Competitive Intelligence in the Entomology Industry

Here is a text a I wrote some time ago for a project and I thought this would be of interest for a wider audience as well. It is about competitive intelligence especially in the entomology industry. What are the aspects you should look into and how to collect the relevant information? Enjoy!

How the intelligence is gathered

Competitive intelligence gathering can be divided to four steps; Planning and Direction, Collection, Analysis and finally Dissemination.

In the beginning of the process, the planning and direction, the company must define what the questions are, the Key Intelligence Topics (KIT), which the company must track and understand in order to be successful. Example KIT-questions could be for example “Where do you and your rival sell products, and to which target audiences”, “What products does your rival have in the pipeline, and how will they be marketed” and “How is your rival’s company organized and how well operations are performing”. The KIT- process is necessary so that the research done in the field will be done on the relevant topics because no matter how big or small the company there is only a limited amount of time and resources to be used on the research. Additionally, the overload of information can bury the relevant information under the irrelevant. Suggestions for the KIT’s of IFF-industry are presented later on.

Overload of data is a real danger so keeping the focus on the predefined questions is essential. Once the data is collected is time for the analysis. Here the relevant is separated from the irrelevant and the knowledge is looked into for pattern and a report is created.

The last step, dissemination, is the step where the analyzed data is given to the company management for them to adjust their plans accordingly if needed. It is likely that new questions will arise from the given analysis. The new questions require the cycle starting from the beginning. Because of the repetitive nature of the CI- collection it is collect a process and a project. Project is thing with a clear beginning and an end, but in this case the collection does rounds one after another so it is a Competitive Intelligence process.

Competitive Intelligence in IFF-industry

What is special about the IFF- industry compared almost every other industry is the novelty state combined with the rapidly growing interest. Before FAO-released their publication “Edible Insects” in 2013 to promote insects as food and feed there were only around 10 small companies rearing insects. At that time the products were sold in Asian markets and for pet animals. Now in 2016 there the number is somewhere around 200 and increasing all the time. You can look at the entomology database in the this site, just select the database from the top menu.

As the high scale insect farming has never been done is such extent and by Western regulatory requirements the technology, Good Manufacturing Practices (GMP), and logistics networks are missing. Additionally, the legal environment is not up to date. For example, it is unclear when EU will allow the insect to be sold for human food or is the slaughtering act of EU will concern insect in the same way as other animals. This is simply because there has never been interest on topic before. The missing data, operational standards and changing legal environment all increase the importance of Competitive Intelligence and they form the Key Intelligence Topics of the industry.

How to collect Competitive Intelligence in IFF-industry?

As mentioned earlier the industry is still in its infancy meaning that there are only a limited amount of operators in the field. As the number is limited keeping an eye on the identified competitors through news, social media and their homepages is not too big of a task. Though, the situation will change eventually.

Before the industry grows further networking is possibly the best way of gathering Competitive Intelligence. The circles are small so even if you would be missing a contract to a certain company, it is possible to reach a company that knows them well.

The biggest forum of the industry is IPIFF, the International Platform of Insects for Food and Feed. According to IPIFF’s webpage their goal is to “help the insect industry to prosper in Europe and worldwide by composing an industry network, encouraging collaboration amongst the members, gathering the interest of members for institutional representation and support high-level research and development”. Even though the description tells that they want to compose an industry network and encourage collaboration so obviously no secrets are shared, but the latest news and trends around the topic are discussed. It is essential for the ambitious company to be part of this knowledge database. One example topic could be the legal issues. It is in the interest of all the members of the IPIFF that the legal changes are tracked and lobbied for. As it serves the common good, the latest information is available for the members and they get a real upper hand against competitors who hear about the news only later on.

The IPIFF- forum only offers the “public” information, the information the industry players are willing to tell and what they consider will not harm their operations, but in IFF-industry the way companies see their competitors vary at least until certain extent from other industries. The lack of companies in the field increase the transaction cost of their clients, for example fish feed manufacturers. When there are only a limited amount of players, the fish feed manufacturer has limited options for horizontal integration meaning higher risks of price fluctuation and delivery difficulties. This leads to situation where the IFF-companies benefit from competitors as they bring more interest and new possible clients that see that relying on only few companies would too risky. This situation will change once the IFF- industry has established itself and once that will happen the companies will certainly co-operate more conservatively.

KIT 1. New competitors and business models

Because the market is very new the companies are still looking for the best business models and trying different approaches how to differentiate themselves from the competition. It can be said that once a company in the field find a successful model of operations, the competition will follow fast.

