Warmer winters, rising fish paste prices cause havoc for Chinese processor
Warmer winters and rising fish paste prices are causing havoc for one of China’s leading distributors of frozen seafood products.
Haixin Foods, which specializes in seafood snacks as well as fish balls for hot pot restaurants, saw profits slump 53.7 percent year-on-year to CNY 12.38 million (USD 1.75 million, EUR 1.58 million) on revenues of CNY 878 million (USD 124.6 million, EUR 112.5 million). In a filing to investors, the company blamed rising input costs – the price Haixin paid for fish paste rose 8.6 percent year-on-year in the first three quarters – as well as warmer winters for the latest results. The company explained that warmer winters make diners less enthusiastic about hot pot, long a popular communal dining option.
Listed on the Shanghai stock market, Haixin has also been spending heavily on marketing in a bid to move into higher margin product ranges for its seafood selections, which includes dried, shredded crab intestines and squid sticks sold in handy packs nationwide.
Fujian-based Haixin scored an 18 percent rise in sales to CNY 542 million (USD 76.8 million, EUR 69.3 million) in the first half of 2019, with seafood accounting for CNY 399 million (USD 56.5 million, EUR 51 million) of that figure. Profits attributable to shareholders at CNY 7 million (USD 1 million, EUR 903,662), however, were down 32 percent, as Haixin spent big on marketing its frozen fish and lobster balls.
Company CEO Yong Yan Teng has set an ambitious target of pulling Haixin away from the congested “low priced competition” snack food segment towards higher margin, branded products for middle class consumers. Company marketing events like “China Hot Pot Festival” have been designed to generate media coverage for the company’s packaged products.
Haixin has heavily promoted its range of frozen and room-temperature seafood and meat products with fish balls, lobster balls, fried cod tofu, and crab cream all aimed at affluent younger consumers who congregate in hot pot restaurants. The company recently purchased another seafood processor, Changheng Foods (Fujian), to increase output of frozen as well as room-temperature "leisure food" products like crab sticks, fish tofu, and crab cream rolls.
The firm hit sales of CNY 1.14 billion (USD 161 million, EUR 145 million) in 2018, up 18.2 percent. Profit attributable to shareholders rose 228 percent last year, after a surge in final quarter sales, totaling CNY 34.89 million (USD 4.94 million, EUR 4.46 million) – well ahead of expectations. The firm lost CNY 17 million (USD 2.41 million, EUR 2.18 million) in 2017 as it scrambled to build sales.
Photo courtesy of Haixin Foods