Tru Shrimp’s trifold strategy emphasizes promise of chitosan market

­Michael Ziebell is the president and CEO of Tru Shrimp, a Balaton, Minnesota, U.S.A.-based company seeking to commercialize a proprietary model of land-based shrimp farming.

SeafoodSource: What are the origins of Tru Shrimp? And what made you want to get involved in leading a shrimp-farming company in landlocked Minnesota and South Dakota?

Ziebell: The technology’s origin is Texas A&M and university professor Addison Lawrence. In 2014, the Knochenmus family [the owners of Ralco Nutrition, which itself owns Tru Shrimp] acquired the patent rights to that technology. I joined the company the following January and I was charged with validating the technology and then scaling it up and commercializing it.

My background is the food industry – I spent most of my career in the frozen food business. When I was introduced to the technology, I was just smitten by it. Being a novice to the shrimp industry, it was amazing to see shrimp being grown in only 14 inches of water. Therefore, their environment is much easier to control. And the promise of the productivity, the promise of making a difference in a market that on the surface has got its challenges – as a strategist, I saw the market was ripe for disruption. It's a fragmented market, there is no real clear branded leader. The difficulties with production in Southeast Asia, the disease there, the issues with sustainability, all those things added up to me as I stepped back and took a look at it I saw there was an opportunity here to disrupt a large market and gain market share, which is what marketers do. I look at it as a great challenge – it has turned into the project of my life, it’s that intriguing and that involved. I’ve done a lot of things, but this is the most interesting.

SeafoodSource: There are very few examples of land-based shrimp farms making it financially. What makes Tru Shrimp different?

Ziebell: First of all, I think a lot of the attempts at shrimp aquaculture, they jumped right to production. We did the complete opposite – we did the research first. The raceways, or what we call Tidal Basins, at Texas A&M were four feet wide and eight feet long and one of the first things that we did and probably the most-courageous entrepreneurial step was we first built the laboratory. We had to validate this technology and scale it before we tried to go into production. And that was more costly and more time consuming, but I think our result is very good. Also, we didn't come with all the paradigms of the shrimp industry. We started with a whiteboard and a piece of technology from Texas A&M and Professor Lawrence came up from Texas to help us get started. Being Midwesterners, we took the responsibility of having an animal to take care of seriously and thought hard about how we were going to best do that. Not that we didn’t kill a shrimp or two along the way while we were learning. But we learned ourselves. That lack of paradigm really has been beneficial to us because we don't have any preconceived notions about how things must be done. You just need to keep the animal healthy and growing.

SeafoodSource: So what are you doing different? What paradigm-breaking things are you doing?

Ziebell: First, the shallow water itself is substantially different. People think of us as shrimp farmers, but I would say the core competence that I've wanted to build in this company is in water chemistry. The water is everything. So our investment is in the systems to control that water. And there's no question the way we do it's more expensive, we use biofilters, but the Tidal Basin itself is a unique design. We've enhanced Texas A&M patents with patents of our own. How we stock and harvest the Tidal Basin is completely different. And we do our own processing. I know there's a market for whole, head-on shrimp, but most consumers eat shrimp with the head off and so processing has always been a central part of our models.

And from the very beginning of the project, we were aware of the opportunities with chitosan and one of the benefits of our Tidal Basin technology is that we’re able to collect the shrimp molts. In most of the world today, companies collect shrimp shells from processing. Well, we get that too, but we also collect the molts and we’ve been enhancing that ever since we got started.

SeafoodSource: In August 2022, Tru Shrimp announced it had commenced production of a branded line of premium chitosan for topical and internal medical, pharmaceutical, and cosmetic applications.

What is the potential of the marketplace for chitosan and how are you pursuing opportunities for meeting that demand?

Ziebell: We grow our shrimp under near laboratory-controlled conditions. We're in charge of their entire environment and therefore, the molt tissue that we collect is pristine. We have no disease, we've never used antibiotics, we use no preserving chemicals whatsoever, and the water is not polluted. That's one of the issues today I believe with commercially harvested shells is that the crustacean was grown in ocean water, which is growing ever more polluted. And we have complete chain of custody from postlarvae all the way through the lifecycle and through the processing and conversion of the material. I think our chain of custody may be unmatched anywhere in the world.

So our focus, because of the quality of our chitosan, is explicitly medical applications – medical devices, pharmaceutical, dermatology, and possibly high-end cosmetics, all coming under the umbrella of USP, or United States Pharmacopoeia, which is the very strict standard of medical application of chitosan and it also has a very strict testing methodology. One of the more-challenging parts of that, for example, is heavy metal and in a medical application, they don't like you putting heavy metals in your body, mercury and things like that. Well in our environment, our raw tissue almost meets the USP before it's even converted.

A couple of years ago, we built an advisory board of medical entrepreneurs and scientists to guide us in this and that has been extremely beneficial for us to understand how to approach the market. The actual size of the market is not very well-defined right now. We’ve acquired syndicated data to try to understand how big the market is and we've done executive interviews with people who use chitosan.

