BANGKOK -- Thai Union Group, the world's largest producer of canned tuna, has begun developing a restaurant business as it tries to deal with the rising cost of canning brought on by a strengthening Thai baht and tighter rules over foreign workers.
The company's key tuna canning business is losing steam, with sales down 7%, year on year in the January to March quarter. CEO Thiraphong Chansiri told the Nikkei Asian Review on the sidelines of the Asia 300 Global Business Forum in Bangkok that the company will focus on the restaurant business as a new source of growth.
Q: Thai Union has expanded through aggressive acquisitions. What are your plans for the future?
A: M&As today are not our priority. The reason [they are] not our priority is we don't see any target which has good value to invest in. Therefore, our focus has shifted to [our] core business, where I believe [there is] upside opportunity -- where we can improve cost, productivity. That's the area we are focusing on now.
With the current business environment, growth has become very challenging. That's why we stopped M&A activities, because we don't really see any attractive investment where it can bring profitable growth to our company. The challenge for us right now is to deliver growth. We need to focus on innovation: new products in which we can bring value to our customers.
Q: Your company bought a stake in Red Lobster of the U.S., the biggest seafood restaurant chain in the world, last year. What was the thinking behind that move?
A: Red Lobster is a really new business for our group, [one in] which we never had experience before. So far, the business is performing quite well. We are quite comfortable and confident with our look at the company. We worked very closely with Red Lobster management to understand [the business]. We still have two or three years [before we] see synergy. Hopefully, in the next few years, we can gain more confidence in the industry. Our goal is to create new revenue for growth.
Q: How has Thai Union been affected by the rise of the baht?
A: A strong Thai baht certainly affects the profitability of company, but it's not everything. The company still has the ability to manage, especially, our cost. We also have a hedging policy, and that also helps regarding the currency situation. At the same time, we also need to try to increase the selling price to make sure it reflects the true cost. This year, the tuna price has remained very high. Currency rates are important, but it's not the most or only important thing. We have to look overall at the market situation, and the raw material price is also very important.
Q: The Thai government intends to tighten regulations on foreign workers. How much of an impact will that have on the seafood industry?
A: The new law won't have any impact on our fishing or the seafood industry. The reason is the industry has taken on and resolved those issues in the past few years.
In fact, ... bad labor practices in the past, including human trafficking, were a big issue in Thailand three years ago. Thai Union has worked closely with the government to try to improve the situation. The seafood industry is complying with the law, including new ones, so we have no concern about it. It does cost us more, but I think this is the right thing to do. We can manage it.
Q: Where are the important markets for Thai Union, outside of Thailand?
A: For now, the most important markets for us are the U.S., Europe and Indonesia. China is one of our emerging markets. We just set up a company one year ago. We just launched frozen product line in the China market. In India, we had an investment many years ago. Recently, we have been expanding frozen manufacturing operation in India.
Thiraphong Chansiri joined Thai Union in 1988. As president and CEO, he has led its global expansion through acquisitions. Born 1965, he earned a bachelor's degree in marketing at Assumption University of Thailand and an MBA at the University of San Francisco.