In China, there is a saying 民以食为天 (Min Yi Shi Wei Tian), which means “food is heaven” and which delineates the relationship the Chinese have with their food. Chinese consumers care about the quality and the safety of the food they eat. Due to many scandals surrounding domestically produced food, including shrimp and seafood, Chinese consumers who can afford it tend to prefer imported foods. With a population of 1.38 billion in 2017 and a rapidly expanding middle and higher income class that has the financial means to pay for more high-value proteins, there are many opportunities for selling your shrimp in China. Seafood in general, and shrimp more specifically, is an important component of the Chinese cuisine. But to reach consumers, it is crucial to promote the origin, the high quality and the safety standards of the shrimp. In this article, we will explore who these consumers are who are willing to pay for premium shrimp, where to find them and especially where they buy such shrimp.
Who is the Chinese consumer of imported shrimp?
In a recent report, the USDA Foreign Agricultural Service, which supports US exporters with finding their way into the Chinese market, has divided those Chinese consumers who are willing to pay for safe, high-quality, imported seafood into four groups. The first group is that of foreign nationals living in China who seek familiar products and are willing to pay a higher price for it. The second is that of the affluent Chinese consumer who cares about the quality and safety of food and especially the status but who does not care so much about the price. The third group includes Chinese middle-class consumers who are also looking for quality and safety but who are more concerned with prices. Last but not least, the fourth and final group is that of a new generation of Chinese consumers who are looking for all of the above as well as for convenience.
Although there are differences between these four consumer groups, they share a demand for food that satisfies their appetite for animal protein, without having to worry about the quality and safety issues associated with domestically produced food. They prefer high-quality and sustainable imported shrimp and are willing to pay for it.
Where do we find this consumer?
When Europeans emphasize that exporters should never consider the EU as a single market but rather as a collection of niche markets, those same Europeans do not always realize that this also applies to China. The USDA Foreign Agricultural Service stresses that, although it is one country, China should not be considered as a single market. Over the past 10 years, China has become a collection of niche markets separated by geography, culture, cuisine, demographics and local commercial trends. Each niche market has its own market dynamic and way of doing business. The four consumer groups described above are located in China’s urban centres, which are categorized according to China’s tier system, consisting of four levels of economic development. Cities in different tiers reflect differences in, among others, consumer behaviour, income level, population size and consumer sophistication. The best developed markets for imported shrimp are in China’s first-tier cities. However, the largest growth potential resides in its second, third and even fourth-tier cities, which are currently experiencing the most rapid economic development. Have a look at the infographic on page 55 to see where these cities are located.
Where does this consumer buy their shrimp?
The foreign national consumer, the affluent Chinese consumer, the Chinese middle-class consumer, and China’s new generation often have their own ways of finding their food products. They eat out in middle and high-class restaurants, go shopping in hypermarkets and speciality shops, and shop online at e-commerce platforms which tailor to their respective needs. We will explore each of these channels in a bit more detail below.
Foodservice
Chinese consumers like to eat out. China’s sales in hotels and restaurants reached USD 430 billion in 2016. The Chinese food service industry is comprised of 26,300 registered companies (companies with annual revenue over USD 315,000) and numerous small family-owned restaurants. The food service sector is developed especially well in first-tier cities like Beijing, Shanghai and Shenzhen and is now rapidly gaining ground as well in second, third and fourth-tier cities across China.
Regional diversity influences the cuisines offered in restaurants. Restaurants serving China’s regional cuisines continue to be more popular than restaurants serving international food. This is especially the case in second and third-tier cities. Normally, imported food products are used in the food service segments catering for high-end consumers who are attracted to fancy Chinese and international restaurants. A product’s origin is an important marketing strategy for restaurants in this segment. For example, restaurants label dishes with titles such as “Canadian lobster” or “Ecuadorian shrimp” to emphasize the exotic origins and sell the food at a premium price.
Although some of the leading restaurant chains and more high-end family-run restaurants may buy shrimp that is directly imported into China, many of the smaller restaurants source local shrimp or shrimp that is imported through the clandestine border trade with Vietnam. If you want to fetch a higher price, and employ the Chinese consumer’s eagerness for high-quality, fancy and safe shrimp, make sure to find your way into the direct import channel.
Retail
In 2016, total retail sales of consumer goods reached $4.98tn, up 10.4% from 2015. Nearly all hypermarkets and supermarket chains sell imported food products. In 2016, the leading retailers include China Resources Vanguard, RT-Mart, Wal-Mart, Lianhua, Carrefour, Yonghui, Bubugao, Wumart, Metro, and AEON China. High-end chains include Olé, BLT, Sam’s Club, Bravo, and BHG. Foreign chains such as Wal-Mart, Carrefour, and Metro are facing keen competition from leading domestic chains like China Resources Vanguard and Yonghui. Let’s have a closer look at the shrimp products offered by one of China’s high end retail outlets.