After doing all that research, we believe the market is there and we’re building the systems to approach it. If you type in the word “chitosan” into Google Scholar, you’ll get over a million papers written on the subject, and we’ve had customers tell us it is among the most-researched compounds in all of medical science. So we believe there is a groundswell underneath this biopolymer that, in addition to what's being used today, there's going to be advanced applications because it is extremely versatile. It has one great quality: it can go into our bodies, and it naturally biodegrades with no harm to us whatsoever. One of the most-exciting things for us is nanoparticles, using nanoparticles to deliver a therapy, and those nanoparticles can be made out of chitosan and that's kind of exciting.

SeafoodSource: How hard was it to get FDA approval for the product?

Ziebell: It’s more laborious than food. You have to develop a series of good manufacturing practices, and most industries have that, but in the FDA medical world, the GMPs are quite rigorous. They are highly detailed, and they must be adhered to. The FDA not only inspects the facility but your adherence to those good manufacturing practices. Over the last 12 months, we have developed those GMPs, which run from our collection and preservation of the shell material all the way to the finished product and everything in between. It was a significant investment of time, energy, and money.

SeafoodSource: So are you producing volumes now? Have you any conversations with potential buyers and talked about pricing at all?

Ziebell: We are not [producing] at significant volume but we are in chitosan production. Our first production batch is done. We have commenced our outreach to key opinion leaders and users of chitosan. The market is still undefined in its dollar value and its tonnage. I will say that, for the most part, the product is so valuable, it's sold by the gram. And yes, we’ve had conversations with customers. Before we even got FDA registration, a company got wind of us on a Wednesday and they were here visiting our facility on the following Tuesday. And so that gives you an idea of how excited they are about this. What interested them most was not only our USP quality, but our chain of custody, and also our manufacturing in the United States, which is going to be a competitive advantage for us.

SeafoodSource: The market for domestically grown shrimp in the U.S. is very difficult. Does the chitosan market give you a cushion on achieving that premium that you need on the product side for shrimp to make the business model viable? Do you foresee it being the primary market almost for what you're producing? Or do you see them as complementary?

Ziebell: Oh, they're complementary. The chitosan market, because the material is so valuable, is going to be very valuable to our business model. But we do have – and I say this with all seriousness, and I try not to be arrogant here – we have a superior shrimp. From the very beginning, we built sustainability into our processes. We had an outside third party come in and analyze us from top to bottom and compare us to pond aquaculture and other RAS and even wild-caught shrimp, and we compare extremely favorably from a sustainability perspective. So all those things add up. In the language of a marketer, we have significant differentiation, and therefore we can build a brand and that's what we intend to do. So we will and we are marketing a very premium product. We're packaging the product different than the marketplace does, approaching it a bit different in every way. I like to tell people that our goal was to change the rules of this industry. In our own small way, we're trying to do that.

SeafoodSource: You’ve talked previously about having three revenue streams. Selling the shrimp and the chitosan are two revenue streams. What's the third?

Ziebell: Our third is a pure shrimp pet food and treat ingredient. We use every part of the shrimp and we do our own processing. The waste stream from processing, damaged shrimp, shrimp that are too soft or small for the consumer market all go into a high-protein, low-fat pet food ingredient that's been extremely well-received. And we are just delighted at the prices were able to get for that. Our Midwestern roots – a big part of our identity is raising animals for food consumption, farmers use every part of the steer and every part of the pig – and that was our mentality going into shrimp farming. We’re about to launch a research project on what can we do with the fecal matter and the uneaten feed, because there's still a significant amount of protein in there, and we don't want to waste that either.

SeafoodSource: Where are you at with production and on planned construction of your farm in South Dakota. Can you give an update on where the company is right now in its growth?

Ziebell: Our original facility after our lab work was done was a pilot facility that we call Balaton Bay Reef. Today, we operate it largely as a production facility but we also use it for research optimization. I will tell you the research is done and now we're just optimizing how to do better and more cost-effectively what we already do. But we're capable here of easily producing over 40,000 pounds of consumer shrimp and all those shrimp go into the Twin Cities [Minneapolis and Saint Paul, Minnesota, U.S.A.]. We are marketed in a supermarket chain called Kowalski’s Markets, which is a very premium supermarket chain. We are marketing it there under the Tru Shrimp brand name, both in the freezer case and in the seafood ice case. We have been working over the last several years to build our commercial facility, which we call a "Harbor,” and we have that slated for Madison, South Dakota.

I will tell you that COVID slowed us down. We also thought we could build a bigger facility, but we couldn't get the investment appetite for something bigger. But it looks very good that by the first quarter of next year, we can break ground on it and start building. Some of the failures and difficulties in other aspects of [the U.S.] aquaculture [industry] have not been helpful in the raising of capital and have really made investors step back from aquaculture altogether. So there has been a little bit of an uphill battle. But the fact that we have three revenue streams – that we are not just dependent on selling the shrimp themselves – is a significant advantage in our ability to raise capital and has really catching people's attention. We're not completely ready to go, but we're on the right track.

