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K&U Enterprise sees potential growth in E.U. An interview with president of the company, Tetsuo Matsumoto

December 17, 2007

K&U Enterprise was established in May, 2005 with registered capital of 120 million baht. The Union Frozen Products, who is a leading fishing company in Thailand with has 13 vessels, and Kyokuyo, the third largest seafood firm in Japan, each share 50% of total stock. Tetsuo Matsumoto, president of the company sees the company is approaching its annual sales of 1.5 billion baht this year and sets the next year`s target to 1.8 billion baht, as a result of surging demand in E.U.

Suisan Times: Will you explore new markets globally?

President: Tetsuo Matsumoto

Testuo Matsumoto: Our company is focused on value-added products, and as a result, 75 to 85 % of the products are for Japan exports. The North America, EU and Australia are other major markets.
 When we look at markets regionally, Japan faces undue competition and severe resistance from retailers. Therefore, it is unlikely we can raise prices although fuel and raw material prices are on the rise, which results in skinnier profits. All things considered, the makeup of Japan will shrink in the future.
 The U.S. exports are restrained thanks to the subprime mortgage crisis and weaker dollar to baht. Our business to supply frozen sushi to Walmart has ended. Instead, we are selling frozen sushi to a Canadian supermarket chain, Loblaws.
 We believe we can expect potential growth in E.U. Our main target is Germany, where demand is constantly increasing. If business there becomes active, we can automatically explore neighboring countries, such as Austria, Belgium and Switzerland. Kyokuyo`s newly opened office in Amsterdam will enable us to open up new business opportunities. We are working on developing new sushi items using tomato and cheese to draw new customers.
 We also consider India and the Middle East countries as new markets.

ST: What about Thai market?

TM: We are mainly selling chilled products in Thailand. Although volume is small, it is steadily growing and we are sure of boosting sales. On domestic market, products are marketed under Prantalay brand. Union Frozen Products`s subsidiary, Prantalay, is launching a new premium quality sushi brand "I LOVE SUSHI by Prantalay" aiming to penetrate high-end consumers.

ST: Approach to eco-labeled products seems to becoming more important to enter into new markets, especially EU.

TM: We have cleared IFS and BRC. IFS evaluates companies supplying retailer food branded products, including traceability from origin to table. BRC, British Retail Consortium, is known as the safest standards in U.K. and we are proud that our food safety and environmental management is strict and thorough. So far, we have never received requests of eco-labeled items.

ST: What`s the baht appreciation affecting your business?

TM: Our operation for the Japanese market has fallen 15% after August due to the impact of the rising baht. Currency fluctuation leaves shrimp farmers to take up the slack. Unalterably, it is causing harsh consequences.

ST: People say rising labor cost is eroding competitiveness against other Asian rivals.

TM: Thai`s technical capabilities can`t be simply compared to its labor cost. Our staff is 100% Thai and we doubt cheaper labor from Burma. If you judge comprehensively, including ambidexterity, royalty to company and religious matters, I believe gaining ground in Thailand was a wise decision. Kyokuyo and Union Frozen Products have long history of business relationship of 25 years and we have a foundation of sharing the same values.
 However, increasing labor cost causes serious concern. Minimum daily wage in Bangkok is 194 baht and will be up another three baht next year.
If left untreated, 100 workers quit and we hire another 100 on a monthly basis

ST: What do you think if you look back on the past year and a half after the company was established?

TM: I am amazed that we`ve made it this far. This is my honest feeling. The biggest challenge I faced is communication. I realized how it is difficult to convey significance of production management and technologies. It was also challenging to have Thai staff develop a deeper understanding of Japanese way of business and views.
 Our number one future task is to seek even safer food, though nothing bad has happened to us. The second step is strength of marketing to expand markets in Japan, the U.S. and EU. As a global company we would also like to put a focus on human resources development, as well.

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