This interview is part of the Inside the Mind of the CEO series, which explores a wide range of critical decisions faced by chief executives around the world.
During his three decades as CEO of Thai Union, Thiraphong Chansiri has led the global seafood company through a notable turnaround. After weathering international criticism of Thailand’s fishing industry because of environmental and labor abuses, the company has doubled down on sustainability. Today, Thai Union is a member of the United Nations Global Compact and a founding member of the International Seafood Sustainability Foundation. Chansiri has also focused on expansion and diversification: founded in 1977 as a canned tuna processor and exporter, Thai Union purchased a minority stake in the popular global restaurant chain Red Lobster in 2016.
The 55-year-old Chansiri, who holds a degree in marketing from Thailand’s Assumption University and an MBA from the University of San Francisco in the US, is currently focused on extracting the most out of his main product, tuna, while staying true to his two-pronged objective: promoting “healthy living and healthy oceans.” He is leading the US$4 billion, publicly owned company to develop diverse, value-added products. Thai Union’s core businesses are built around tuna, shrimp, sardines, mackerel, salmon, pet food, and prepared foods, sold under international brand names such as Chicken of the Sea, John West, Petit Navire, and Parmentier, as well as leading local brands like Sealect, Fisho, Qfresh, and Monori. The company operates globally, with plants in more than a dozen countries spread across Europe, Asia, Africa, and North America, and has a global workforce of 44,000.
In a recent interview with strategy+business, Chansiri shared his growth outlook and approach to innovation, and explained how he plans to achieve his business and sustainability goals amid economic uncertainty.
S+B: What are some of the key challenges facing your business today?
CHANSIRI: The major risk we see in 2022 is inflation. The increase in costs has been huge. We are talking about a nearly 40% to 50% increase on some components of our costs, which is significant. We are now in the process of negotiating with customers to pass on such cost impact. Even if we can successfully pass on the costs, we expect that it might affect volume—that consumption may drop due to the high price.
We have also seen high workforce churn this year. In many markets, like the US, it’s very difficult to recruit people. In addition, we’re still facing logistical issues, including the shortage of containers, and we don’t see this situation improving in the near term. And we are keeping a close watch on geopolitical issues, such as trade conflicts.
S+B: How are these challenges affecting your approach to growth?
CHANSIRI: In terms of our overall strategy, we are taking a more cautious, wait-and-see approach until we have a clearer picture of the economy’s trajectory. The goal is to ensure a strong balance sheet and cash position. I personally feel negative about global economic growth prospects, given what we have seen so far in every country in which we operate. The weak global climate makes consumer spending a concern. I think 2022 is going to be a very challenging year and another big test for most companies, including ours. Moreover, business dynamics have changed, and I see a wave of consolidation leaving fewer players in the industry. Many businesses are dying, and many that have exited don’t even want to come back.
Looking ahead, Thai Union’s 2025 strategy is built around margin improvement. Our overall growth margin presently is around 16% to 17%. In the next couple of years, we want to move it to more than 20%. In terms of markets, our attention will be on Asia for growth, given that the US and Europe are already mature.
S+B: Are you concerned that as we return to normalcy and people start dining out more, the demand for shelf-stable products like canned and frozen food may ease, affecting your core business?
CHANSIRI: I’m not worried much about that. I think we’ve now seen a normalization in our ambient [shelf-stable] seafood business. At the same time, as things continue to reopen and people start to go out more, our investments in Red Lobster [a US-based chain with restaurants in North America, South America, Asia, and the Middle East] should be very profitable. We have well-diversified businesses with products that complement one another.
S+B: You mentioned your diversified business, which includes canned seafood, frozen and chilled seafood, and pet care, among others. Which will be areas of focus in the near term?
CHANSIRI: Although we have done quite well in the last two years supplying low-cost food to all consumers, for our core businesses—ambient and frozen seafood—we only expect perhaps 3% top-line growth next year across our mature markets like the US and Europe.
For our other businesses, we see more opportunity, more potential growth, and also higher margins. Pet care will be our highlight in the next few years. Because people have been at home more during the pandemic, they have had more time to spend with pets and want to feed them well. People are willing to pay high prices for their pet food, sometimes even higher than they pay for human food. Pets today are like children, and their food is comparable with baby food. We have seen our pet care business achieve double-digit growth during the pandemic. That’s one reason we are in the process of spinning off this business into a separate company, with plans to list it in the Thailand stock market in 2022.
Our shrimp feed business also has strong potential against the backdrop of rising health awareness among consumers. Shrimp feed fulfills the nutritional requirements of farmed shrimp, improves production, and ensures quality harvests, while enhancing profitability and reducing environmental harm. We spun off this unit and listed it on the Thailand Stock Exchange in October of 2021. Another investment that is crucial to our business is Red Lobster—we hold a minority stake in this restaurant chain, along with a consortium of investors. We want to improve its performance and, hopefully, list it in the US in the next four years.
We have established a new unit called “Ingredients,” linked to our core tuna product—for example, deriving oil, protein hydrolysate, collagen, and calcium from our tuna. Alternative protein is another business unit we established recently, which focuses on developing our business across all the possible alternative protein opportunities, from plant-based to fermented to cell-based. Today, we already have a range of plant-based seafood solutions available, among other vegan or vegetarian ready-to-eat meal options. We want to explore and continue along this path. Everybody wants to play in the alternative proteins space, and it’s too early to identify the winners and losers in this game. It’s going to take us a few more years, and then we will be able to evaluate [the landscape] better, but we believe this is an exciting opportunity where we have strong credentials to succeed.
