The ferocity of the competition between Chinese seafood processors in a sluggish domestic market can be seen in the 2023 results of Gaodi Holdings.
The company, formerly known as the China Shenghai Group, booked a loss of CNY 38.1 million (USD 5.3 million, EUR 5 million) in the second half of 2023, compared to a loss of CNY 40.1 million (USD 5.6 million, EUR 5.2 million) in H1 2023, on revenue of CNY 195.9 million (USD 27 million, EUR 24.9 million), compared to just CNY 121,737 (USD 17,000, EUR 16,000) in H1 2023. It recorded a gross profit margin of only 3.4 percent for the full year.
Headquartered in Xiamen, the company focuses on the processed seafood snacks market via a national distribution network.
Weak consumer demand has forced firms like Gaodi to discount prices. In a report for the 18 months up to the end of June 2023, Gaodi detailed how the company had been discounting its shrimp- and squid-based seafood snacks to improve retail sales. The situation did not seem to have improved much in the latter half of the year, as consumer spending remained flat in the face of a weakened housing market and lower employment prospects.
Yet, the company said it expects consumer confidence to return, albeit gradually, in 2024.
“The direction of demand improvement in 2024 is relatively clear, and consumer confidence is expected to return steadily,” a note from management to investors that accompanied the recently published results said. “A gradual recovery of industry demand and the gradual easing of base and inventory pressures will be expected, and the improvement on the operating environment of the food industry can be expected.”
China’s retail sales grew by only 2.3 percent in April 2024 year over year, lower than the 3.1 percent year-over-year growth recorded in March.
Chinese seafood processors relying on export markets are going through a “tough” situation due to high material costs and soaring shipping rates, according to Landy Chow, head of the Guangzhou office of exporter Siam Canadian.
“The factory whose main business is exports is really struggling right now,” he told SeafoodSource.
Many are reconsidering an earlier strategy of switching focus to the domestic market in the face of weaker economic growth in China, dampening consumer confidence. Exporters have also sought to hedge against a weakening Chinese renminbi by earning dollars from exports.
However, higher raw material and freight prices make ...
