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Published on February 6, 2008

Despite starting business with low investment, a local imported-pet-food company called Vet Recommended has found after 15 years that commitment is its greatest capital.

Vet Recommended is the exclusive distributor in Thailand of a US-made, world-class pet food called Hill's.

Moreover, it is one of Asia's leading distributors of the premium pet food, being ranked fourth in sales out of 10 targeted markets, behind Taiwan, South Korea and Hong Kong. It is expecting 20-per-cent sales growth this year, reaching Bt180 million.

Hill's Pet Nutrition, the pet-food arm of Colgate Palmolive, appointed Vet Recommended as its exclusive distributor in Thailand in 1992.

Tienchai Paitoonvongvira, the Thai company's managing director, recalls that the authorised-distributorship agreement between the two companies was signed after talks that lasted only a day and a night.

"Fortunately, I have a good partner who offered me very good conditions," Tienchai says. "Even my company's proposal to Hill's America was drawn by Rick Hawkin, Hill's former president for international business. The contract was assured."

As a veterinarian, Tienchai had worked on sales of animal medicines and products with a leading company for seven years after graduating from university in 1985.

He was instrumental in introducing Hill's to its first distributor in Thailand. But the business did not run smoothly, because the Thai distributor handled a range of animal products. Hill's wanted to find a new Thai partner, preferably a small company concentrating on pet food alone.

"Hill's wanted to have a company to help run its business 100 per cent," Tienchai says.

In 1992, Hawkin (Hill's former president) persuaded him to set up a Thai company to do business with the US manufacturer.

"After gathering some confidence, I spoke seriously with Hawkin every day about a business plan and what I should do to win the contract," he recalls.

At the outset, Vet Recommended had registered capital of only Bt2 million and a staff of four, including Tienchai. But Hill's decision to award the contract to the fledgling firm was based on expertise and commitment. It provided full support to Tienchai by purchasing all stock remaining in the hands of its former distributor.

Tienchai says he decided to set up his own business, because he foresaw its future potential. At the time, his wife had just opened a pet clinic, creating a synergy for Hill's new distributor.

"My wife became my first customer," Tienchai says.

Working with old customers, he soon increased Vet Recommended's sales.

In 1993, the company met Hill's target of selling 113,636 kilograms of pet food, worth Bt10 million. Last year, 15 years after its launch, Vet Recommended's sales reached Bt150 million. Now Tienchai plans to double sales within the next three years.

He says there are great opportunities in Thailand's pet market, which is valued at Bt5 billion a year with average annual growth of 10-15 per cent.

However, competitors have poured into the industry with low-end through to premium products, and there are now more than 100 brands. Only three - Hill's, Royal Canin and Iams - focus on premium-quality pet food.

Tienchai is particularly proud of a new innovative Hill's product called JD, which stands for "joint diet". It is a dietary pet food designed to combat joint degeneration in pets. Importantly, the packaging - printed and applied in the US - is in Thai.

"This shows Thailand is one of Hill's important markets," he says.

Despite the small size of his company, Tienchai learned to develop the business from on-the-job experience. Like many others, Vet Recommended was caught up in the 1997 financial crisis, and it faced an exchange loss of Bt5 million.

To cope, the company focused on its inventory, reduced its import volume, adopted a shorter credit line and reduced staff salaries.

Lately, the fluctuating baht and spiralling oil prices have led the company to use hedge management to reduce business risks.

"Each container of imported goods is hedged, and stockpiles have reached two times monthly sales," Tienchai says.

The company is currently planning a standard management-restructuring exercise, after which it will implement a monthly bonus and performance scheme to boost sales.

Tienchai also wants the government to revise feed-meal laws. At present, pet food is subject to the same tax rates and standards as feed meal. However, pet food and animal feed have different objectives, he says. Pet food focuses on animal health, while feed meal is aimed at a feed-conversion rate.

The restrictions created by the system have made it difficult for pet-food companies to increase their retail prices, he says.

Achara Pongvutitham

The Nation