Thai firms taking upgrades to Europe

• Mar 23, 2018

As Thai firms shift their focus to upmarket items, they are looking to invest heavily in Europe and North America, the largest markets for these products. 
Thai Union, Sea Value, Double A, Indorama Ventures and PTT Global Chemical (PTTGC) recently announced major investments in France, and the European continent more broadly. 
Gilles Garachon, France’s Ambassador to Thailand, said the two conglomerates may soon join the five SET-listed companies as major investors in France. 
The firms operate in a variety of industries (from food and beverage to petrochemicals), but they are all shifting to value-added products with wider margins that have strong demand in Europe and North America, but may not have a large customer base in Southeast Asia. 
The Thai seafood industry has shifted to quality rather than quantity, said Joerg Ayrie, chief financial officer of Thai Union. 
At 600,000 metric tonnes producer per year, Thailand used to be the largest shrimp producer in the world, before the onset of early mortality syndrome, which killed shrimp before they were harvested. Production has never recovered after the initial wave of the disease in 2013, reaching a maximum of 300,000 metric tonnes since. 
Players like India and Vietnam stepped up to fill the production void left by Thailand in the intervening years. 
Faced with competition in the lower end of the market, farmers are focusing on export-quality products rather than low-grade crops. 
“I am not sure getting back to 600,000 [metric tonnes] is the goal anymore,” he said. The products, which emphasise quality raw materials and production transparency, result in prices and margins that are 30% higher if farmers can obtain stamps of approval from international or independent quality standard organisations. 
There are few suppliers in this higher-end sector, which also means there is less price pressure, said Mr Ayrie. 
However, demand for this kind of product is driven primarily by Western markets. “You see a lot less of that in Asia, with the possible exception of Hong Kong and Singapore,” he said. 
“Chinese consumers are also moving in this direction. They are willing to pay for quality products, since the country has been beset by a number of food safety scandals.” 
The focus on food quality and traceability is part of larger trend to eliminate human rights abuses in the industry as well as genetically-modified organisms, and hazardous preservatives. 
Thai Union, for example, introduced tuna cans with QR codes that allow consumers to learn details such as where the product was caught, and at what time it was delivered to the airport. 
The can QR codes, already present in the UK and US, will be introduced in Thailand soon, said the executive. 
The company also acquired 49% of American seafood restaurant chain Red Lobster in 2015 for US$575 million (17.9 billion baht). 
Sea Value Plc, another large Thai tuna producer, set up its first factory outside of Asia by acquiring ailing French firm Atlantic Gourmet in 2015, and investing €2 million (76.8 million baht) to expand its production capacity. SET-listed paper producer Double A has been selling in Europe for more than 20 years, but only set up a factory there 2013. 
The factory allows the firm to be competitive against European producers after years of dealing with high logistics and inventory costs, and react to the market more quickly. 
Transporting paper from Thailand to Europe used to take an average of 45 days, said Phichej Wangtherdkiat, director of the business strategies and planning. 
The company will invest in a large project in Europe in the near future, but Mr Phichej declined to disclose more details. 
Other SET-listed firms with important investments in France include PTT subsidiary PTTGC, and petrochemical producer Indorama. 
PTTGC purchased an 85% stake in French chemical maker Vencorex. 
Indorama purchased DuraFiber Technologies’ Mexican operations in October of last year, after the North Carolina-based company filed for bankruptcy. 
Indorama also agreed to acquire the French operations of the company, subject to regulatory approval. The acquisition will help the company shift a larger portion of its turnover to high value-added products, and serve as a platform to extend the brand’s market share in the rest of North America and Europe. 
Mr Garachon said investment in recent months has been driven by the business-friendly policies of President Emmanuel Macron, who has lowered taxes and unemployment. France is already the Thailand’s seventh-largest partner in terms of foreign direct investment. 
“In Paris, you can open a bank account in a tobacco shop, and in less time than it would take you to smoke a cigarette,” said Charle Charoenphan, head of SCB’s Digital Ventures’s accelerator and co-founder of co-working space Hubba. Thai agro-industry already has a sizeable footprint on the continent, but there is still large opportunities for small businesses and Thai hospitality firms, already a “powerhouse” in the region, said Mr Garachon. 
Bilateral trade between France and Thailand topped $5 billion last year. 
“It is reasonable to expect investment from Thai firms in France to increase 10% this year, but there is room for a 20-25% increase,” he said. 
“Before companies in Laos or Cambodia bypassed their neighbours and looked at Singapore to raise billions of dollars. Thailand now has the liquidity and investors to provide that kind of financing,” said Fabrice Lombardo, chairman of boutique investment bank Gereje. 
Among the more interesting offers in the market is a developer that produces homes out of recycled materials (which retail for $20 million), and a company that develops electric motors for boats, with sales of $8 million per year, Gereje said. 

Source: https://www.bangkokpost.com/business/news/1433622/thai-firms-taking-upgrades-to-europe