Thai Union Frozen Products PCL

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Thai Union Frozen Products PCL

72/1 Moo 7 Sethakit 1 Road, Tambon Tarsrai, Amphur Muangsamutsakorn
Samutsakorn
74000
Thailand
Telephone: 66 34 816 500
Fax: 66 34 816 886
Web site: http://www.thaiuniongroup.com

Public Company
Incorporated: 1988
Employees: 5,140
Sales: THB 40.33 billion ($1.19 billion) (2004)
Stock Exchanges: Thailand
Ticker Symbol: TUF
NAIC: 311712 Fresh and Frozen Seafood Processing; 311711 Seafood Canning; 424420 Packaged Frozen Food Merchant Wholesalers; 424460 Fish and Seafood Merchant Wholesalers

Thai Union Frozen Products PCL (TUF) is one of the world's leading processors and producers of canned tuna, notably through its control of the Chicken of the Sea brand, and other canned and frozen fish products. Canned tuna makes up 46 percent of the Bangkok-based company's sales, and the United States is the group's biggest customer, representing 60 percent of the company's revenues. Exports dominate TUF's sales; more than 92 percent of revenues are produced overseas, including 13 percent from Japan. Frozen shrimp is TUF's other major product group, accounting for 21 percent of sales. The company also produces frozen cephalopod and other canned seafood, including canned pet food, for the export market. TUF produces a range of domestic brands as well, including the Fisho brand family of products. The company has targeted China for expansion in the mid-2000s. After establishing its own marketing subsidiaries, TUF acquired a 50 percent stake in local producer Century Union Foods in Shanghai in 2005. TUF is led by founder and Chairman Kraisorn Chansiri and his son, company President Thiraphong Chansiri. The company has been listed on the Thailand Stock Exchange since 1994.

Thai Fishmonger in the 1970s

Kraisorn Chansiri had already established himself as a leading fishmonger in Bangkok by the late 1970s. In 1977, however, Chansiri took a chance and acquired a failing tuna cannery in nearby Samutsakorn. Chansiri was soon joined by members of his family, including son Thiraphong.

The younger Thiraphong traveled to the United States, where he earned an M.B.A. from the University of San Francisco, before returning to Thailand and rejoining the family business. Together the Chansiris invested in developing technology enabling the processing of smaller fish of two kilos and less. In this way the company avoided direct competition with larger canneries in the United States and elsewhere, which tended to avoid this category of fish.

The Chansiris built a dedicated processing facility to house the new production process in 1988, at Mahachi, in the province of Slut Sakhon. The family then launched a new company for the cannery business, called Thai Union Frozen Foods (TUF).

The Chansiris proved fortunate in their timing. In the late 1980s, the larger American fish companies began seeking to shift their canning operations overseas, and especially to the lower-wage, developing markets. TUF's ability to process smaller tuna, coupled with the low wages in the Thai canning industry, placed the company in a strong competitive position. While the company continued to produce for the domestic market, notably through its own Fishy branded products, the United States quickly became the company's most important market.

TUF's expansion began in earnest in the early 1990s. In 1992, the company made a strategic investment by constructing a new and larger cold-storage facility. The company also sought out strategic partnerships, forming joint ventures with Mitsubishi Corporation and Hagoromo Foods corporations. These partnerships enabled the company to step up its product develop-ment, and especially to redevelop its production facilities to meet international standards.

At the same time, TUF began acquiring a number of businesses in Thailand in order to vertically integrate its operations. This effort gave the company operations spanning production of cans and other packaging, label printing, and public relations and marketing businesses. The company also boosted its range of food offerings, acquiring IFC Inter-Food Co., which distributed pies, and a stake in T-Holding Co., which owned the fast-food chain Calico, specialized in seafood. Another purchase, that of a 51 percent stake in a frozen shrimp packaging business in the south of Thailand, became known as Thai Union Seafood. That operation eventually became TUF's second largest product segment, after tuna canning.

TUF went public in 1994, listing its stock on the Thailand Stock Exchange. Soon after, Thiraphong Chansiri was appointed as the company's president, then just 30 years old. The younger Chansiri now became determined to expand the company into one of the world's largest seafood specialists. As Chansiri told Asiaweek: "We stick to what we're good at. We didn't go out and buy hotels, didn't branch out into telecommunications. We are in the seafood business."

The single-mindedness meant that the company's share price lingered below the radar as the international investment community sought out other, more visible stocks in the highflying Thai and Asian markets in the early and mid-1990s. Investors shunned TUF's more conservative approach. "Today it is the right approach, but a few years back we were the stupidest company in the market, you know," Chansiri told Asiaweek. "People asked why we did not borrow and expand."

TUF nearly gave into temptation, arranging a loan for $42 million. Yet in early 1997, Chansiri became concerned over the possibility of the devaluation of the Thai baht ahead of the looming Asia economic crisis, and did not go through with the loan. The decision to remain debt-free set the company apart when the Thai government went through with the devaluation of the baht, and the Thai economy crumbled. As many of the country's debt-laden, overly diversified companies collapsed, TUF emerged as one of Thailand's healthiest businesses. The company's long focus on the international market, which accounted for as much as 96 percent of sales, meant that its revenues came in as U.S. dollars, while its costs remained in baht. As Chansiri told Forbes: "The crisis proved we had the right approach to our business."

