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The Impact of
COVID-19
on Seafood in
China
skinny
Key Observations
S E A F O O D M A R K E T I N C H I N A T O D AY
• Logistics will be the major issue to overcome – biggest concern for suppliers in hospitality and
retail; procurement managers further complaining about the diminishing quality of imported
seafood products since the outbreak further pushing them towards domestic providers to meet
supplies; likely to remain an issue over coming 6 months with businesses trying to stay afloat
• Hospitality industry has been hit hard and will take time to recover – several businesses within
the sector registered huge losses with over 80% expecting to need additional financing over the
coming 6 months to stay afloat
• Consumers still reluctant purchase fresh seafood from offline vendors – fear of bacteria
and infections has consumers seek contactless solution to purchase seafood; short-term
preference towards prepackaged seafood moving forward likely
• Emergence of Community eCommerce likely a trend that will remain – Successfully
penetrated large number of communities on the back of increased health and
safety concerns; likely to remain a trend moving forward due to level of security,
convenience and price
• Ready-to-cook/eat show among the greatest potential for growth – Catering to
the increased interest of people spending time at home; convenience component
emphasized as a key selling point
• New marketing hygiene emphasis to appeal to hospitality and retail – Trust &
safety are as important as ever with procurement managers and end
clients appreciating those suppliers that can make their processes as
transparent as possible
Import Plummet & Estimated Seafood Shortage
• Seafood import volume Y-O-Y growth plummeted from 64.8% in December 2019 to 6.4% for Jan/Feb
With the decrease of flights and shipment 2020
to China the country will be facing a huge • Heavily reliant on domestic supplies, forecasts predict major seafood shortage starting from June
challenge in filling demand for seafood • Fear that China’s current supply chain will not sustain such a large increase in domestic production
particularly in the second half of 2020. • Situation heavily dependent on how other countries will recover in the second half of 2020
• Australia announced it will provide A$110 million to fly agriculture and fisheries products to key overseas
markets, starting with Singapore, UAE, China, Japan and Hong Kong
Import Volumes Jan-Feb Only (tonnes) Import Value Jan-Feb Only (USD)
5 60.0% $14.00 60.0%
Billions
Millions
4.5
40.0% $12.00 40.0%
4
20.0% 20.0%
3.5 $10.00
0.0% 0.0%
3
$8.00
2.5 -20.0% -20.0%
$6.00
2
-40.0% -40.0%
1.5 $4.00
-60.0% -60.0%
1
-80.0% $2.00 -80.0%
0.5
0 -100.0% $0.00 -100.0%
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
Import Volume Growth Import Value Growth
Source: China Business Industry Research Institute
RevPar: Revenue per available room
RestaurantRev: Restaurant Revenue
TotalRev: Total Revenue
Impact on Hospitality Industry China Hotel Association COVID 19 Report Jan-Mar 2020
Catering industry has been hit hard by the outbreak. Beijing-Tianjin-Hebei
A recent survey by Deloitte in collaboration with the RevPAR 74%
Restaurant Rev. 68%
China Cuisine Associations determined that: Total Rev. 69%
• 94% of catering enterprises dine in services have
been affected
• 80% decline in dine in customer numbers for
69% of companies
• Over 80% businesses expect to need additional
financing over the next 6 months Triangle of Central China Yangtze River Delta
• Policy support will be essential for most RevPAR 85% RevPAR 80%
Restaurant Rev. 74%
businesses from reduction in tax & insurance Restaurant Rev. 80%
Total Rev. 74%
Total Rev. 79%
payments as well as post-outbreak rent
reductions to remain open
• Not being able to pay suppliers among the
biggest concerns Chengdu-Chongqing City
Group
RevPAR 90%
Restaurant
81%
Rev. Pearl River Delta
Total Rev. 84%
Domestic tourism has slowly started to pick up over the past RevPAR 81%
Restaurant
month as life returns to somewhat normal conditions which Rev.
