Sometimes to save something you just have to eat it. 

This bad boy can grow over 6 feet long. Source: isla_yelo/ Wikimedia Commons.

That's the new approach Whole Foods Market (NASDAQ:WFM) is taking in an attempt to save arapaima, or paiche as they appear in supermarkets, a genus of five whitefish species native to the Amazon River basin that can grow up to 450 pounds in weight. The organic supermarket chain is trying to develop a market for paiche to compete with more expensive whitefish such as halibut and Chilean sea bass. It won't carry the U.S. Department of Agriculture label for organic foods (the USDA has yet to establish organic standards for aquaculture), but it does have interesting market, social, and sustainability implications.

Can paiche be saved?
It may seem counterintuitive, but Whole Foods is setting out to establish a market for paiche because the fish is teetering on the edge of extinction. Regional appetites have led to global appetites, which have led to industrial fishing, which has led to population decline in the Amazon. A recent survey of 81 Amazonian communities found that arapaima species were extinct or very rare in 19% of reporting waterways. Meanwhile, State University of New York ichthyologist Donald Stewart said only two of the five species have been reported in the wild in the last several decades.

Still confused? Whole Foods Market's logic goes something like this: An international market for arapaima could only be supplied by fish farms. Since the supermarket will only take the fish from sustainable sources, it will encourage fishermen and/or fishing communities to develop more sustainable harvesting practices such as minimum catch size or aquaculture -- a key pillar of the company's seafood business.

The ultimate goal is to sell paiche at a lower cost than other whitefish (Chilean sea bass can sell for over $30 per pound) and grow the volume of seafood sold. Whole Foods Market has used a similar strategy with salmon this year with great success. On the company's third-quarter earnings conference call, President A.C. Gallo told investors "We saw a huge lift in the amount of pounds of salmon we sold when we reduced our price." How did it work? The company switched to a supplier that used lower-cost feed and harvested higher volumes of fish to reduce salmon prices by at least 15%.

Could the same strategy work for less developed markets such as paiche? In theory, yes, but it could also backfire for investors and the environment.

Why it could backfire
Creating an entirely new market for paiche in a sustainable manner is a noble cause -- one that could also be quite lucrative. Whole Foods Market could generate close to $31 million in revenue for every 1,000 metric tons of paiche it sells. Additionally, hundreds of direct jobs could be created in South America, while repairing wild fish stocks could result in a myriad of indirect benefits for local communities.

However, creating an appetite for paiche too soon could have devastating consequences. Not every supermarket or food distributor will adhere to the strict sustainability standards of Whole Foods Market. Circumventing aquaculture for cheaper paiche caught from local waterways would exacerbate, not solve, the problem. All fingers would be pointed at the organic food distributor for its failed "do good" mission. Would "we had good intentions" be an acceptable excuse?

The company might have good intentions, but a full risk assessment may not reach favorable conclusions for the Amazon River. Source: Chico75/ Wikimedia Commons.

That's not all Whole Foods Market and its shareholders have to consider. The company slashed salmon prices by using novel feed and production methods, but that would appear to be difficult to do with paiche. Not only is the fish's native habitat thousands of miles from U.S. Whole Foods Market stores (so much for buying local), but it may be difficult to sell the exotic fish for $14 per pound and ensure workers' rights. 

More worrisome, only one company, Amazone, actually knows how to breed paiche in captivity and has exportable seafood available. The fact that Amazone was formed by "one of the largest business groups in Peru" as a "corporate social responsibility initiative" seems to be at odds with customers who bemoan corporate control of the food system. Other aquaculture companies will surely step up to fill demand, but there's a good chance for messy market development that puts Whole Foods Market at the mercy of one aquaculture company, or perhaps a small number of companies. 

Foolish takeaway
While it's a lucrative and noble opportunity, attempting alone to save paiche could cost Whole Foods Market more than revenue or profits. At a time when investors are worried about shrinking margins and encroaching competition, the supermarket certainly doesn't want to become known as "the company that destroyed paiche and Amazon waterways." I think creating an expanded market for whitefish through aquaculture could certainly help repair wild stocks, but there needs to be a more concerted effort from multiple food distributors, food suppliers, and regulatory bodies.