Giant conglomerate Charoen Pokphand Foods (CPF) is expanding its business focus on brand building and packaging development, with the aim of becoming the biggest food producer in the region.

The company is also mapping out plans to set up its own distribution centre and logistics system, designed to support its expansion as well as meeting demand from rapidly growing regional trade. However, it declines to give further details of its logistics plans, saying only that the proposal is being studied as an investment opportunity and potential partners are being sought.

"Distribution and logistics are the most powerful factors controlling business," said CPF president and CEO Adirek Sripratak, adding that the company has recruited about 10 logistics experts to help draw up its plans. In addition, the Hong Kong-based logistics operator IDS will become a partner.

He said the plan aimed to ensure sustainable growth for CPF, averaging 10 per cent per year over the next five years, to achieve Bt200 billion in annual sales revenue.

The brand-building strategy aims to direct the company towards global recognition and, eventually, to settle on a "one company, one logo" policy.

"We plan to reduce exports of fresh meat and to focus on our brand and finished products," Adirek said.

CPF has already achieved the "third step" in food industry development, involving a value chain beginning with breeding and animal feed, owning farms as a medium step, and making processed foods downstream.

Adirek said the company's current investment aimed to facilitate future manufacturing based on advanced technology.

In addition, CPF has expanded not only into neighbouring countries such as Laos, Cambodia, Vietnam, Burma, Malaysia and Indonesia, but also into other potential Asian markets like India, Turkey and Russia.

It has invested Bt500 million to set up an animal feed meal and pork products plant in Russia, which is expected to begin operations late next year. It is also planning to expand its animal feed meal and aquaculture businesses in the Philippines.

Adirek said the food industry had reached a turning point because grains like maize are being diverted for use in ethanol manufacturing. Demand for maize to support the ethanol industry in the United States has increased from 10 per cent last year to 20 per cent this year, and major maize importers such as Japan and Vietnam are facing price increases from Bt6 per kilogram last year to Bt8 this year.

In Thailand, maize prices are expected to rise by 15 per cent this year to Bt6.50 per kilo.

"It is forecast that the cost of producing meat will increase because the feed meal industry will face a shortage of grain and this will prompt tougher competition on the world market," he said.

As a result, the company has stepped beyond its vision of feeding Thailand's population of 60 million and is occupying overseas markets. "We are now eyeing a population of three billion in the Asian region," Adirek said.

The company is aiming for sales revenue growth of 10 per cent next year, after making an estimated Bt130 billion this year. However, anti-dumping problems and trade barriers imposed by major trading partners, in particular the US and the European Union, are already threatening that target and sales growth may be lower than projections.

At present, export revenue contributes 22 per cent of CPF's sales while offshore investment contributes 14 per cent. The ratio between export and domestic revenue is 40:60, which the firm plans to make 50:50 next year.

Adirek said the stronger baht would not affect operations as lower payments for imports are balancing the exchange losses on exports. The company's annual export revenue is Bt20 billion, equalling the value of its imports.

However, he said the continued strength of the baht would prompt manufacturers to seek increased retail prices of goods to offset increasing production costs.

Achara Pongvutitham

The Nation

Nakhon Ratchasima