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Investors Taste Success in Thailand’s “Kitchen of the World”

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Investors Taste Success in Thailand’s “Kitchen of the World”

 

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In 1970’s Thailand, Kraisorn Chansiri was doing business with a modest aim: to provide for his family. Instead, the struggling fish processing factory he acquired in 1977 grew to become a global seafood empire, Thai Union Group, the world’s largest producer of canned tuna and owner of such iconic international brands as Chicken of the Sea and John West.

 

Recalling that extraordinary four-decade growth story, Kraisorn’s son, company president Thiraphong Chansiri, credits much of Thai Union’s success to geographical location, a top-quality local workforce and supportive investment-focused government policies. “The opportunity was provided by Thailand,” he said in an interview.

 

Now, despite the COVID-19 pandemic ravaging international business, Thiraphong, who has an MBA from the University of San Francisco, predicts that Thailand’s resilient, innovation-focused food sector – backed by rich natural resources, government incentives and a reputation for quality and product safety -- will defy the global crisis and offer even more opportunities for investors. “It is the number one choice,” he says.

 

Early indications are that he is right. Thailand’s universal health care system has helped the country avoid the worst of the COVID-19 fallout, enabling factories to remain open and food supply chains intact. And even as economies around the world ground to a halt, international demand for Thai food products actually increased.

 

In May, Thailand’s agricultural and agro-industrial exports grew by 2.5 percent despite overall merchandise shipments falling due to severe disruptions in the global economy. Frozen and processed fruit and vegetable exports jumped by 83 percent. Thai Union, which supplies one in five cans of tuna sold in the world and has annual revenues exceeding $4 billion, saw its sales rise by 6 percent in the first quarter of 2020.

 

Overall, the proportion of food exports to total shipments from Thailand jumped from 16 to 22 percent – a level that will likely be sustained in a post-COVID world, according to Pimchanok Vonkorpon, director-general of the Commerce Ministry’s trade policy and strategy office. Thai Food exports to China grew even more disproportionately, with the large, pungent-smelling, much prized durian fruit outselling cars and electronics and helping overall shipments increase in value by 15 percent in May. “Food will undoubtedly be the star product of Thailand in the years to come,” Pimchanok says.

 

International consumers are, of course, no strangers to Thai food. Aromatic Thai curries, stir-fries and fiery tom yam soups are devoured hungrily in tens of thousands of restaurants around the globe. However, the kingdom’s critical role as a “kitchen of the world” is perhaps not so widely understood.

 

Lush and fertile with a population of almost 70 million, Thailand is one of the fortunate few countries that can produce far more food than it consumes – including the world’s most sought-after staple, rice.

 

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In a world that since the COVID-19 crisis has increasingly been concerned about food security, Thailand’s 10,000 food processing companies stand out as reliable suppliers of safe and plentiful food. Thailand is the world’s number 1 exporter of canned tuna, canned pineapple, sweet corn, coconut milk, cassava, and durian. It ranks 2nd in the world in rice and sugar and among the top 5 in chicken and shrimp. Although not a predominantly Muslim nation, it is the 9th largest exporter of halal products. It is also the 11th biggest global supplier of ready-to-eat meals.

 

Food industry revenues account for more than 20 percent of Thailand’s GDP and last year the value of food exports totalled $33 billion. Traceability of food from farm to processing plant is a given in Thailand. The government even has an app, tracethai.com, that uses blockchain to verify the authenticity of organic Thai rice. “Thailand is one of the world’s leading agricultural suppliers, primarily due to its well-developed food processing sector and global recognition for its quality control and standards,” the United States Department of Agriculture reported this year.

 

Multinational food giants certainly agree. Companies such as Nestle of Switzerland, Cargill, Kellogg and McCormick of the U.S. and Ajinomoto of Japan all have major investments in Southeast Asia’s second largest economy.

 

And increasingly, Thailand is becoming a hub and funding source for technology-focused food-tech entrepreneurs—so-called “agro-preneurs” -- from around the world. In 2016, leading Thai food companies including Thai Union, Bangkok-based multinational CP Group and leading local agribusiness Betagro teamed up with Thai government agencies and universities to launch Food Innopolis, a food-focused research, development and innovation hub within the Bangkok-based Thailand Science Park.

