(From Left) Mr. Dhanin Cheravanont, Chairman & CEO of the Charoen Pokphand Group. (From Right) H.E. Mr. Thongsing Thammavong, Prime Minister of Laos People's Democratic Republic.
Recently, Mr. Dhanin Chearavanont, Chairman & CEO of the Charoen Pokphand Group (CP) and executives hosted H.E. Mr. Thongsing Thammavong, Prime Minister of Laos People’s Democratic Republic and delegation during attendance of World Economic Forum held in Bangkok, Thailand to strengthen investment and trade ties between CP and Laos.
Dr. Sarasin Viraphol, Executive Vice President of CP, had stated that both Laos and CP discussed possibilities in developing the agricultural sector of Laos to modernize the nation’s farming capabilities for the upcoming ASEAN Economic Community in 2015.
In this event, CP had proposed the ‘4-in-1’ agricultural model that was utilized for the‘Modern Agricultural Village’ established in China as a solution with the ‘3-million Layer Chicken Project’ in the district of Pinggu, Beijing province PRC as an example. The ‘4-in-1’ agricultural model is a collaboration between four parties that consists of the Chinese government, Coop of Chinese farmers, banking institution of China and CP.
Mr. Dhanin expressed to Laos leadership that he views agricultural products as being like ‘oil from the ground’ and is more than comparable to petrol which very much pleased P.M. Thammavong and his delegation upon hearing this as Laos is an agro-based country with an aim to further develop and expand its agricultural sector to become the nation’s foundation for economic and social growth.
Executives from CP who received the Laos leadership delegation included Mr. Adirek Sripratak, CEO of Charoen Pokphand Foods PLC, Dr. Sarasin Viraphol, Executive Vice President of Charoen Pokphand Group, Mr. Sumeth Pinyosanit, CEO of CP Crop Integration (Corn business), Mr. Sakol Cheewakoset, Managing Director of C.P. Lao Co., Ltd., Mr. Thongkam Polthongmak, Assistant Managing Director of C.P. Lao Co., Ltd. andMr. Pakaphon Ngamlak, Executive Vice President of Charoen Pokphand Group.
The Laos delegation included 25 members that included the likes of Dr. Thongloun Sisoulit, Deputy P.M. & Foreign Affairs Minister of Laos, Mr. Sinlavong Khoutphaytoon, Head of the government Secretariat committee, Mr. Sommath Pholsena, Minister of Public Works and Transport, Mr. Somdy Douangdy, Minister of Planning and Investment, Mr. Phouphet Khamphounvong, Minister of Finance, Professor Dr Bosengkham Vongdara, Minister of Information, Culture and Tourism, Mr. Siaosavath Savengsuksa, Vice Minister of Industry and Trade, Dr Phouang Parisak Pravongviengkham, Vice-Minister of Agriculture and Forestry and Mr. Lee Boonkham, Ambassador of Laos to Thailand.
Since 2006, CP had invested in Laos under C.P. Laos Co., Ltd., that includes animal feed production facility, swine farms, fully integrated layer and broiler chicken farms, fish and fish processing facilities for the domestic and export markets. In addition, CP has invested in Laos the growing of corn for animal feed since 2002.
Forbes Asia's Businessman of The Year: Mr. Dhanin Chearavanont
Forbes Asia Magazine dated December 05, 2011
Dhanin Chearavanont turned Thailand's CP Group into a global food powerhouse that's raising rural incomes. Now he's building China's biggest megafarms.
To get rich is glorious. So is helping poor farmers. One man who has done both is Dhanin Chearavanont.
As chairman of Charoen Pokphand, Thailand's largest nonstate conglomerate, Dhanin leads a group that is the world's top maker of animal feed, the world's biggest shrimp farmer and one of the world's largest poultry producers. Modern farming, along with retailing and telecommunications, has made him the richest person in Thailand, with a fortune that FORBES ASIA puts at $7.4 billion.
During the past five years Dhanin has transformed CP from a disjointed collection of local commodity businesses into a branded, high-margin, global food company complete with its own supply chains and distribution channels. It profits from every step of bringing food to consumers' tables: with interests in hybrid seeds, livestock, animal nutrients, antibiotics and vaccines, poultry and pork, frozen cooked meals, retailing. It operates in 17 countries, including Taiwan, Vietnam, India, Sri Lanka, Russia and Turkey, and exports to some 40. "We want to be the kitchen of the world," says the 72-year-old Dhanin, who took over the business from his father in 1969.