KIT 2. Technology and GMP

The technology used today by IFF-farms are either self-made or the machines and tools are not used in the farms to something else that they were originally designed for. For example the containers the insect are reared in are in many cases actually containers made for bread industry. Other example are the egg-cartons used for cricket farming. IPIFF says in the homepage that they are aiming to create “white papers” and standardize the best practices of the industry to promote high quality and this way the credibility of the industry. Before such standards are formed the companies are going their own directions looking for the best solutions, others succeeding better than others. The companies must be alert of the technological advantages in field to be sure that they are the one with the best solutions from all the used ways of operating.

Also, by understanding the state of the technology and the expected developments in the near future the investments done today might be outdated tomorrow. For this reason especial care must be taken with this KIT right from the beginning.

KIT 3. Legal changes

The companies that are aware of the coming legal changes the best have a huge advantage in the planning of their operations. The main question in the legal and regulatory field is when EU will open the markets for food and feed. More specifically, in which order the products will be released, is it the fish feed or maybe poultry? These questions have huge impact on to which aspect of research and development the companies should focus on, and when the marketing campaigns are started. Just like in EU, also USA is still thinking of its approach to the topic. At the moment some states allow farming and selling for food and feed, while in the other end some states do not allow any of these activities.

Conclusion

Competitive intelligence is very important in the IFF-industry. Because of the three KIT-issues explained a conclusion can be made that for proper risk management and success in the future a company should do its utmost to find the latest CI. Additionally, the companies must to be flexible and agile to modify its technology and business model according to the latest information from the field.

In case you are looking for help with this topic, please contact me for quotation: ilkka@iffautomation.com

Database Analysis; The Chosen Species

I published my Entomology Company Database in this website about one week ago. I already got a lot of positive feedback and also people informed me of missing companies and mistakes, thank you for that! I will keep on updating the database from now on, if you spot a line that needs updating, let me know!

There are many ways to look at the data and I believe it can be used to serve multiple purposes, but what I will do here is to paint a picture of the insect species that are reared by the industry and what can we conclude from the findings.

Database analysis; The Chosen Species

To get started I first filtered out all companies that are not active. Then I selected companies that are involved in farming.  Also, I filtered out companies whose species are unknown.  This leaves us 69 companies (Note! I am using the database file version 08, uploaded on 14th of January).

Point 1. Most companies focus only on one species

First thing we can learn from this is that vast majority of companies, 43 out of 69, are focused only on one species. Putting the company’s focus to only one species brings many positives effects: R&D resources are better used, hardware investments and inventory carrying costs are lower. Also, benefits of economies of scale can be reached easier. There are negative sides as well; Focusing only on one species means higher environmental and supply risks. What if the chosen species are not among the most popular species when the industry grows? Or even worse, what if the species are not in the list of approved species when the legislation is going through big changes?

More on this you can read from my blog 5 Questions an Investor Should Ask Before Investing into a Insect Farm. https://ilkkataponen.com/2015/06/20/5-questions-an-investor-should-ask-before-investing-to-a-insect-farm/

Four companies have chosen the path of two species that might be a way to control the risks, but in the same time keep the costs low. The companies are Ynsect, Ofbug, Big Cricket Farms and Micronutris.

When looking at the “Multiple species” companies 12 of out 23 are companies that mainly focus on biocontrol or pet food manufacturing. When working on these segments of insect farming the higher production costs and loss of the benefits of economies of scale is justifiable as the companies get better price for their product. This is because their selling unit is rather pieces than kilos.  They operate in the a high-end segment, while when producing for food or feed the companies are competing e.g with soy bean that is extremely cheap.

Point 2. The most popular species

Looking at the most popular species is not easy as many companies talk only about “crickets” instead of the actual species of crickets. All the cricket companies make total number of 19. The black soldier fly (Hermetia illucens) farming companies are 21. Maybe surprisingly only seven companies are involved mainly with mealworm or lesser mealworm. Of course some of the “Multiple species” companies are rearing these as well.

Point 3. The lone wolves

Two companies stand out with the selected species: Steak Traz Traz are the only one to choose Grasshoppers so far and Fly Farm Systems only one with Musca Domestica. Being the only raises few issues and increases supply risks. How come these companies have chosen a different answer than others? Do they know something that majority does not, and are they really the one with the better option?  Surely every company is their own individual case and they could justify their chosen species from production and business perspective today, but the in the future the case will be different. One reason is because of the environmental risk explained in Point 1. The biggest risk is not the environmental, but the supply risk that is very significant in the case of the lone wolves. Companies rearing e.g the most popular species black soldier fly will benefit from the wide vertical integration that they build together with other similar companies. This will not only bring security against the supply risk of the company but benefits in increased sales as the demand risk is reduced for the downstream of the logistic chain.

