TKN rejigs in the face of virus outbreak

TKN rejigs in the face of virus outbreak

Taokaenoi Land shops will be converted to a new concept focused on health and targeted at local customers. Somchai Poomlard
Taokaenoi Land shops will be converted to a new concept focused on health and targeted at local customers. Somchai Poomlard

SET-listed Taokaenoi Food & Marketing Plc (TKN), the maker of Tao Kae Noi seaweed snacks, is restructuring its business after receiving a heavy blow from the coronavirus outbreak.

Chief executive Itthipat Peeradechapan said the company is consolidating its two snack factories, moving the production facility in Nopphawong, Pathum Thani to Rojana Industrial Park in Ayutthaya, leaving the Nopphawong factory as a warehouse, logistics and research centre. The plan will be completed in the third quarter of 2020.

Once the factory's consolidation plan is complete, production capacity at Rojana Industrial Park will be increased to 6,000 tonnes a year from 3,550 tonnes now.

In 2019, total production capacity of the two factories stood at 8,250 tonnes, of which 3,550 tonnes was produced at the Rojana factory and 4,700 tonnes at the Nopphawong facility.

More automated machines will be installed at the factory to increase productivity and product quality.

The company plans to shutter 8-10 underperforming Taokaenoi Land branches in the first half to increase the company's cash flow. The remaining 4-5 souvenir shops will change their concept to health, focusing more on local customers instead of Chinese tourists.

Mr Itthipat said the company is developing a new team to handle online to balance the channel mix. It will also launch new products faster than the original plan. The marketing budget will be slashed, focusing only on activities that truly drive sales.

Taokaenoi also plans to increase its R&D budget for product development.

For overseas operations, the company is scheduled to expand sales of Taokaenoi products via branches of local distributors in the US to cover 125 branches from June, up from 30 now. Sales in the US are projected to reach US$5 million this year, up from last year's $3 million.

Taokaenoi said sales contracted by 3% in 2019 to 5.26 billion baht. Net profit shrank 20% to 366 million baht.

Of total sales, Thailand accounted for 40%, China 36% and international markets the remainder.

Domestic sales grew by 3% last year to 2.12 billion baht, boosted by the company's new products and two new Japanese restaurants in Bangkok.

Export sales contracted by 7% to 3.14 billion baht in 2019, mainly because of slowing sales in China, which contributed 61% of total export sales.

Moreover, the company changed its distributor in China, leading to a business hiccup last year.

Fierce competition in the US seaweed snack market caused Taokaenoi to shut down its production line in the US last year and hire subcontracted manufacturers instead.

Mr Itthipat said that if the virus outbreak is controlled in the first half of this year, the company feels confident that sales in 2020 will reach 5.3 billion baht, on a par with last year's level.

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