This strategy--"from farm to fork," says Dhanin--has helped double the group's annual revenue to $30 billion in the last four years. CP expects revenue to reach $33 billion to $34 billion this year, and profits to exceed last year's $2 billion. And it has produced a golden egg for investors: Shares of the Thailand-listed core firm, CP Foods, were trading last month at ten times their price in November 2008.
It is in China, however, where Dhanin is leaving his most lasting mark. Now in the midst of spending $10 billion--including government funds--on building out food production in the world's hungriest market, CP's chief is changing Chinese lives and raising the bar for his own companies. In recognition, he is FORBES ASIA's 2011 Businessman of the Year.
Selling what is produced remains a vital part of the story. More than one-fifth of the business is its fast-growing stores. In Thailand CP operates the world's second-largest chain of 7-Eleven shops, more than 6,000, listed as CP ALL, as well as some 500 CP Mart fresh food stores. CP ALL broke into FORBES ASIA's list of the 50 best big companies in Asia this year. In China CP owns the 76 Lotus stores (including 45 listed in Hong Kong as CTEI), which are deluxe hypermarkets with many of the upscale features of department stores. Among recent additions to the stable: Shanghai's high-end Bazaar supermarket.
Synergies cut across borders and operations. The group's Thai telecom operator, True Corp., led by the youngest of Dhanin's three sons, Supachai, serves the food business: Talent recruited from True's cable TV channel appear on China's top-rated reality show, where they become CP brand ambassadors.
Dhanin entered China right at the beginning. To build a feed mill and poultry farm, he won "Foreign Investor Certificate No. 001" in 1979--just after Deng Xiaoping launched his economic reforms. Dozens more followed, and for decades CP ranked as China's biggest foreign investor. Today half of CP's sales are generated in China, and Dhanin is better known among Chinese than all but a few of China's own businessmen. A poll published in 2009 by Chinese Economic Weekly ranked Dhanin as China's fourth most important business leader and top among foreigners. In 2008 he was elected the first president of the Overseas Chinese Entrepreneurs Association, a group of 300 whose name he aims to put on a twin-tower high-rise set for Beijing.
Dhanin's renown gives CP an edge when local and national governments seek a partner. One plum opportunity was a prime retail site in Shanghai's Pudong district, where in 2001 the company opened the $500 million Superbrand Mall, then China's largest shopping center and today a money-spinner. Now it is planning a mall in Beijing that would be twice as big as its first mall.
Years of history in China put Dhanin in an optimum position when Beijing began overhauling its agricultural sector in 2005. The goal was to move to bigger and more efficient farms, and CP was quick to seize the new opportunities. The company is mobilizing more than $10 billion of bank credit, government support and its own funds to develop cutting-edge projects that will churn out vast quantities of eggs, poultry, pork and produce each year. These carefully laid plans will culminate in April with the opening of an automated egg factory near Beijing that will produce 840 million eggs a year. Later a $1.2 billion farm in Zhanjiang City, Guangdong Province, will begin raising 100 million broiler chickens and 1 million pigs a year. Other farms are under construction or planned in Zhejiang, Jilin, Xinjiang, Liaoning and Tianjin.
CP's new egg factory--with 3 million layer hens and 1 million breeder hens hatching chicks, served by an onsite feed mill ten stories tall--will be the largest of its type in Asia. The company claims that it will be the most advanced in the world. CP is developing its own systems to put the farm online so factors such as barn temperatures, feed formulas and air chemistry can be adjusted from anywhere in the world by smartphone or laptop. "When our chairman gives us instructions, it's not easy to meet his target," says Warat Srifa, a CP senior vice president who spent two years traveling the world to shop for the project's technology. "He's always thinking of the future way. If it's the current style, then he's not happy."
Dhanin says, "Asia's farmers are poor because they lack access to capital, modern know-how and markets." That's where CP comes in. He believes new agricultural methods that increase fertility, disease resistance and growth rates should be high-tech but easy for farmers to use. CP's systems enable a farmer who used to raise 300 broiler chickens at a time to now raise 400,000, with nine crops a year. Hog farmers once limited to raising 50 animals annually can now handle 1,000.
