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April 23, 2019


CP Foods raises investment, production capacity in Vietnam

 

Thailand's Charoen Pokphand Foods is tapping into opportunities pertaining to Vietnam's access to Trans-Pacific Partnership (TPP) nations by increasing its investment in the country, Nikkei Asian Review reported.


The company will invest more than US$200 million for the establishment of an export hub which will serve its poultry and pork businesses. According to Nikkei, the project represents a huge inflow into Vietnam, equal to more than 25% of the total invested by companies from Thailand between 2015 and 2017. CP Foods had so far put in a total of US$1 billion in the country following its entry into the Vietnamese market in 1993, Montri Suwanposri, CEO of CP Vietnam, a unit of CP Foods, said.


Currently, CP Foods hopes to be able to take advantage of Vietnam's favourable trading terms with other TPP countries. The company will use Vietnam as a hub for the export of chickens and shrimp, as well as the export of most of its processed meat to Japan, the Middle East, the EU and other countries.


The company intends to enlarge its Vietnam operations, which account for 15% of its total sales, by making further investments in meat-processing plants. Its completed chicken factory could potentially process one million chickens weekly. Total chicken production from CP Foods' Vietnam operations is still below its Thai unit, but the company plans to enhance capacity in the future.


In addition, the company is planning to increase shrimp exports with the support of the Vietnamese government. It is considering expanding its shrimp farming capacity in the country to 50 billion units a year from the current 12 billion. CP  Foods will also increase its annual production capacity of shrimp feed from 300,000 tonnes to 500,000 tonnes in 2019, said an executive in charge of fishery products at CP Vietnam.


Vietnam managed to ratify the TPP last year and economists were expecting that its exports could grow by 4%.


"CP Foods is to use Vietnam as a hub to export, to enjoy [free trade agreements], tax privileges and export quota," said an analyst at Bualuang Securities, a leading securities company in Thailand. "Thailand [a non-TPP state], for example, has an export quota for chickens to the EU. They can export more by using a quota from Vietnam, once they use up their quota from Thailand."


CP Foods' investment in Vietnam is part of a broader overseas expansion. It recently announced the acquisition of Canadian pork producer Hylife group holdings for CAD498 million (US$372.79 million). CP Foods will take 50.1% of the Canadian company, with Japanese partner Itochu holding the remainder.


- Nikkei Asian Review

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