Struggling for margins, Chinese processors are going through a “really difficult” period

The fierce competition among Chinese seafood processors in a sluggish domestic market is reflected in Gaodi Holdings’ 2023 results.

The company, formerly known as China Shenghai Group, reported 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 (5 .6 million USD, 5.2 million EUR). ) in the first half of 2023, with a turnover of 195.9 million CNY (27 million USD, 24.9 million EUR), compared to only 121,737 CNY (17,000 USD, 16,000 EUR) in the first half of 2023. recorded a gross profit margin of just 3.4% for the entire half-year. year.

Headquartered in Xiamen, the company focuses on the processed seafood snack market through a nationwide distribution network.

Weak consumer demand has forced companies like Gaodi to cut prices. In a report covering the 18 months to the end of June 2023, Gaodi detailed how the company had reduced its shrimp and squid-based seafood snacks to improve retail sales. The situation does not appear to have improved much in the second half of the year, as consumer spending remained stable in the face of a weaker housing market and weaker employment prospects.

Still, 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,” said a management note to investors that accompanied the recently released results. “A gradual recovery in industry demand and a gradual easing of base and inventory pressures are expected, as well as an improvement in the food industry’s operating environment.”

Retail sales in China grew only 2.3% in April 2024 year-on-year, lower than the 3.1% year-on-year growth recorded in March.

Chinese seafood processors that rely on export markets are facing a “difficult” situation due to high material costs and soaring shipping rates, according to Landy Chow, head of the Guangzhou office of the exporter Siam Canadian.

“The factory whose main business is exporting is really struggling right now,” he told SeafoodSource.

Many are reconsidering an earlier strategy of focusing on the domestic market in the face of weaker economic growth in China, which has weakened consumer confidence. Exporters have also sought to hedge against a weakening Chinese renminbi by earning dollars from their exports.

However, rising raw material and freight prices make…