More on the supply risk briefly from my presentation here: https://ilkkataponen.com/2015/10/29/presentation-in-insect-business-and-research-meeting-in-seinajoki-finland/

Or with detail from my thesis here: https://ilkkataponen.com/2015/05/20/thesis-supply-chain-risk-management-in-entomology-farms/

 

Sending Unannounced Live Insect Shipments Is a Really Bad Idea

A vast majority of logistics companies do not accept live insects on board. The reason is that even though insects have very different requirements than e.g mammals during transportation, they fall under the same category of “live animals”. Live animals mean extra work, extra cost and especially extra risk and for these reasons the logistics companies have chosen this policy.

In Europe live animals are declined by at least the following major companies: TNT, FedEx, UPS, DHL, Schenker. Some companies have exceptions if the transportation happens within a country or if airplanes are not used. For example Matkahuolto company in Finland allows ground transportation, but only within the country. What is interesting is that FedEx is doing live insect transportation within different states in USA, but not in the EU.

So if the policies are so strict, how come companies are able to send live insects internationally?

First of all the large global companies do not have consistent approach to the relatively new demand. This we can see from the example of FedEx and their differences in EU and USA. When the logistics companies do not have clear answer, it is possible for some departments or local offices to go around the official policies.

The second reason and the most common way to send live insects is to send them unannounced meaning that the insects are packed and sent without telling what is actually inside the box. The Finnish national post office Posti has told that they know that their network is used for live insect transportation this way. Using this method is a really bad idea in the long run and will lead to big problems sooner or later. In some cases sending unannounced might be the only option to be able to send at all, but the following points should make you consider the option of not sending at all seriously:

When sending purposely against the regulations you might be eligible to cover damages. This is the case if the logistics company notices your violation of the rules and must carry out quarantine actions to isolate the risky shipment from other packages.  The second and a lot more serious and expensive case is the breaking of a live insect box during the transportation. Depending on the case it might be that the logistics company has to decontaminate multiple shelves, or even complete airport hangar, dispose other packages that are affected by the escaped insects and so on. And if this happens you can be sure that they are not willing to pay the bill themselves.

There is no legal or regulatory cover. This goes to both receiver and sender! When something goes wrong with a shipment, and eventually something will go wrong, the logistics company will not cover anything to you once it is clear what was inside the package. If you are using the method of unannounced shipments, is it clear what will you do with you if a shipment doesn’t arrive because of the third party?

So what to do? If you are a supplier you should cover yourself by selling your live insect with the Incoterm Ex Works. This means that you are selling them “free from the warehouse” so that products are available from a given location where the customer or a third party assigned by the customer can pick them up. At the moment of picking up the responsibility of the supplier ends and all possible issues are now in the hands of the customer.

The best options is obviously using a logistics service provider that officially transports live insects. There are now a few options available also in EU. If you are interested to get connected I am happy to help you out!

e-mail me ilkka (at) iffautomation.com or call +358 40 762 9601

Insect Farming Is Best Suited for the Production of Animal Feed

The companies of the growing industry of high-scale insect farming are approaching their businesses from many different angles, but where the use of insects can be justified the best is when the insects are used to create animal based feed for other animals. The “animal based feed” means feed that include proteins and other nutrients that are coming from an animal instead of plants. Certain farmed animals like salmon and pets like some reptiles require animal based feeds for their health and efficient farming.

When evaluating where the insect based products should be used, the animal based feed is the only group of products where the insects stand out in a positive way against the substitute products. Other products that can be made out of insect are human food, chitin and fertilizer. Chitin and fertilizer are side products of the main purpose of the insect farming that is aiming to produce food either for human or animal consumption.

Let’s go through some of the approaches the insect farming industry has made so far, and how they match up with the substitute products.

Human food

When talking about human food, insects are associated to it as a protein source and replacement for other animal products and beans like soy. There is no doubt that insect farming have significant benefits over these two product groups, but when looking at other new protein products, insects are not anymore the number one choice. Single-cell proteins (Algae, fungus and bacteria), cultured meat and bio engineering (e.g plant based products mimicking animal based products) can all offer the same value proposition as insects, but they do not carry similar risk exposure for the producers making them. For this reason the substitute products are more likely to be produced with more efficiency.

