From Thailand, with love: Cargill’s poultry business expands in Southeast Asia
July 31, 2017
Thongchai Kaewreongrit and his wife Thitiporn live in a large, Roman-style home with two-story pillars out front. On a humid June night, floodlights illuminate the white structure and make it look quite grand.
Yet, they are a modest couple, walking barefoot as Thais do indoors, across the home’s white marble floors. He was a politician and she a court attorney when they met more than 15 years ago. The house was built by Thongchai’s parents, who started a small, local company called Song, which to this day distributes fresh chicken in Northern Thailand.
Song was the first customer of Cargill’s chicken business in Thailand, which began in 1990 as Sun Valley Thailand, later renamed Cargill Meats Thailand. After expanding protein operations to Indonesia and the Philippines, the business now operates as Cargill Protein Southeast Asia.
Tonight the Kaewreongrits are serving a simple dinner of salad greens, fish, pork and chicken to Somchai Glahan, domestic sales general manager for Cargill Protein Southeast Asia in Thailand. Even as Cargill’s poultry business has grown in the region— it has some of the biggest, most well-known companies in the world as customers and partners— it has continued to serve customers of all sizes and scale.
“We still have a lot of Thai customers who were once small and who have grown with us,” said Watcharapon Prasopkiatpoka, Cargill Protein Southeast Asia’s country director for Thailand.
While Cargill focuses on cooked chicken, the business was originally set up in Thailand to sell fresh chicken, with Song as customer No. 1. There are now many large, sophisticated poultry companies in Thailand, but Song has stayed with Cargill for a good deal of its fresh chicken needs for nearly three decades. That’s because, as the owners say, Cargill doesn’t favor the big at the expense of the small.
“Cargill gives opportunity to local businesses,” said Thongchai, who now runs the business with his wife. “It’s good for the community.”
Being welcomed into the community is important, especially for a business that started 27 years ago with 1,000 employees in Thailand and now has 13,500
, with more on the way in two other Southeast Asian countries.
New avenues for growth
Cargill’s poultry business in Thailand has been on a growth trajectory since the beginning, expanding steadily in the 1990s and 2000s. The company made the strategic decision to shift from an emphasis on fresh chicken to the higher-margin cooked products, and leveraged Cargill’s global expertise in food safety and quality to sell cooked chicken to premium markets in Japan and Europe.
As a result of these efforts, Cargill became the top Thai exporter of cooked poultry products. Today, 80 percent of the production in Thailand is shipped to Japan, Hong Kong, Europe and Canada – 28 countries in all.
“Export is the most prized piece of the Thai poultry economy,” said Hans Kabat, managing director of Cargill Protein Southeast Asia since 2016.
Yet, the business reached a critical turning point. As good as the Japanese and European markets were, they were mature. Everyone was competing for Japanese consumers. The European Union had import quotas. How would Cargill continue to grow?
Two years ago, the business identified emerging markets of Southeast Asia as the next growth opportunity. “We wanted to take the success of our Thailand business and build a truly regional business,” Kabat said.
Growth came in the form of two joint ventures in 2016. In the Philippines, Cargill partnered with Jollibee, a popular quick-serve restaurants throughout Asia, to build a poultry processing plant that will be operational later this year. In Indonesia, Cargill joined forces with So Good Food, a top retail brand of protein products in Indonesia, to produce cooked chicken. Indonesia was selected because it’s the world’s fourth-most populous country, and the market for cooked poultry is still small and with opportunities for growth.
“The JV approach to growing in Indonesia provides Cargill with entry into the fast-growing Indonesian market,” said Derek Schoonbaert, Cargill Protein Southeast Asia’s country director for Indonesia.
With Jollibee in the Philippines, Cargill is building a poultry processing facility that will employ 1,000 people. Jollibee’s signature product is fried chicken called Chicken Joy and so the joint venture is called C-Joy.
“C-Joy is growing every day,” said Paul Fullbright, Cargill Protein Southeast Asia’s country director for the Philippines. “We have been learning lots about how the poultry supply chain works in the Philippines.”
Thailand hasn’t been forgotten in the growth equation, with a $50 million investment in an additional cooked-chicken plant in Korat, which along with processing facilities in Saraburi are in Central Thailand. When completed in 2018, the new Korat plant will employ 1,000 and will be the fourth processing facility at the location.
With the expansion into Indonesia and the Philippines, what used to be called Cargill Meats Thailand was renamed Cargill Protein Southeast Asia.
“We set a bold, audacious goal two years ago to serve two billion meals by 2020,” Kabat said, noting that one chicken equals nine meals. “We are on track to meet that goal, and possibly even exceed it.”
Putting safety first
As the business has grown, it has maintained a strong emphasis on food safety and quality that sets it apart in a crowded marketplace.
In Thailand, the rigor around quality and food safety starts on Cargill’s breeder farms and goes through the finished product. There are 820 quality and food safety checks along the way.
At the microbiology lab in Saraburi, Manager Piyaporn Kalayasiri has a staff of 90 doing more than 1,000 tests a day for Salmonella, E. Coli, allergens, water and air quality, nutritional measures such as salt and protein, and other measures related to food safety and quality. The demands for safe food and quality products has grown immensely over the years. “When I started 23 years ago, we had 10 employees in the lab,” she said.
There are elaborate steps taken at the breeder farms, hatchery and broiler farms designed to prevent diseases such as avian influenza. At the broiler farms, where the birds are raised to their full weight, workers stay on site for six-week stretches to minimize movement on and off the farm. At multiple points within the facility, employees take showers and change clothes as they move between areas. Different colored boots are assigned for specific areas of each farm.
Much as it leveraged Cargill’s global capabilities on food safety to become Thailand’s leading exporter of cooked chicken, Cargill Protein Southeast Asia is applying those same approaches in the Philippines and Indonesia to build a competitive edge. The same goes for people safety.
“With almost 14,000 employees and growing, we can’t lose sight of our safety mission,” said Bancha Areepong, operations director for Cargill Protein Southeast Asia. As new employees come onboard across the region, Bancha says they will start off slow. While that may mean less productivity early on, it pays off later by preventing injuries.
“Before we learn to cut chicken, we learn how to come to work safely,” he said.
Regional business, local needs
While Cargill can replicate many best practices from Thailand across the region, some local considerations need to be made.
Wassana Phaphan, general manager of the R&D center in Saraburi, has a team of about 40 food scientists that are constantly dreaming up new products to meet customer needs. With the expansion into the Philippines and Indonesia, the team faced a new challenge. While consumers in Japan and Europe will pay a premium for quality products, the story is different in emerging economies.
The R&D staff is working on reformulating some products to be more affordable in the emerging economies, tapping into Cargill’s market research and consumer insights capabilities to ensure that the products they are developing will truly satisfy local needs.
Across the region, the team is united around the common goal of serving their customers and ultimately providing safe, high-quality protein products to Southeast Asian consumers. And as Cargill gains new poultry customers from around the world, it’s adamant that longtime partners like Song will continue to receive the same level of care and attention they always have.
“Even though we’re growing, we can still support local businesses,” said Glahan, the domestic sales general manager who dined with Song owners Thongchai and Thitiporn Kaewreongrit at their home that evening in June. “These local businesses are not transactional, and once they like you they stay with you. We help each other.”