CPF digs into US market by acquiring frozen food producer

Chiang Mai – Buying a US company for 38 billion baht would make most Thai investors nervous.

But not the top brass at Charoen Pokphand Food (CPF) who seemed confident and composed by the announcement its largest acquisition to date has been completed at the weekend.

They are now proud owners of Minneapolis-based Bellisio, a frozen food producer with operations that stretches from the Mid-West to the West Coast, with outlets in California.

When asked by reporters in Chiang Mai why the optimism, CPF  President and CEO Adirek Sripratak narrowed it down to a few compelling reasons.

The US has the greatest capacity for growth in the developed markets. Thus it will benefit CPF by establishing a US center that meets its standards and can fulfill its ambitions to expand into North America.

Then there is the emergence of Donald Trump as the next US President.

The President-elect is seen as good for US business. Trump has single handedly renewed conviction among investors at home and abroad that America is one of the best places to put your cash to work.

More and more people in the US and global markets are embracing the belief that it is time to shake off caution to become more exposed to risk. Economists call this stoking “animal spirits”.

So, where is the proof?

The new reality has been amplified in the US the past month by the surge in stock prices, dollar strength and inflows of cash from abroad.

They say the language of business is understood by all players in the marketplace. It does not matter if you are a merchant in Beijing or Timbuktu. The language of interest rates, tax and dollar exchange is comprehended by all money changers, traders and bankers.

It is also about stock indices and commodity prices. It is about them coming together, and if the cocktail is potent enough, you get what investors pray for: a bull run.

As in alchemy, where a mixture can set off a chemical reaction, it is more scientific than mystic. It has legs to stand on.

So what came together with Trump’s victory?

Essentially his election promises of lowering taxation by streamlining to code for fairness benefits the USA.

To make America great again, he would do away with things that obstruct business, such as a high tax system that encouraged big companies to employ ways to avoid paying them but punishes small businesses that cannot afford expensive accountants and lawyers.

Every Thai businessman knows what Trump is saying and approve of what he is doing. CPF is urging the Thai government to reflect on these policies to stoke up the local economy.

By slashing it to 15% Trump will make America’s investment environment superior to that of Hong Kong and Singapore, says CPF chief Adirek.

He and his deputy Chief Operating Officer Pong Visedpaitoon are convinced this is a trigger that will fire up US growth.

But wait a minute, some critics say he is not president yet. And what are the chances these bills will get passed?

As to the first fear, unless he is struck down by sickness or an assassin’s bullet, Trump will be seated at the Oval Office in February.

If his enemies are foolish enough to exercise violence, his Voce President Mike Pence will most certainly carry out his directives with a vengeance.

As for passing the bills, with a Republican majority in both Houses, the Congress and Senate, resistance will be futile.

Unlike Barack Obama, Trump will be anything but lame duck President and it is unlikely that he will need to resort to evoking executive action, a dishonorable employment of political power.

In short, Thai and US businessmen, whether they work at CPF or on Wall Street, there is clarity about the language and even more importantly, greater clarity about what the future brings.

Low tax, high growth and wealth creation are good things for the market players and observers.

Another empirical evidence backing this view is how similarly world markets have reacted.

Shares have surged while bonds plunged in Europe and Asia.

Billions in cash now unlocked after years on the sidelines and in offshore accounts will make its way to be deployed in search of higher returns.

This “liquidity tsunami” to be unleashed will be fully felt when Trump takes his place at the White House.

To be sure, people outside the financial markets still find all these events of the past month rather bewildering.

After all Trump had staged a big upset. Hillary Clinton supporters had rioted in many towns.

Shouldn’t things tank? Shouldn’t there be a fallout?

As a bitter Humprey Bogart would say in “Casablanca”: “They don’t amount to a can of beans.”

But for bean counters, and CPF started as a small shop selling vegetable seeds in Bangkok’s Chinatown, everything has value.

The key is to locate it, free it and make it grow.

For the alchemists of business, this is all predictable: call it basic textbook economics.

It’s like mixing sulfur, charcoal and potassium nitrate with saltpeter. To chemistry-challenged minds, that’s just dirty black powder.

But to a gunsmith or bomb-makers, the mixture means “kaboom.”

That’s all you need to create a loud explosion.

This “gunpowder effect” is Trump’s New Year gift to the US and the world.

Even before taking office, he has set the stage for the next boom.

CPF understands this better than most. They live and die by reading the market signs correctly.

CPF is a leading producer, processor and exporter of meat in South-East Asia and a world leader in animal feed. A member of the DJSI, the company has operations in Belgium, Cambodia, China, India, Laos, Malaysia, the Philippines, Russia, Sri Lanka, Turkey, Taiwan, the United Kingdom and Vietnam. Tracing its roots to 1921 in Thailand, it’s annual turnover is about US$14 billon.

Adirek added that CPF was astounded by the wider profit margin exercised by US food firms when compared to its own in the Kingdom. “The cost of raw materials such as grains and meat in the US is far cheaper than in Asia,” he notes. “It is not just selling to the US, we could ship some US-made products for our Asian markets.”

Unavoidably CPF intends to introduce some Thai dishes through Bellisio. “Demand for Asian frozen food items should grow with a more affluent, more sophisticated American consumer market.”

Bellisio is one of America’s largest and fastest growing frozen food companies with a 26–year history of providing quality, innovative food tailored to consumer tastes and lifestyles.

Based in Minneapolis, Bellisio Foods produces more than 400 products spanning a wide variety of categories, including single and multi-serve entrees, snacks, side dishes, and specialty sauces.

Bellisio markets these products under its Michelina’s and Eat! brands, as well as under licensed brands Boston Market, Chili’s, EatingWell, and Atkins.

CAPTIONS:

Top: Charoen Pokphand Food at the weekend completed its US$1.07 acquisition of Bellisio Food Inc, a Minneapolis-based frozen food giant.

Inset: CPF President and CEO Adirek Sripratak is confident of increasing revenue and growth from the US investment, the largest for CPF.

Below: A Bellision worker cooks food at the modern facilty in Minneapolis, Minnesota. The largely Italian-food company will now add Asian dishes including Thai specialties as part of its menu in the coming years.

By Cimi Suchontan

 

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