By pouring vast sums into China, Thai company Charoen Pokphand Group is suspected to forgo the Vietnamese market to concentrate on one with the biggest population.
|C.P. Vietnam is the largest husbandry group in the country |
Last week, top Thai conglomerate Charoen Pokphand Group (C.P. Group) just decided to pour billions into the pork business in China, spanning from breeding to food processing, in an attempt to combat a swine shortage caused by flooding and disease.
According to Nikkei Asian Review, Chia Tai Investment, an indirect subsidiary of C.P. Group’s food processing arm C.P. Foods, will buy 43 businesses encompassing breeding, farming, slaughtering, and food processing in a deal valued around 28 billion yuan ($4.1 billion).
Pork dishes are a regular fixture on Chinese dining tables. The country was the world’s largest swine market in 2019, valued at roughly $200 billion, but an epidemic of African swine fever and heavy flooding in Asia’s largest economy have caused a supply shortage.
C.P. Foods intends for the re-organisation to bolster Chia Tai Investment’s operations through access to the Chinese pork market. The 43 transferred businesses have facilities in 22 Chinese provinces with a combined annual farming capacity of 7.2 million hogs.
Chia Tai Investment already owns feed milling operations. Integrating it with these businesses would let the group “better address market changes, leverage the know-how across the value chain, and further expand its footprint in the future,” C.P. Foods said in a statement.
Chia Tai Investment faces the same vulnerability as its peers to the difficult pork market, but the group is banking on management know-how through its experience of livestock farming.
One year ago, C.P. Foods announced doubling (equal to $1 billion) of its investment in Vietnamese and Chinese plants, accelerating its pursuit of growth outside Thailand. The Thai company aims to lift annual sales to ฿800 billion ($26.13 billion) within five years from ฿555.5 billion ($18.15 billion) in 2018.
The company, which generated 72 per cent of sales in overseas markets last year, seeks to lift this to 75 per cent by 2024.
With their home market ageing, Thai companies are shifting investments in neighbouring emerging countries into higher gear. Of these, Vietnam is the third-biggest market for C.P. Foods after Thailand and China.
C.P. Vietnam – also a subsidiary – is the largest husbandry company in Vietnam. In 2019, due to the impact of African swine fever and the drop of pork price, its revenues for the first half of the year dropped by 23 per cent on-year.
However, across the whole of 2019, C.P. Vietnam gained VND65 trillion ($2.8 billion) in revenues, and VND6.3 trillion ($274 million) in after-tax profits.
China has always been a major market for C.P. Food, contributing 65.6 per cent in total revenues, while the remainder comes from Thailand and Vietnam.