RSSThai Companies Pan for Gold in Silver Linings (Part II)
By Paul Baiocchi | September 24, 2008 | 4:06 PM | 0 Comments
This is part 2 of a three-part series covering Paul's visit to Thailand on behalf of Delta Global Advisors. To view part 1 click here.
Economic slowdowns generally don't annihilate an industry's entire market. They can, however, push markets out of step with the past. Unlike its gas producing compatriot PTTEP, reviewed in my last column, the Thai company discussed today is ensuring its survival through diligence in uncovering today's best markets. In the stormiest weather, there's always a silver lining somewhere and that's the best place to pan for gold.
Based in Bangkok, Charoen Pokphand Foods Public Company Limited and its subsidiaries (CPF Group) is Thailand's largest agribusiness and food conglomerate, with a fully integrated grasp on the food chain from feed production, up through animal breeding and raw meat processing, to the manufacture of processed food products. Its lifestock and aquaculture businesses encompass chicken, duck, swine, shrimp and fish.
Globally, while the world continues to eat its way through an economic downturn, it does consume less of items considered luxuries, such as shrimp. Locally, the wounding of Thailand's vital tourism industry by a stronger baht and political unrest has reduced meat demand. So what's a food producer to do? Find new ways to diversify...into the richest fields for revenue cultivation.
Products are one source of diversification. Faced with a hypercompetitive raw shrimp market with dwindling profits, CPF has forged a value-added path with products like its new shrimp burgers.
But the company's greatest diversification efforts are aimed at moving beyond its national borders. CPF's goal, despite a four-year-old prohibition on raw chicken imports, is to raise foreign business from its current modest position at 14% of total revenue to a brawny 50%.
The company has intelligently varied its strategy with its target markets, and the strategy is full steam ahead into the young growth markets of India and Russia. With only two years in the Indian shrimp market, CPF already ranks among the country's top five in sales and is expanding into new locations and new products.
CPF's Russian operations, also two years old, include sales of a million tons of chicken and pork and a newly completed mill scheduled to start pumping out feed in the last quarter of this year. Over the next two to three years, major growth is expected in this massive northern market.
Europe is being developed as a major market for the company's cooked meat products, with the UK as top importer and Germany and Switzerland close behind. Newest venture: CPF shrimp burgers now buck the beef tide in German Burger Kings and major supermarkets.
And CPF is paving the way for the future in markets not yet ready for shrimp burgers. The company is working to help farmers in the developing countries of Eastern Europe set up feed businesses. Protected from economic instabilities by government farm assistance programs, this initiative benefits local populations and sets the stage for future CPF processing plants.
CPF management says their advantage is quality and, if they focus on safety and quality, the new markets will come. But we say-and they obviously understand-that it doesn't hurt to focus on analyzing global needs and competition too.
This is part 2 of a four-part series covering Paul's visit to Thailand on behalf of Delta Global Advisors. To view part 1 click here.
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