S. Khonkaen using Poland plant to expand sales in EU

S. Khonkaen Food Industry Plc, a major producer of Thai-style sausages and dried, shredded pork, plans to use a processing plant in Poland as a springboard to expand sales in the European Union in the face of increasingly tough food standards.

Charoen Rujirasopon, the SET-listed company's chief executive officer, said the move would also help the company reduce foreign-exchange risk.

He noted that the EU market was a challenging one because of non-tariff barriers related to food safety and sanitary standards, as well as concerns about foot-and-mouth disease.

The Thai company has hired Paruzel of Poland, the country's leading food processor, to produce all kinds of S. Khonkaen products for distribution in 16 EU markets as well as for export to other countries including Australia and New Zealand.

The company will pay 10 million baht to hire the Polish firm under an original equipment manufacturer (OEM) agreement for three years, while both firms will share in marketing costs.

''The products will be made at the Poland factory but the technology, know how, product quality inspection and marketing will be under the control of the S. Khonkaen team from Thailand,'' said Mr Charoen.

In the first stage, capacity of 50 tonnes per month will be dedicated to two brands: S. Khonkaen for sales to consumers in supermarkets by December, and Winner brand products sold to restaurants at prices about 15% cheaper than for other premium meat brands in Europe.

The company expects to gain about 60 million baht in sales from the Poland factory in the first year.

Mr Charoen said demand for Asian-style processed meat in the EU market was high among the roughly 10 million Asian people living there. The company will have competition in the market from Taiwanese and Vietnamese companies.

According to Mr Charoen, concern about foot-and-mouth disease has barred Thai manufacturer from exporting meat-related products to the EU.

He expressed confidence that the expansion would lift sales to international markets to 15% of revenues this year, up from 10% last year, and to 40% by 2010.Since the company's main consumers are aged above 40 years, he said the company planned to enlarge its market to appeal to younger consumer groups. It will introduce seafood snack products in November and ready-to-heat pork and barbecued meat in the first quarter of next year.

Sales of its processed pork and seafood products this year are expected to grow by 6% to 740 million baht, below the earlier expectation of 8%, as a result of declining consumption.

The company also plans to spend 30 million to 50 million baht next year on new machinery and a chilling room.

Share of S. Khonkaen (SORKON) closed yesterday on the Stock Exchange of Thailand at 14.70 baht, down 30 stang in trade worth 227,000 baht.

Source: bangkokpost.com