May 3, 2011

CPF eyes India, Vietnam, Russia, and the Philippines for expansion

Charoen Pokphand Foods (CPF) has identified India, Vietnam, Russia and the Philippines as its top priority markets for expansion in a five-year business plan.

India, Vietnam, and Russia have been selected based on factors such as potential growth in population, variety of consumption, low competitors, and lack of farming technology. "We plan to access the market where we believe we can win," said Adirek Sripratak, president and chief executive officer of the company.

The company's investment budget this year will be THB8 billion (US$267 million) to THB10 billion (US$333 million). Of that, 60% will be spent overseas, with heavy investment in the four countries mentioned. The aim is to increase overseas sales from 26% to 40% by 2015.

Adirek said CPF's investment policy abroad focused on markets where consumers bought a variety of meats, with high growth, low numbers of competitors and a lack of farm technology. For instance, India has great business opportunities, with a population of one billion and growing purchasing power due to its expanding economy.

In Vietnam, the company is expanding with many businesses including pig, chicken, fish and shrimp farms, feedmills, and shrimp hatcheries. The business in Russia focuses on pig farms, with the first two of 10 planned farms already running. The company also plans more investment in feedmills to serve the pig farms. The Philippines is a high-consumption market, where people consume meats including beef, pork, chicken, fish, and shrimp. Moreover, the population growth rate in The Philippines is high, at 2%, which is the key factor causing rising consumption.

The company reported that sales from overseas investments in its main markets reached THB16.44 billion (US$548 million) in Taiwan, THB15.76 billion (US$525 million) in Turkey, THB6.83 billion (US$228 million) in India, THB5.42 billion (US$181 million) in Malaysia, and a combined THB5.19 billion (US$173 million) in Russia, Laos, the Philippines and China.

CPF also sees business growth over the next 10 years boosted by accessing the African market. Tanzania and Kenya have great business opportunities now. Chicken farms and feed mills are expected to start operating within the next 6-12 months. Adirek added that the company has also invested US$10 million in South Africa to set up a chicken farm.

An analyst at DBS Vickers Securities (Thailand) said that the company expected meat prices to remain strong through the third quarter this year. It also expects CPF earnings to surge 66% in the first quarter this year (quarter-on-quarter) and 6% year-on-year to THB3.4 billion (US$113 million). This has been driven by higher meat product prices amid short supply and strong demand.

In the first quarter this year, average broiler prices surged 22% quarter-on-quarter and 8% year-on-year to THB48 (US$1.60) per kg. Swine prices edged up 10% quarter-on-quarter and were flat year-on-year at THB59 (US$1.97) per kg.