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Small Business
Caviar the hard way
August 2, 2001: 8:29 a.m. ET

Californians hope to benefit from ban on Russian sturgeon fishing
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NEW YORK (CNNfn) - Mats and Dafne Engstrom's fish farm, a business enterprise they have nurtured for nearly two decades, has required a torturous amount of patience and more than a monk's share of faith.

No business is without risks, but the odds of raising sturgeon on a farm to produce caviar seemed stacked against the couple. For one thing, nobody had ever done if before, so they didn't know if the fish would adapt and survive in tanks.

And then there was the issue of overcoming the caviar lovers' snob factor. There was no way to know if those willing to pony up the high price of salty sturgeon eggs would ever warm up to anything that didn't come from sturgeons plucked from the Caspian Sea by Russian or Iranian fishermen.

They know now that it can be done. The Engstroms' sturgeon eventually adapted to life in the freshwater tanks, matured and began producing eggs. These days the Engstroms are harvesting three tons of caviar a year and selling it under the name Tsar Nicoulai.

And as for getting caviar lovers to try their American farm-raised variety, the Engstroms are hoping the ever-escalating price of Caspian Sea caviar and a possible supply crunch may be just the fortune they need to persuade caviar lovers to wash American sturgeon roe down with a cold glass of champagne at their next celebration.

Bad, bad Russians

Russia, Azerbaijan and Kazakhstan halted sturgeon fishing last week for the remainder of the year after the United Nations Convention on International Trade in Endangered Species threatened to ban exports of caviar from the Caspian Sea in an effort to save the sturgeon from extinction.

After the breakup of the Soviet Union, controls on the caviar trade collapsed and what ensued was called an environmental disaster in the making. Sturgeon poaching skyrocketed and all efforts at managing the already-declining sturgeon population fell apart. By some estimates, poachers in the four former Soviet republics account for 10 to 12 times more than $100 million legitimate caviar trade.

Iran, another state that harvests sturgeon from the Caspian for caviar, was
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spared the CITES controls because it has sound management and regulatory controls that includes a hatchery program to replace the slow-growing sturgeon that are killed for their eggs.

Sturgeon fishermen in the former Soviet republics will be able to sell caviar already in storage.

All five caviar countries must, by the end of the year, come up with a joint plan to manage future sturgeon harvests, set up a commission to decide catch quotas and make a survey of Caspian Sean sturgeon stocks. If they cannot create a satisfactory plan, they may face a possible ban on fishing until one is completed.

Already, sturgeon numbers in the Caspian Sea are dwindling and not everyone thinks that, even with a preservation plan in place, the wild sturgeon will ever come back in numbers seen before. 

Already getting more expensive

Prior to the ban, the price of the high-grade Caspian caviars – beluga, osetra and sevruga – have skyrocketed in recent years. The U.S. lifted an embargo on Iranian caviar a few years ago, which led to the first price hike. The Iranians, considered by connoisseurs to be the true masters of caviar, charge up to 20 percent more than their Russian counterparts. The
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Russians followed the opening of the Iranian market with a price hike of their own.

"It is coveted," said Betsy Sherrow, owner of Seattle Caviar Co., of the Iranian caviar. 

Then came the millennium, when caviar was the must-have hors d'oeuvre at every over-the-top New Year's celebration from New York to New Zealand. Demand grew so much at the close of 1999 that the Russians and Iranians imposed another stiff round of price hikes. According to Ira Goller of Murray's Sturgeon Shop in New York City, the price of beluga has just about doubled in the last three years.

If the current ban on fishing leads to a supply crunch, the price may get bumped yet again.

The ever-higher prices for caviar may be good news for the Engstroms, whose farm-raised roe (technically, only eggs from wild Caspian sturgeon can be called caviar) is less expensive than a comparable product from the Caspian Sea. Most people compare farm-raised sturgeon roe to osetra or sevruga caviar in taste and consistency.

