range of one to two times minimum wage in passive income, and in a part of the world with 90 percent unemployment, like I said before, that's a huge income, a huge, huge income. It's enough to support the family and support your neighbors, and so the pond itself becomes a stable and long term income source for the partner and, of course, for us it becomes a growth avenue because we get a lot more eggs.
Speaker 2:But, practically speaking, our technician goes out, the pond partner can be present, can join, the eggs are collected, and then they used to be put into a one-ton incubator on the back of a truck and hauled. That's an expensive system that we developed to move eggs. But what we realized with drones is like you can do small systems on a continuous flow basis, and so now the drone that we've been testing now is carrying 200,000 eggs per trip. The drone that we'll move to soon is going to do 500,000 eggs per trip. So, even you know, not all the eggs are fertile, not all the eggs will survive into fish, but even if that creates that's going to still create a couple hundred thousand fish dinners in Kenya 10 months later. So it's you know, and you mentioned that drones can do a trip every six minutes. So it's a very rapidly scalable model to connect entrepreneurs and invite the community into our supply chain.
Speaker 1:And how skeptical were you or maybe were the investors as well can you reach the same quality standards you need that you were reaching when you were doing like the pond adjacent to your facility when you go to? And I have to think of a, an interview we did with completely different company with seed linked uh shout out to nico that were worked in the very uh, conventional seed, uh, breeding industry. I was very skeptical that decentralized seed research could ever reach up to the quality he was doing in alfalfa, etc. And it turns out that that's absolutely, uh, not the case. Like you can reach better, at least the same or better quality with a distributed, of course, well-managed group. How was that narrative in your mind and also in, let's say, in your surroundings? You said most people thought it was a terrible idea and playing with eggs. It sounds very risky, but maybe this is my non-knowledge here.
Speaker 2:Well, I'm giving my investors a bit of a hard time because there maybe was some skepticism in the beginning. Once the investors saw it and, I'd have to say, other third parties who have visited it becomes crystal clear how powerful the model is. The community members who participate love it, of course, from the income gains and sustain, you know, the self-driven livelihoods that they're able to create for themselves by being a partner. There's a huge amount of social welfare benefit of, let's call it, social capital that we engender within the community in a genuine way. There's no handouts, it's earn your own income by being a partner. So those are all really easy to see and understand.
Speaker 2:We've had periods, so I think, if we extrapolate that one step further, this is a little like as companies get bigger, maintaining your entrepreneurial flame gets harder and harder, and my ability to be a part of every team is, you know, with 1500 employees is, of course, diminished a lot, and so one way of reinvigorating that is through franchise-like arrangements and I avoid the word franchise for the pond partners intentionally, because franchises have a lot of good and bad baggage, and this is absolutely not a franchise pond model, but the idea of engendering the entrepreneurial spirit is maybe a bit similar, and so, whereas a Victory Farms employee with 50 ponds to manage is kind of just doing a job as much as we want it to be more invigorated in you know, a storm comes and a branch falls in and a net is damaged.
Speaker 2:I mean that entrepreneur, that partner, they are on top of it that minute because they don't want to lose a single dollar of revenue, whereas for an employee it's always a little bit slower. So I think what has surprised us we actually budgeted the whole model with a haircut and what has surprised us is that the passion of the partners has often shown better performance than our own team.
Speaker 1:Which is very, very interesting from a narrative and, of course, skill perspective, and so this is another leapfrog piece on the drone side. How difficult was it to integrate drone delivery or or pickup in this case, and delivery to you into systems? I know we've seen some videos on drone delivery around the world. We've seen very little examples, except in certain African countries, and I think now I think Zipline is active, a fascinating company, in the US as well, specifically around medical deliveries, blood etc. It seems like definitely the continent is taking a leap in that. Was that easy to convince local authorities that we're going to fly quite a heavy drone flying 200,000 fish eggs over people's head, or how did the process go?
Speaker 2:So far I've been really, I mean, across every level. It's not without problems, but in general, the governments have been in Kenya on this topic and Rwanda too on different topics, but the government in Kenya has been really really good to work with on this. I think three, four years ago it was kind of impossible to fly drones in Kenya and I don't know what caused the change. I don't know if it could be different reasons, but the current administration has been very proactive around supporting innovation.