CP Group was founded in 1921 as Chia Tai, a shop selling seeds in Bangkok's Chinatown, by Dhanin's father, Ek Chor Chia, and uncle, both Teochiew speakers who had just emigrated from Guangdong Province. In 1946 the company was renamed Charoen Pokphand, which means "prosperity for consumers" in Thai. Over the next two decades CP branched out from seed into feed, farms and grain trading. It set up feed mills in Hong Kong, Taiwan and Malaysia. Of Ek Chor's four sons, Dhanin was youngest but had such a flair for business that he succeeded his father as chairman at age 30. He made his mark with farsighted decisions, like starting the shrimp farming business in 1991 that today is the largest in the industry.
But Dhanin's smartest move was entering China. During the decades of Mao Zedong's rule, the farm sector stagnated, so Deng's priority was agriculture. Part of Dhanin's sales pitch to Deng was his "Three Benefits" philosophy. "When we invest somewhere, we must benefit the nation and the people as well as the company," says Dhanin. Spreading the benefits is high-minded but also shrewd. As he puts it, "If we don't, then someday the government might just tell us to go home."
Today, as the Chinese government again ushers in epochal change in agriculture, CP is reprising its role as a preferred corporate partner. Deng reformed the rural sector by reversing Mao's collectivization, to let family farms and market incentives lead the way. That greatly increased farm output China's Changing Diet The average Chinese is consuming 40% more calories each day than at the dawn of the reform era and much more when it comes to these staples:
743% FRUIT
337% SEAFOOD
667% MILK
361% VEGETABLES
327% MEAT
and incomes, but in recent years the sector has developed much less rapidly than the urban economy based on manufacturing, construction and services.
Rural incomes now stand at less than one-third urban ones, and the gap has been widening. The low productivity of the country's tiny farms (1.6 acres on average) pressures farmers, middlemen and food processors to take shortcuts that chronically threaten the safety of the food supply. Inefficient farming wastes China's scarce supplies of water, arable land and energy, harms the environment and contributes to the rise in food prices. Rising meat consumption, meanwhile, increases demand. China's diners consume 70% of the world's pork.
So in 2005 Beijing began targeting various farm-sector problems. It abolished taxes on agriculture, which had been in place for 2,600 years, and encouraged the formation of farm cooperatives, of which there are now some 150,000, each typically grouping several dozen farms. In 2008 President Hu Jintao announced reforms aimed at doubling rural incomes by 2020, in part by allowing farmers to transfer land-use rights. That opened the way for a much larger corporate role in farming.
But, for now, too many farmers are working too little land for too little money. More than 50% of China's population-- or some 700 million people--are involved in farming, compared with 1% in the U.S. Streamlining is inevitable, says Xiangping Jia, agricultural economist at the Chinese Academy of Sciences. But too fast a leap into Americanstyle factory farming would throw tens of millions out of work, swamping overburdened cities with migrants. "There is no best way," says Jia. "There is only ever a second-best policy that is most suitable to the economy at a given stage." So how to make second-best better?
Dhanin has proposed some strategies. He agrees that fewer Chinese should farm in the future, but he believes that agriculture should be corporatized in ways that make the countryside richer. He says companies such as CP should help farmers own today's engines of agribusiness--information technology, robots, environmental protection gear, energy recovery systems and so on. And agribusinesses should guarantee payments so that farmers are protected from risks such as price fluctuations and disease. Big companies should deal directly with farmers so that middlemen don't erode farm incomes. "These are revolutionary concepts that will completely change farming," he says.
Dhanin backs this claim with success stories from Thailand, where starting 30 years ago he had CP experiment with a pig-farming project that turned landless villagers into farm owners with middleclass incomes (see box, p. 44).
Based on these experiences and years of working with Chinese farmers and officials, CP is building its model egg farm in Pinggu, a rural part of Beijing where villagers traditionally grow peaches but rely on government subsidies to get by. The huge facility features a glass-encased viewing corridor for visitors that protects birds from contagion. It comes with an egg museum set up by the project's main IT supplier, IBM. "We are not selling eggs but food safety, so when our customers come we can show them," says Warat, the CP official. Besides packaging fresh eggs, the farm will produce cooked foods. It will also make natural fertilizer from manure dried by technology that recovers the body heat generated by the chickens.
What's eye-opening is that CP and the local government will each own just 15% of the $113 million project. The majority share, 70%, will be held by 1,900 local families--6,000 people--who are part of a government-founded co-op grouping local land-rights holders and some 756 disabled individuals. Families, as co-op members, will receive a $3,500 annual income during the first 14 years, increasing to $9,500 a year thereafter. The 838 families with land rights also earn another $6,300 a year for every 0.16 acre they hold. The villagers will be owners, not workers, but they can earn more by taking jobs at the plant.
