U.S. countervailing duties against Chinese shrimp imports may ironically lead to higher prices in the longer term for U.S. buyers as the one of the top Chinese suppliers seeks to reduce its exposure to the U.S. market by ramping up sales at home. Demand from Chinese consumers will ultimately cause competition and higher prices for U.S. shrimp buyers, said a company source speaking to SeafoodSource.
Announced last year, the U.S. duties — amounting to 18.6 percent — forced Zhanjiang Guolian to speed up R&D efforts and invest in marketing to switch product to local sales according to Li Zhong, company CEO, who has been promoting new products this month at a week-long set of events in the company’s base in southern Chinese province of Guangdong.
Pushing Guolian’s range of domestic brands at a forum for customers and suppliers, Guolian CEO and founder Li Zhong said his company would use online sales in mainland China to drive domestic revenues, with a goal to increase the percentage of revenue from domestic sales from 40 percent to 50 percent by next year. Apart from selling more of its own product at home the firm is also seeking more high-grade imported shrimp to sell at a premium to wealthy Chinese consumers, says Li, who said the firm has had good results with South American wild caught shrimp.
Guolian’s China-focused Long Ba (which roughly translates as Dragon Lord) brand of frozen packaged shrimp has done well this year, explained Zhao Hongwei, company deputy general manager and marketing boss, who noted with sales of Argentinian red shrimp now doing “particularly well.” Zhao added, “We want to be a global seafood trading platform, we will export but also import seafood for Chinese consumers.” One of the firm’s best-selling products under the Long Ba range is a frozen range of pre-cooked vannemei packs that sell at CNY 80/500g on leading Chinese e-commerce websites like Taobao.com.
Aside from the Long Ba range, Guolian has also targeted its ‘Guo Mei’ brand of frozen and breaded shrimp at Chinese consumers. Guolian will seek to make its ‘OGood’ and ‘iCook’ brands popular both in China and abroad, said Zhao, who has hired several Chinese entertainment stars to endorse the range. Switching earnings from processing to marketing is a goal for Guolian, which like many Chinese companies has studied with envy the success of Thai conglomerate Charoen Pokphand, which has taken on Guolian on its own turf, as a major supplier of frozen seafood products in Chinese outlets of major retailers like WalMart and Carrefour.
Yet with a new 10,000 square meter factory — built in a new industrial park with assistance from subsidies from the local government- Guolian will be continuing to focus on processing for some time. Known more for its prawn production and processing, Guolian has also been ramping up its tilapia seedlings and processing business in Guangdong province following a much improved performance by the Chinese tilapia sector in 2013.
There are signs the strategy may be working: Guolian achieved net profit of CNY 16 million (USD 2.6 million, EUR 1.9 million) in the first quarter of 2014, up 284.3 percent year on year.
With a market capitalization of CNY 3.4 billion (USD 547 million, EUR 401 million) and almost 4,000 employees, Guolian has this week enjoyed a surge in its stock price, trading at CNY 9.80 (USD 1.58, EUR 1.16) per share this week, up from CNY 5.10 (USD 0.82, EUR 0.60) this time a year ago, as investors take heart from better results.
Guolian’s focus on the domestic market with new frozen product ranges synchs well with trends in the Chinese frozen food market. Data show that China's frozen food industry was worth CNY 64.5 billion (USD 10.4 billion, EUR 7.6 billion) last year, up from CNY 4.56 billion (USD 733 million, EUR 538 million) in 2004, representing a compound annual growth rate of 30.42 percent.
A report from the Beijing-based China Market Report Center consultancy credits the acceleration of the urbanization process in China and improved living standards for a “significant change” in eating habits and “golden age of development” for the growth in frozen food sales with double-digit annual growth. There’s clearly plenty of room to grow given China's frozen food sales are only a twentieth of those of the U.S. and a tenth of EU averages and an eight of Japanese consumption.
