The Israeli tech start-up out to beat the ‘fish cartel’

Although Israel enjoys miles and miles of coastline and unencumbered access to the sea – along with a fair-sized freshwater lake in the north of the country – some 85% of the country’s supply of frozen and fresh fish is imported. And, to add insult to injury, said Josef Melchner, CEO of Israeli aquaculture firm Subflex, the prices are high and the selection is small. “We pay more for fish than in most Western countries, and the selection in markets here, compared to that in supermarkets in the US and Europe, is very small.”

There are numerous reasons for this situation – much of it due to what Melchner calls the Israeli “fish cartel,” consisting of a Byzantine wholesale and distribution system with many middlemen who make sure they get their “cut.”

But Melchner has a plan.

“Our submersible, flexible net cage systems will allow for the managed raising of fish in the ocean, providing large, locally grown harvests that will help lower the cost of fish. In addition, we plan to sell the fish directly to markets, ensuring that the cost to the consumer is much closer to the producer price,” he said.

The decision to go into the fish business is part of a long journey Subflex has been traveling since it was first established over a decade ago. Subflex was one of the first, and remains one of the few, companies in the world to engage in managed offshore aquaculture – where fish are raised in cages off-shore, provided with food and protected from predators. It’s a form of “battery farming,” a term usually use for chickens, which are warehoused in huge coops solely for the purpose of being raised for food.

While that practice makes many people uncomfortable – with animal rights groups demanding that chicken growers give the birds some room to move around – the situation is far different for fish in Subflex cages, who do get to swim around while they are fattened up for market.

In a submersible open-ocean cage system, fish are raised in their natural environment – the sea, which has the nutrients and growing conditions they thrive on. Because the system is in the open sea, effluent – the feces and leftover food that fish do not consume – float away and are dissipated by the ocean currents.

A major advantage of an open-ocean cage system – as opposed to the shallow-water fish farms that have been more popular in the past – is that there is no need to remove the effluent, which is difficult to do and requires that fish be given antibiotics and the like to protect them from bacteria from the waste that cannot be removed. At one time, for example, there were numerous such fish farms in the waters off Eilat – and they were closed down after it became clear that the effluent was affecting the quality of the water in the Gulf of Eilat, and damaging the coral reefs there.

Subflex cages at Ashdod Port, ready for deployment (Courtesy)

To actualize its vision Subflex will be bidding on a tender to set up the world’s largest managed offshore aquaculture installation off the coast of Israel.

“The government has mapped out a full plan of what to do with Israel’s territorial waters and economic zone waters (24 nautical miles and 200 nautical miles respectively,” said Melchner. “The ocean development plan includes use of waters for leisure, gas exploration and mining, and fish farming.”

That tender, which will be out in the next month, will allow for the development of as much as 8,000 dunams of ocean space in which to raise the fish, which, Melchner promises, “will include a much wider variety than are available to Israeli consumers right now. Instead of just trout, sea bream, and mullet – the fish you usually find in markets – we plan on raising many more varieties, like greater amberjack and wild salmon that are used in sushi, as well as other varieties. We could also raise tropical saltwater fish for export. There are a lot of possibilities.”

And all of those possibilities will be healthier ones, said Melchner. “Today, a consumer who buys fish in the market has no idea where the fish came from – whether from polluted waters, a shallow-water fish farm, a wild catch, or even from a lab. We will be attaching an ID tag to each fish we raise which will allow markets and consumers to get all the information they need to decide whether or not they want to eat that fish.”

The Subflex team (Courtesy)

Subflex has been in business for twelve years – but it’s only been in the past two or three years that the company has seen its fortunes rise.

“We were in the research stage for a long time, perfecting our system,” said Melchner. “Also the market wasn’t quite ready for a solution like this. But over the past several years we have gotten a lot of attention. We’ve set up projects in Peru, China, Vietnam, and other places, and we received a grant for research and development as part of the European Union’s Horizon 2020 project.”

And in order to make sure that its system works the way it is supposed to, Subflex is managing the whole operation itself – from cage to table, essentially.

“We want Israel to be a showcase for how the fish business can be run,” said Melchner. “We decided that in order to do that, we had to move from being just a tech company to an active player in the market, in order to take the power away from the ‘fish cartel’ – consisting of a few large importers – and give the tech the power to make a difference. That’s an important vision for the company, and me personally. We want entrepreneurs to copy the system we develop and bring the benefits of our tech to consumers everywhere.”