Speaker 2:I think if we were to try to fly big drones like Zipline or Cloudline, we would encounter some of the challenges they've encountered from a regulatory perspective. But those drones are quite a bit bigger and flying over much larger distances than what we're doing, and so so far the government has really, you know, frankly, they've given us the permits to do the pilots and we still need to get permits to turn it into a permanent business process. But I don't have any indication to believe the government's going to be resistant to it and also it's very encouraging. But, like, the government sees the impact on the community and they see the impact on livelihoods and you know they've been very responsive to if Victory can help create an inclusive environment for smallholders to enter into. You know, then we should be doing whatever we can do. And if they see drone technology as a way of connecting that dot and maybe even delaying their road repair bills, then great.
Speaker 1:Yeah, because your heavy trucks for sure didn't help. Didn't help with the roads, and so what are other pieces of the puzzle that you could like turn into, not in a franchisee, but like turn into more of a platform model? Like, what are other things on your mind, on your radar? It doesn't have to be built already now, but what are other logical pieces that you don't have to fully do in-house and that could limit or unlock a lot of the skill?
Speaker 2:Well, I think eventually, if we go 20 years out, victory is hopefully going to be the pioneer that built a lot of these capabilities. But the industry is going to become more specialized. Right now the benefit goes to the pioneer, but in time the benefit will get spread out across entrepreneuring businesses that take up value chain capabilities. So I'll give you a good example. We're working on a proprietary breeding program. So we breed Kenyan fish from Lake Victoria with Kenyan fish from Lake Victoria to improve the strain of fish. So a long time ago about I don't know 30 years ago, tilapia was collected from our region, let's say the Lake Victoria Basin and the Nile River Basin, and the fish was collected from this area and a couple other areas, but predominantly here, and taken to the Philippines in a program that was very constructive for the industry. It then bred the fish and now that fish grows at twice the speed of how it used to grow in whatever pre-improvement and that's now it's called gift. That's now the dominant strain of tilapia. It's probably 90. It probably has almost 100 percent market share globally as a subspecies for larger fish farms, and so that's interesting that you know.
Speaker 2:Now Africa is kind of forced to buy that fish from Asia back every year, even though it was the genetics that was taken. It's a little bit of a tragedy. So we're working with local government and with a research university. We're two years into a breeding program to get Kenyan fish to perform at the same level as the Asian enhanced variety, and so what does that look like for us in a few years? Right now it's just an expensive, multimillion dollar research program, but the results are clear. So the fish is growing faster. We've kept the genetic diversity of the fish, so it's robust. It's resistant to local diseases, whereas the one from Asia is definitely not. So that's how we can operate a no antibiotic business, whereas most of the Asian fish are fed antibiotics. So it supports our sustainability story at the core, but it also is going to become a business line.
Speaker 2:So will Victory Farms always be the hatchery of East Africa? I doubt it. But this improved strain. What we can do is work with other hatcheries, and we're in discussions today. We haven't moved forward with it. We also are doing everything with government, which goes a little bit slower. But basically you can imagine a scenario a couple of years down the road where Victory says hey look, let's partner with regional hatcheries which are following ESG standards and are legally set up with government approval, which are following ESG standards and are legally set up with obviously with government approval, and then those can become our what's called multiplication centers for the improved fish. So those can then supply regions of Kenya or of East Africa which we don't have a commercial interest in but a smaller hatchery may have a commercial interest in, and so those improved fish can continue to be part of our revenue cycle.
Speaker 1:But we'll only take a very very small slice of the pie and you mentioned somewhere that you're really focused on being carbon negative or positive, depending on how you look at it by 2025, which is like tomorrow. We're recording this in November 2024. What are the biggest bottlenecks for that to you? Because it might be you might wrote that a few years back, but what are the biggest bottlenecks of what you've seen? For sure, the half a million trees will help and the fodder and the feed, but in your operation, in your business, in your ecosystem and universe, what are the biggest bottlenecks still on the carbon side? Absolutely, what are the biggest bottlenecks still on the carbon?
Speaker 2:side. Absolutely. I don't think we'll hit it in 25, but that we might be the leading fish player globally in carbon footprint. We think is possible. So we've just commissioned a third party I actually forget the name, but one of the big CO2 verification companies. We've just commissioned them to do a full study on our complete supply chain with I think it's called like level three or whatever. So it'll look at our sourcing and our customers and we think that's especially important because of our low carbon sourcing and customers. So I think we will reflect very positively. We can revisit this in six months when they finish the exercise to see how we rank globally compared to fish peers. Again, I expect us to rank very well In terms of getting carbon negative.
