How Thai Union Turned Crisis Into Opportunityff

Unlike other canned tuna companies struggling with restructuring after the 1997 regional economic crisis, Thai Union Frozen Products (TUF) saw a golden chance to expand abroad to serve its advanced vision of becoming one of the world’s leading producers and exporters of canned tuna and other frozen and processed seafood.

“We can say that the company’s significant growth and development occurred during the economic crisis,” president Thiraphong Chansiri said in a recent interview with by the Thai newspaper “The Nation”.

The company concentrated on shrimp and tuna products, which turned in growth of 20-25 per cent a year despite the crisis.

Back then, almost all operators had to overhaul their business to survive financial pressure. Some of them had to shut down and others had to shoulder a huge debt burden - both in baht and US dollars - for years.

The crisis created great opportunities overseas for TUF, which was free of dollar debts.

In 1997, the company started its offshore offensive by acquiring 50 per cent of California-based canned seafood products marketer and manufacturer Chicken of the Sea. TUF set up TriUnion Seafoods to facilitate the transaction.

Aquastar Foods was also taken over by TUF in the same year to serve the huge American market.

In 2000, the company exerted greater control over its operations in the world’s largest market by taking over the remaining 50 per cent of Chicken of the Sea, which is the US second biggest supplier of canned tuna, turning the American company into a Thai-owned business in the United States.

For the acquisition of Chicken of the Sea alone, the company spent about US$135.5 million.

The year 2003 saw further expansion, with the company gobbling up New York-based Empress International to widen distribution channels for its frozen seafood.

With demand increasing from American consumers, Chicken of the Sea moved downstream with its own distribution system to get closer to retailers and their customers.

Although both the regional and global economies have recovered nicely from the crisis, TUF has not stopped being a “non-stop machine”, Thiraphong said. It formed joint ventures both in the Kingdom and Asean last year. For instance, it joined with a Thai ally in setting up High Health (Thailand) to operate a shrimp farm and hatchery.

It also took over Juifa in Indonesia to secure supplies of raw ingredients as well as partnered with Shanghai-based Century Canning Corp to set up Cosi Trading (Shanghai) as its sales office in the province. The presence there helps to open up market access for finished products.

Thiraphong said the company’s sales had quadrupled since 1997, from Bt13 billion to Bt55.4 billion last year. Profit has doubled to Bt2 billion in the period, while assets have surged to Bt27.13 billion.

The few years after the crisis were a good time for the company to spread its wings both in the country and outside.

“Thanks to the float of the baht at that time, many major rivals both here and in neighbouring nations faced the same troubles and were preoccupied with restructuring, but for me it was expansion time,” he said.

TUF's rapid growth is also reflected in its shares listed on the Stock Exchange of Thailand, he said. The company has mobilised funds twice - first in 1998 by raising Bt1.34 billion from the stock market, and then in 2002 by selling convertible debentures worth Bt1.65 billion.

The proceeds funded more than half of the company’s capacity expansion.

The group employs 24,000 people worldwide, of which the US has 2,200 in manufacturing and marketing at its three companies there.

The US operation concentrates on the domestic market where demand is surging. The Indonesian arm is directed at canned fish.

“Our strategy has been drawn to ensure market access and also to strengthen our competitiveness. For example, having a manufacturing base in the US allows us to avoid import tax [on finished goods],” Thiraphong said.

The company learned a lot from the economic crisis, particularly about business risk, which prompted it to embrace stricter discipline.

Exporters are finding more obstacles - not only rising labor costs but also trade barriers, including anti-dumping duties and continuous bonds, he said.

However, free-trade pacts have encouraged more exports, as many trade barriers have been lifted for freer flow of goods and investment.

The most important factors so far are the firmer baht and fluctuating oil prices. The baht has appreciated more than 15 per cent against the greenback since last year, compared with 3-8 per cent for export rivals China, Vietnam, India, Indonesia and the Philippines.

“Despite skyrocketing oil prices, we can manage to maintain our competitiveness because countries around the world are suffering from that, but the stronger baht has directly hit only the Kingdom,” he said.

To maintain export competitiveness, TUF has set a strategy for “sustainable growth and stability”, which stresses efficiency, enthusiasm, speed and performance.

After the crisis, the company embarked on a five-year technology development programme. In the past three years, it has emphasized human resources development.

Ten years on, the company is looking forward to another 10 years of building wealth by drafting short- and long-term business plans. Initially, sales should reach $2 billion (Bt67 billion) next year, and growth should be sustained at 15 per cent annually.