The difficulty of making a profit while taking market share in the Chinese seafood business was underlined by the recently reported annual financial results of a Dalian-based firm with a major online presence as well as a network of traditional shops to distribute imported and local seafood.
Kaiyang World Seafood Co., which sells product caught by China's African fleet and imports from Chile and Europe, saw revenues rise 67 percent to CNY 320 million (USD 44.8 million, EUR 41.6 million) in 2019. But its profits, at CNY 6 million (USD 840,000, EUR 780,000), were down by 40 percent, according to its results, which were released to investors this week.
Even though Kaiyang significantly increased its revenues, the costs of expanding its network of stores and marketing spending appear to have put the company’s profits in reverse. In 2019, the company invested in the creation of a studio in Dalian for producing and broadcasting a live e-commerce channel. The company has also sought to expand sales of gift boxes featuring imported seafood.
The Dalian-based company processes and trades in seafood. It markets sole from Cote d’Ivoire and squid from Ghana, while also offering Chilean salmon. Kaiyang offers salmon steaks at CNY 78.00 (USD 10.90, EUR 10.14) per 500 grams and sable fish steaks at CNY 88.00 (USD 12.32, EUR 11.40) per 500 grams on its Tmall store. It also markets salmon floss as a health snack at CNY 40.00 (USD 5.60, EUR 5.20) per 80-gram jar.
Kaiyang’s results mirror the same curve of those of crustacean specialist Guolian Aquatic, which blamed higher costs in developing and promoting new products in the domestic market for losses in the past two years, despite major growth in revenue.
China’s seafood imports have grown rapidly in recent years as the country lowers tariffs to widen its supply options. Chinese seafood processors have piled into the seafood import and distribution business, but China’s scale and a comparatively threadbare cold-chain logistics network can result in an investment in distribution networks turning into a major drag on profitability.
