Nick Lykiardopulo - Adversity in aquaculture: Fish farming during the crisis
While the spread of COVID-19 continues to affect the food supply chain and consumer demands, how has aquaculture handled all the changes? Nick Lykiardopulo of Philosofish, located in Greece, shares challenges that are currently impacting the aquaculture industry and what he expects for the future of fish farming.
This episode is part of a special AgFuture series on the impact of COVID-19 on the food supply chain. Join us to hear how those on the frontlines of the global pandemic are working to overcome adversity and feed the world.
The following is an edited transcript of Michelle Michael's interview with Nick Lykiardopulo. Click below to hear the full audio.
Michelle: Hello! I'm Michelle Michael. In this special series of AgFuture, we're talking with those working along the food supply chain about the impact of COVID-19. My guest today is Mr. Nick Lykiardopulo. His company, Philosofish, is a Greek business producing sea bass and bream. Thanks so much for joining us today.
Nick: Hi! Thank you for having me in this interview.
Michelle: We're going to talk about fish farming today. Where are you located, and what is your role in the aquaculture industry?
Nick: I'm currently in Greece, but I actually live in Switzerland. I chose to sit out the lockdown in Greece partially to be closer to some elderly relatives and partially because of business interests, particularly aquaculture in Greece, which has been going through some challenging times during the crisis, and I wanted to be nearby. I'm an investor in a large aquaculture business in Greece.
Michelle: From a personal standpoint — we'll get to the impact of COVID-19 on aquaculture in a minute — but from a personal standpoint, what's going on outside your door right now? What's life like for you?
Nick: Well, specifically in Greece, Greece has been one of the success stories in terms of control of coronavirus. The government took very draconian and early steps to control social contract. As a result, even though Greece has a similar population to the state of New York, it's had less than 150 fatalities and less than 2,500 infected, confirmed infections.
In terms of the local society, everyone's been experiencing the same lockdown as everybody else in the world, but the sad headlines we've seen elsewhere have been absent from Greece. From my own point of view, I'm a man who catches ten-hour plane flights a week, and so it's had a big effect on my lifestyle — one which I've actually quite enjoyed, being in one place for a month and a half.
Michelle: Let's go now to the impact of COVID-19 on your actual business. You talked about aquaculture being impacted greatly. Can you just give us the basics of what's going on in that world?
Nick: Well, I think the two significant effects are, first of all, on demand, on our sales, largely because of the closure of restaurants, hotels, the cruise line industry, the disappearance of people traveling for holidays or on business. A big part of the demand for aquaculture is now closed, which has had an effect on the sales of a lot of aquaculture businesses who directed their product towards those channels. Obviously, there has been an increase in those that sell largely to supermarkets.
The second effect — and immediate effect, at any rate — has been on the logistics chains. Shipping movements have been difficult and complicated. Road transport and ferry transport has been affected. Drivers and products are subject to greater delays at borders and periods, sometimes, of quarantine. This has made distribution more difficult. On top of that, air freight has substantially reduced in terms of its capacity to carry seafood because there are so many less passenger flights, which also carry freight at the same time as the passengers.
Michelle: From a fairly basic point of view, when we talk about the aquaculture industry, the types of fish farming that you're talking about, is there a certain type of fish that we're speaking of?
Nick: Yes. The Mediterranean fish market is predominantly made up of sea bass and sea bream — or in the States, (they’re) usually referred to as branzino for sea bass and dorade for sea bream, branzino being more well-known to U.S. consumers, but there are other species which are being produced and developed in the Mediterranean.
It's a white fish, relatively small in terms of its volume compared to salmon — around 300,000 annual production, compared to slightly over two million tons of salmon.
Michelle: But across the board, all those species are impacted at this time.
Nick: Yes. From what I read and learn by joining webinars, a very similar experience has been had by the salmon industry, and I believe (it’s) the same with shellfish and other forms of aquaculture.
Michelle: Without the ability to move fish at this time, can we discuss some of the global stresses and strains, some of the challenges facing fish farmers right now?
Nick: Well, short-term, the challenges are that if you don't sell your fish, there are several knock-on effects in our business, in our business model. Mediterranean fish production is a two-year growth cycle, and so if, for a period — especially one that is about to go through the high-growth period of the year, the summer — we don't sell all of our fish, we are presented with a series of problems. First of all, we continue to feed our fish, which means that we have greater feed costs, (which puts) quite a lot of stress on our businesses' cash flows. As a result, probably most businesses reduce the level of their feeding to a non-optimal level, so they're not making the best use of their resources. At the same time, the fish grow to, in many cases, above the best ideal size for the market. At the same time, the cages become more crowded, increasing the risk of disease. Often, the licensing, regulatory and just physical restrictions mean that the fish can't be spread out more widely to alleviate those problems.
