The factory, located in My Tho City, aims to reduce the business risk of its ventures in Thailand, where most of its raw materials such as sardines and mackerel are imported from Indonesia.

The new factory will supply canned fish to cater to the Vietnamese market and also export such products, including to Thailand.

Built with an investment of US$15 million (Bt500 million), the new factory will require at least 50 tonnes a day of sardines and mackerel. It has a production capacity of between 200 to 250 tonnes per day. Royal Foods owns a 90-per-cent stake in the factory, while the remaining 10 per cent is held by the company's dealer in Vietnam.

"We have faced a raw material shortage, particularly sardines and mackerel, over the past two years as almost 90 per cent of them have been imported from Indonesia," said Settha Udombanditkul, executive director for sales and marketing.

Settha, 38, is the youngest son of Suwat Udombanditkul, who together with his friends founded Royal Foods in 1973. Royal Foods expects to achieve sales revenue of Bt2.5 billion this year, up 10 per cent from 2006. About 10 per cent of its business is from exporting canned food to many markets in Europe, North and South America, Africa, Australia and Asia.

"We started looking for new sources for those raw materials two to three years ago and Vietnam was the appropriate location," Settha said, adding that after a couple years of feasibility study, the company started the construction of its factory in Vietnam last year. The factory will have a test run next month.

"Vietnam is a promising market with a population of more than 70 million. About 60 per cent of total production will cater to the domestic market in Vietnam and the rest will be exported, including back to Thailand," he said.

He said the company expected its Vietnam factory to achieve sales of Bt600 million in the first 12 months of operations.

Settha said the company had distributed its canned food to Vietnam for over 10 years through a local dealer. The company's flagship Three Lady Cooks brand currently has a 70-per-cent market share in Vietnam. The brand is also a huge success in Thailand, where it leads the market with a 60-per-cent share. Formed by five co-founders, Royal Foods has manufactured and distributed a large variety of canned foods and seasoning products for over 30 years.

The company has three major Thai factories. The ones in Samut Sakorn and Pattani produce canned fish, while the other in Chiang Mai produces canned mustard greenleaf and tomato sauce products.

"We have already purchased a five-rai land plot on Rama II Road, which will serve as our head office and distribution centre within the next five years," said Settha.

Kwanchai Rungfapaisarn

The Nation