Speaker 2:The cold chain was a big step. So this ultra low energy usage and the predictive algorithms that was kind of the first piece that we got. The second big one was the feed energy. That was actually the logistics costs of importing everything from Egypt or Europe and having almost all of our feed 90 plus percent is now sourced locally, so that got the global footprint reduced. And then putting it on a geothermal well where we're 100% renewable energy that's also, of course. That was the next biggest piece. So we've kind of looked at this from a prioritization standpoint.
Speaker 2:But we've taken a couple of the biggest pieces. We've taken those to zero. Now we're still emitting carbon as a company and we've also taken single-use plastic completely out of the business, which I think in fish is quite uncommon. There's no polystyrene, no single-use plastic, and we avoid customer relationships and I'll call out Carrefour until they do business with us, but we won't supply fish in polystyrene. So if they want to have East Africa's freshest tilapia, they will have to use food-grade plastic, the same as us, and I have a good relationship there, so I can poke, but I do think they need to get polystyrene out of their supply chain too. So I think if we look at those pieces, that still doesn't take us negative or you know, or to the point where we're consuming carbon, and the only way to do that is to have programs that are at scale, that really push it.
Speaker 2:So we're working on two big ones. One I'll mention briefly is just the getting market ladies to convert to a carbon neutral fuel, and we don't do that alone, we do it with partners, and I think we have a lot of work to do. We've still not met our targets internally on converting market ladies from traditional charcoal to basically carbon neutral forms of cooking, which is totally possible in today's world in Kenya and Rwanda. So we have work to do there. The other piece is converting our waste into inputs for the mill, which I discussed earlier on the eggs. So the wastewater from those ponds is flowing to you know, today, 3000 trees. Hopefully in 90 days it's a half a million trees and hopefully in a couple of years it's 15 to 25 million trees that we build into this big ecosystem. And once we've done that I'm not sophisticated enough to do the math, but that has a good chance of taking us to carbon negative with every fish. If not, we will keep working on it until we get there.
Speaker 1:No, absolutely, and I want to ask a few questions. We always like to ask and specifically, we like to ask this. In a way, let's say, we're doing this in a theater in Nairobi or another financial hub in East Africa, with the financial world present, both direct, both investors investing their own wealth, institutions, et cetera. We do this on stage. A lot of nice, we had a nice dinner, a lot of nice imagery. So people really have an understanding, but people also forget. If there's one thing you want them to remember from that evening, what should investors know about what is happening around let's say, regenerative aquaculture and preferably put into action the next day when they're at their desk? What is one seed you would like to plant? Or one fish egg you would like to plant in people, to not literally to remember and to take away? If we had an evening and do this on the stage, I like the dramatic imagery.
Speaker 2:I think I would put a dramatic line out there, which is that a climate positive and community inclusive food solution for Africa exists, and we're doing it at scale. We're producing hundreds of millions of fish. We're doing it in a way that I think and certainly we're open to the scrutiny of any third party I think is world leading on both climate and community inclusivity, and so building strong communities, I think, is as important as taking care of the climate, because if we weaken our communities, well then they're the ones who go chop forests down, understandably to take care of their families. So I think this model exists and I guess the takeaway is look, this solution exists and you know we're looking for partners to help us continue to scale this. It's not just investors, we're also looking for, you know, a range of other types of partners, because some of the work we're doing is related to conservation and regeneration. I told you we're working with Conservation International, but I think there's a lot of work we can do on that side. And so, and for any folks who are not directly interested in the African aquaculture world, I think it's the example, and for me it's this.
Speaker 2:I have a very clear image in my head of you know this salmon eater. It's actually in my head. It's always in New York, but you've got a high income salmon lunch at New York somebody earning six figures, whatever and that is is often, and too often, an unsustainably sourced product from a consumer who can absolutely afford to make it regenerative. In Kibera, in one of the biggest slums in Africa today, that same person, who's actually only earning $5 or $10 a in in her environment, is eating a regenerative tilapia for lunch and it's and a better and a better fish.
Speaker 1:Like actually better for her, interestingly enough, if it hasn't been fried.
Speaker 2:Yes, yes, but I'm hoping she eats the ceviche that we we try to promote, but uh, but the point being that how can it be that a five dollar income consumer is eating a climate positive product when we can't accomplish that in new york city? And so I would challenge the whole food industry that we need to hold ourselves to a different standard today and build systems, food systems that deliver that for consumers and do you see, like, let's say, you weren't doing fish in, or fish not necessarily not in africa, um, what would be your?