It's a good deal for CP, which is more interested in selling its branded food than in owning farms. The Pinggu project will give CP a steady supply at stable prices close to metropolitan markets. By situating the chick and layer farms, feed mill, and cooking and packing plants on one site, rather than scattered across a province, CP will save big on logistics. "That savings alone would pay for the project," says Dhanin. He sees building another nine such egg farms around China in the years to come, in addition to a variety of other very large, hightech integrated farms.
While CP Group includes seven listed companies, 57% of last year's revenue was from unlisted operations, many in China, such as poultry and swine farms, six large food-processing operations, Superbrand Mall, and many of the Lotus stores. But more and more of these businesses are being sold to the listed companies, often following an incubation stage or a revamp to make them profitable. It's unclear whether this restructuring will address perennial investor gripes about opacity. But that has not dissuaded a heavyweight such as the Carlyle Group, which in May spent $175 million on an 11% stake in CP Pokphand, the Hong Kong-listed operator of the China feed mills.
Dhanin's run of big successes over the past five years followed years of setbacks. In the 1997 collapse of Asian currencies the company was saddled with roughly $1 billion in foreign debt, weighing down its China retail ambitions. Skeptical of CP's financial viability, suppliers to Lotus stores stopped extending credit, and before the Superbrand Mall could launch, many big brands pulled out. Dhanin bit the bullet and sold CP's main hypermarket chain in Thailand, also called Lotus, to Tesco.
By 2003 the group was moving ahead just as bird flu struck. But that cloud had a silver lining. The company started producing value-added chicken products such as frozen quick meals for China's domestic market. Today CP specialties such as quick meals, premium Thai jasmine rice and fresh shrimp are bestsellers. "Before we just had the farm and feed businesses in China, no food," says Narong (Alex) Chearavanont, Dhanin's eldest son, a retail specialist who serves as executive vice chairman of Chia Tai, CP's name in China.
Dhanin's second-eldest son, Soopakij, also known as Chris, who is chairman of CP Lotus, describes his father as stoically determined to succeed: "All through the financial crisis I never heard him sigh. He just put his hand over the bullet hole to stop the blood and kept marching."
Off the battlefield Dhanin enjoys hobbies such as raising bantam chickens and racing pigeons. "But work is relaxing if you are not too serious," he says. "Then you can reach real happiness."
Additional Passage:
As CP Group rolls out a series of giant factory farms in China, it’s often using a template – poor villagers, loans financed with farming proceeds, the latest techniques for raising livestock, guaranteed prices, recycling – developed over the decades in Thailand. It began with a model pig-farming community set up in 1980 to benefit landless farmers in Chachoensao Province, bordering Bangkok. The company bought 500 acres and selected 50 families from a pool of 1,000 who had applied. Each family was given 9 acres, a house a barn, and was trained in how to raise piglets using CP feed and methods. The company provided breeder sows and guaranteed prices it would pay for piglets.
After ten years income from pig sales paid off the loan, and each family gained full ownership of its land and house, now worth roughly $180,000. Today families earn from $1,200 to $2,400 a month from pigs, and up to $300 more from other projects such as growing rubber trees, fruit, corn, chickens or flowers. Most have been able to send their children to college. “We make about two or three times as much as our relatives do growing crops like rice, says villager Jamrong Suchit.
At each farm, manure flows into a covered pond, used to control odor and to produce methane. This biogas powers a generator that handles 30% to 50% of the farm’s electricity needs. The co-op invested in a plant to make manure fertilizer for sale and has set up community amenities such as a tutoring service, computer center, library, sports facilities and a variety of savings and insurance schemes. Now the co-op, like CP before it, plans on starting its own model farm.
CP will own some of the mega farms in China. The biggest is under way outside Cixi City, Zhejiang Province, on 6,500 acres reclaimed from Hangzhou Bay. CP will initially invest $912 million in the project, which centers on greenhouse farming, rice paddies, an R&D center, agro-tourism, biogas electricity generation and even harvesting crocodiles. Produce will supply the nearby cities of Shanghai, Ningbo and Hangzhou.
When the complex starts operating in 2016 CP expects it to generate revenue of nearly $800 million a year and a 5% profit. It will have 3,000 employees, 1,800 of them permanent. Cixi City is investing $188 million and has spent nearly $1 billion on land reclamation and infrastructure in the area. “The government believes this project is needed to help keep Cixi people here,” says Yang Haiyong, a city official.
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