December 26, 2016 10:00 pm JST

Thai Union quits China tuna partnership to make solo splash

Fish processor wants to push own brands in No. 1 seafood market

YUKAKO ONO, Nikkei staff writer

Thai Union's canned products.

BANGKOK -- Top canned tuna processor Thai Union Group is selling its stake in a joint venture in China to Philippine partner Century Pacific Group, taking a temporary step back from the world's largest seafood market.

Although the divestment appears out of character for a company that has been making headlines with aggressive acquisitions, it reflects Thai Union's big ambitions in China.

The joint venture, in which Thai Union and Century each hold 50% stakes, distributes Century-brand products. The brand has become the most popular canned tuna in the country, but Thai Union wants to pursue long-term growth with its own brands.

"The sale will allow Thai Union to focus on new opportunities in the China market, including the launch of the King Oscar brand in the frozen and chilled salmon and shrimp segments," said Whitney Foard Small, global director of corporate communications.

King Oscar -- a Norwegian brand Thai Union acquired in 2014 -- is best known for its premium sardines but has expanded into shrimp and frozen food under its Thai parent.

Analysts say the Century investment was an "experiment" that allowed Thai Union to test the waters in China. Entering the premium product segment could lead to higher revenue and better profit margins, helping the company reach chief executive Thiraphong Chansiri's ambitious target of nearly doubling global revenue to $8 billion by 2020.

"Chinese consumers like the luxurious lifestyle and Thai Union's globally recognized brands, such as King Oscar and John West, might be stronger brands and fit in better with the market," said Sureeporn Teewasuwet, an analyst at Finansia Syrus Securities.

She added that Thai Union could also explore the market for lobster -- a favorite in China. The company this year bought stakes in Canadian lobster processor Les Pecheries de Chez Nous and U.S. restaurant chain Red Lobster.

To compete in China, an analyst at Bualuang Securities suggested that "Thai Union will have to complete at least one or two big acquisitions on the scale of $1 billion, or quite a few midsize deals of around $500 million." 

Middle-income wave

The rise of middle-income consumers in China has been pushing up demand for raw and processed seafood. A 2010 report in National Geographic magazine said China caught and consumed the most fish of any country, giving it the biggest footprint on marine life -- or "seafood print." 

Per capita apparent fish consumption in China came to about 37.9kg in 2013, according to a recent report by the United Nations Food and Agriculture Organization, up from 14.4kg in 1993 and surpassing the global figure of 19.7kg. "In the last few years, fueled by growing domestic income and wealth, consumers in China have experienced a diversification of the types of fish available," the FAO said in its report.

Not surprisingly, the market is attracting players from abroad.

For Century Pacific, the takeover of Thai Union's 50% stake in the Chinese distribution operations marks the Philippine company's most concrete expansion move since it went public in 2014. The listing, which raised 3.2 billion pesos ($64.34 million at current rates) in fresh capital, was partly aimed at bankrolling forays abroad.

Century Pacific Food, the listed arm of Century Pacific, will acquire a combined 100% interest in a group of entities from its parent and Thai Union for $2.56 million.

"China could be a future growth market for us, with its total canned food market estimated to be increasing by double-digits annually," said Gregory Banzon, vice president and general manager at Century Pacific Food.

"We look forward to growing our product portfolio and expanding our distribution network in China," Banzon said, adding that the company is "studying opportunities to enter adjacent categories to take advantage of this new market."

The China deal will support the expansion of Century Pacific's international brand segment, which is still a relatively small part of its business. The company exports products to North America, Europe, Asia, Australia and the Middle East.

Century Pacific is a leading canner in the Philippines and dominates the domestic canned tuna segment. It also produces canned meat as well as dairy products. Singaporean sovereign wealth fund GIC became a strategic investor in the company in 2014.

The group is owned by the Po family. The Filipino-Chinese family also controls Shakey's Pizza Asia Ventures, which listed on the Philippine Stock Exchange on Dec. 15 and aims to expand across Asia, including China. Arthaland, a publicly listed "green" real estate developer, is another Po-owned business.

Nikkei staff writer Cliff Venzon in Manila contributed to this article.

Asia300

Thai Union Group Public Co. Ltd.

Thailand

Market(Ticker): BKK(TU)
Sector:
Industry:
Consumer Non-Durables
Food: Meat/Fish/Dairy
Market cap(USD): 2,868.42M
Shares: 4,771.81M

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