Expansion and contraction are inevitable issues of business progress for almost every enterprise. And some  management experts call it as the “addition and subtraction method” of business development strategy. Whether using addition or subtraction method, different enterprises have different experience. We can say: “addition and subtraction method” is the means to develop the company, and also the means to handle the risks. Today Food Co., Ltd. masters the art of “addition and subtraction method”, breaking through the ceiling which blocks the growth of the company.

At 10:30 on November 5th, the appointed time, correspondents arrive at Xikou, Fenghua, where Today Food Co., Ltd. is located. On the third floor, a small meeting room which can accommodate a dozen people is being closed. Accompanied by Mr. Yuanjian, the assistant of the general manager, we quietly pass the meeting room and enter the office of Mr. Chenyifang, the general manager of Today Food. After a whole hour, Mr. Chenyifang comes into the office. “Sorry for waiting, we have the regular meeting of delicacy management every day”, Mr. Chen says.

What kind of delicacy management meeting can be refined to be hosted very day? Looking at correspondents’ surprised look, Mr. Chenyifang opens the discussion. And our interview starts from here.

Counting the costs, each one is increasing.

Chinese Yuan exchange rate, deposit and loan rate, the export tax rebate rate and oil price, material price, labor cost, export commodity price are vividly called “three rates and four prices”. Now it seems that each one of these becomes the burden for the company.

Today Food Co., Ltd. is located in scenic Xikou, found in 1992. Now it has become the largest tuna processing enterprise in China, with the annual production capacity of 30,000 tons.

Mr. Chenyifang tells reporters: over the years, Today has been focusing on own business, without diversifying the investments. Based on the accumulation over the years, the company’s financial status is still quite good. But he feels very confused by the situation that the production capacity is expanding, but the profit is not growing accordingly.

“Labor, water, electricity, gas, packing, materials, logistics and etc, no one doesn’t increase”, Mr. Chen explains one by one to reporters. Increasing costs eat the big part of company’s profits.

These disturbing factors, summarized as “three rates and four prices”, are referring to Chinese Yuan exchange rate, deposit and loan rate, the export tax rebate rate and oil price, material price, labor cost, export commodity price. It seems that each of these factors becomes the rope to hold back the company.

“These external factors are not under our control. We can’t expect pennies from heaven. We can only deal with these factors by tapping the potential and controlling the internal costs.” Mr. Chenyifang introduces: what is the cost of our each product? Which part of costs is out of control? Which part of costs is under control? Where are root-causes of out of control? We need to know all these every day. And these are the content of the delicacy management meeting.

Fish processing enterprises are labor-intensive enterprises. Today Food employs around 1,200 people. “Now the company’s labor cost increases 15% to 20% every year and young people don’t want to work at fish processing industry. The company’s employees are mostly around 35-50 years old. He (she) has relatively low level education. And also the cost of training is increasing.” Mr. Chen says.

The appreciation of Chinese Yuan is another tough rope. “Take export sales of US Dollar 40 million as an example, 1% appreciation of Chinese Yuan means the loss of US Dollar 400,000.” says Mr. Chen. For many small and medium sized enterprises, this normally means one year’s profits.

“Three rates and four prices” trouble many enterprises. But for Today Food, the biggest headache is not the increasing costs but the shortage of raw fishes.

Rely on the big tree, solving the issue of raw fish resource

At the early stage of company development, Today Food could only do processing by using limited tuna resources. It’s hard for company to grow. How can we break through the ceiling of growth? After having the painful experience of Asian Financial Crisis, Today Food started to seek change at 2010. Using the “addition and subtraction method”, Today Food finally found the way to develop. One of the largest “additions” is the introduction of strategic investor – Zhejiang Ocean Family Co., Ltd.. Ocean Family is the subsidiary of Wanxiang Group.

In early 2010, Ocean Family took the initiative to approach Today Food, discussing the capital restructuring. The negotiation went well. In May 2010, Today Food officially introduced the strategic investor.

“This is called giveup. No giveup, no gain.” Mr. Chenyifang has the strong feeling of what ‘relying on the big tree’ is about: after Ocean Family controls Today Food, my personal rights become smaller. But the management is getting more professional. And we don’t need to worry about resources of tunas. In order to protect the ocean fishery resource, the international fishing management organizations make the clear rules: companies can only fish unless they get the quotation of fishing. China has just more than 20 tuna purse-seine vessels, with the annual fishing capacity of 150,000 tons. And Ocean Family can only reach the annual fishing volume of 20,000 tons. The cooperation between Ocean Family and other big Chinese fishery firms further guarantees the raw fish supply to Today Food.

“The introduction of the strategic investor, now it seems, was the right action.” Mr. Chen says. For food processing enterprises, the biggest issue is resource. This strategic adjustment and capital restructuring lets Today Food break through the ceiling of growth. And Ocean Family builds up a more solid industry chain, achieving a win-win result.

Focusing competitiveness, developing core products

Mr. Chenyifang says: having many products but no core product, an enterprise can’t have sufficient influencing power and own real competitiveness. Before the restructuring, Today Food had more than 30 different products, such as crab meat, shelled shrimp, frozen fish and etc. However, market needs changed quickly and the company couldn’t accordingly match the demands. Moreover, without having the advantage of resource, the company couldn’t have the influencing power.

