From farm to table

From farm to table

Thai agribusiness group Betagro moving slowly but steadily to build a full-cycle operation in Cambodia, from livestock farming and feed to meat processing and sales.

Betagro operates an 850-million-baht feed mill that began production in Cambodia in April this year.
Betagro operates an 850-million-baht feed mill that began production in Cambodia in April this year.

While many companies are rushing to keep up with the fast pace of Cambodia's economy, Betagro Group prefers a "slow and steady" approach with an emphasis on preparing its people and studying the market in detail.

"We cannot jump. We have to walk with confidence and certainty," said Narongchai Srisantisaeng, the chief operating officer and executive vice-president of the Thai agribusiness and food group. "Betagro has enough money to invest. But we can't put in money alone. We also have to watch how the market grows and capture the right segments."

In Cambodia, he said, the company was studying the possibility of establishing the country's first standardised slaughterhouse to avoid the impact of price fluctuations in sales of live pigs. Prices of processed meat are more stable, and by becoming a processor Betagro would have a first-mover advantage in the segment ahead of competitors including Charoen Pokphand (CP), Thailand's largest agribusiness group.

Today Betagro's contracted and leased farms in Cambodia trade only live pigs, dealing with local wholesalers who later sell to merchants in fresh markets.

"We will not jump in terms of farming, but we will jump by increasing sales of animal products and how quickly we can turn live animals into consumable meat," Mr Narongchai said.

One reason for the strategic shift, he explained, was the growing demand for quality meat coming from the burgeoning middle-income population bolstered by the fast-growing Cambodian economy.

In Asean excluding Thailand, Betagro is involved in feed production for swine and poultry, and breeding of livestock, as well as trading of animal supplements and veterinary pharmaceutical products. Mr Narongchai said the company preferred to maintain its focus on neighbouring countries including Laos, Cambodia and Myanmar because of similarities in terms of culture and consumption behaviour, making it easier for a Thai company to do business.

The next country with potential to expand its feed products network is Indonesia because of the consumer base of 250 million, he said, adding that India and China were also interesting markets but the language barrier and logistics would be tremendous challenges.

"Most of our businesses still involve domestic Thailand and export activities. Business expansion to Asean countries is only a start," he said. "[In Asean excluding Thailand] there have been investments in farms and factories, but these have not begun to pay back yet."

The Betagro Shop convenience store in Phnom Penh is intended to showcase the Thai company's meat products to the growing number of middle-class urban consumers.

Asean economic integration allowing free flow of goods, he said, would help Thai products gain greater exposure in the regional market, while the prospect of products from neighbouring countries flooding into Thailand was not as great.

"I'm not worried. Apart from Singapore, no countries will be better off than Thailand when Asean [integration] begins, because our livestock farming quality is up to the global standard," Mr Narongchai told Asia Focus.

"Livestock businesses in the CLMV countries (Cambodia, Laos, Myanmar and Vietnam) are nowhere near the standard of ours," he said. "The Department of Livestock Development in Thailand is far more advanced and efficient with well-established rules and regulations."

In terms of human resources, he said, foreign workers from neighbouring countries would flow into Thailand for better-paid labour jobs, while on the other hand, highly skilled Thai workers in some professions would seek more lucrative opportunities elsewhere.

Betagro has been in the Cambodian market for eight years, starting from exporting animal feed from its home base in Thailand and then building a feed mill that began operating in April this year. As well, it has opened a Betagro Shop convenience store in Phnom Penh to showcase its meat products to urban consumers.

The Betagro Shop convenience store in Phnom Penh is intended to showcase the Thai company's meat products to the growing number of middle-class urban consumers.

Under its five-year roadmap, the Thai company is establishing another office and a shop in Siem Reap, and developing a livestock farm with a capacity of 2,000 head of swine. It currently has a farm in Kampong Chhnang, located 60 kilometres from Phnom Penh, with 1,500 head. Mr Narongchai said the company aimed to be raising 10,000 head of swine within three years, which would account for 12.5% of the country's total of 80,000.

"Since [the new plant] started running, sales have increased continuously," he said. "We aim to have more than 10 billion baht in sales in Cambodia, but that's many years away yet," he said, adding that the company might consider building another feed mill, in either Pailin or Battambang province.

Last year Betagro's sales in Cambodia were 700 million baht, compared with total group revenue of 86 billion baht. This year, it plans to achieve one billion baht in sales in Cambodia and 90 billion group-wide, reduced from an earlier target of 96 billion baht because of the slowing Thai economy.

The 850-million-baht plant currently has a monthly production capacity of 6,500 tonnes of animal feed. The company uses 1,000 tonnes for its own leased farms, and the remainder is sold commercially. The plant's capacity will increase to 12,000 tonnes a month by the end of 2016 and reach full capacity of 18,000 tonnes in 2017 when phase two is completed.

Betagro Cambodia has already halted most of its importing activities from Thailand, confident that an established reputation of eight years on the ground can help it to retain and build market share amid a rising number of competitors.

Sacks of animal feed are stacked at the 850-million-baht mill that Betagro opened in Cambodia in April this year.

Those new rivals include China's largest animal feed maker, New Hope Liuhe Co Ltd, which has made a commitment to major expansion in Asian markets. Also active are Vietnam's Greenfeed Co Ltd and a few minor local players, but Betagro's biggest local competitor is its Thai rival CP, which has a 30% share of the Cambodian market. The number of animal feed plants in the country has grown from three to 10 within only five years.

"From now on, political stability in Cambodia will be much conducive to investment," said Mr Narongchai. "Huge development is taking place with major help from Japan and Korea. Urbanisation will complement income growth, and there are still many gaps to be filled.

"Food businesses like ours will grow because when there is more consumption, we have to breed more livestock. I believe it's the right time for agro-industry to thrive."

Betagro Cambodia has a 100-year lease for its 23-rai site in the Phnom Penh Special Economic Zone, 20 kilometres from central Phnom Penh, where foreign companies can enjoy investment incentives such as 20% corporate tax, and full import and export duty exemption. The only operational cost that companies find burdensome is the high electricity tariff, around 30% more than in Thailand, at the equivalent of 19 US cents of 6.80 baht per unit (kilowatt/hour).

The Cambodian operation imports 35% of its raw materials including some veterinary pharmaceutical products made by Betagro subsidiary Better Pharma Co Ltd in Thailand. It also imports feed packaging bags from Vietnam because they are of higher quality and cost less than those from a Thai supplier.

The company markets its feed products under three brands -- Betagro, Bio-Lac and Balance -- to capture all market segments from high-standard to economy. Feed prices average 18,000 baht per tonne but also vary according to animal type and category.

Betagro has also introduced a modern trade concept, bringing its Betagro Shop outlets to Phnom Penh, but so far it has struggled to attract consumers and generate much revenue. The majority of its customers are in the food service industry, mainly hotels and restaurants, and they want to place wholesale orders.

The Betagro Shop sells all imported products from Thailand such as processed and chilled meat, so the prices are roughly 40% higher than in Thailand depending on exchange rate fluctuations.

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