April 16, 2007

China's seafood companies looking to tap domestic markets
 

Signalling a changing of the times, China's seafood companies are increasingly looking at the domestic market to market their high-end seafood instead of looking at international markets.

Abalone, sea cucumber, shark fin and fish maw are China's four traditional high-end seafood products.

Due to their limited production volumes, they are extremely rare and expensive.

However, with the increased adoption of western cuisine in China, western delicacies such as caviar, foie gras and truffles have crowded out the traditional delicacies and the eating of the 4 traditional seafood delicacies have become less popular with Chinese consumers.

China's traditional delicacies are still very much in favour abroad, especially among the well-heeled in Hong Kong, where such delicacies are served in top restaurants. In fact, these  traditional Chinese delicacies are gaining popularity in western countries such as Australia, EU and the US.

However, it is other countries who decide the prices of China's finest. Japan, particularly, earned the right to decide the prices of these Chinese delicacies due to its massive production. Taking scallops for example: Japan's production is at 750,000 tonnes, dwarfing China's 26,000 tonnes. Production of abalone also far exceeds that of China's.

In China, high-end seafood processed by top seafood companies such as Zhangzidao and Haodangjia were almost exclusively for export. However, in the face of massive production from Japan, it was difficult for China to set its own prices. Each year, the price is set by competitors such as Japan, US and Chile.

As export is difficult and China was rapidly urbanizing and consumers are getting moresophisticated, with more disposable income, China's seafood processing companies are shifting priorities to develop the domestic markets.

In the past, to cater to exports, China's companies often select premium quality aquaculture products for export while reserving lower quality products for the domestic markets. 

However, as international competition intensifies, such selling practices have become increasingly detrimental to the seafood companies. 

There remains much to be tapped in the domestic markets.

For example for abalone, prices are normally at RMB 60-80 per abalone, but in restaurants in more prosperous cities in China, it can be sold up to RMB 1,000 for one after processing. Thus, it would not be impossible for prices to rise to RMB 200-300 with market stimulation just as with sea cucumber which rose from RMB 40/kg in 1991 to RMB130/kg by 2004, experts said.

China's leading seafood companies such as Haodangjia and Zhangzidao have become A-listed stocks in China. The latter's stock have risen 64 percent since its first offering last year.

Seafood consumption continues to grow in cities with booming economies such as Beijing, Shanghai and Dalian, while even second tier cities such as Changchun and Chengdu are experiencing surprisingly high growth.