Thai food major Charoen Pokphand Foods will continue to view Vietnam as one of its biggest investment destinations, and this year the company plans to focus on growing its food processing business in the country.
CP was established in 1993, and its integrated livestock and aquaculture business now spans the entire food production chain. The company began by producing and distributing feed before diversifying into breeding livestock and aquatic animals, followed by processing of meat and packaged food products. The company now has more than 11,000 employees, 90% of which are local people.
Focus on food processing
It currently has two food processing plants in Vietnam, while a third in the centre of the company will open during 2013 to complement its north and south ventures. More than 90% of CP’s Vietnam business comes from animal feed, farming and aquaculture, as well as CP Fresh Mart and CP Shop stores and Five Star grilled chicken street stalls. However, the processed food side of the business accounts for only 3% of its total revenue.
To grow this segment, the company will expand its sales and distribution facilities to target domestic consumers and foreign travellers.
“Vietnam will continue to be one of the biggest investment destinations for Charoen Pokphand Foods, particularly among Asean countries,” Sooksunt Jiumjaisawanglerg, chief executive of CP Vietnam, recently told Bangkok Post.
“Our focus will be more on food processing and read-to-eat food products in order to increase brand awareness as well as to complete full supply chain traceability to ensure food safety and manage reputational risks.”
However, he added that it could be 10 years before CP’s ready-to-eat food products generated comparable revenue to its animal feed and livestock businesses.
Vietnam is a fast-growing market with population of about 90 million and by 2020 it is expected to reach 100 million. Given the rapid rise of the middle class and urbanisation, now is a perfect time for company to take the advantage of the opportunities presented, said Sooksunt.
However, the company is facing a number of challenges. For starters, Vietnamese chicken producers are struggling due to their costs surpassing the per-kilo prices of their meat on the local market. Imported goods are being sold at just 60% of domestic prices.
And then there is the question of how to develop the most efficient means of output. “Unlike Vietnamese people, most Western people prefer breast meat, which leaves massive amounts of other chicken products to be exported to Asia including Vietnam,” explained Sooksunt. “It’s very important that we create public awareness and general understanding of where these products are derived from.”
Last year CP’s Vietnam operation experienced low revenue growth of 8% as a result of the global economic slump and its consequent impact on local purchasing power. The second-half of 2012 was particularly difficult because of an oversupply of animal products and rising raw material prices.
But Sooksunt is positive about the future. “I believe the worst has passed, and foreign investors are starting to come back. Macroeconomic stability is starting to pick up as we can see that now many people are regaining their confidence in the country,” he said. “Inflation is now under better control and political stability is always the government top’s priority.”