Selling seafood in China? Keep a good eye on the cold chain

Published on
September 16, 2015

China’s food safety law has created a demand – and an imperative – for better cold chain management. While China now has a stricter food safety regime it doesn’t have a cold chain system that can get perishable foods from one point to another. Worryingly, over 80 percent of the country’s perishable food supply travels outside the chilled channel.

There are shocking consequences for the seafood sector: Witness photos displayed by logistics provider Swire at the recent Seafood Expo Asia in Hong Kong show skipjack tuna whole fish being transported from docked trawlers via open-topped trucks in Ningbo to processing factories (presumably equipped with cold rooms).

True, Swire is keen to raise the alarm given it is keen to recruit customers for its cold chain and logistics services across mainland China. But the alarm is nonetheless worth heeding – or at least it’s worth asking when you have a good distributor in China how do you know the end consumer is getting your product in a sound state?

This should be of major concern to anyone investing considerable sums in marketing products and categories in China. It may be selling now, and the relationship with the distributor may be rosy, but all it takes is a food safety scandal involving your seafood product to ruin any marketing efforts and expense in China.

This is all happening in the process of retail shifting from wet markets to new supermarkets – over 100,000 new supermarkets are predicted to open in China in the coming decade as an ever-more urbanized population turns to the convenience and perceived safety of refrigerated supermarkets.

The emergence of e-commerce portals offers the prospect of full management of the cold chain. But e-commerce is best suited to branded and packaged product and online sales still comprise only 10 percent of China’s overall retail sales. Those seeking to reach a large-volume restaurant market in China will have to sign up well-qualified distributors – and they’ll have to know how to verify the cold chain capacity of that distributor.

Experience has shown that Chinese authorities relish shining the spotlight on foreign producers and products in the case of a food safety scandal. Hence while industrial quantities of fake and unhygienic red meat are churned out by local criminal gangs and small-time operations around the country, it was the international fast food chain KFC and its supplier OSI that at separate times and for different reasons were subjected to the full glare of the state-controlled Chinese media. Both firms saw their sales and market share in China seriously damaged.

Foreign brands selling seafood in China should avoid being spotlighted in any similar light. Protecting a brand or company image matters. Hence the importance of choosing the right distribution partner in China. There are options – well-known Chinese seafood brands have also sought to increase their competitiveness by expanding their cold chain capacity. Among them Zhangzidao, which retails packs of frozen scallops. Shrimp processor Guolian likewise also offers third-party logistics services.

And there are options for those going it alone, though some may be costly. A competitor of Hong Kong-based Swire, Shunfeng Express last year launched “Cold Games,” (pictured, file photo) a service to get perishable food products to customers who order online or through retailers using a company fleet of refrigerated warehousing, trucks and airplanes.

Cost is a big part of the problem. Shunfeng claimed at the launch that only 23 percent of China’s seafood is covered by the cold-chain, compared to 95 percent in the EU and United States. The cost of cold-chain logistics in China is four to five times the cost of non-refrigerated logistics, according to industry sources. But waste drives up prices. Up to 70 percent of the retail price of seafood goes to compensation for losses in transit, says Hans Peter Reust, managing director at Star Farm, which supplies outlets of German wholesale-retail giant Metro in China.

Hopefully as China’s cold chain gets more professional waste will be minimized and costs controlled. In the meantime, there are plenty of opportunities and plenty of buyers in China for quality imported seafood. But to create the right kind of image and the right kind of impression it’s best to have figured out your cold chain options before selling in the country. As China enforces its border customs and its food safety regime more strictly, no foreign seafood brand should be singled out as an example. Check and double-check that your logistics provider meets international standards.

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