Thailand’s CP Foods: Hungry For Australian Growth

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Thailand’s CP Foods: Hungry For Australian Growth
Gillian Tan
December 4, 2012

Packs of Charoen Pokphand Foods's CPF.TH 0.00% frozen meals are displayed in a refrigerator
Bloomberg News

Between now and 2017, Thailand’s Charoen Pokphand Foods PCL intends to spend more than US$2.4 billion on expanding its offshore businesses. The group’s General Manager for Australia, New Zealand & Pacific Islands, Richard Lovell, talked to Deal Journal Australia about the company’s plans Down Under, and how his division hopes to contribute to overall group performance. CP Foods has guided to annual revenue of between US$11.4 billion and US$11.7 billion for the year ended December 31.

WSJ: Why did CP Foods decide to open an office in Australia?

Richard Lovell: Our Melbourne opened in March 2012 after almost three years of planning. We’re extremely interested in this market because there are so many opportunities for growth. We are focused on exporting products out of Australia but we also import seafood. A couple of years ago, we were Australia’s largest-single customer for wheat, a key component of our operations given we’re the world’s largest animal feed company. I am sure we are still a large buyer although not certain on whether we still rank as No.1.

WSJ: What products get the best response from customers?

RL: In general, Australian produce carries a perception premium in Asia so the benefit is enormous. We export everything from milk powder to chicken, duck, pork, ostrich, fish and prawns but at the moment, demand for beef in Thailand is growing faster than anything else. To put it in context, beef consumption was half a kilo per capita in 2008but is now up to 2 kilograms per capita. That’s a result of a lift in Thailand’s minimum wage to 300 baht per day (US$9.79), more availability of products nationwide, knowledge about beef and its uses, a growing tourist trade to Australia, and students returning from studies in Australia and being a walking talking advert for all that’s Australian.

There’s another product that’s doing ridiculously well – our own CP prawn wonton noodle soup which is available at Costco COST +0.09%, Woolworths WOW.AU +1.06%, IGA and 7-Eleven. In Costco Australia, it outperforms our Costco U.S. sales by 40-to-1 and even outsold red meat while on coupon last year!

WSJ: How does CP Foods plan to increase its expertise in beef?

RL: In March, Len Rae, a beef expert and former trade manager for Primo Smallgoods joined our team. We’re establishing relationships with some key suppliers to help us meet demands not only from Thailand but to service our global branches which supply other varieties of protein to supermarkets like Tesco TSCO.LN -0.84%, food-service companies and also manufacturing use such as beef for a UK pie-maker.

WSJ: What are CP Foods’s goals in the Australia and New Zealand region?

The Charoen Pokphand Foods Pcl (CP Foods) logo is displayed at the company’s processing plant in Chok Chai, Nakhon Ratchasima province, Thailand
Bloomberg News

RL: We’re hoping to increase revenue by A$100 million of new sales in the next three years, trade between CPF and Australia has previously been approximately A$200 million a year. We are to build relationships with Australian companies for future generations. We’re a company that’s not in a rush, but in the long-term, I’m sure there is potential for acquisition opportunities once we better understand them.

We’ll open a New Zealand satellite office next year and have begun exporting cooked mussels to Singapore, with the potential to add Thailand, China, South Korea, U.K., Spain, U.S. and Japan. For context, we are opening a poultry-feed factory in Tanzania and we’re doing business in Tanzanian shillings, a rarely-traded currency. CP Foods isn’t worried about returning those profits to baht; we’re focused on growing the actual business and helping Tanzania and its people, as part of our corporate social responsibility.

Our policy wherever we invest is to benefit the country we are investing in, benefit the people from that country and lastly our company. To have a successful long term business you must give back to the country you are investing in, this is of most importance.

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[rossconew]

Can't wait to get home to try them....................NOT. No really, I am flying home on Friday for a month or 2 so I will def look out for them, now if only they could package Thai pussy and export it.

[Marmite the Dog]

Our policy wherever we invest is to benefit the country we are investing in, benefit the people from that country and lastly our company. To have a successful long term business you must give back to the country you are investing in, this is of most importance.

A former Tesco manager I know said CP used to cripple Thai farmers by offering good rates the first year for products, then they gouge them over the next few years until the farmer goes bust.

Not the sort of investment I think is good for local farmers.