Last year, at an auction of dried abalone in Hong Kong, a Hermanus business sold abalone for between $400 and $500 US dollars per kilogram. That business is Abagold – voted the 2024 Business of the Year by the Hermanus Business Chamber. In this interview with BizNews, CEO Tim Hedges tells viewers why South African abalone is at the top of the abalone hierarchy along with Japanese abalone. He traces the 29-year history of Abagold that now exports 95% of everything it produces – and provides permanent employment to 420 people. Hedges also lists the ways in which Abogold is maintaining its position in the global market and growing its business to ensure that it is still around in another 30 years.
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Extended transcript of the interview ___STEADY_PAYWALL___
Chris Steyn (00:02.01)
Abagold has been named the Business of the Year by the Hermanus Business Chamber. We speak to CEO Tim Hedges. Good morning, Tim
Tim Hedges (00:12.462)
Good morning Chris, how you doing this morning?
Chris Steyn (00:15.868)
Fine, thank you. Thank you for joining us. I know you’re busy running the Business of the Year, but let’s talk about how long Abagold has been operating in Hermanus already.
Tim Hedges (00:28.336)
Chris, the business was started really as almost a scientific project as far back as the mid 1980s, but Abagold was actually formed and created in 1986. So we sort of heading into our 29th year. It was actually started by Dr. Pierre Hugo, who was a veterinary scientist who actually owned the local newspaper. So go figure that one out.
And if you speak to his wife, she will tell you about how she had baby abalone in her bath, she had baby abalone in her zinc. There were baby abalone everywhere. There was salt water or sea water being transported up Fernkloof into their house to be able to do all the experiments. And specifically, it was just to be able to replicate the natural process of spawning and reproducing that took so much time.
The business from there sort of grew, I would say, sort of almost organically rather than through acquisition or through anything like that. And so we’ve grown from sort of three or four tanks to now having over 3,400 tanks that hold abalone in, around about 670 tonnes of abalone at any given time, and all taking place sort of in a five-year life cycle from the time that the baby abalone is born until such time as the abalone would actually be fully market ready.
Chris Steyn (02:02.777)
Before we go further, why do people eat abalone and how and where is it consumed?
Tim Hedges (02:12.144)
So, you know, if you were to ask the local South African, there are multiple people that had spent time either in Hermanus or on the West Coast that had been exposed to abalone. But it was always, it was never really the primary sort of source of consumption of abalone. Whereas in the Middle East, in Asia, specifically China, Hong Kong, Singapore, Malaysia and Japan, abalone was always considered to be a very premium, special product and its history actually goes back to the Japanese Emperor providing and handing over dried abalone to the Chinese Emperor at that time when they met. So it was always considered to be a very prestigious gift-type product. And so it’s kept that mystique and it’s kept that uniqueness.
And that’s validated by essentially being probably still one of the top two or three edible products in terms of value. So it has an exceptionally high value. 75% of all people that eat abalone never pay for it. Now, there’s an interesting stat. And the basis of that is that you would normally get it served to you at a wedding or at a celebration…
Tim Hedges (03:37.944)
or at a banquet. And so it is often purchased by somebody who is recognising you as a gift, sorry, recognising you as a guest, alternatively recognising you as a friend and providing you value in terms of what they’re serving you. And abalone sits in that space. It is also considered a happy food. So when things are tough, like now in China, less abalone is being consumed. But at the same time, there are still those occasions, you know, there are people getting married, there are events and celebrations that do take place. And that’s principally where it gets served. It’s not an everyday food, it’s not something that people would have on their menu on a regular basis. And due to the fact that it’s so expensive, it is always considered to be you are treating somebody or recognising somebody when you actually provide them with an abalone dish of some sorts. It is also quite difficult to cook at home.
So the restaurant trade and the hotel trade is sort of where you would probably get the best representation of an abalone at any given time.
Chris Steyn (04:47.513)
Now what puts your product, the abalone product, in a unique position in the food chain?
Tim Hedges (04:55.366)
So I would take maybe just one step back from that and recognise that there are probably between 25 and 32 species of sea snails, which is what an abalone is. The genus is Haleotus, and the South African species is actually called Haleotus midae, and it is only found around our coastline. And it has a very unique texture, very unique taste and a very different shell to any of the other abalones that are out there.
So abalone is produced in around about 12 to 13 countries commercially and South African abalone has always been considered as a premium abalone in the hierarchy of abalone. Strange enough that there is such a thing as hierarchy but it has been considered at the top together with the Japanese abalone. And so Abagold slots into that space within the South African species which is available to the world.