65%
Total Rev. 72%
should improve seafood sales in the hospitality sector. However,
a recent survey by traveling platform Ctrip has shown that only
16% are ready to travel again in the upcoming 5-day May holiday
with the majority of respondents not expecting to travel before
August. It may take a while
The picture can’t be displayed. Impact on Retail Sector With the significant losses registered throughout the B2B industry and lack of important not meeting the required demands, international businesses traditionally focused on hospitality trade may need to pivot towards a cross-industry approach. While the retail industry has been heavily affected as well, there are several trends that came out of the outbreak that are not just likely to remain but be among the biggest factors for growth in the overall seafood category with several major players pivoting in that direction Retail Challenges Since the Outbreak: • Customer flow in offline retail decreasing out of fear of bacteria and infection • Prefer to avoid interaction with staff where possible • Rumors around fresh seafood counters potentially being a threat for getting infected with virus Retail Opportunities Since the Outbreak • Significant growth for fresh produce and New Retail platforms through online orders (page 7) • Community eCommerce a rising trend (page 7) • Gap for distinctive, engaging imported seafood brand • Seafood snacking and ready-to-cook/eat products among the only growing categories since outbreak
K e y To u c h p o i n t s S i n c e t h e O u t b re a k Stronger emphasis on Delivery Several offline retailers have registered significant losses throughout the outbreak with a greater emphasis towards online delivery evident across the mainland. Among the key developments were community eCommerce platforms as well as the increasing growth of new retail concept stores such as Alibaba’s Hema that were among the first to react to the outbreak and cater their offerings according to new consumer needs. Community eCommerce: • Allows users to place orders through community WeChat groups • Benefit of bulk sale prices and other brand-initiated discounts • January 2020 saw community ecommerce orders increase up to 322% • Limits touchpoints as users pick up order without leaving their compound Hema • Already associated as a great source for quality seafood • Managed to grow sales through clever initiatives since the breakout • Gained consumer loyalty through pledging not to shut down or raise prices during the pandemic • Pushed contactless delivery solutions and increasing transparency to relief concerned customers • Big part of the Community eCommerce trend for fresh produce
C o m m u n i t y e C o m m e rc e
The New Norm 2020 Traditional Fresh Food Ecommerce APPs by DAU Jan.14 – Feb.04
With the increased health and safety concerns, fresh produce During the peak of the
community ecommerce has successfully penetrated a larger outbreak, although the
number of communities with its: demands for fresh food
were at its all time high, but
the delivery was critically
• Users can place orders by simply sending out a understaffed. Fresh food
Convenient
text in a community WeChat group ecommerce platforms
Buying
• Users can pick up in the nearby community quickly introduced
Method center/inside compound without any additional community ecommerce
social contact features to tackle the issue
• Users can enjoy bulk sale prices while not
and their orders increased
Competitive
having to worry about over-buying rapidly again.
Pricing
• Users can also sometimes enjoy additional
brand-initiated discounts
Receved 18k+ community Introduced “7Pin” feature.
requests within 2 weeks Within 2 weeks, covered 12k+
after introducing the feature JD 7Fresh communities and 500k residents
Miss Fresh
In the first week of 2020 CNY, community ecommerce orders
were said to have increased 322% as a result of home quarantine. Launched a WeChat Mini program for
Setting up convenient stations
As an emerging new form of social ecommerce, community and WeChat groups for giving out group ordering named Kuai Tuantuan to
ecommerce is now on the rise to become the next popular additional coupons for members Pinduoduo push group orders and reduce logistic fee
Meituan/Elema
distributing method for fresh produce. The shift is expected to
have a lasting effect as fear of the virus continues.
In February 2020, Hema launched a self pick up feature on its “We have now many new ways of doing things, (due to the virus outbreak) the decision-making became a lot of
APP while setting up self pick-up points in communities and local-initiated. Most of them are city-specific since the situations can vary so much and not all of them were
compounds. ideas from the head quarter. This will likely to continue. Our longer term focus is to get closer to the customers
by opening mini stores which requires less capital and lower delivery costs… ”
In Guangdong region alone, Hema has set up 400 community self
pick-up points and 300 compound service stations. - Xulin Guo, Head of Strategy, BD & International Business at Hema
Case Study: Hema During The Crisis
Already associated as a great source for quality seafood, Alibaba’s new retail chain Hema managed to grow even
further throughout the outbreak via clever initiatives. Already outselling established supermarkets 3-4 times per square
meter, Hema put more emphasis on their online delivery component, pledging not to shut its operations to provide
consumers with fresh produce. The company partnered with dozens of restaurant chains to deploy their sidelined
employees, negotiated favorable supply terms with business partners and devised contactless delivery solutions.
