Thai Union/Chicken Of The Sea Plans To Double $1 Billion Sales ff

Thai Union Frozen Products, owner of the Chicken of the Sea canned tuna brand, took 27 years to reach the $1 billion sales mark. The company's president, Thiraphong Chansiri, says he can double that in the next five years.

Sales at the world's No.2 tuna canner after Del Monte Foods/StarKist/Heinz tuna surged 17 percent to 40 billion baht, or $1 billion, in 2003, a target Thiraphong did not expect the Bangkok-based company to meet until 2005. To reach his next milestone, Thiraphong, 39, plans to buy rivals and sell new products.

“New business means mergers and acquisitions,” he said, without elaborating on potential acquisition targets or the timing of purchases. “We have a clear direction.”

Thai Union faces growing competition for space on U.S. supermarket shelves as rivals such as Del Monte and Bumble Bee Holdings combine. To keep pace with them, Thai Union needs to add to the $170 million of acquisitions it has made in the past seven years, said Chanpen Sirithanarattanakul, analyst at DBS Vickers Securities (Thailand).

“The company already sells in most parts of the world,” said Chanpen. “To boost sales, it has to acquire other companies.”

Thai Union's 2003 profit rose 47 percent to 2.27 billion baht. That pace may be hard to match this year as rising prices for raw tuna narrow profit margins and U.S. shrimp producers move to block imports from Thailand, Thiraphong said. Thai Union gets more than half its sales from tuna and 10 percent from shrimp.

Fourth-quarter profit slid 60 percent as tuna prices rose. On Wednesday, the company's stock fell 7.2 percent to 23.9 baht, the biggest decline in two months. Shares at the company - which bought Chicken of the Sea from Van Camps Seafood for $97 million in 1997 and acquired Empress International, a U.S. frozen-fish brand, for $24.5 million last year - have fallen 23 percent so far this year after rising 46 percent in 2003.

Bigger rivals also threaten Thai Union's sales in the United States, which account for 55 percent of the company's total. Chicken of the Sea is the No.3 canned-seafood brand in the United States, with a 12 percent share. Del Monte's Star-Kist is No.1 with 27 percent, while Bumble Bee ranks second with a 20 percent share, according to the market researcher Information Resources in Chicago.

Competitors have expanded. The San Francisco-based Del Monte bought the Star-Kist, College Inn, 9-Lives and Kibbles 'n Bits brands from H.J. Heinz in December 2002 for about $2.9 billion. Del Monte's sales were $2.17 billion for the year that ended April 27, 2003.

Connors Brothers Income Fund, the world's largest producer of canned sardines, said last month that it planned to buy the closely held Bumble Bee for $385 million to cut costs and expand its product range.

Connors Brothers, based in New Brunswick, Canada, said it aimed to save as much as $8 million a year by streamlining the tuna canner's seafood buying, marketing and distribution operations. The company said that combining its Brunswick sardines with Bumble Bee and Clover Leaf tuna and salmon would help it win supermarket shelf space from brands including Chicken of the Sea and Star-Kist.

“The competition in the U.S. will intensify,” said Chalinee Congmuang, an analyst at KGI Securities (Thailand).

Thiraphong said Thai Union needed to grow to compete with Bumble Bee and Del Monte. At the same time, he said, the company would be “careful” to avoid taking on too much debt as it expands. Thai Union has no bonds outstanding and has about 6 billion baht in borrowings from banks and other sources, according to a March 1 filing to the Thai stock exchange.

“The size of the investment must not be too large for the company to digest,” said Thiraphong. “The tuna business in developed countries is owned by giants who are financially stronger. To compete with those guys, you have to be careful.”

New products are also key to Thai Union's expansion, Thiraphong said. The company introduced vacuum-sealed bags of tuna and frozen cooked shrimp, oysters and other seafood in pouches this year and is spending $15 million to promote the new products.

A bird-flu outbreak that has killed seven people in Thailand this year - prompting Japan and the European Union to ban Thai chicken imports - has raised Thai Union's sales in Japan, its No.2 market, Thiraphong said. He declined to give sales figures for Japan, which resumed imports of some Thai chicken this week.

The company plans to spend 600 million baht to increase capacity at its Thai tuna-processing plant by 30 percent this year, Thiraphong said. Thai Union now produces 800 tons of tuna a day in Thailand and 350 tons a day in American Samoa, he said.

Rising raw tuna prices threaten profit growth this year. The price of tuna from the Indian Ocean, the source of most of the company's fish, surged to above $800 per ton late last year from about $500 in May as rough weather reduced catches, compared with $650 per ton for tuna caught in the Pacific, Thiraphong said.