At a company event at its headquarters in Chengdu, China, in June 2023, Tongwei Foods President Chen Bo announced a trebling of the conglomerate’s processed seafood sales in 2022.
Tongwei, which is a major player in solar power and which has installed panels above many of its aquaculture facilities, has been keen to improve on its profit margins and shift away from reliance on its staple, low-margin aquafeed business. Tongwei recorded a gross profit margin of 7.8 percent – a drop of 1.6 percent – in its feed and food business in 2022.
However, overall, Tongwei grew its revenue nearly 30 percent to CNY 31.6 billion (USD 4.4 billion, EUR 4.2 billion), in 2022. And it is doubling down on aquaculture, having recently commenced work on a land-based, 10,000-metric-ton, 134-hectare shrimp farm in Dongying, Shandong province, at a cost of CNY 1 billion (USD 140.1 million, EUR 126.8 million).
Among the speakers at the event was Huang Geng, vice president of the Federation of the Global Chinese Catering Industry, who said there had been an “upsurge” in orders from Chinese catering companies for semi-prepared seafood. Tongwei subsidiary Hainan Lake Foods used the Chengdu event to launch a range of chili-flavored tilapia and catfish fillets for catering companies to take advantage of the growing catering market in China.
Also at the event, Tongwei Foods introduced a range of new processed and flavored filets of catfish and tilapia. Tongwei has worked to rebrand tilapia as bream as part of a rebranding process that seeks to change consumer perceptions of tilapia.
Tongwei Vice President Xue Feng said the company planned to increase its range of new convenience and ready-meal products and predicted Tongwei will win cross-regional market share with a larger range of branded, consumer-facing products.
“They meet the demands of modern society for convenience and for food with health benefits,” Xue said.
Feng said convenience retailers and restaurant chains have expanded in recent decades alongside the urbanization of China’s population, and that China’s urbanization level now stands at 65.2 percent, bringing China on a par with some Western societies.
Also at the event, Chengdu Dachi Batang Catering Management Head Jiang Zhen Quan noted rising demand for processed and semi-processed seafood from mass-market restaurant chains. Traditionally, Chinese restaurants have served fresh fish, often kept in water tanks in the restaurant, to reassure clients of their freshness, but consumer preferences are changing across the country, Jiang said.
Tongwei isn’t the only Chinese seafood firm looking to expand its range of convenience offerings.
Dalian Rich Export Sales Head Sarah Shi said her company, which manufactures a range of value-added seafood products, is moving even further into the domestic convenience foods space.
“[We’re] doing a lot of work for the seafood ready-meals market,” Shi said. “It is just starting in China, but has a lot of potential.”
Traditionally focused on the export market, Dalian Rich will “continue to increase investment in the domestic market ready-meal seafood products and promotion in the following years,” Shi said.
Convenience and value-oriented products may be better placed than premium products in China’s slowing economy. Spending on dining rose by 43.8 percent year-on-year in April (from a low base) after China dropped its zero-Covid restrictions, while retail sales grew 18.4 percent in the same timeframe, though economists had predicted a 21.7 percent rise in retail in a poll conducted by Chinese finance news portal Yicai.
Weak consumer demand has been blamed for an 8 percent drop in China’s overall imports in April, with economists suggesting high levels of household debt – much of it related to mortgages on China’s frothy property market – is impacting spending. But even in the context of weaker consumer demand and a push toward cheaper convenience-oriented products by firms like Tongwei, there are signs that demand is also holding up for more expensive seafood products like salmon.
Imports of whole fresh salmon from Norway to China between January and April 2023 reached 26,100 metric tons, 9 percent ahead of the previous record year set in 2019, according to Andreas Thorud, head of the Norwegian Seafood Council’s office in China. Average prices for fresh salmon (whole and cuts) exported to China were up 22 percent year-on-year.
“We feel very optimistic about the Chinese salmon market as we enter into the summer which is a traditional high season for salmon,” Thorud told SeafoodSource. “It is worth noting that China’s reopening story has played out very well for the fresh salmon market. Salmon has performed strongly in foodservice, as well as we see retail and e-commerce becoming more important channels.”
A focus on health, convenience, and home consumption will continue to be important drivers for growth of Norwegian seafood, according to Thorud.
“It is clear that fresh salmon is gaining popularity in second-tier cities within the retail segment, in cities such as Changsha, Wuhan, and Nanjing,” Thorud said. “It is still a low penetration in these cities; However, feedback indicates high frequency of purchases among new consumers. It goes to show a great untapped potential for further growth in sales of Norwegian salmon.”
NSC data suggests strength in seafood demand amid darkening cloud for the Chinese economy. Japanese bank Nomura recently issued a research note warning of a rising risk of a continued downward spiral of the economy, resulting in weaker activity, increased unemployment, persistent disinflation, and a weaker currency. Investor uncertainty about the Chinese economy has put downward pressure on the yuan, which is currently drifting towards CNY 7 to USD 1, denting China’s buying power.
Fixed asset investment similarly underperformed, suggesting infrastructure has dissipated as a traditional economic driver, and the Chinese economy has benefitted the way other countries have from pandemic-era consumer-focused cash schemes.
Photo courtesy of Tongwei
