Top executive steps down from embattled scallop firm Zoneco

The head of strategy has resigned from China’s troubled scallop supplier Zoneco (formerly Zhangzidao Fishery Group) at the same time as the firm has been the subject of criticism in a statement from the Shenzhen Stock Exchange where the firm is listed.

The company — China’s largest listed seafood firm by capitalization — has announced that Feng Yuming — who also held the titles of vice president and CEO in recent years — has stepped down from his position. An official company statement said Feng stepped down earlier this month for “personal reasons” and now had no role at the company.

Zhangzidao was the focus of controversy and investor criticism late last year when the firm announced a CNY 800 million (USD 128 million; EUR 112.8 million) loss due to damage to the firm’s scallop-breeding aquaculture operations. The controversy came at an unfortunate time as the firm was celebrating an expensive rebranding process, switching to the more international-sounding name Zoneco. While the firm rebranded as Zoneco, the original company name Zhangzidao is used on all company announcements.

Chairman Wu Hougang as well as VP and board secretary Sun Fujun and head of the firm’s “ocean pasture and marine biotechnology” arm Liang Jun are named in the statement, posted on its official website and Twitter account by the Shenzhen Stock Exchange. It criticized the executives for not revealing the true impact of the scallop operations on the broader company’s performance in company reports filed to the stock market. “Severe damage” was done to investors, according to the statement.

The statement was described as a “reprimand” by some major Chinese media outlets like the Beijing News, which have been focusing closely on Zhangzidao in the wake of the announcement of the major loss.  

With staff working flat out to fulfill orders for the upcoming Chinese New Year celebrations, Zoneco shares were trading at CNY 12.62 (USD 2.01; EUR 1.78) today, a significant drop on the CNY 15.50 the shares were making before trading was suspended two months ago. The share price is, however, at a similar level to where it was this time last year.

Education was the mantra of Feng Yuming when he spoke at Seafood Expo Asia in Hong Kong last September. Introduced as VP of Zhangzidao, he told a panel on sustainability that his company was trying to “set an example” for the Chinese seafood sector by seeking Marine Stewardship Council (MSC) certification for its whole global value chain as the firm expands its distribution chains overseas.

One of the largest seafood producers in China, Zoneco has hatchery, farming, harvesting and processing operations across China and Asia. It turned to imports in earnest in 2013, having first built up a significant cold-chain logistics system across China. A network of 450 fully owned stores and a network of distributors across the country set the firm up for fast expansion of imports.

The bulk of the firm’s imports currently come through its U.S. subsidiary, ZF America, which also handles its shipments of scallops and fish to U.S. retailers, foodservice distributors and restaurants. Zoneco hopes to increase sourcing operations at ZF America to supply China’s growing demand for imports. Company executives have often pointed out that Zoneco is well placed to expand its imports given its scale and position as a listed company in China: This allows exporters supplying the firm to more easily secure export insurance.