The next effect is that in not selling mature fish, new fry is not being stocked, which cannibalizes our ability to produce fish during the next two years, so for 2021 and 2022. Further on, that creates a logjam in our hatcheries, where the fry, which were waiting to be stocked, start to become too large and too overcrowded to remain in the hatcheries, so it has quite a considerable effect on our business model.
Michelle: It sounds like a snowball effect, really. From the consumer point of view, should we be concerned that, down the line, there could be a shortage of fish in supermarkets?
Nick: Well, I think there will be less production in the next year, but by necessity, fish farmers will stock less fish in their cages. They will seek, as best as they can, to sell cheaply their fish currently, but investment in future biomass will be reduced. I don't know if there'll be a shortage on the ground, but it's quite difficult to define what a shortage is in a protein market, because none of the fish that is produced is thrown away and all of it gets eaten, so demand pretty much equals supply. It's just that consumers may have to eat different products to the ones that they prefer in order to satisfy their dietary requirements.
Michelle: When we talk about these disruptions, will that affect fish pricing in the future?
Nick: Yes, I think it will reduce fish pricing in the short-term but increase it in the longer term, for a variety of reasons — firstly, because of less supply; secondly, because the cost of operating all businesses, not just aquaculture businesses, will become higher. Supermarkets, restaurants, hotels, cruise ships, transportation businesses will all have to live with a degree of social distancing for many years to come. This is not a problem which is going to be solved in the next two to three months, so the cost model for all aspects of society, public transport, the way we operate in our office spaces is going to become more expensive across the board.
That, inevitably, will filter through to the prices of whatever is being produced — in this case, fish. On the positive side, it seems likely that energy prices will go through a period of considerable reduction over supply of energy, and that will counteract some of the effects that I described.
Michelle: Another potential positive, I suppose you could say, (is that) fish is known as a healthy diet option. Do you think, in the long-term, this crisis will make consumers more aware of the benefits of seafood?
Nick: Very much so. We're seeing this as a very positive development for the industry. Firstly, there have been a number of academic and governmental comments about how vitamin D- and omega-3-rich diets improve the immune system and how it is one of the ways that people can prepare themselves better to fight off this or any future virus. Also, I believe that there is an increasing focus on healthy diet, partially because of an imposed more sedentary lifestyle, but partially because it is clear that obesity has been a major increased risk factor in terms of mortality and serious repercussions of the virus. These are not problems that can be solved in one or two months of changing one's diet, but actually, one's immune reaction can be improved in the very short term.
One's general well-being and the quality of one's diet takes longer to improve, but we believe that there'll be more focus on that as time moves on — and more focus on the traceability and the animal health aspects of producing food. I think it's fairly widely accepted that whatever the immediate causes of the current pandemic, elements of poor animal health have contributed to the start of the virus, and I believe that both governments and consumers will become increasingly focused on this.
Michelle: Certainly, so many changes from this pandemic. I'm curious, from your point of view, if you think the aquaculture industry has ever faced a challenge as serious as the coronavirus, or is this unprecedented, just like the pandemic itself?
Nick: Well, I'm not sure that the pandemic is unprecedented. It's certainly unprecedented in our lifetime, but I think if we look back in history, there have been many pandemics. If we take Spanish flu, which was only a hundred years ago, at that time, between 3% and 6% of the population is estimated to have died as a result of Spanish flu. The economic effects were very, very strongly felt — actually, particularly in the United States, and very differently from one city to another, depending on its reaction to the epidemic. Going back further, in the 14th century, there was a great famine which killed 30% to 50% of Europe's population, and the Black Death is estimated to have killed around 25% of the world's population, so it's not unprecedented in human history, just in our lifetime.
I think that as far as the aquaculture industry is concerned, it has faced some very big challenges from animal disease, from outbreaks of disease amongst the animals that we farm and, indeed, the effects of El Nino on the cost of feed and the availability of feed inputs, but it's certainly, in my understanding, the worst crisis that we've faced in terms of reduction of demand because, apart from the period of closure of restaurants, as I've said, we can expect a very substantial decline in world GDP, in the spending power of consumers and the ability of governments to fund projects because of lower taxation receipts.
The overall effect on the world economy and, therefore, the buying power of our customers is, I believe, unprecedented.
Michelle: Restaurants are closed. Farmers now have to hold onto their fish longer. Does that change the way they operate — feeding, stocking, things like that?