Sam’s Club, part of Wal-Mart China, is a high-end chain with roots in the United States. It currently has 19 shops across China’s wealthy cities, such as Shenzhen, Dalian and Hangzhou. Looking at the shrimp assortment offered by Sam’s Club, there is some variety but it is certainly not endless. Catering to its wealthy clients, it offers relatively expensive shrimp from origins that are internationally recognized in terms of premium quality. On its website, Sam’s Club promotes a range of seven Pacific white shrimp (L. vannamei) and black tiger shrimp (P. monodon) products with “A Product From Thailand” stamped on the packaging. To give you an idea of prices, the seven products include head-on shell-on (HOSO) Pacific white shrimp (2kg at 21-25 count per kg) at 298 yuan, HOSO black tiger shrimp (2kg at 31-40 count per kg) at 259 yuan and a tail-off peeled and deveined (PD) Pacific white shrimp (1kg at 176-220 count per kg) at 105 yuan. The premium product in Sam’s Club’s shrimp range appears to be a HOSO black tiger shrimp from Madagascar (2kg at 30-35 count per kg) at 388 yuan. This Malagasy shrimp is internationally recognized in terms of quality and sustainability and is clearly Sam’s Club’s top range product.
E-commerce
Online retailers enjoy several advantages over traditional retailers. Online retailers are able to scale up quickly because they are not dependent on obtaining expensive real estate in densely populated areas. Moreover, they can quickly adjust to trends. E-commerce sales continue to grow and now account for over 15% of total retail sales, which translates to about $750bn in annual sales. Industry insiders estimate that 10-30% of retail food and drink imports are sold through e-commerce channels. Almost all major online retailers such as Amazon, JD.com, and Tmall sell imported seafood and shrimp products. Cross-border e-commerce, which brings imported products from the country of origin directly to the consumers, is an emerging sub-sector. Regulations and import tax policies are more complex than those for domestic product e-commerce channels, though. In recent years, e-commerce grew significantly in second-tier cities such as Nanjing, Wuhan, Suzhou and Xi’an. Due to e-commerce growth in first-tier cities having begun to slow down after a dramatic expansion in previous years, major e-commerce retailers are now setting their sights on second and third and even fourth-tier markets as the key to future growth.
JD.com, after Alibaba, is China’s second largest B2C e-commerce platform. The variety of seafood offered through JD.com is impressive. The main origins for its warmwater shrimp are mainland China, Ecuador and Argentina but JD.com also offers several niche products from different origins, such as blue shrimp from Brunei, spotted shrimp from Myanmar, black tiger shrimp from Vietnam and black tiger and Pacific white shrimp from Thailand. JD.com’s products are all well known for their reputation in terms of quality and safety. For example, Indian shrimp, which has a lesser reputation, cannot be found on JD.com. Contrary to some of the more high-end e-commerce platforms, JD.com does not pay much attention to extensive product information; its focus is more on price. This is in line with its broader target group, the large middle-class, which, while they do care about quality and safety, is mostly very price sensitive.
A smaller regional e-commerce platform is Chunbo.com, which focuses on Beijing and the surrounding provinces and targets especially upper-middle class consumers. Founded in 2014, Chunbo.com currently has one million registered users and operates several offline shops in Wuxi in the Jiangsu province. The company operates several organic farms in suburban Beijing, directly bringing fresh high-quality products to its users. Besides organic produce from these farms, Chunbo.com sells seafood, beverages, snacks and health food. Contrary to JD.com, Chunbo.com pays particular attention to conveying the story of the product to its customers.
Chunbo.com offers a wide variety of farmed Pacific white shrimp from Ecuador, Malaysia Vietnam and mainland China, farmed black tiger shrimp from Vietnam and wild caught shrimp from Argentina and China. Chunbo.com even offers several live shrimp products, though it is unclear from which origin. Particularly impressive is that Chunbo.com offers its customers product information that goes beyond the mere required specifications. For example, the product page of the Ecuadorian Pacific white shrimp that is supplied by Ecuadorian exporter Songa and marketed under Songa’s Champmar brand starts with some simple product specifications, followed by a detailed section with buying recommendations highlighting the product’s unique selling points in terms of taste, texture, size and origin (Ecuador). A range of photos shows the Galapagos islands, Songa’s farms and the processing facility in Ecuador. To our big surprise, we are even shown a letter from the Ecuadorian trade office in China, emphasizing why we should buy this Ecuadorian shrimp. With all this, customers will doubtlessly be convinced that they are buying a high-quality and safe product that they can eat without worry.
