A Chinese seafood-processing company is branching out into the bar business in a bid to boost its loss-making principal business.
Gaodi Holdings, based in Xiamen in southern China, told investors it would invest over CNY 5 million (USD 700,000, EUR 650,000) on equipment to set up a series of bars.
“Since 2020, the Group has accumulated losses of more than CNY 270 million [USD 37.8 million, EUR 35.1 million], mainly on its packaging and sales of dried seafood, algae, and fungi and seafood snacks business,” Gaodi said in a note to investors. “Taking into account the uncertainty of the economic outlook in the post-Covid-19 period in [China] and increased competition, the company considers that the prospects of seafood packaging and sales business remains uncertain.”
Thus, the company, previously named China Shenghai Group, will seek to tap into the opportunities in continued urbanization and spending by young urbanites by opening bars.
“With the acceleration of urbanization and the change of consumption concepts, bars have become an important place for young and fashionable people to gather, relax, and entertain,” Gaodi said.
The company, which recently appointed 33-year-old Li Tingfeng as CEO, said it will maintain the current scale of operations in seafood packaging. Headquartered in Xiamen, in the southern coastal province of Fujian, the company distributes processed seafood snacks such as dried squid to a national network of retailers. It also makes a variety of baverages, including the Sablee brand of cocktail mixers.
Gaodi has struggled with ferocious competition in a sluggish domestic market, as underlined in its 2023 results. In a report for the 18 months up to the end of June 2023, Gaodi detailed how the company has been discounting its shrimp- and squid-based seafood snacks to improve retail sales.
Gaodi booked a loss of CNY 38.1 million (USD 5.3 million, EUR 4.95 million) in the second half of 2023, compared to a CNY 40.1 million (USD 5.6 million, EUR 5.2 million) loss in the H1 2023 on revenue of CNY 195.9 million (USD 27 million, EUR 24.9 million). Gaodi recorded revenue of just CNY 121,737 (USD 17,043, EUR 15,825) in the H1 2023 and recorded gross margin of 3.4 percent on its products in 2023.