Nick: Yes. It means reduction in feed rates, reduction in stocking rates. It means a greater focus on new forms of sales. Quite a lot of home delivery is now taking place. Supermarkets are increasing their proportion of the food market in the absence of restaurants. Consumers are favoring products which have longer shelf life and greater ease of handling, not just canned and frozen foods, for reasons of easy cooking at home but also preferring to avoid the risk of fresh meat or fish or other products having been recently handled on the fish counter or the meat counter in the supermarket.
People's purchasing habits are changing, and the focus of the industry will be increasingly on easy-to-cook, ready-to-eat products and elements of food safety. In the very short-term, though, people tend to reach for cheap staples: dry foods, rice, pasta, and those are the things — tinned tomatoes — which are sold out first in the supermarkets, but over a longer term, I think people will want protein with easy-to-eat and easy-to-store characteristics.
Michelle: It's been said that crisis, at times, drives innovation. Do you see any positives coming from what's happening right now in the world?
Nick: Yes. I think we will see, in our industry, a less fragmented industry, because it will be generally easier for the larger and better-capitalized businesses to survive. I think we will see a greater emphasis on production being close to consumers in the market and not being reliant on very long supply chains, which may be interrupted for one reason or another.
I think a focus on food safety will be a great opportunity for the industry. Countries will also focus on food security at times when imports, for one reason or another, become difficult. We have seen that China, for example, has had to dramatically eat into its strategic food reserves in order to avoid food shortages during this period and is now actively replacing that food, but I think it's unlikely that other countries will not learn the lesson of the potential of food shortages when supply chains are interrupted. I think all of that is an opportunity for the aquaculture industry to direct investment with considerable government support throughout the world and to develop new markets.
Michelle: Nick, you're a recent investor in the Mediterranean industry, is that correct?
Nick: Yes, that's correct, in the last five years.
Michelle: How do you see your business developing in the next five years?
Nick: Well, I think we see quite considerable opportunities for growth. We have a strong investor group who are committed to the food sector generally — and particularly to aquaculture.
We believe that the opportunity is there for aquaculture producers to follow — certainly the Mediterranean ones — to follow the model pursued by salmon and shrimp and other sectors of our industry and produce less and less round fish and more and more processed and ready-to-eat products, all of which requires considerable amounts of investment and a great deal more employment to items which will be much in need in much of Europe — and particularly in Greece — over the next few years.
Michelle: And nobody knows, day to day, nobody knows a timeline. The pandemic really is driving the time, but how long might we expect the effects of the coronavirus pandemic to influence the aquaculture industry?
Nick: Well, I think, because of the long growth period for fish, undoubtedly, for the next two to three years. The economic effects on GDP, disposable income, different travel habits, the way people take the holidays — I think we'll have a longer effect of at least five years. Restaurants will not be able to operate, for a long period of time, in the way that they have done in the past. Table density will be reduced. Health requirements will be much greater. Hotels will have to operate in a completely different way to the way they do now, which will increase costs, reduce the number of available bedrooms (and), therefore, the number of people eating meals. Cruise ships, for example, will have to operate, if they do, in a completely different way. All of those will have very long-term effects on the way we live our lives. I can see five years as being the minimum period that we will see the effect.
Michelle: I'm curious if, in your eyes, you think this pandemic will impact the way consumers look at farmers. Are farmers more appreciated as the world's food supply is threatened at this time?
Nick: Yes, I think they are. I'm not so sure how long consumers' memories last, but certainly at the moment, the lack of mobility for cheap labor, pickers, seasonal workers in many parts of the world — either mobility within the country or mobility across borders — has focused on the need for sustainable local farmers. I think that people appreciate those in the food supply chain, even down to those stocking shelves in supermarkets, as being key workers. A number of politicians I think quite rightly said that we will all look at the people who collect our trash and the people who stock our supermarket shelves in a different way following this crisis.
I just think that society has a relatively short memory. Ten years from now, people will be increasingly less careful about passing disease one from another, but in the short-term, I think this crisis will drive a great deal of change in the way we live our lives and the way people think about life. I'm in my 60s. I'm one of the first generations that has not faced the likelihood of imminent death at all during my working life, but my parents and grandparents all lived through very significant wars, outbreaks of disease, persecution on a global scale. We've lived a kind of charmed lifetime in which we haven't faced those risks. We're very saddened, certainly, in the developed world when people die at a young age or in accidents, whereas for many, many centuries — and, indeed, it is still in some parts of the world — the fragility of one's life is a daily worry for people. I think this will change people's psychology, certainly, for the next few years.
Michelle: This virus certainly has changed all of us. Mr. Lykiardopulo, stay safe, stay well. Thank you so much for joining us today.
Nick: Thank you for having me. Thanks a lot.
Michelle: For additional resources on COVID-19, visit alltech.com.