K E Y TA K E A W AY S
Setting these clear initiatives right in the beginning of the crisis rewarded the brand with more loyalty than ever.
Queensland entrepreneurs would be wise to make similar pledges to their Chinese customers – both B2B and B2C – if
Consumers continue to blur the
they can fulfil them.
boundaries between online and
GAMIFICATION RETAIL PILLARS physical channels.
Brick-and-mortar retailers that
have integrated new retail
components are likely to
succeed more than ever as a
result of COVID-19.
Traditional retailers may struggle
with limited foot traffic and cash
flow.
Hema opened a store in the popular Nintendo Hema recorded strong growth during COVID-19 thanks to
Switch role playing game Animal Crossing. Players incorporating the following new retail pillars: In 2019, online accounted for
in the game are enabled to purchase a variety of 36.6% of all retail sales in China.
seafood products in the game that are actually 1. Home deliveries. Consumers could opt for fast and easy
available in Hema. Several brands have integrated delivery for their daily foods.
their products to engage with younger consumer 2. Profitability. An average Hema store makes 3-4 times
groups, however in April the Chinese Government more revenue than a normal supermarket.
but a ban on the game due to increasing numbers 3. Smart logistics. Hema was able to stock essential fresh
of Hong Kong support messages in the game. foods and daily necessities when availability was scarce.
Tre n d i n g S e a f o o d C a t e g o r i e s Performing well since the outbreak The seafood category as a whole took a major hit as supplies were cut short due to limited imports as well as rumors floating around that COVID 19 may be transmitted through wild seafood products. However two categories Seafood Snacking & Ready- to-Cook/Eat seafood not only managed to remain relevant but were able to increase in popularity online. There currently is a gap for an imported brand as all trending brands for these categories are domestic. Snacking: • Snacking at home common habit throughout outbreak • Precooked seafood among the most popular with several online celebrities endorsing brands • Very strong on engaging with consumers, brands within category show great understanding of target consumers and finger on the pulse of society • Brands such as Bestore from even the most infected areas of China managed to overcome perceptions through tailored marketing aiming to reassure consumers Ready-to-Cook/Eat • Tapping into increased home cooking trend • Easy and convenient to use • All ingredients in one place, doesn’t require additional purchases • Strong branding with several key elements to engage with consumers • Estimated to become a trillion rmb industry with major players catering towards the increasing need
Snacking
Since almost everyone was locked down during the coronavirus, snacking at
Case Study: Bestore overcoming bad associations
home became a habit. While fresh seafood saw the sales dropped, the processed
seafood snacks are enjoying their popularity for its
convivence, safe to consume as it’s not The Challenge
raw and longer shelf life for storage. Whilst
seafood snacking are generally much lower-priced The Hubei snack brand had their work
than fresh seafood, they may be scope to cut out for them as people were
explore retail-ready premium seafood snacks. concerned to purchase products from
the most infected area in China. With a
large portion of the brand’s products
• On social media hashtags from the seafood category, the brand
#InstantSeafood and #SpicyLittleSeafood had to figure out a way to reassure
are by far the most trending consumers that their products are safe
to consume.
• Over 130 million views on short video
platform Douyin How did they overcome this?
• Social commerce trending with local • Leveraged the trending support towards Hubei brands trending on social
seafood farmers and fishermen selling media with several celebrities showing support
their processed seafood directly through • Reassured consumers about quality of ingredients, strictly hand picked
WeChat and Douyin from Zhangzi Island
• Collaborated with singer Kris Wu and celebrity chefs to particularly
• Among most popular seafood snacks are endorse their Yesso Scallop snack
squid and octopus • Reassured consumers that each parcel will be thoroughly disinfected
before sending it out
• Engagement currently mainly by domestic • Clean and convenient package design, each scallop individually
suppliers packagedReady-to-cook / Ready-to-eat
Ready-to-cook/eat products are expected to have a large
impact on the seafood category moving forward. Compared to Case Study: Aqua Man Ready-
last year, semi finished seafood dishes sales in Hema increased To-Cook Seafood
by more than 50% during Chinese New Year. Additionally,
Suning reported that their ready-to-cook giftboxes increasing
13 fold over the same time period. The trend becomes further
evident when looking at the recent efforts made by all major
fresh produce platforms to tap into this growing market:
• JD Fresh launching their “Catering Retail Development
Alliance” aimed at collaborating with suppliers to offer semi-
finished & easy to prepare foods. Currently partnered with
over 100 brands
• Hema promoting their Hema Workshop product line,
branding semi-finished fresh products as their own
Aqua Man/海鲜君 is among the leading
• Popular hot pot restaurant chain Haidilao launched retail brands offering ready-to-eat seafood.