The main difference and in the same time the source of higher risks compared to these other modern food sources is that the insects are the only animal based, or putting it more precisely, the only one coming from live animals.  When farming animals in high-scale the pathogens are a risk for the health of the animals themselves. This risk is underlined in the coming years as the pathogens’ are building bit by bit more resistance against antibiotics. Secondly, when dealing with live animals the end products are also exposed to pathogens like salmonella more than plant based products.

The factor that insect industry has over the substitutes is the possibility of nutrient recycling. Nutrient recycling in this case means that nutrients can be saved from bio waste or even manure by feeding them to insects. Using bio waste brings multiple benefits for an insect farm, but it also highlights the risks. When the raw material of the production is bio waste the cost is very low. This lower cost can make up some of costs of higher risks when comparing the substitutes and underline positive environmental impact of the insect farming.

There are a few negative sides of using bio waste. Depending on the source of the waste the quality and quantity of it changes and this makes the forecasting of the production more difficult also in both quality and quantity. Additionally, when the waste is so unstable it bring additional pathogen risks. There are ways to mitigate these issues: If using waste from bio waste created by facilities such as breweries the quality and quantity are consistent, but the price is not as good as the same waste can be used for example in bio gas production. Other way to make the raw material consistent is for example fermentation and mixing of different high standard deviation batches to make them consistent by quality, but these solutions increase the production and inventory carrying costs. Lastly, the issue of regulations might be a problem from companies using bio waste. At the moment it is unknown how for example heavy metals and medication residues build-up in the food chain of insects. This is one of the main reasons why EU has not yet opened the markets for insect based food and feed. It has been speculated that the first steps of the opening of the markets will include only certain insect species fed only with certain feeds, and those fees would not include bio waste.

All these downsides may compromise one of the main arguments of insect farming, the possibility of nutrient recycling. If you are interested to read more about this aspect, see my blog post “Using bio waste as feed” here: https://ilkkataponen.com/2015/08/20/using-bio-waste-as-feed-for-farmed-insects/

Animal feed

When looking at the substitutes in the animal feed sector “insect feed” is competing with wild fish, side streams of traditional farming and plant based proteins like soy. The prices of these products are low and the quantity demand is extremely high. It will be difficult from the insect businesses to answer these numbers especially when the industry is still building up, but insect feed have other significant benefits over the competition.  Both wild fish and insects are part of the natural diet of predatory fishes like salmon, but unlike the wild fish, insects can be produced locally and insect products are a lot more sustainable. Soy is one of the key elements in the modern fish farming even though it is not a part of for example salmon’s diet. This area is not my expertise, but it is my understanding that soy is being used as fish feed only because it is the cheapest possible protein source, and if the price of an animal based protein source would be close soy, soy would be ditched right away. Additionally, the rise of the wild fish based fish feed prices is expected to continue. This will be closing the price cap year after year in benefit of the insect feed.

Conclusion

Keeping in mind the explained issues and when thinking about the industrial scale food production it can be concluded that insect are most suitable for animal feed for situations when the animal based nutrients are a must. When thinking of human food the new and modern substitute products offer more efficient and, depending on the type of the feed used for insects, more environmentally friendly solutions. When looking at the topic from non-industrial point of view insects are a great solution for human food. For developing countries and areas where arable land is scarce insects can offer great benefits over mammal farming that need huge areas of land and water. Topic that was not discussed in the blog was taste; will it work in benefit of insect or other protein sources? This question I leave for other bloggers and experts.

Collective Consciousness in High Scale Insect Farming

In the Finnish national broadcast company’s radio channel Yle Puhe there was a great program by a man called Jari Sarasvuo.  His latest talk show encouraged me to right this post. What he was talking about among many other things was Collective and Social Consciousness. These are not theories of his own, but his way of telling really struck me and made me notice many aspects of these theories exactly in this industry of high scale insect farming. For all the Finnish speakers here is the link for the show: http://areena.yle.fi/1-3092290

Earlier in this blog I have discussed the issues related to the conservative approach to co-operation by many in the entomology business. Companies are not willing to discuss even the very general approaches for example to the business strategy. I claim that this is a wrong approach that is wrongly justified. It is a way to kill your own business but its also hurting all the other operators in the field. Now in the current situation the restricted communication is forcing all the companies to do the same failures in e.g their trials related to scale up and the start of production. The situation in this specific industry is underlined by the lack of public studies.

