Minh Phu chairman: Company will take on Chinese market
With its geographic proximity to Vietnam and its huge demand for shrimp, China should be a major market for Minh Phu's shrimp, company chairman and CEO Le Van Quang told SeafoodSource.
But in 2018, Minh Phu exported only 450 metric tons (MT) of shrimp to China, worth USD 6 million (EUR 5.3 million), a modest total compared with USD 305.7 million (EUR 273.4 million) the company earned from selling into the U.S. market.
This is likely to change shortly, as Quang said the company believes it is the right time for it to enter the Chinese market in full force. Chinese people’s traditional habit of eating shrimp makes consumption in China surpass any major market in the world. And Minh Phu is working, in a sustainable way, to meet their rising demand.
Quang said he is not intimidated by the decision to target the world’s most populous country – he said the company has gained all the confidence it needs after successfully growing in the United States, Japan, and the European Union.
“We will successfully conquer the Chinese market in two or three years,” said the businessman, who is often referred to as “the king of shrimp” in Vietnam.
Quang said Chinese buyers mostly order fresh and cooked whole shrimp, and between the two types, they prefer cooked whole shrimp. At present, Minh Phu is able to meet the expected demand using its existing production lines. But it will be more profitable for the company to eventually build new processing plants to produce output exclusively for China, Quang said.
A a result, Minh Phu is in process of working on proposals to build out its plant. Quang said the company will move forward on that effort once the company completes the sale of a minority stake, an effort that formally kicked off in February, when Japanese conglomerate Mitsui and Co. and four other foreign investors were shortlisted to be permitted to buy up to 75 million shares in Minh Phu. The sale is expected to take place by early April, Quang said, and will give the company the funding it needs to advance the project.
One other obstacle Minh Phu faces in entering the Chinese market is that its farming and transportation methods need to be adjusted in order to meet the enormous demand in China, Quang said. The company recently developed an advanced farming system it has dubbed “234 technology” that Quang said can solve the expected issues. The company plans to produce 10,080 MT of shrimp from farms using this technology this year.
Once the company resolves all issues, from farming to production, it does not have to worry about finding buyers. The demand is huge, Quang said. He said a Chinese company that sells seafood online recently approached Minh Phu and asked if it could supply 20,000 MT of shrimp per year. Later this month, Minh Phu will host 30 Chinese companies in Vietnam to tour its facilities and learn more about its farming and supply capabilities. Quang said he met the leadership teams of many of these firms last year in Shanghai, when he accompanied Vietnamese Prime Minister Nguyen Xuan Phuc in a visit to China in November.
This won’t be the first time Minh Phu has attempted to enter the Chinese market. Around a decade ago, Minh Phu supplied whole tiger shrimp to a company operating in Beijing and Shanghai. Its monthly demand was between three and 10 containers of shrimp, each with a capacity of around 18 MT. However, Quang said Minh Phu eventually lost out on price against suppliers he claims were injecting their products with gelatin to increase their shrimp’s weight and value. Their prices were 10 percent less than the lowest Minh Phu could offer, and the company ultimately lost its customer.
“As a big company, we would never risk our reputation by producing and selling low quality products,” Quang said.
However, times appear to be changing in China, he said. Chinese authorities are intensifying a crackdown on producers who inject gelatin into their shrimp, and Chinese customers have become more scrupulous in their seafood purchasing, with food safety concerns driving demand for clean and high-quality products, Quang said.
In addition, the previously-common practice of illegal trading of shrimp via Vietnam’s land border into China has also been curtailed by Chinese authorities. That has created opportunities for larger companies that export their products through official channels, Quang added.