With trade war biting breaded shrimp imports, Sunnyvale expanding US products list
Sunnyvale Seafoods has targeted the U.S. West Coast for a sales push, with plans to expand its local distribution from San Francisco up the Northwest coast and expand its product lines to include more regional items.
Sunnyvale, which was purchased in 2012 by Guolian, a Zhangjiang, China-based multinational producer and seller of shrimp and tilapia, and which has shifted to become Guolian’s U.S. sales arm in recent years, is focused on the Bay Area, according to Sunnyvale Vice President Kevin Tang.
“Right now, we’re in the process of doing an expansion of our local distribution business in there, on up through the whole Northwest coast,” he told SeafoodSource. “We’re increasing our physical presence and our direct distribution, and also expanding our product lines to add more fresh products including oysters and fresh salmon.”
Sunnyvale CEO Jeff Sedacca said the company is also looking into development and distribution of more value-added products, particularly in salmon. He said investing in more distribution and adding more products to Sunnyvale’s offerings go hand-in-hand.
“For us, it’s really a matter of economy of scale. There’s less resistance when we’re selling more products to the same customer, rather than trying to get new customers,” Sedacca said. “We’re a major importer with pretty deep product lines and logistical capabilities. We reach a number of restaurant chains, retailers and foodservice distributors, and we’re renowned for our ability to consistently supply. So adding more products is an easy way to maximize the use of those capabilities.”
The idea, Sedacca said, is to create species specialists and to encourage team members to work together to address the various needs of any given customer. To stay on top of consumer trends, Sunnyvale will continue to pay close attention to its distribution channels, Tang added.
“With our distribution [network] – it’s about 25 percent of our total business – we see shifts in products being demanded,” he said. “That gives us eyes into the market in really helpful ways. As tastes shifts, we’re seeing it firsthand. By serving small, mom-and-pop stores, and Asian and Hispanic supermarkets, as their preferences shift, we’re aware of it as it’s happening.”
Sedacca acknowledged the biggest perceived headwind facing a company owned by a major Chinese shrimp firm might be the trade war that has flared between the United States and China, but Sunnyvale has been able to adapt to what he hopes is a short-term problem. Tariffs between 5 and 25 percent now greet most of the seafood Guolian exports from China to the U.S., though the so-called “Phase One” deal signed in January between the world’s two largest economies has ramped down some of those duties.
“Obviously, the trading environment has been pretty tough, but I think we’re managing fairly well,” he said. “We’re still importing from China, and the market seems to be adjusting somewhat. We’re hopeful that a Phase Two deal could possibly happen before the [U.S.] election [in November], and put things back on a more favorable course.”
If that doesn’t happen, Sedacca said he’s still confident Sunnyvale can keep its market share.
“Ultimately, it will come down to what will the market bear,” he said. “If the trade war goes on long enough, the market will have to adjust to higher prices or do without the products we’re importing from China. We’re fortunate in that we think tilapia is still a relatively cheap protein, and the market is not going away for breaded shrimp. But either this trade war is going to ease or the breaded shrimp market is going to adjust up.”
Despite the bite of the tariffs, Sedacca said Sunnyvale continues to import both shrimp and tilapia from China.
“Not as much raw, but more breaded,” he said. “China produces the best breaded shrimp in world. And customers who buy Chinese breaded shrimp want it from our plants. They want the quality they’re getting from us. They’re not looking at what country it comes from, they’re looking at what factory it comes from. So we’re able to pass [the cost of tariffs] on to customers to some extent.”
Tang said Guolian had – through years of experience and significant investment – managed to develop the expertise needed to produce quality breaded shrimp and tilapia at scale.
“It took a while to develop that. It’s an art,” he said. “It’s a foundation that we’ve been building for a long time. And it is helping us hang the breaded shrimp market even with tariffs taking a toll.”
It also helps that Guolian sources shrimp from across Asia, Tang said, meaning the tariffs aren’t hitting all of Sunnyvale’s imports.
“We’re not importing 100 percent from china,” he said. “It’s around 25 percent from China, 75 percent from elsewhere, including Thailand, Indonesia, and Vietnam.”
Between Guolian and Sunnyvale, the two companies are among the top five traders in many of the popular seafood species in both China and the United States, including tilapia, crawfish, shrimp, and carp, Tang said.
“Our buying power and our vertical integration gives us a huge advantage – synergies because our group is producing and buying for both countries.,” he said. “Our global network carries a lot of weight. Our business is not seasonal. We’re able to pretty nimbly shift our sourcing based on what product is available when, and we’re able to do that.”
While the relationship between Guolian and Sunnyvale used to be more geared toward selling to the U.S. market, with the rise of the Chinese middle class, demand has surged for some of Guolian’s core offerings at home, Sedacca said. That has led the two entities to shift their approach.
“We’ve gone from being a Chinese supply company to a global supply company,” he said. “We’ve always handled goods globally, but the company is really becoming global in everything it does. And from a sales perspective, the goal is to leverage our leads here in the U.S. with Sunnyvale, and to leverage Guolian’s sales leads in China.”
With the size of China’s middle class as large as the entire U.S. population, even a small increase to its seafood consumption total can double its per capita consumption figure, Sedacca said.
“China is being recognized now as the place with the most growth opportunity,” he said. “We especially see an opportunity for shrimp. It’s a popular item for the Chinese, and with our distribution base all through country and also our very strong online presence, we think we can do well in that market.”
Online sales are going to be a bigger part of future business done by both Guolian in China and Sunnyvale in the U.S., Sedacca said.
“Already, a lot of seafood is being sold online directly to consumers,” he said.
Ultimately, despite the trade war, Sedacca said partnerships like the one between Guolian and Sunnyvale – bridging a global market – is where the future of the seafood industry lies.
“People have the option of looking at things the way they want. I’m not going to change people’s minds when they say they don’t like Chinese shrimp or customers with biases against a certain country,” he said. “We’re big enough where we can deal with that. We just have to have the product mix that allows us to serve them all, and we do.”
Photo courtesy of Jeff Sedacca/Sunnyvale Seafoods