To offset a bearish US market for tilapia, China looks inward
Facing more competition, China is losing market share for its tilapia in the United States. But tilapia farmers and marketers in the world’s most populous country are finding new outlets for their product – including domestically.
Final figures have not been issued yet, but U.S. imports of tilapia are set to fall 32 percent in 2017, according to China Aquatic Products Processing and Marketing Association (CAPPMA). China remains the indisputable low-cost supplier to the United States – its prices for frozen filets and whole fish were on average 50 percent lower than supply from Indonesia and Taiwan in 2015, according to CAPPMA data. But increased consciousness of fresher alternatives among U.S. consumers have been a major factor hurting Chinese tilapia exporters, according to a new report issued CAPPMA. Ecuador is able to supply fresh and chilled tilapia to the U.S. market at far lower prices than those offered by Asian suppliers.
With the U.S. market offering a less-than-positive outlook for Chinese tilapia exporters, China needs new buyers to take up its massive output, which rocketed from 600,000 metric tons (MT) in 2001 to 1.8 million MT in 2016. The challenge is to find alternatives that can compare to the huge scale of the U.S. market. America imported 229,459 tons in tilapia in 2013 and bought nearly 170,000 tons of that from China. But its purchases from China fell to about 130,000 tons in 2016.
China has found mixed success in its quest. Mexico has been upping its imports of Chinese tilapia, reaching an estimated 50,000 tons of tilapia in 2017. The Russian market has also taken less tilapia, but Saudi Arabia, which serves as a logistics hub for the Middle Eastern market, is growing in importance, with 25,000 tons of Chinese tilapia imports in 2016.
For many in the industry, the best alternative purchaser of Chinese tilapia is China itself. There was much optimism along that line at a recent gathering of producers, processors, and representatives from the catering and retailing sectors in Haikou, a city on the southern island province of Hainan. The forum was organized by the Hainan arm of CAPPMA and several local tilapia processors. There was general agreement at the meeting that the increasing modernization of China’s retail sector, with lots of demand for convenience-type food, is creating openings for tilapia.
Di Gang, the head of tilapia working group at CAPPMA, detailed how he has been working with Pei Liang, head of the China Chain Store Association (CCSA), with the goal of getting tilapia onto the shelves and into the menus of convenience retailers and fast-food chains, which have both been expanding at a rapid pace in China over the past decade.
The evolution of China’s quick-service dining and retail scenes creates opportunities for tilapia, according to Pei, who pointed to the emergence of online to offline players like Alibaba and its He Ma chain of supermarkets – retailers that are appealing to a younger consumer base that lacks prejudices of older generations towards farmed fish.
The operators of many of the leading hot-pot chains in China are also buying more tilapia, for use as an input into fish balls. Hot-pot chains like Hai Di Lao want to use more tilapia in various forms for its hot-pots, the company’s sourcing manager, Zhao Chun Yu, told the Haikou gathering. Inland Chinese cities like Urumqi and Hohot, far from seafood sources, are proving leading centers of demand for tilapia, according to Zhao.
Tilapia has also come onto the radar of Xia Pu Xia Food and Beverage Management Co., one of the country’s major restaurant supply companies. Zhang Xiang Hui, the head of the firm’s distribution department, told the forum that hot-pot restaurants are big buyers of the fish “but we have very high quality requirements and we enforce these.”
Tilapia also aligns well with trends in the domestic catering trade, which is seeking to offset rising labor, environmental, and other compliance costs, according to Zhu Chang Liang, chairman of Wuhan San Liang Tou Zi, a restaurant investment consultancy in the central Chinese city of Wuhan.
“Restaurants are not opening at the same rate; they’re looking to reduce costs,” Zhu explained.
Zhao Hong Kui, head of supply management at Yunnan Yun Hai Yao Catering Management Co., which runs restaurants across Yunnan Province, said his company had doubled down on its dependence on tilapia lately.
“Tilapia has become a key product for us,” Zhao said.
Tilapia could prove a draw for snack-makers, too. Tilapia suits the snack market because “it has good qualities…it crumbles easily, it has a good clear color…” explained Dong Jia He, general manager of Guangzhou Lu She Shi Pin Co., a major maker of savory snacks – the largest category of China’s snacks sector.
Another leading savory snack maker, Xi Bei You Mian, based in Inner Mongolia Province, has been testing tilapia in its laboratories, according to head of standards at the firm, Huang Chao. The firm, which produces a range of meat-based packaged snacks based on local recipes, has a national distribution reach but carefully researches consumer demand and awareness before launching a new product, Huang said.
Investment in product research and development by tilapia processors will be crucial to growing the domestic market, according to Ma Zhi Guo, CEO of Maoming City Evergreen, a unit of the huge Guangdong Evergreen Group (Zhanjiang Evergreen Aquatic Product Science and Technology Co. Ltd.), which farms and processes shrimp and tilapia.
While developing new products, tilapia processors also have to ensure contracted farmers are producing fish to their standards. Erratic standards are a problem in particular if Chinese consumers are to be converted to tilapia, having long harbored prejudices against farmed seafood. That’s according to Zhou Qinfu, general manager of Hainan Qinfu Foods Co., which claims to have the largest acreage in Hainan in terms of pond space – about 500 hectares, though over 20 percent of that is contracted to farmers.
Achieving consistency of quality in tilapia supply has also proven a challenge for the industry. He Xin, head of sourcing at Beijing Xin La Dao Catering Management Co., said his chain wants to source more tilapia but has struggled to find a consistent supply of high-quality fish.
Export efficiency remains central to the industry in China. The bulk of Chinese tilapia pond production has clustered around the province of Guangdong, mainly because the province is home to some of China’s leading ports, like Shenzhen and Guangzhou. But Guangdong is also home to some of China’s densest urban populations and a thriving convenience food sector, making it a good base from which to transition to the domestic market.
Notably, production in Guangdong’s neighboring province of Guangxi contributed 16.9 percent of output, but recently, production from this region has fallen. The province produced from 80,000 MT of tilapia in 2012 but that total shrunk to 40,000 MT in 2016.
However, a newer source of tilapia supply, Yunnan Province, is taking on a larger role in production. The sprawling southwesterly province, which borders several Southeast Asian nations, has more land and better water than most parts of China, but is remote compared to Guangdong – a major why all of the Yunnan production is for the domestic market.
Nevertheless, with so many positive factors in its favour, the outlook looks bright for Chinese tilapia consumption, Wang Ling, vice president at Baiyang Investment Group, one of China’s leading exporters of tilapia, said at the meeting.
The local market for tilapia was “slow to take off… but we now see a positive trend towards take-off,” Wang said.
In the near future, customer education will be key to growing the domestic popularity of tilapia, Pei Liang, the head of the CCSA, said.
“The most important thing is education of consumers about tilapia,” Pei said.
Zhao, of hot-pot company Hai Di Lao, agreed.
“China is a market of 1.4 billion people. There is no reason why tilapia can’t have a huge market…but there are different views on tilapia,” Zhao said. “We need to educate and guide and train the consumers on the use of tilapia.”