Speaker 1:not advice, but what are are things you see from your work that could also be applied. Or I think many people have been taking notes and lessons learned but to, let's say, more land-based or to agriculture colleagues elsewhere, both in ken, both outside the region and outside the continent. What are things you see, things you wish people would be doing, etc.
Speaker 2:Both entrepreneurs and investors. I don't think what Victory is doing is a unique outlier. I think it's replicable. If you're in a different value chain, I believe that if you take, if you're in a different value chain, I believe that if you take, you have to apply modern technology and talent. It's very related with capital, with time, and so if we expect a solution in 24 months, it's just not going to happen.
Speaker 2:But we need to have those pieces, we need to put together and if we can combine world-class talent, which will create and attract, combine world-class talent, which will create and attract the world-class technologies, if we can combine that in this kind of trifecta, then we can build food systems across multiple verticals that are climate positive and community inclusive. And so I would really say right now, the narrative around Africa of starving children and warfare, of course that exists, but it's not the story of Africa, it's the wrong narrative. And the story of Africa is we can innovate. We've got most of the world's arable land remaining and certainly we have most of the world's poorly performing agricultural land. If you look at what this continent can do with the talent that's available, of course there's a demographic dividend going on. We apply modern talent and technology to it. With natural ecosystems, we can build regenerative food systems across different verticals.
Speaker 1:And flipping the conversation or the question what would happen if you're on the other side, on the investor side? We love to ask this question what would you do with a billion dollars if you had to invest it? So, which is a huge amount of money, and nothing at the same time, if you look at the global financial system which for sure you, you, you noticed in your banking era, but let's say you had that, which is more resources than most of us will ever have at our fingertips, but you had to put it to work, not saying it has to come back in two years. There's a return, let's say expectation but long-term, what would you focus on? What would be big buckets? I'm not asking exact dollar amounts, but I'd ask you what you would prioritize if you had a billion dollars to put to work.
Speaker 2:Of course I would put some portion I don't know if it's a quarter or a half, but into the model that works, which is Victory's fish model, because you can very clearly correlate that to CO2 savings, to livelihood gains, even to IQ gains for stunted populations. So I think a portion of that I would just put into a model.
Speaker 1:Which is something just to double click on that, something we often forget, like how malnutrition or not malnutrition, but undernutrients, like how that leads, like what's the missed opportunity of all those people and children, specifically children of not being fed, not being able to be fed. Well, in terms of what kind of genius are we missing there? What kind of massive poetry, cathedrals, breakthroughs is sorry to take it on a deep, sad note, but what we're missing there, not only from a human welfare perspective, but simply from humanity, it's insane.
Speaker 2:No, I think that's right. I mean I also don't want to end it on a sad note, but I mean we are talking about tens of millions of children that are experiencing acute stunting right now, who will all effectively be locked into the poverty cycle and be a burden from an economic standpoint for the future instead of instead of a gift. So no, I think it's. I think it's enormous. I mean, and I think if these things were quantified and I know you and the different agencies have tried to quantify these, and it's huge numbers. So the cost to humanity beyond the moral side is also certainly it's culture, it's art, it's economics. But if I get back to your question on a billion of cash which I would love to deploy, for sure, I put some of it into a model that I think can very clearly play a role on those issues we just discussed. I would take a substantial portion to kind of create ecosystem building capacity, which it is, if you look at what Victory can do today and we're so lucky to have the talent that we have now, whether it's the local talent that we've been able to attract and develop, or folks from people from Stanford, and I mean you name it from all the top institutions in the world. We're lucky to have those people on our team.
Speaker 2:If you now that's partly a result of 10 years of building our story and building our capabilities and building this mission, or at least chasing this mission, if we wanted to kickstart this more rapidly in other high impact agricultural verticals in Africa, you could imagine, with that level of funding you could kind of build systems so we could create that talent pool, the local and the international we could create. You know, we could try to build replicability in what, let's say, you know, if I could be as immodest as to say, you know the success that victories had on the aquaculture side, but if we could try to replicate that across other key agri-verticals, how much impact could that have? And so I think that that's what I would try to do, because I fundamentally believe food systems can be regenerative. But we've got to apply again the modern talent and the modern tech and capabilities to it with time to be able to produce that and I think also with the imagination and the purpose. But I think that can be easily engendered with such a profile.
Speaker 1:And as a final question, which usually leads to a few other final questions, but if you had a magic wand and you could change one thing overnight, what would that be? This could be anything, it could be extremely practical, local, could be extremely lofty and a global mindset shift, et cetera, but only one thing what would that be?