And Abagold over the years has consistently built on a quality and a consistency of product. We produce abalone in three different formats. So we sell the product in a live format that ships out with airlines pretty much every second day to most of Asia. Then we also produce a canned product which is sold and has a five-year shelf life, so obviously has a lot more longevity, and this tends to be sort of a gifting product or a restaurant-type product, and is consumed at certain times of the year. And then there’s a dry product, which obviously also has quite a lengthy shelf life, and is the old traditional way that abalone was always preserved and then reconstituted over time. So it literally gets put into a pot and is recooked for up to three days before it is ready to serve. And what it does in that dried format is it just concentrates all the flavours. So when you actually consume the product, is very different to eating either a live abalone or a canned abalone. So that’s pretty much how we slot ourselves into the South African species itself. But we do consider ourselves to be right at the top in the premium with our brand, Abagold.
Tim Hedges (07:21.818)
And that’s, I think, a time issue. We’ve been there for many, many years. We’ve also had consistent customers in Asia that have been buying our product for almost 20 years. So those relationships have now, in some instances, moved to the next generation. We’re actually dealing with the children of the original people that engage with us. So there’s a very long loyalty that exists between Abagold and the customers…
Tim Hedges (07:50.971)
as well as the restaurants and the hotels that we service.
Chris Steyn (07:55.932)
Now, I would imagine the global industry has changed in the last decade. How would you describe that change?
Tim Hedges (08:03.206)
It has changed significantly, Chris. I mean, it really has metamorphised itself, if that can be considered a word. The reality that we started with was that the total production of abalone out of South Africa is commercially and done through agriculture is around about 3,000 tonnes. There are still, unfortunately, around about 3,000 tonnes of abalone that still leave our shores as poached or captured product, which is very sad and something that we are working quite closely on to try and see if we can rectify that. But that 6,000 tonnes in 2014 sat within a total production of around about 86 to 90,000 tonnes. So we were meaningful in terms of percentage, but the majority of that 86,000 tonnes was produced by China. And China has now more than doubled that production. So the total production of abalone globally now is in excess of 230,000 tons. And we’re still only producing 3,000 on the farms and 3,000 sort of, let’s call it illegally. So the reality is we’re a tiny, tiny player in the global market. And that’s why we’re able to position ourselves into the premium space where we are probably competing against no more than 20,000. And that premium space is defined by the size of the abalone, the, like I explained, the quality, is sort of the consistency of both the flavour and the texture, as well as the quality of the shell and how and where it is positioned. Whereas the majority of the Chinese product may even just be consumed in the very close proximity to where that farm exists.
What does make life quite difficult for us is that the majority of the Chinese product that is produced is produced in the sea. So those are in cages that are basically kept in the sea consistently. Whereas we are pumping water out of the sea onto land, which is significantly more expensive and much more labour intensive because we’re working in tanks. But our coastline is just too aggressive. We would not be able to…
Tim Hedges (10:24.262)
find a spot where we could safely put cages into the sea that would not be washed up by these crazy storms that we get along the Cape of Storms. So that sort of gives you a little bit of an understanding that the environment has changed to such an extent that Abagold has had to adapt to how we enter this market and how we engage in this market.
And to give you an example, last year Abagold…
Tim Hedges (10:53.83)
hosted the first ever dried auction of abalone in Hong Kong. And it was an amazing evening. We invited a number of our customers, but also a lot of dignitaries. We had the South African Consulate there. We had many, many people that had never experienced Abalone, most of them. And we auctioned up a number of lots, some of which were older than 30 years old meaning that those abalone had actually been in our system for 30 years. And that’s the sad thing about abalone. Because people are taking them out of the sea illegally, the abalone that should be living for 25, 30, 35 years are not making it. And so our coastline has been literally destroyed in terms of natural abalone that are available.
Tim Hedges (11:47.876)
And this is just continuing on an ongoing basis. So we also see our position in the world, especially in South Africa, as conserving and being able to position ourselves as a long-term sustainable business. And that was also how we positioned the auction that we did, which was whatever you buy here, you will be able to get again in two years’ time. It was so much work, we decided we were not going to be doing an annual auction, but we do hope…
Tim Hedges (12:15.622)
to maybe take our auction to another global capital, maybe Singapore, maybe Kuala Lumpur, maybe even Beijing in 2027. So let’s see what happens.
Chris Steyn (12:29.168)
So in what other ways are you going to try and maintain your position in the global market and grow the business?
Tim Hedges (12:36.902)
Chris, we have had to think very carefully about how we manage costs. We’ve had to consider things like automation. The industry itself at the moment is still a very manual process. To give you an idea, we have sort of 420 permanent employees that are involved directly and indirectly through administration and farming itself in raising the 660 tonnes that we have. So it is hugely important to Hermanus because those 430 individuals support 430 families. And so the role that the abalone farms specifically in Hermanus play is very important in the stability here.
