Japanese majors step up focus on Thai food business

By RJ Whitehead

- Last updated on GMT

Related tags: Food, Southeast asia

Japanese majors step up focus on Thai food business
After a decade of rising profits on the back of Chinese demand for coal and iron ore, Japan's two biggest biggest trading companies are shifting focus to food as bulk commodity prices and demand continue to wane. 

This became more apparent when, the day after bitter rival Mitsui announced a significant sugar investment in Thailand, Mitsubishi also said it was looking at the country’s food industry, and planned to set up a shrimp seafood venture there.

Japan's biggest trader by market value, Mitsubishi agreed to set up a shrimp business in partnership with Thai Union Frozen by buying existing facilities on the coast of the South-east Asian nation and building new ones, the Tokyo-based company said in a statement. Mitsubishi will own 49% of the venture and the total project cost will cost JP¥3bn (US$36m).

Responding to demand

"This strategy will help Mitsubishi respond to increasing global demand for food products and to fulfill the role of providing a stable supply of resources​," the company said.

Mitsui, Japan's second-largest trader, relies on raw materials for more than 90% of its profit. But now it has said it plans to expand its non-commodity assets over the next couple of years to account for 30% of net income within six years from about 6% last year.

Japanese trading houses have looked to food in the last few years for new business growth, as well as stable returns during volatility in industrial commodity prices.

Mitsui announced it will buy 11.1% of Thailand's Khonburi Sugar, and its related company, Mitsui Sugar, will buy a further 5.6%. The purchases will cost the two Mitsui companies about THB1.15bn ($38 million). They will also provide the Thai producer with equipment and marketing support to expand.

Shifting focus

Mitsubishi last year invested in meat and livestock in China with Cofco Corp, entered the salmon fish-farming business in Chile and in 2012 added grain collection and coffee plantations in Brazil, as well as phosphate mines in Peru. The trader will make food one of its key areas, chief executive Ken Kobayashi said in Tokyo in April.

In the Thai venture, Mitsubishi is targeting annual capacity of 10,000 tonnes of shrimp, the company said. Total annual consumption of wild and farmed shrimp globally is about 6.5m tonnes, it said.

"The goal is to be well positioned to respond to imminent increases in global demand for shrimp products​," Mitsubishi said.

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