The financial crisis has once more reaffirmed Betagro's international carefully planned strategy: expansion through partnerships. A fourth joint-venture in the international pig market has just been established and the company is confident that these developments will help Betagro continue to grow during the crisis.
By Vincent ter Beek
Japan, isn't that the world's biggest importer of pork? And isn't it also the country having one of the most stringent import regulations regarding the import quality of pork meat? The answer to both questions is 'yes'.
Despite the import regime, despite ongoing Foot-and-Mouth Disease (FMD) in Thailand and despite the global financial crisis, last March saw the conclusion of yet another Japanese-Thai joint-venture regarding pork exports. Thailand's second-largest agro-industrial business Betagro agreed to embark on a programme worth 172 million baht (€3.7 million) together with Itoham Foods and Ajinomoto “to manufacture processed meat products in Thailand, mainly for export and a smaller percentage for local distribution”. The plans include a target capacity of 3,400 tonnes/year and the construction of a new processing complex near the town of Lop Buri.
Positive experiences with previous Thai-Japanese joint-ventures preceded this last agreement. On earlier occasions, Ajinomoto, Sumitomo, Dainippon, Mitsubishi and Ootoya have been involved in agreements that both involved the company's top-end quality poultry and swine integrations.
Recent PRRS outbreaks in several Asian countries, among which China, once more indicate why the Japanese cannot rely on China only for (cheap) pork production, explains Dr Nopporn Vayuchote, executive vice president, group business development at Betagro Group. Together with Dr Kriengmas Punchai, senior vice president swine integration business at Betagro, he spoke to Pig Progress about Betagro's strategy. “The Japanese also need their own supplies in Thailand.”
Nopporn says: “When we talk about Betagro, we say we work on food safety and on quality products. We are the first company that announced traceability in Thailand, which was recognised by many government organisations. In addition, we introduced a 24/7 programme to emphasise quality control. If customers want to buy good pork, then they will buy Betagro pork.” This is Betagro's vision in a nutshell – a message that is only reinforced by the increasing and on-going Japanese confidence.
Betagro, founded in 1967, is a full-chain integrator from feed to meat. The company's structure is divided into five business operations: regional and feed business, swine integration, poultry integration, animal health business and other businesses. The pig integration business takes up approximately 7% of total revenue; the company takes care of its own breeding, growing, slaughtering, processing and – in Thailand – marketing. Fattening is often outsourced to contract growers. About 20% of the company's revenue comes from exports and overseas markets, the majority of that from Europe (50%), but the Asian markets are also waking up to Betagro's products, particularly Japan (45%).
The company has shown growth figures every year, but it is organic and careful growth, together with international partnerships, that lead the way, Nopporn explains. Investments abroad have not always yielded big successes, he says, mentioning unfortunate projects in China and Vietnam. “We don't have any plans to do any investments on the international market. We are looking for partnerships; we can also work together with a chicken business in Bangladesh. They want to know how the chicken market will develop, maybe Betagro can help.”
Human resources play an important role in the decision to go for partnerships instead of investments, Nopporn explains. “We don't have the people as it comes down to Betagro culture. Our experience tells us that we cannot do remote control management. We have learnt from that mistake. Instead, we will grow from inside.”
Right now, the company's only foreign activities can be found in neighbouring Laos and Cambodia, which are relatively close to the Thai market. Local offices there, set up in December 2008 after years of growth, provide assistance for 'border trade', in Lao and Cambodian language. In other countries in South East Asia, dealers are appointed for distribution of animal health products and farm equipment.
High quality for Thailand
One of the new projects that is doing reasonably well relates to the introduction of high hygiene pork for the Hong Kong market. Fully made and packed in Thailand, then shipped to Hong Kong and sold in the supermarkets to a niche market, it is thus not meant to be any competition to the cheaper backyard reared pork in China.