“A clenched fist is stronger than five separate fingers”, Mr. Chenyifang seriously announced during a company meeting. Restructured Today Food will use “subtraction method”: kick out products without competitiveness and put all efforts to develop a few products with high added-values. “Now we are focusing on ‘two fishes’ and ‘one flower’”, Mr. Chenyifang smiles and tells reporters “‘two fishes’ refer to tuna and mackerel, and ‘one flower’ refers to broccoli.” Today Food has planted more than 4,000 acres of broccoli in Ninghai and Zhenhai. Through methods of drying and freezing, the company can make fresh broccoli into foods which can be easily carried and preserved. This product is exporting 100% to other countries.

Mr. Chenyifang tells reporters that the recovery is essential for tuna processing. If the recovery can be up 1%, we can create considerable profits. In the meantime, tuna production also generates many scraps. Although enterprises are trying to turn those scraps into wealth, due to the limitation of current technologies, most of scraps are wasted. “Scraps are also the resource. If we can use it properly, scraps can become the new source of profits.” Mr. Chenyifang says. In Today Food, fishmeal made by fish bones, fish floss made by tuna scraps and etc are common examples of “turning waste into treasures”. Moreover, under deep processing, fish guts and fish oil can be made as health products, cod liver oil and etc.

‘Tunas have some brown meat, commonly known as red meat. We use it to make canned pet food. And it can generate more than 10 million Chinese Yuan per year.” Mr. Yuanjian, the assistant of the general manager, introduces.

Now Today Food is aiming the other fish—mackerel, which once was classified into low-grade fish. And it is sold particularly cheap in the market. Mr. Chenyifang tells reporters: the resource of mackerel is very rich in Yellow Sea, East China Sea and other short seas. With the developing of fishing technologies and processing procedures, the taste of processed mackerel is much better now. Today Food can process 5,000 to 10,000 tons of mackerel per year. The company can make the mackerel fillets or canned mackerel. The value of these orders can be 20 to 30 million Chinese Yuan per year. And Today Food has been one of few enterprises which can export canned aquatic products to EU.

Fresh fishes are more valuable. Mr. Chenyifang has a grand plan: work with separate fishermen or fishing unions. Mackerels will be frozen immediately and then processed ashore to maintain the freshness of fishes. On the one hand, doing “subtraction”: exclude unprofitable products, giving up low-end market; on the other hand, doing “addition”: focus on high-end market. Getting more out of “two fishes”, precisely and deeply, it is the way to get rid of the wasteful mode of operation and create profits through delicacy management.

“Next year, we will invest 20 million Chinese Yuan to introduce a set of advanced equipment from Denmark. The equipment will be used to process the scraps of tunas.” says Mr. Chenyifang. Scraps processed by this equipment, depending on different materials, can be the raw materials for cosmetic and health products. And this will become a new source of profit growth for the company.

Exploit the domestic market: tunas “swim” onto citizens’ dinning-tables

Along with the increasing of the living standard, people are showing the higher consumption needs such as eating, drinking and etc. The demand for seafood is more obvious. Ocean Family timely starts the domestic market strategy. This action not only seizes the market opportunity, but also leads the consumption trend.

Recently Ocean Family launches more than a dozen selling stores in Beijing, Shanghai and other cities, marketing the freshest tuna products. Through those outlets, tuna products processed by Today Food are also targeting nationwide market and reaching common citizens’ dinning-tables.

“Formerly we exported our products 100%. But now, we have established our selling outlets in eight cities such as Beijing Shanghai and etc. The selling store or seafood counter will also be set up in Ningbo quickly, selling tunas at the price which will be slightly above the wholesale price.”, Mr. Chenyifang tells reporters. In marketing, Today Food is doing “addition”: focus on the domestic market, so people can often enjoy fresh tunas.

Last month, Ocean Family opened its online flagship stores on Tmao.com and womai.com. Therefore, Today Food’s products are also on board of e-commerce, the broader market.

Developing the new abroad markets is also Today Food’s option. Mr. Chenyifang tells journalists: since last year, Today Food has been actively exploiting new emerging markets such as East Europe, Middle-East, Africa, South Africa and etc. in some areas mentioned above, the firm has formed a stable customer base.

In Today Food’s workshop, journalists witness the situation that worker are operating in a busy but orderly manner. In the other workshop, workers are installing the new equipment imported from Thailand. This is Today Food’s new loin workshop with the investment of 20 million Chinese Yuan. When the workshop is up and running at next month, the annual tuna processing capacity will increase 20,000 tons. And Today Food’s annual capacity will reach 50,000 tons from former 30,000 tons. This biggest Chinese tuna processing enterprise, through strategic restructuring, has prepared ready the ration for the “winter time” and shown the strong confidence for the future.

Relative linkages:

Tuna: the king of fish

Tuna has the reputation as “king of fish” (its meat is fresh, delicious and less susceptible to environmental pollutions) and is a rare healthy food. Tuna has up to 20% protein content and very low fat content, with the nickname of “chicken from the sea”. There are more than 30 different species of tunas. Six out of those species have high economic value, including Bluefin tuna, Bigeye tuna, Yellowfin tuna, Sword (Flag) fish, Albacore, and Skipjack. The first four species are mainly used for the production of sashimi and the latter two are used for canning production. 

(Text: Taolianxiang, Xuezhiyi)

(Quoted from “Southeast Business News” 11/8/2011)