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Published on September 28, 2007

The production outsourcing will expand the company's major meat-based processed food products - fermented sausage, Vietnamese sausage, northern-style sausage and dried beef - to EU member countries and other potential markets, such as Australia, New Zealand and Canada.

The move will also help overcome the current problem of the baht's appreciation, which has negatively affected the company's export revenue.

"We cannot export these meat-based products directly from our factory in Thailand, because the country faces non-tariff barriers from Western trade communities, including EU members, which have banned meat-based processed foods from Thailand as a protective measure against foot-and-mouth disease," said CEO Charoen Rujirasopon.

"So we've to set up local production directly in the market by appointing a factory in Poland that has already achieved the necessary production standards to export to the EU and other Western markets that have non-tariff barriers with Thailand," he said. "Poland offers the benefit of cheap labour costs compared with other EU member countries, such as the Netherlands or Spain. Salaries in Poland don't run above Bt40,000 a month, only one-third those of other EU countries where the cost of unskilled labour is as high as Bt120,000 a month," said Charoen.

He said Poland was centrally located in Europe, which would benefit the company in terms of logistics management and transporting its products within the EU.

Charoen said the Polish factory would initially supply about 50 tonnes of meat-based processed food products a month and generate sales of Bt60 million in the first year. It will primarily serve more than a million Thais living in the EU, as well as other Asians and Westerners who prefer traditional Thai food.

Charoen said the foreign expansion would also help overcome the problem of the stronger baht that the company has faced in exporting its processed food products from Thailand. The company has suffered a currency deficit so far this year from exports of between Bt2 million and Bt3 million.

He said S Khonkaen Food Industry expected to achieve Bt770 million worth of sales this year, including exports, up 6 per cent from last year. Exports currently enjoy a 10-per-cent share of company sales.

The company's Samut Prakan factory has a current production capacity of 5,000 tonnes of processed foods a year and employs 700 people. Next year, the company will spend Bt30 million to Bt50 million on new machinery and a freezing room for the Samut Prakan facility.

"We also expect to expand our foreign business in the next three years, which will increase from 10 per cent of sales now to 40 per cent, including foreign production," he said.

For the domestic market, Charoen said the company would introduce new ready-to-heat products, such as mu daeng (Thai red pork) in next year's first quarter, in order to target a new generation of consumers demanding convenience in food preparation.

Kwanchai Rungfapaisarn

The Nation