Speaker 2:I would have truth in labeling so that consumers can decide. This is highly democratic, but the consumers can decide how much damage they want to cause to animal welfare, to the environment, can decide how much damage they want to cause to animal welfare, to the environment or to communities. And I know it's not too realistic to have such a statistic on a label. But I believe that many consumers, including very low-income consumers in places like where Victory operates, but I believe consumers across the spectrum would take impressive decisions, in spite of financial limitations that everybody faces, toward products that are driving better societal outcomes in terms of flavor, obviously, but also just like the research now on nutrient density, like how we farm fish or how we farm animals and produce also determines what ends up being in it.
Speaker 1:Do you see there, like the health potential, health benefits of better fish, better fed fish and better bread fish being an interesting potential driver in terms of transparency as well, because a fish could be very, very good for of transparency as well, because a fish could be very, very good for you or actually very, very bad, depending on what the salmon ate or what the fish ate. And what do you see there? Of course, it's a step further than safety, like is this fish going to make me very sick or not?
Speaker 2:I think almost all consumers of all income groups would shift toward higher nutrient outcomes. Of course, many people are not going to take trade-offs on flavor or convenience and that will always be the anchor or the drag in the system. But if we could create a global shift toward more nutrient dense products, it would create significant financial incentives for companies to chase those. Just as an example like we don't get paid for producing more nutrient-dense fish, we do track it and so, interestingly, how do you measure it?
Speaker 1:We had a PhD With these new ingredients as well. You use.
Speaker 2:We haven't done that yet, but that's definitely in our pipeline. So we had a PhD live on our farm for a long time, like a year or two, and she did her doctoral thesis on children's nutrition eating different types of fish whole fish, filleted fish, and then a couple different species of fish, and then farmed versus wild, and there is a difference. Wild fish is more nutritious than farmed but fortunately for tilapia there's not a huge difference.
Speaker 2:And the difference becomes much less if you eat the whole fish, because there's a lot of nutrients in the organs and everything else.
Speaker 2:But the step that this has taken for us and this is a non-commercial outcome, but a good environmental and human outcome is the government of Rwanda.
Speaker 2:So, based on a study I think it was from MIT, but based on a study from one of the big schools, the Rwandan government then found that IQs are five points higher on average for kids who've had one fish meal per week. We combined that with the doctoral work from this lady I mentioned, and so we combined that with that, and so we're in the process of putting together a program for children in Rwanda, which will be government and NGO paid, at least for the first few years. So that's why I mean it's kind of a non-commercial outcome. But it's now flipped so that Victory is tracking the nutritional outcome of the fish that go into the program and we're going to, of course, be compensated on the nutritional outcome. So it's a really, and maybe that's a step forward that markets can follow in the future. But how amazing is that? Because of course, the government only cares about the nutritional outcomes and the educational outcomes of its people.
Speaker 1:So what a great way to incentivize us to serve us. That's an outcome-based nutrition program which don't really exist too much around the world. Let's be and very, very interesting. And that's, of course, there's a step away, but it does potentially trigger you as well to really pay attention to. Of course, the feed that goes in is extremely important what kind of weight you're hitting and how soon, and mortality rates and disease and all of that, but also what ends up being in the fish in terms of omega-3, omega-6 and other kinds of nutrients you need, and it could be part of that outcome study. Very interesting you need and it could be part of that outcome study.
Speaker 2:Very interesting, yeah, and I applaud the Rwandan government for being bold enough to take those steps, because I think it's difficult for a government to do that sort of work.
Speaker 1:And then of course, his private sector very excited to try to deliver on that. Yeah, amazing. And now there's so many other pieces on the region that we're not going to go there. I want to be conscious of your time and thank you so much for coming on here, of course, for the work you do, and coming on here to share about a fascinating deep dive into a regenerative fish story in East Africa. So thank you so much, Joseph, for coming on here, share and, of course, good luck with a 10X and with all the drones and the eggs. Good luck with a 10X and with all the drones and the eggs. I'm just imagining massive drones not massive, significant drones flying with 500,000 eggs under in their belly, which must be quite a sight.
Speaker 2:Well, hopefully you can come out and take a look, but in any case, thanks so much for having me on Pleasure to be here.
Speaker 1:Thank you so much for listening all the way to the end. For the show notes and links we discussed in this episode, check out our website investinginregenerativeagriculturecom. Forward slash posts. If you liked this episode, why not share it with a friend or give us a rating on Apple Podcasts? That really helps. Thanks again and see you next time.