But I think, you know, the difficulty for us is if we don’t keep looking at innovation. So to give you
one very simple example, we used to just pump water and put blowers on every day to keep the air bubbling through the tanks. But through using technology specifically called variable speed drives, we’ve been able to bring the consumption of electricity down dramatically. And that focus was also directly linked to the extent of load shedding. So when we had load shedding, we can’t stop pumping.
So we’ve been using generators to try and get through the first part of load shedding, but we have also converted the farm now fully to solar as well as to battery. So whenever there’s not electricity or whenever electricity is at its peak, in other words, during the peak time of early mornings and later afternoons, we switch over to the battery if we don’t have enough solar. And that’s helped us to manage costs significantly.
I think we probably got 10 or 15 such projects that are ensuring that this business can be around for the next 25 or 30 years, because I think we owe it to the founders and I think it’s very important for a month. So we’ve got to keep this industry going. It creates and brings external capital into the town, which yes, tourism does, but we’re probably one of the few businesses that actually exports…
Tim Hedges (14:56.87)
95% of everything we produce. So it’s very critical for Hermanus and for the people that work here.
Chris Steyn (00:02.7)
Tim, are you able to tell us what prices were fetched at the Hong Kong auction?
Tim Hedges (00:08.902)
Yes, I am able to tell you, but I’m going to put it in context just a little bit. So in the current environment and traditionally, abalone from South Africa is sold between 25 and 45 US dollars per kilogram. The explanation in terms of how we sell the product and how we do the pricing is linked specifically to the equivalent of a live equivalent. In other words, we use one pricing mechanism and full abalone in its shell that is live as it leaves the farm. So we always refer back to that. It’s just easier to reflect in terms of pricing because every format has a different pricing methodology. And if you remember that I was telling you that we sold most of the product that we sold at the auction was dried product. And in principle, that would have been the tonnage or the size and the weight of the auction items that we sold would be 10% of the original live weight. That’s just because it’s in a dried format. So hold onto your hats. But the pricing that we sold the dried abalone for was between $400 and $500 US dollars per kilogram.
That’s a really, really expensive meal and you must really love the person or have lots of respect for them to buy them that product. But we sold all the product that we took to the auction. We had 22 lots and we made this most magnificent auction book, which was a collector’s item. And the people that were there and the people that were invited were absolutely ecstatic and have all asked us whether they can come to our auction again in 2027.
Chris Steyn (01:32.597)
Wow.
Tim Hedges (02:02.462)
But that gives you pretty much an idea of where it is. Even at the traditional sales prices that we’re selling today are between 25 and 35, 40 US dollars per kilo. It’s obviously size dependent. That’s significantly more than you would pay for salmon or for caviar or for truffles or for any of those luxury type items. So really, abalone does hold a very, very…
Tim Hedges (02:31.974)
premium position in the global food chain. So it’s something to consider. Start saving Chris.
Chris Steyn (02:38.752)
Well, I don’t think I be able to afford it in my lifetime. Before I let you go, please tell us about the Specialised Aquatic Feed.
Tim Hedges (02:53.104)
And Chris, this is something that Abagold is extremely proud of. Because when we started the business 30 years ago, 29 years ago, the traditional way of feeding abalone was to provide seaweed and then the green seaweed, is called ulva. And unfortunately, we are not allowed to just collect as much of that seaweed as we would like to feed to the animals. Because you can imagine, we would take up and use so much of that volume. So around about 10, 15 years ago, we started to develop a feed that we could give to the abalone that is an artificial feed and made from combined different sources of protein, carbohydrates, specific ingredients that are supportive of helping the animals to be healthy, gut health, all those kinds of things.
There’s absolutely no antibiotics, additional growth hormones or anything like that. It’s all natural feed. And we produce this feed in a factory that we built in 2015. The nice thing about this factory is that it didn’t just stay an abalone feed facility. It now produces 75% of what it produces is for the trout industry and for the pet food industry. So many of the pet foods or the dog and the cat foods that you feed to your animals here in Hermanus come originally from the Specialised Aquatic Feed facility. And it really is going from strength to strength and we’re extremely excited and very proud of what we’ve been able to produce there. So it’s something…
Tim Hedges (04:44.86)
that sort of came out of nothing. If it wasn’t for the abalone, we would not have had a feed facility in Hermanus.
Chris Steyn (04:53.036)
Well, no wonder Abagold has been named the Business of the Year by the Hermanus Business Chamber. And that was CEO Tim Hedges speaking to BizNews. And I’m Chris Steyn. Thank you, Tim.
Tim Hedges (05:06.61)
You’re more than welcome and we’re extremely proud to be the recipient of that award this year. Very, very proud. Thank you Chris for your time.
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