Canned Seafood Leader in the 2000s

In the meantime, TUF had continued its program of international expansion and its strategy of entering into partnerships. In 1996, the company moved into the U.S. canning market, forming Thai Union International Inc., which then formed a joint, $12 million purchase of Pan Pacific Fisheries. The following year, at the height of the Thai currency crisis, TUF's solid financial position enabled it to form a new joint venture, Tri-Union Seafoods, together with the Gann Family Trust, led by Edmund Gann, a noted tuna boat operator, and Tri-Marine International, a top raw tuna trader. Through that partnership, TUF acquired a 50 percent stake in another important U.S. seafood company, Van Camp Seafoods, owner of the Chicken of the Sea brand. For just $23 million, TUF now found itself among the leaders in the U.S. and international canned seafood markets.

Van Camp was founded in 1914 when the father-and-son team of Frank and Gilbert Van Camp purchased the California Tuna Canning Company, and then became the first in the United States to pack yellowfin tuna. By the 1930s, Van Camp had launched its own tuna fishing operations. The early 1950s, however, marked the company's breakthrough—the launch of the Chicken of the Sea brand. By 1956, Van Camp had opened canneries in San Diego and Terminal Island in California, and in Puerto Rico and American Samoa. In the 1960s, Van Camp became part of the Ralston Purina foods group. Acquired by an Indonesian company in 1988, Van Camp soon became majority owned by Prudential Life Insurance Company.

The Chicken of the Sea brand played a primary role in TUF's new goal of becoming a $1 billion company by 2005. A major step toward meeting this target came at the end of 2000 when the company paid its partners $38.5 million to buy the remaining 50 percent of the Chicken of the Sea brand. The addition of Chicken of the Sea gave TUF a solid U.S. base, and ownership of the country's second largest canned tuna brand. Under TUF's sole control, Chicken of the Sea immediately began its own expansion effort, buying CI Seafoods Inc., which controlled the Jonah, Pacific Pearl, and Perla Pacifica brands of canned seafood.

TUF moved to rationalize its growing U.S. operations in 2001. By then, the tuna fishing market had shifted its center to the Western Pacific. TUF followed that movement by shutting down its California cannery operations in order to step up production at its American Samoa plant. At the same time, TUF made its first effort to expand beyond seafood, launching production of canned chicken that year.

Company Perspectives:

Mission: Generate steady growth in revenues and net profit. Focus on improving and adding value to products. Build strong business foundation with global product presence. Maintain leadership position in seafood industry. Constantly monitor business risks in response to potentially adverse trading situations. Generate regular returns to shareholders. Support socially and environmentally beneficial activities. Equip workforce and personnel with necessary professional caliber and expertise in core business.

Nonetheless, seafood remained TUF's core market, while expansion of its international sales continued to play the central role in the company's growth strategy. In the United States, TUF profited from the economic slowdown and the depressed climate following the terrorist attacks on September 11, 200l. As Thiraphong Chansiri explained in Thai Press Reports: "Our tuna business generally becomes flat when the economy is in high-growth mode, as people opt for other foods. But whenever the global economy is in bad shape or grows slowly, our business thrives."

Yet Chansiri himself played the primary role in TUF's growth, leading the company on its continued acquisition program. In 2003, the company moved into second place in the packaged seafood market through its purchase of Empress International, a New York-based importer and distributor of frozen shrimp, shellfish, and other seafood.

At the same time, TUF began moves to enter a new market, that of mainland China. In 2003, the company set up its first marketing subsidiaries, in an effort to import its own brands into the Chinese market. When that effort failed to take off, however, TUF quickly changed course. Instead, in 2005, the company paid $4 million to acquire a 50 percent stake in Century Union (Shanghai) Foods Co. In this way, the company gained greater access to the Chinese market through Century's FMCG brand family of products.

By then, TUF had achieved its goal of topping the $1 billion mark, with sales of more than THB 40 billion ($1.19 billion) in 2004, and a forecast of more than THB 50 billion ($1.3 billion) by the end of 2005. Under Thirophong Chansiri, TUF had expanded to become one of the world's leading canned and frozen seafood companies.

Principal Subsidiaries

Century Union (Shanghai) Foods Co. (China); Chicken of the Sea International (U.S.A.); Empress International (U.S.A.); Thai Union Manufacturing Co,; Tri-Union Seafoods LLC (U.S.A.).

Principal Competitors

Antarktika Fishing Co.; Juraslicis A.S.; Mar Fishing Company Inc.; ENACA; Primlaks Nigeria Ltd.; Maruha Group Inc.; Unilever Deutschland GmbH; Mavesa S.A.; Mukorob Fishing Proprietary Ltd.; Nichirei Corporation; StarKist Foods, Inc.

Key Dates:

1977:: Kraisorn Chansiri buys a failing tuna cannery near Bangkok.
1988:: Chansiri is joined by his son Thirophong Chansiri, and develops technology to process small-sized tuna and opens a new cannery company, Thai Union Frozen Products.
1992:: The company expands its cold-storage capacity and launches partnerships with Mitsubishi, Hagoromo Foods, etc.
1994:: TUF goes public on the Thailand Stock Exchange.
1997:: TUF acquires 50 percent of Van Camp Seafoods and its Chicken of the Sea brand in the United States.
2000:: Full control of the Chicken of the Sea brand is acquired.
2001:: TUF closes its California cannery and shifts production to American Samoa.
2003:: The company launches a marketing subsidiary in China; Empress International in the United States is acquired.
2005:: Century Union (Shanghai) Foods in China is acquired.