AgriMarine salmon targets China
AgriMarine’s China subsidiary celebrated Christmas by introducing its locally produced Pacific salmon to China’s retail market. The firm sees Chinese consumer demand for smaller, Pacific salmon and believes it can capitalize on a lack of in-store marketing by Atlantic salmon suppliers, according to Richard Buchanan, company managing director, speaking to SeafoodSource in Beijing.
Norway salmon sales have been targeted by an unusually heavy amount of Chinese inspections, which is seen as revenge for the award of the Nobel peace prize in 2011 to Chinese dissident Liu Xiaobo. Difficulties faced by Norwegian salmon importers getting product into China “is a problem known in the Chinese industry,” said Buchanan. Japan-based convenience store chain Ito Yokado approached AgriMarine for this very reason, eager to secure local supply. After some delay, the AgriMarine product hit the shelves of one of the chain’s stores in Beijing last week.
AgriMarine’s first Chinese farm, located near the northerly city of Benxi, is designed to produce 500 metric tons (MT) a year but the company plans to increase that figure, said Buchanan. AgriMarine is seeking investors in Chinese private equity circles to expand its operations and looks to an eventual IPO in Hong Kong this year. The firm last month signed an agreement with Akvatech AS, a Norwegian private equity group, to advance the adoption of the company’s closed containment farming technology.
The firm will also supply BHG, a Beijing-based supermarket chain focused on wealthy consumers. Buchanan said the 25 percent mark-up sought by BHG and Ito Yokado retailers is cost efficient for AgriMarine. The company will avoid duties of 13 percent paid by salmon importers, and product can be delivered from the firm’s northern China production bases directly to the retailers’ distribution centers — cutting out middlemen.
Buchanan said a smaller, 2.5-kilogram fish will prove popular for home consumption and fill a niche market demand, “we are creating a fish that China retail customers will consume.” Supermarkets are currently only using as few as two Atlantic salmon per week, said Buchanan. AgriMarine consumer research in Beijing supermarkets has proven there’s a demand for smaller, luxury fish. “Hence there’s an opportunity.”
AgriMarine has not determined what the price tolerance of Chinese consumers will be. But the AgriMarine product will be two-thirds lower than the price of Atlantic salmon, said Buchanan. “We have a distinct price advantage,” he said. Another possible barrier is the preference among Chinese consumers for a product with higher fat content that can be found in Atlantic salmon.
According to Buchanan, AgriMarine will capitalize on what retailers tell him is a lack of marketing attentiveness in Chinese supermarkets from Norwegian salmon suppliers, perhaps keen to keep a lower profile in China. “Retailers have informed us that they do not get adequate support from the Norwegian suppliers, in terms of in-store promotion.” AgriMarine will invest heavily in-store promotion such as videos and sales staff and tastings at BHG and Ito Yokado.
AgriMarine had previously supplied its salmon to restaurant and hotel customers, including the Kempinski in Beijing. However, that market has proven less profitable, given competition from Norwegian and Chilean salmon suppliers. “It’s not cost competitive and they want large fish.”
While in just two retailers’ outlets in Beijing, AgriMarine’s Pacific salmon stands to gain from lower costs of local production. Likewise, the firm will be able to import Pacific salmon from British Colombia when its local supplies run out. The firm also has the option to import Pacific salmon from New Zealand.
AgriMarine’s local production in northern China has been challenging. Water levels at the firm’s Benxi reservoir base have proven inadequate, creating problems in summer when the temperature rises. Low water levels contribute to disease and health issues. Hence the firm has sourced new sites along the North Korean border, though Buchanan declined to say how many new sites are under development. Water resources have become increasingly difficult to find given a new emphasis on securing drinking water supplies in northern China. However the firm has been able to draw upon good relations with the local government, which is keen on the processing and distribution jobs the salmon industry would bring.
Government will also receive royalties, depending on the number of salmon produced. While local labor costs constitute only 2 percent of the firm’s feed production costs, the firm has had to bring in foreign advisors, particularly in the early stages, to train local staff in the technology. Canadian veterinary advisers still visit the facility regularly.