business with plans to release a series of ready-to-cook Sourcing their products form over 70
products partners across the globe. Currently their
offerings range from seven types of ready-to-
eat products from scallops, squid, octopus,
• Miss Fresh inviting F&B suppliers to jointly develop finish and prawns, bullfrogs, clams and abalones.
semi finished productsW h e re t o F ro m H e re ?
Essential Steps for Seafood Exporters
1) Assure Supply
By far the hardest task, with factors such as China’s priority of tackling its
excess domestic supply and reliance on government-chartered freight. Deliver
what can be said with certainty.
2) Assure Safety
Rumors on seafood and inherent dangers were abundant during the crisis.
Understand what messages of trust and transparency are needed to ease
Chinese consumers in the tail end of the crisis and beyond. This also offers
opportunities for exporters of frozen produce to combat stigma of inferior quality
compared with chilled by being able to more easily communicate safety
measures from Australia to China.
3) Connect with New Needs
Even with China re-opening, the lingering fear and COVID-19 habits remain.
Consumers are much more interested in spending time at home, and that
includes cooking (ready to eat/cook products) Establishing new relationships
with retailers may be difficult right now, but this is trending behavior change will
endure beyond the crisis.
4) Establish Distinctive Import Brand
Currently a gap for a distinctive imported seafood brand that engages with
consumers and cuts through the monotone imagery of fresh seafood. Although
not perceived to be as premium, we can take many learnings from domestic
brands’ marketing techniques.The New Marketing Hygiene
What are the key issues
1. Trust & safety Traceability
2. Reassuring reluctant consumers
3. Food Hygiene Traceability allows consumers to track products back
4. Quick delivery/transport to source, potentially could add temperature
5. None refundable for poor quality measures of people that came in contact with
product
What will be important?
Logistics Assurance
Emphasis on logistics, reassure
consumers quick delivery, options
for refunds for bad products
Certification
Certificates to reassure quality,
internationally accreditation
usually preferredNote: Foreign brands more known for lobster and domestic
brands more known for crayfish, but both have similar
Opportunity to Rebrand product usage and offer a clear branding contrast.
Even before the Covid-19 crisis, domestic seafood brands had overtaken foreign brands in terms of branding and marketing, which will pay further dividends post-
Covid-19. Foreign brands did not build their branding around engagement but rather relied on common, inherent advantages foreign countries tend to share. A simple
comparison of ecommerce listings clearly illustrates this point.
Selection of Foreign Lobster Listings on Tmall Selection of Domestic Crayfish Listings on Tmall
Zero Branding = Zero Attraction Zero Personality = Zero Engagement Zero Connection = Zero Retention
The majority of foreign lobster brands on Tmall look like the Without a brand image and personality it is very Covid-19 has without a doubt depressed the
above listings. Clean, crisp imagery of fresh lobster, but they difficult for a brand to engage with consumers. Foreign seafood market, however domestic players that
all look the same, there is little to no differentiation and brands are limited to mono-directional marketing have strong brands and consumer engagement are
certainly no branding. Compare that to domestic crayfish points, such as ‘we have pristine waters’, which are far more likely to retain customers and recover
listings where you have a variety of packaging, logos and impersonal and distant compared to the brand quicker than faceless. Foreign brands have strong,
mascots, all of which are more memorable than foreign mascots and identities that domestic brands have inherent advantages but fail on branding.
brands. been building.LET’S CHAT 631 Jiangning Road, Suite 9B Jing’an, Shanghai, China chinaskinny.com info@chinaskinny.com
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