SeafoodSource: What is the current status of your desire to do an IPO since postponing it in February 2022?

Ziebell: We've really tabled that for now. We were a victim of timing. We were ready to go, then the market collapsed and that hurt. That was not a pleasant experience. There was a lot of time and money and effort invested in that. But we don't see those conditions changing for a while – the IPO market is essentially dead in the United States. So we've turned our attention back to private equity to raise the capital.

And as part of that, we’ve scaled back our plan for our Madison Bay Harbor. When we first started, we wanted to build a 10-million-pound facility, but we couldn't find enough investor appetite for that. So this Harbor will be smaller. We do still intend to build bigger facilities once this is operational and shows proof of concept. We are projecting 1.6 million pounds of shrimp will come out of the Madison Bay Harbor, along with over 4,000 kilograms of chitosan and 500,000 pounds of pet food.

I'm afraid you know we got caught a little bit in the vortex of some of the difficulties in other aquaculture species, which scared everybody a little bit. When we get a chance to talk to investors and show them the breadth and depth of our technology, the research behind it, the databank we have, they can see we have a very predictable and safe system.

SeafoodSource: How long will it take to build the Madison facility once you have secured financing for it?

Ziebell: Under ideal conditions, I would say less than 18 months, but the conditions are not ideal because getting the raw materials is going to be difficult. So in our planning we've reserved ourselves 24 months, though we’re hoping we can build it faster.

SeafoodSource: If and when Tru Shrimp becomes commercially successful with its Madison facility, what comes next?

Ziebell: Well, a lot of people love the model of having a shrimp farm near every city. We don't think of it that way. Again, we're Midwesterners and our strategy is hub and spoke. Our intention would be to build multiple harbors [farms] here in the upper Midwest, with a central hub concentrated on what I call the functions of excellence: our processing, sales, marketing, husbandry, veterinarian skills. It is the model that has been used by terrestrial protein integrators that built these huge protein companies. The beauty of it is you can pick up the hub-and-spoke model and move it closer to the U.S. East Coast or west of the [Rocky Mountains] and you have the real advantage of centralized processing and centralized distribution of the product.

Eventually, we would very much like to expand into the European Union. It's a 1.5-billion-pound annual market. Last time I looked, virtually all of European Union’s shrimp is imported. And Europe is very interesting because it's so compact compared to the United States. And then, in the rest of the world, we would be interested in licensing the technology.

SeafoodSource: What is your marketing strategy for your commercial shrimp?

Ziebell: We are selling our 16- to 20- count shrimp, peeled and raw for USD 23.99 [EUR 24.45] a pound at Kowalski’s. I and my colleagues here are packaged goods marketers, we are branded marketers. We went into this with a branded mentality and not a commodity mentality. It's one thing about the shrimp industry in general is very, very commodity-minded – Urner Barry prices rule their world. Our marketing is quite straightforward. We really promote the fact that we're a product of the United States, that we use no antibiotics. We don't we don't even use Everfresh, which is a common product used in shrimp farming. We also package the product in vacuum-packs so you can see the shrimp and to conserve its freshness. One of the great features of our technology is that every shrimp looks like the shrimp next to it. I mean they all come out looking exactly the same, with a beautiful blue tint, and they taste magnificent. The shrimp never let us down. When people get a chance to eat them, they're just delighted by them.

We just keep promoting those points of differentiation, and people seem to respond to it. We're not going to get everybody. It's one thing you have to accept as a branded marketers – not every consumer can afford your product or will care about your points of differentiation. We have no illusion of replacing imported shrimp, at least not now. But we can carve out a spot where we can make a difference. It’s not going to work for every retail outlet or every restaurant work but we’re going to be persistent and trust our data and our product and our differentiation.

SeafoodSource:  How is Tru Shrimp going to make it when so many other U.S. shrimp-farming concepts have not?

Ziebell: I don’t want to be critical of all those companies that came before us and those that are still active. There's more than enough room for all of us in this marketplace and I don't even view them as competition. For us, I hope the difference is the amount of time and money and effort that we put into the research on the front end, which has greatly mitigated the risk in our processes. Today we are we are running cohorts of shrimp one after another that are extremely uniform. But it took a while to get there because of all the work that had to be done on finding the optimum water chemistry and all those other things that we worked on in the laboratory and in the pilot facility. I and the shareholders of this company are counting on that to make the difference. And then the quality of our product will give us the opportunity to create a branded shrimp that will be successful. We know brands don't happen overnight, especially in the food world. We have to gain the trust of the consumer and the retailer, who's our intermediary, or the foodservice operator, and you do that with a quality, consistent product and that's what we stay focused on.

Photo courtesy of Tru Shrimp