January 9, 2014

Thai Union Frozen Product to focus more on consumer goods

Thai Union Frozen Product PCL (TUF) has recently started to ramp up its systems and build teams, gearing to become a more globally integrated business and transforming from a food-processing company to a consumer-products company.

Faisal Sheikh, a former principal at consulting firm Booz & Company focusing on the consumer-goods sector, is one of the many new executives who joined TUF in past months as head of global strategy and corporate business development. He described the exceptional 50% drop in net profit registered during the first nine months of 2013 as a disappointment but not a surprise, since the firm had faced a "perfect storm" of a severe shrimp-disease crisis, highly volatile tuna prices and political crises in the Middle East, as well as a big loss at its pet food subsidiary in the US.

"This [how TUF recovered] is impressive in its own right. Surviving and recovering fast, our third-quarter results were up 180% compared with the second quarter, and the prospects for the final quarter continue to be strong," he said.

Sheikh attributed TUF's success to four major factors: customer-centricity; good business partners; expansion into new categories and value-added products; and its "smart" acquisition of brands and businesses, all of which were undertaken with good financial discipline.

At the global executives meeting, TUF drew up a strategic framework that comprises three major elements: continuing customer-centricity; being consumer-centric; and an "obsession with competition". Customers in this sense include retailers and traders, while consumers are the end-users.

An obsession with competition means TUF has to build up its capability to anticipate changes and stay ahead of its rivals, since market competition has become very intense. Category maturity in some key markets has translated into lower demand growth, leading to demanding retailers who put more pressure on their suppliers' profitability, he explained.

He said TUF was currently doing well on the "midstream" or the food-processing part of its business, thanks to its efficiency and ability to "mass-customise" its thousands of product items.

Meanwhile, the company has recognised the need to strengthen its "upstream" capability, and is therefore expanding its fishing fleets. On the "downstream" or marketing side, it currently sees no imminent need to buy more brands, preferring to leverage more from the ones it already owns, such as through expanding sales coverage beyond their traditional territories.

Beefing up innovation and new product development are also among the key ingredients of TUF's new drivers for growth, although it is not easy to innovate with tuna, Sheikh acknowledged.

Second, managing complexity has become a key challenge after the firm achieved phenomenal growth over the past couple of years, making it a large and complex organisation.

Third, global competition and the industry's consolidation amplify a need for TUF to find ways to stay ahead of the curve.

Fourth, solving the problems at its pet-food subsidiary US Pet Nutrition is still a challenge, although a turn-around plan is in place and progress is being monitored closely by headquarters, he said.

Meanwhile, early mortality syndrome (EMS), a shrimp disease that has been a major pull on TUF's profit this year - with the outbreak expected to halve Thailand's total shrimp output to about 250,000 tonnes - is no longer a big worry for the group.