BANGKOK -- Having grown stupendously, albeit mostly unbeknownst to consumers, as a processor of canned tuna, Thai Union Frozen Products is continuing efforts to become a purveyor of name-brand fish in its own right.
The world's biggest producer of canned tuna said Friday that it will acquire Bumble Bee Foods, the top seller of canned seafood in North America by market share, for $1.5 billion. That makes its third acquisition this year, which saw it net European distributors of smoked salmon and canned sardines.
The deal will cement TUF's position in the tuna industry, President Thiraphong Chansiri told a news conference. Bumble Bee hauls in $1 billion in annual sales with its namesake brand and others.
TUF's latest catch should come as no surprise: Thiraphong had declared that the company had its eye on the top two brands in each country. True to his word, TUF bought U.S.-based Chicken of the Sea International in 1997 and MW Brands, the French purveyor of several major European brands of canned seafood, in 2010. The Thai blue chip's share of the global market for canned tuna has swelled to more than a fifth.
TUF's strength lies in its efficiency, which is partly a product of its scale. A plant just outside Bangkok processes 320 tons of tuna a day -- a credit to its more than 3,000 workers. Since fish do not come in standard sizes, the task of carving up tuna does not lend itself to automation. The cooked fish is separated into cannable and uncannable bits entirely by hand.
After taking charge of TUF in 1995 at the age of 30 from his father, the founder, Thiraphong set about enlarging the company through acquisitions. Processing tuna for sale under outside brands is a low-margin business that requires economies of scale to raise profits. But Thiraphong realized that quantity can only carry TUF so far.
Its penchant for acquiring brands stems from the strategic shift begun by Thiraphong. With the purchase of Bumble Bee, TUF-owned brands are expected to contribute more than half the company's revenue for the first time. Since TUF can decide how these products are manufactured, not to mention marketed, it can savor fatter profit margins. It can also get feedback from consumers more easily than with seafood sold under outside brands.
With fewer tuna being caught, TUF needs to pursue even greater efficiency. This challenge has been taken up at its new R&D center, which opened earlier this month in Bangkok. Only about half of each tuna is canned for human consumption. TUF uses 99% of the other bits, including bone and skin, for pet food and fish feed. It is also researching value-added applications for tuna derivatives, such as the omega-3 in the fish's eyes, a potential ingredient in cosmetics.
TUF now takes in 70% of its revenue in the U.S. and Europe. Having achieved sufficient scale in the West, according to Thiraphong, the company is looking to emerging markets. In such countries, where many people may have never heard of tuna, it will essentially start from scratch. Finding ways to cater to the diversity of tastes will also be a job for the new R&D center.
Two years ago, TUF began selling John West canned seafood, part of MWBrands' lineup, in the Middle East. In low-income Southeast Asian countries, TUF will try to gain a foothold with canned mackerel and sardines, which are more affordable than tuna.
After Bumble Bee, TUF will hold off on new deals for two years, Thiraphong says. But a Thai-based analyst reckons the company will need more mergers and acquisitions to achieve its goal of doubling sales to $8 billion by 2020. Sooner or later, it looks likely to cast its net again.