 

Then last year, Thai Union partnered with Thailand’s National Innovation Agency and Bangkok’s Mahidol University to establish Space-F, an incubator and accelerator that has attracted startups from the U.S., Canada, Germany, Norway, India and Singapore as well as Thailand. Betagro, liquor giant ThaiBev and international accounting firm Deloitte subsequently joined the Space-F partnership. Thai Union has also launched a $30 million venture capital fund, which last year invested in an Israeli startup, Flying Spark, which seeks to develop insect protein as a sustainable and nutritious alternative to animal farming.

 

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Food experts at Thai Union’s Global Innovation Center rely on consumer insights and science to develop new products and processes.

 

One catalyst for this food tech buzz is the government’s “Thailand 4.0” strategy to become the innovation hub of Asia. Befitting its status as kitchen of the world, high-tech food processing is one of the key industries the government has selected to promote. And Thailand Board of Investment is offering a suite of incentives to investors in this sector, including exemption of corporate income tax for up to 8 years and so-called smart visas that enable key employees and their families to stay in the country for up to four years without having to obtain a work permit.

 

Both Thai and international food companies applaud the BOI for the incentives and other support it has offered over the years. Just looking at the last year and a half, from January 2019 to June 2020, investors have filed 116 investment promotion applications for food processing and drinks manufacturing projects, representing a total value of 18.8 billion baht (ca. 600 million US dollars).

 

Ajinomoto, a 111-year-old Tokyo-based company with operations in 24 countries, opened its first factory outside of Japan in Thailand in 1960 with 90 employees to make monosodium glutamate and was the first foreign investor to receive government support. Today, Ajinomoto operates 11 factories in Thailand employing 7,000 and has branched out into the manufacture of instant noodles, amino acid-based products for athletes, canned coffee, processed and frozen food, including gyoza dumplings and karaage (Japanese fried chicken), and Thai seasoning products. It also operates an R&D facility, the Thai Food Technology Center, staffed by 100 Thai and Japanese technicians.

 

“Thailand has good factory workers with good skills and a very stable economy with government support,” says Hiroharu Motohashi, President of Ajinomoto Co. (Thailand). “It is rich in raw materials and we can find good quality resources at cheaper prices. That’s why we can accelerate our business development.”

 

Motohashi also points to Thailand’s location in the center of the ASEAN economic community, a trade grouping of 650 million consumers. “I can say that Thailand is the best candidate for investors,” he says.

 

Thai Union, which sells 42 percent of its seafood in the U.S. and 30 percent in Europe, has also had a decades-long history of backing from the BOI—including support for a Global Innovation Center the company launched in 2016 in Bangkok to develop new technologies. “The BOI has been one of the greatest investment support vehicles of Thailand,” Thai Union president Thiraphong says. “We believe in the future of Thailand and the future of the food industry in Thailand. We also believe in the opportunities in the world market and that’s why we are confident to make investments, especially in innovation and sustainability.”

 

Source: https://www.nationthailand.com/recommended/1002

 

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-- © Copyright The Nation Thailand 2020-09-23
 

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I agree with the negative comments about farmed shrimp & pesticides. But, look, this is a hopeful sign. We're not just slaves to tourism. This is no pie-in-the-sky article. Looks like Thailand can bounce back, same same but different.

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On 9/23/2020 at 4:56 AM, webfact said:

Thailand’s universal health care system

What universal health system is being talked about?  None of my Thai friends enjoy such a thing and they must pay for everything when they need to visit a doctor, buy medication or go into hospital for whatever reason.  Then if they die in hospital, the treatment, care, operations, hospitalisation fees, etc., must be all paid for before the carcass is released.

'nuf sed

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33 minutes ago, wotsdermatter said:

What universal health system is being talked about?  None of my Thai friends enjoy such a thing and they must pay for everything when they need to visit a doctor, buy medication or go into hospital for whatever reason.  Then if they die in hospital, the treatment, care, operations, hospitalisation fees, etc., must be all paid for before the carcass is released.

'nuf sed

I think deceased might be a better word than carcass, although I might also see how you are thinking. No slight on you intended.

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On 9/25/2020 at 3:05 PM, unblocktheplanet said:

I agree with the negative comments about farmed shrimp & pesticides. But, look, this is a hopeful sign. We're not just slaves to tourism. This is no pie-in-the-sky article. Looks like Thailand can bounce back, same same but different.

What's this "we're not slaves to tourism". Foreigners don't fit into that grand scheme of Thai success. If there is a bounce back, it won't be for any of the people here on Thai Visa or any other forigners for that matter unless you are connected in some way to the companies that make these products. Even then, you're not going to share in the spoils. 

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In 2015, Thai Union was embroiled in a slavery scandal after the publication of a report that documented forced labour conditions in the Thai fishing industry

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