CHINA: Far East still main market for Danish Nowaco

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Danish Nowaco is an international food trader specialising in bulk commodities, including pork, beef, fish & seafood, and dried fruits and vegetables. After more than 15 years on the Chinese market, the Far East (mainly China) has developed into a main market for the Danish company, taking approximately 40% of the company's volume.

For Nowaco, the China trade is focused on two activities: the first is the export of pig's toes, pig's ears and other cuts that Western consumers do not want for human consumption in China. The other is export of fish for processing in China and re-export to Western markets.

"In all humility, we were actually the first to promote this activity more than 15 years ago, and this is why we set up shop in Qingdao on the Shandong peninsula, which is the main home of China's fishing industry," explains Preben K. Nielsen, founder, owner and CEO of Nowaco, to news2biz. "Now all the major players in the fishing industry have processing in China."

The fish processing business still works in much the same way as when Nowaco started 15 years ago. Nowaco buys shiploads of fish from all over the world, ship them to China and re-export them to Western markets. Filleting and other processing are done by a sub-supplier with whom Nowaco has a long-standing partnership.

"This kind of operation requires a lot of capital as money is tied up in fish for the duration of this process – from the seller in, say, Europe over processing in the Shandong province to end-sales to, say, the US. We take this risk upon us and you require a good balance sheet to do that. This is in line with the tendency in food production – it is not enough to offer processing, you have to cover a larger part of the value chain," says Preben K. Nielsen.

Mr Nielsen is not too worried, but does see one obstacle to this business in the future: the rising wages.

"We have seen some companies changing the venue to Vietnam as labour costs are cheaper there. I do not see that we are doing that, but in this business you never know – you always have to be ready for something new," says Preben K. Nielsen.

The increased opportunities for Danish exporters to export more processed and heat-treated cuts of pork to China has little impact on Nowaco's business, at least as the situation is now.

"Our niche is to work as supplementary to the distribution activities that, e.g., meatpackers have themselves. Danish meatpackers have been good at serving, e.g., the Japanese and the Hong Kong market, but our mission has been to buy surplus products or cuts used for, e.g., animal fodder and upgrade that to higher value products for human consumption and to convince them that they could make money of it. We will still be doing that," says Preben K. Nielsen.

Nowaco is a truly global company and at the moment the it is expanding in Western Africa, including Nigeria and Ghana, and in Latin America. The focus on bulk foods is clear even in these markets, but the solitary focus on bulk is not that new. In 2004, the Danish company divested its activities in the Czech Republic and Slovakia – activities that included distribution of a broad range of food products, including meatpacking plants and the largest ice cream maker in the Czech Republic. In 2009, this was taken over by South Africa's Bidvest which last year bought Nowaco's activities in the Baltics (see news2biz LITHUANIA no 326 page 9). Bidvest is keeping the Nowaco brand in these countries in Central & Eastern Europe.

In China, Nowaco is present in Hong Kong, Shanghai and Qingdao with a staff of 19 in Qingdao, 15 in Hong Kong and four persons at the Shanghai sales office which was opened 7-8 years ago.

Nowaco is present in 10 countries with a total staff of 120. In 2011, the company turned over EUR 238m and made a gross profit of EUR 13.4m. The company was founded by Preben K. Nielsen and celebrates its 40th anniversary this year when the founder celebrated his 75th. The company is controlled by Mr Nielsen through a 94% ownership by Tika Holding, a company that has invested in property primarily in Aalborg in Northern Denmark where Nowaco is headquartered, and in industry.