Rising labor costs and economic malaise in key EU and U.S. markets are forcing Chinese seafood processors to explore domestic markets and adapt through a mix of mechanization. Favorable government policies guaranteeing easier credit terms with state-owned banks has made the switch easier, according to one of the country’s leading processors.
Increasingly, scarce and expensive labor is the key challenge of 2011 for Yilufa Co., a processor in the southeastern city of Qingdao, the center of much of China’s re-processing trade. Export manager Zhang Zhenfeng said his firm in 2012 will “install more machinery to replace human labor” while also streamlining its logistics operations to cut costs.
Proud of Yilufa’s designation as an “advanced export industry in Qingdao,” Zhang said the firm expects to be able to tap loans from local banks, which have been instructed by government to speed up lending to companies upgrading to value-added and high-tech business models.
“The government has more favorable policies for high-tech industry such as favorable credit. This is not the situation in labor-intensive industries,” said Zhang. While frozen cod fillets remain the firm’s top export line, Yilufa also ships 30 different kinds of battered, breaded and pre-fried seafood.
Established in 1993, the firm — which processes 40,000 metric tons annually of mostly codfish, pollock and halibut imported from the United States and Russia — is also seeking new and higher value-added product lines to increase its earnings. The company is considering cod from New Zealand, he explained. “The price and quality are right,” said Zhang, adding that he’s also keen to tap more salmon-processing business due to its higher margins.
Yilufa has no plans to expand its fish feed and surimi business. Located in Chengyang on the Jiaozhu Gulf, the plant ships 7,000 metric tons of surimi and 15,000 metric tons of fish feed, much of it shipped to shrimp farms in China as well as Latin America. Surimi is common in Korean and Japanese eateries, popular in China, and at convenience stores like 7-11, also rapidly expanding here.
Shifting current seafood-processing capacity to the local market is difficult because Chinese consumers aren’t familiar with much of the species Yilufa fillets for export. “Take Pollock, for example. Chinese consumers don’t know this fish so who’s going to buy it?” said Zhang.
Nonetheless, China’s domestic market is starting to look promising. New YiLuFa products aimed at the locals include canned fish. “We’re thinking of replacing some of our fillet capacity with canning,” explained Zhang. “Local consumers are more open to canned fish rather than frozen.”
Non-seafood product is another option — since last year Yilufa has been canning soya and other beans for the domestic market.
Zhang said company staff will be shifted to the R&D department researching new trends in canning and food preservation. The staff has also been busy researching regional retail trends and building ties to a local retail scene that remains highly regional.
It’s clear the firm will have its work cut out in convincing locals to eat the kind of product produced by the firm’s 2,000-square-meter plant in Qingdao. Frozen seafood section at JinKeLong, the leading domestic supermarket chain in Beijing, remains limited to carp and shrimp.
The bulk of sales happen at the fresh counter, explained a floor manager surnamed Gao at a large branch of the supermarket chain in Tuanjiehu, a residential Beijing neighborhood. “Frozen seafood sales are definitely on the rise but we see very little in way of processed or breaded fish. Canned tuna — that’s probably the only thing off the fresh or frozen fish that we sell in reasonable quantities.”