All these businesses require technology, know-how, and capacity building. We continue to invest in automation, robotics, and artificial intelligence, to improve our supply chain with eyes firmly set on cost savings and productivity improvement.
S+B: How do seafood consumption trends tie into some of these innovation initiatives?
CHANSIRI: As a healthy and nutritious food option, especially against the backdrop of COVID-19, seafood is going to be an important part of people’s daily diet. I believe there’s good future growth potential for the industry.
But seafood is a broad category, with many different species and products. Also, we are not only competing within the seafood industry but also with all other protein sources. As a result, it’s pretty much like a commodities business. Our main products are tuna and shrimp, and the questions are: How can we add more value? How can we offer new products to the consumers? That’s where innovation comes into play. It’s very important for our survival.
Today, our products are not just ordinary seafood products, they are functional and life-stage products for different age groups. It cannot be one-size-fits-all anymore. For example, in the UK, we launched new products under our “vitality program.” We no longer just sell canned tuna there, but rather tuna with high calcium or collagen or extra DHA [a beneficial omega-3 fatty acid].
S+B: What role do collaborations play in your innovation strategy?
CHANSIRI: Acquisitions help capture new growth areas faster, and they have also been important for us to build scale. But today, we have achieved the scale we wanted, and it’s no longer our priority.
However, since certain areas of interest are new for us and outside of our core businesses, to make investments in these areas, we have entered into some collaborations or joint ventures. For example, the purpose of our joint venture with ThaiBev, one of the leading Asian beverage companies—which we announced in October 2020—was to collaborate on the development, production, and distribution of food and beverages that incorporate marine ingredients. ThaiBev is very strong in brand management and distribution, while we are strong in manufacturing and R&D. I believe our partnership can lead to new ways of working and innovative products in the market.
In January 2021, we announced a joint venture with the Thai biopharmaceutical company Interpharma to develop health and well-being supplement products in Thailand for distribution in hospitals. Then, in August, we invested 10% in the Australian ingredient company Clover to produce encapsulated DHA. We supply tuna oil in liquid form, and they use their patented technologies to convert it to dry form for usage as ingredients in health and dietary supplement products. Through our investment in this company, we can learn more and enter this new area.
We have been collaborating with Thai food supplier RBF since September 2021 on food flavors, which is part of our ingredients business. We see Thailand’s potential to be the regional leader in the food flavor and food color space, to optimize our agricultural products with more value add.
S+B: Another critical area of focus for Thai Union is sustainability. How did this journey begin?
CHANSIRI: Back in 2014, it was difficult to decide to start a sustainability journey, because it required significant resources—money, people, and time. Many of our competitors had not engaged in sustainability, and thus it became a premium that we had to justify to our customers. In 2015, Thailand’s seafood industry was criticized by various stakeholders, including NGOs and regulatory bodies, and received a “yellow card” warning from the EU because of illegal, unreported, and unregulated fishing. At this time, we recognized the need to formally articulate our sustainability vision, SeaChange 2020. SeaChange comprises four key pillars: responsible sourcing, safe and legal labor, responsible operations, and people and communities. Each pillar has its own goals and a supporting action plan.
The first few years were difficult, and we worked hard to convince customers and to justify why our products were more expensive. After a few years, other industry players followed, leveling the playing field in terms of costs. Of course, cost is still a challenge today. Everyone wants sustainability compliance, but consumers don’t really want to pay for it. But I see it as a license to operate. As a company, you have to do it; there’s no other option.
S+B: What are some of the sustainability initiatives you are working on?
CHANSIRI: Sustainability has been part of our business strategy since those days, and we have come a long way—and the sustainability standards today are higher than ever. We were ranked number one in the Dow Jones Sustainability Index [food products segment] in 2018 and 2019. We recently launched Blue Finance—a financing framework related to projects benefiting oceans—in Thailand and Japan, for which we saw strong demand. The interest rates of these sustainability-linked bonds are tied to a company’s key performance indicators and achievement of its sustainability performance targets.
Everyone wants sustainability compliance, but consumers don’t really want to pay for it. But I see it as a license to operate. As a company, you have to do it; there’s no other option.”
For responsible sourcing, it is important that we operate within the sustainable yield of any given fishery and avoid overfishing. Through our Tuna Commitment, we commit to source 100% of our branded tuna from fisheries that are either Marine Stewardship Council [MSC] certified or engaged in Fishery Improvement Projects to move them towards MSC certification. These programs ensure the long-term sustainability of fish stocks and keep the ecosystems healthy.
Recognizing traceability as the backbone of change, we are also championing new technologies. For example, in shrimp farming, we are working with blockchain to ensure full traceability of our seafood back to the point of origin. I don’t think we’re perfect yet when it comes to using this new technology, but we’ve made good progress.
Our vessel code of conduct addresses illegal fishing and labor practices across our entire supply chain. We work with our key suppliers to install mobile systems such as GPS, CCTV cameras, and WiFi to track where and how our boats operate, while allowing our fishing crews to stay connected to the mainland. In addition, we have internal and external third-party teams to audit the fishing vessels to ensure the working conditions are compliant with all rules and standards, and teams to support them in raising their standards.
When it comes to sustainability, you have to continue to improve, and I think most businesses today understand how important this is for everyone in the ecosystem. And of course, when countries talk about addressing climate change by 2050, this means that the journey is only just beginning.