Betagro in figures, 2008
Net revenue: 45 billion baht (€960 million)
Year-on-year income growth: 30%
Forecast growth 2009: 22%
Swine business line growth: 49%
Number of sows: 50,000
Monthly production: 400 tonnes of processed pork products
Exports: 280 tonnes of pork
Exports to: EU (50%), Japan (45%), Canada, Singapore, Korea
• Betagro & Sumitomo Corporation: SPF swine breeding & slaughtering
• Betagro & Ajinomoto: SPF pork cooked processing
• Betagro & Dainippon Pharmaceutical & Sumitomo: producing
concentrated soup base
• Betagro & Itoham Foods & Ajinomoto: processed meat products
The focus for Thailand is much in the same direction, as about half of the high quality meat from the Sumitomo joint-venture (see box) is sold domestically. “The market in Thailand is less developed than the Japanese or the European market,” Nopporn explains. “There is a good demand, but no-one can supply – and this is an opportunity for Betagro. We introduced a premium product to the market; we try to explain to consumers about our products' safety in comparison to normal pork on the Thai market. Consumers in the high-end markets can accept that. They don't mind the price of the pork, but they want to know that the products they buy are safe.”
In order to meet the Japanese high quality market demands better, two years ago Betagro started a project together with several Thai universities to develop a new breed on a GGP level, with an emphasis on feed conversion and meat quality. A Landrace/Large White will be met with Durocs, which are especially appreciated in the Japanese kitchen. It will take another two to three years before the new breed can be fully used, Kriengmas estimates.
Official company-wide figures reveal optimism for 2009, with estimations being named between 14 and 22% growth. “Growth drivers are the fast expanding domestic market as a result of the company's focus on delivering more value-added products and growing numbers of new distribution channels, such as Betagro Shop,” a recent press release said on the future estimations for Betagro in the year to come.
Nopporn does not see any problem related to pork demand on the Thai market for now – and internationally, it's a matter of wait and see what 2009's second quarter will bring. But he's confident that the prudent international strategy will help Betagro pass these difficult times. “Normally, we have long-term orders. In addition, we work with reasonable companies like Ajinomoto. It won't be much of a problem,” he says. And let's not forget that pork is a commodity – not a luxury product. Nopporn: “That is our advantage… when a crisis comes, we are the last market to be affected.”
Betagro's SPF joint-venture with Sumitomo
In February 2004, one of the first international joint-ventures of Betagro was celebrated with the opening of the Betagro Safety Meatpacking (BSM) plant in Lop Buri, roughly 150 km north of Bangkok. This slaughter and primary processing plant is related to a network of Specific Pathogen Free (SPF) breeding and finishing technology, set up by Betagro and the Japanese company Sumitomo over ten years ago. This joint-venture was conceived to meet demands for high health products in Japan. Due to the prevalence of FMD, pork raised in Thailand has to be fully cooked prior to entering Japan.
SPF poses special requirements to pig production: grand parent sows are culled after one litter, an aim to raise pigs with a low disease pressure (free of e.g. FMD, CSF) and there can be no antibiotic use during production. Pigs are being trucked in from 600 pig farms in a 200 km radius around Lop Buri. Almost 60% of these farms raise pigs in according to the SPF way, the rest raises pigs as high hygiene pork. Each truck is fully documented and can be linked back to the farm. At the slaughterplant, there is a 100% inspection on several diseases, including atrophic rhinitis, Aujeszky's Disease, swine dysentery, toxoplasmosis and brucellosis.
The HACCP slaughter plant can handle 140 pigs/hour – and slaughters approximately 1,600 pigs/day. From the daily amount of pigs being trucked in, approximately 900 animals hail from SPF farms. After slaughter, meat from about 500 pigs is cooked and destined for the Japanese market, where meat is sold as Chashu, Sliced Chashu, Buta Kakuni, Kushi Katsu and Tonkatsu. Meat from another 400 pigs go to a nearby further processing plant for marketing and distribution on the Thai market. In Thailand, the meat is branded under the 'S-Pure' brand – healthy and health-conscious, aimed at the top-end of the market.
The further processing and marketing of the high hygiene products, both in Thailand and Japan, is coordinated in a separate joint venture with Ajinomoto Foods.
Source: Pig Progress Volume 25 nr 4