“See if you can do something with these,” was the bold statement made by two Limfjord fishermen who had just delivered 25 kilos of live shore crabs to the cold store at Carnad – a company specialising in producing extracts from meat and seafood products, primarily exporting them to SMEs in Asia and large food companies in Europe.
The 25 kilos of shore crabs triggered an experiment to create a new export product that would not only be marketable, but also help solve a local problem for the Limfjord fishermen.
These small, unappetising crabs are exploding in numbers in the Danish fiords, getting stuck in fishing nets and damaging the famous Limfjord mussel beds.
80 tonnes of crabs
“We have a highly flexible facility capable of handling all types of raw material of animal origin and quick restructuring for test production purposes,” says Johnny Koch, Managing Director at Carnad.
Our objective with the crabs was to produce and sell an extract with a flavour so close to the flavour of the basic ingredient in lobster soup that even experienced chefs cannot taste the difference. We succeeded. Today, two fishermen are employed full time from May to November supplying crabs to Carnad.
He had heard that we were beginning to turn customers down because we couldn't afford the long credit periods, so he suggested we turn to EKF for assistance
The result is up to 80 tonnes of crabs per year, and demand, not only for crab extract, but also for the company's other products, is increasing year by year. But the export success comes with a price tag.
”The challenge is that our customer and order numbers keep growing, and so does our liquidity requirement. While payment terms of 30 days were enough for our small customers in the past, large food enterprises require payment terms of 180 days”, says Johnny Koch.
Carnad’s extracts and powders are characterised by being based on natural raw materials rather than artificial flavouring. The company has also started to develop organic products, and they are constantly working with international food giants to expand into new areas of the food industry.
Working Capital Guarantee
The bank and investors have all been patient and monitored the company regularly. They could tell that the company was growing, but also that there were production challenges. So they held back.
”The first few years were a disaster. We started up in 2009 right after the financial crisis, and we had a lot of technical challenges. I was convinced that the right product at the right price would be able to sell, so we hired sales staff to develop the markets in Asia. But developing new customers in the food sector is a slow and demanding process, and neither the board of directors nor the bank thought we were ready for debt financing,” explains Johnny Koch, who has now assumed responsibility for sales himself.
The good news is that customers themselves have started contacting us. The bad news is that growth in turnover has put the company's liquidity under further pressure.
It was Asbjørn Berge, chairman of Carnad’s board of directors, who suggested contacting EKF for financing assistance.
”He had heard that we were beginning to turn customers down because we couldn’t afford the long credit periods, so he suggested that we turn to EKF for assistance.”
Once Carnad had contacted EKF in consultation with its bank, things really picked up. The company was assessed based on three years of financial statements, and in close dialogue with the bank, it was decided to grant a three-year operating credit guarantee capable of covering growth in turnover of 10–20 per cent per year. As half of the risk was covered by EKF, the bank was willing to grant a loan.