I have understood that the companies do not want to share their knowledge because they feel they have used resources to collect it and they justify their approach not to co-operate by saying “because we have suffered for this, you should suffer too”. Behind this thinking is a wrong assumption that other insect farms or for example other insect product processors would be competitors for each other, but it is not true. While there is still so few operators in the field and the market demand of insect products is not even closely satisfied, the competitors are found from the replacing products that are the traditional protein sources.

It is a fact that the lack of operators in the industry is hurting all the companies, but still we do not want to help each other, we rather build barriers around ourselves. I think is fair to say a company’s competitive advantage is not in knowledge that can be achieved by six months of learn and fail experiences, but the same missing knowledge from the starting companies creates a barrier of entry and increases the risks of failure. Every failed company in the field is a loss from the whole industry as it narrows the horizontal integration. More on this in my seminar presentation that you can find here: https://www.youtube.com/watch?v=In_ONp_PoY0

The Collective Consciousness is a way of thinking where individuals are thinking “us and them” over the Social Consciousness way of “us”. The Collective is a part of conservative management were people were reflecting their lives and getting their motivations mostly through their own eyes. The Social way sees that the individual benefits the most when we think of the benefit of everyone over the battle between the two groups “us” and “them”.

Now you have struggled through the set-up and we get to the cricket-steak:

For many insect industry entrepreneurs the desire to find the company is coming from Social Consciousness- motivation. We want to build something sustainable and ethical for the good of the planet, right? For the good of not only us, but of you as well. By doing this we believe that us and you will all enjoy a healthier future.  So how is it so that the similar thinking is not transferring to the actual work the companies are doing? Is it the wrongly identified competitors, lack of business understanding or can it be that motivations of the entrepreneurs are after all more Collective or the Social?

The future belongs to Social Consciousness and the co-operation will always be more beneficial than isolation. There is always more to win from co-operation than there is to lose. It is choice of all companies to make the decision whether they will anchor themselves to core of development by co-operating or are they hurting themselves by building walls around themselves.

Presentation: Insect Business and Research meeting in Seinäjoki, Finland

The 23th of October I gave my presentation at Finland’s first Insect Business and Research Meeting held in Seinäjoki.  In the previous post I gave the links and background info the event itself, so I am not going to repeat it here. You can find the post here: https://ilkkataponen.com/2015/10/21/insect-research-and-business-seminar-on-23th-of-october/

My presentation is available in Youtube behind this link: https://www.youtube.com/watch?v=In_ONp_PoY0&feature=youtu.be

The list of all the presentations, videos and presentation materials is available here:http://www.ucs.fi/index.php/biotutkijahotelli/linkit

In the presentation I am talking mostly based on my thesis. The references and reasoning behind the presented conclusions can be found from the thesis itself where the original references are listed accordingly. Thesis can be found here: https://ilkkataponen.com/2015/05/20/thesis-supply-chain-risk-management-in-entomology-farms/

Additonally to the thesis references I mentioned the avian flu epidemic. You can read about it more here: http://america.aljazeera.com/opinions/2015/7/the-end-of-chicken.html?utm_content=buffer14455&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

Enjoy the presentation video! Let me know your thoughts in the comment section!

Insect Research and Business Seminar on 23th of October

This Friday the 23th I am speaking in Insect Research and Business Seminar in Seinäjoki, Finland. The seminar is first of its kind in Finland its arranged by set of organizations including for example the University of Helsinki and the Natural Resources Institute of Finland.

My presentation is called “Supply Chain and Production Risk Management in High Scale Insect Farming”. I will be talking about my thesis, but also little bit of the latest news around the topic. After the presentation I will upload here my presentation slides together with a video of the presentation.

If not all, at least majority of the presentations will be in English, even though the program is published only in Finnish. The seminar is also streamed online, so if you are not able to make it to Finland this time, you are able to follow whats happening anywhere you happen to be. You are also able to submit questions via Twitter using account @agrobiotalous

Here you find all the information:

The seminar program, the times are GMT +3: http://huispaus.ucs.fi/UCS/ht/hyonteistalous_23-10-2015.pdf

If you want to attend the seminar you can do it for free, just sign up over here: https://elomake3.uta.fi/lomakkeet/15510/lomake.html

If you are not able to make it to Seinäjoki, you can follow the live-stream over here: http://www.ucs.fi/index.php/biotutkijahotelli/linkit

If you cannot make it to the seminar nor you are not able to see the live feed you can see at least some of the presentation later on in Youtube in this channel:  https://www.youtube.com/user/ucseinajoki

I hope to see a lot of people over there and get a lot of questions all over the world!