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One Man's Opinion: Margins threaten golden goose
By Peter Redmayne
October 01, 2007
How hard can it be to buy seafood? All you have to do is
say, "Your price is too high," all day long. After a while,
when you've squeezed your vendors and played them off against
each other, you cut a bunch of POs. Then every once in a while
you shake your suppliers down for a rebate or make them take an
ad in your annual sales catalog. Of course, the golden rule to
follow here is always: Vendor pays.
The reality of being a seafood buyer, though, is more
complex. Buyers work under a lot of pressure from their bosses,
who may not always understand the nuances of what they buy and
why they buy when they do. And how much fun can it be to have
people chasing you all day, pleading for some of your
business?
Still, when it comes to buying commodity seafood products,
the name of the game is price. Big or small, buyers seem to be
increasingly fixated on price above all else. And that's
starting to cause some problems, as this summer's brouhaha over
the safety and quality of all Chinese imports showed.
China now accounts for more than 20 percent of the 2.5
million metric tons of seafood the United States imports each
year. As it has done with industry after industry, China has
built a colossal manufacturing base built largely upon cheap
labor. But things are changing in China. And they're changing
pretty fast.
The inexhaustible supply of cheap labor from China's rural
hinterlands is no longer churning out workers willing to toil
in fish plants for a few dollars a day. Increasingly, there are
better jobs to be had. As a result, fish plants have had to
offer higher wages to retain and attract workers.
At the same time, the Chinese are being squeezed by their
steadily appreciating currency, thanks largely to the drumbeat
of Washington politicians who pander to their constituents in
their continual battle to retain congressional seats.
Making matters worse is the fact that Chinese businessmen
are hard wired to overcapitalize. In the past few years, scores
of new fish plants (called "factories" in China) have been
built, especially near the northeastern cities of Qingdao and
Dalian. That has increased competition and margins, already
thin, are thinner.
The Chinese business mantra is always "big volume, big
money."
Small wonder, then, that some Chinese suppliers feel they
have no choice but to cut corners in order to book orders from
their customers overseas. That's why there's been a surge in
imports of less-than-true net-weight product from China, as
well as other Asian countries such as Vietnam. Tripolyphosphate
abuse is also increasingly rampant.
At the end of the day, the person who suffers is the
consumer. And that's bad for everyone in the distribution
chain. The reality is that China's development as a
manufacturer of low-cost, value-added seafood products has been
good for the U.S. seafood industry and American consumers who
can't afford to fork over top dollar for fresh fish. If buyers
keep pushing and pushing on price, they may soon find that they
have killed off a valuable goose that has laid them a golden
egg.
Contributing Editor Peter Redmayne lives in Seattle