"It is good for us. Definitely. It has absolutely put us on the map. People are calling us and are very interested. It is something we have hoped for for so long," Dafne Engstrom said.

Tsar Nicoulai osetra caviar, at $51 an ounce, sells for about 15 percent less than imported osetra. The American sevruga from Tsar Nicoulai is less than half the price of the Caspian sevruga.

Michael Mina, the owner of Aqua in San Francisco, is one of those chefs who has used California farm-raised caviar in the kitchen of his restaurant. "The eggs are pretty consistent," he said, and it works well to round out some sauces. But the flavor is different and his customers still prefer the primo stuff from Russia and Iran when served by the ounce.  

Door opens for substitutes

From the beginning of their great sturgeon adventure the Engstroms have expected Caspian Sea stocks would dwindle either because of overfishing or rampant habitat destruction. And they expected at that point chefs and consumers would have no choice but to consider alternative sources of caviar.

In the U.S. there are several substitutes. Whitefish roe, salmon roe, and
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trout roe all have been billed as inexpensive stand-ins to plop on top a toast point with a dollop of sour cream.

The Engstroms run the only privately owned sturgeon farm in the U.S. Stolt Sea Farms, a Norwegian aquaculture company, also raises sturgeon in Northern California for meat and for caviar, which it sells under the brand name Sterling.

As an industry, the Engstroms liken sturgeon farming to owning a vineyard. It is capital intensive, the "crop" requires patient tending over many years and the final product must appeal to the most particular of gourmet palates.

The Engstroms, Swedish immigrants, have been involved in commercial fishing in Northern California since the 1970s. They began by raising and processing crayfish, a popular summer item in their native Sweden, for export to Scandinavia. It was a seasonal business, however, and they began importing caviar from Russia as a way to supplement their income.

Sturgeon were once so abundant in the lakes and rivers of the U.S. their  caviar was given away as a freebie in New York and San Francisco bars. Overfishing eventually took its toll and commercial fishing of wild sturgeon was outlawed in California in 1917.

Farming sturgeon for caviar seemed the perfect profession of the Engstroms because they had been involved in both aquaculture and the caviar trade. And as importers they were sure the supply from the Caspian Sea would eventually fall prey to either overfishing or disease from water pollution.

18 years later....

The Engstroms set up their first farm in 1983 and, with partners from the University of California at Davis, began their experiments in raising sturgeon. In the wild, the coveted beluga sturgeon takes up to 25 years before it is old enough to produce eggs. Osetra sturgeon are usually around 15 years old before their roe can be harvested.

Shortening the time it takes to harvest the eggs was critical in creating a viable business out of a sturgeon farm.

The Engstroms lost their first farm in a fire but decided even after that to move forward with their attempts at raising sturgeon. They used the insurance settlement from the fire, took out some bank loans and attracted angel investors to raise about $10 million to start the farm they have now, also on the Sacramento River delta.

For years, the Engstroms watched their prehistoric fish splash about in pools of clean, warm water from deep wells and waited. It took significant experimentation to create the proper environment for these fish. It turns out, for example, they respond only to rapidly flowing water that is constantly recycled and refreshed. But they did eventually respond and the Engstroms now are raising about 40,000 fish that are reaching maturity in 7 to 8 years.

In the intervening period, they sold the meat of some of the male sturgeons they raised and, using roe they bought from nearby sturgeon farmers (who raise the fish for meat, not caviar) sold small amounts of caviar. They also have used this very long waiting period to perfect their skills at processing the eggs, salting them just slightly and packing them perfectly.

The Engstroms aren't trying to fool anyone with their farmed fish eggs. The taste is slightly different and they aren't trying to pretend they don't. They're just hoping that caviar connoisseurs will make room for a new sort of breezy, salty caviar taste on their buds.

"Is a merlot better than a pinot noir? Is red wine better than white wine? No. They're different," said Mats Engstrom. "It's not that caviar from Russia is better. It's different." graphic

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.