Kaijae rice competes on quality
Premium rice packager Kaijae expects revenue growth of 10% to 2.2 billion baht this year, as competition in global rice markets stiffens with the rise of low-cost competitors and the government pushes for development of upmarket rice varieties.
Revenue in the rice segment of Chon Buri-based Soonthorntanyasap Co has increased steadily, from 40 million to 2 billion baht in the last 10 years, propelled by expansion into modern trade and foreign markets.
In that span, the company grew from 20 to 600 employees and diversified into real estate and snack production. Rice, however, still represents upwards of 90% of turnover.
The rice market in Thailand is worth about 200 billion baht, divided among more than 1,000 competitors. Kaijae holds a 10% market share in packaged rice and a 20% share of rice sold in modern trade establishments.
“The domestic rice market is a big cake, and there is still a lot of space to grow,” said Teerin Tanyawattanakul, managing director of Soonthorntanyasap, the maker of Kaijae rice. “Within 10 years we hope to break the 10-billion-baht revenue mark.”
The domestic market has morphed greatly since Kaijae was founded by Mr Teerin’s father 30 years ago. “There were few or no rice brands back then,” he said. “The acceptance of pre-packaged rice has grown steadily as consumers and restaurants started demanding high-quality, consistent grains.”
Today’s consumers, especially in urban areas, are abandoning 5kg and 10kg rice bags in favour of prepared rice at convenience stores and restaurants. In order to adapt to the trend, Kaijae is moving away from direct consumer sales and targeting restaurants and other preparedfood venues.
The domestic market still represents 80% of business, but the firm is attempting to increase exports with high-margin products like packaged pre-cooked rice, which is popular in Europe but not in Thailand, where ready-to-eat rice is readily available.
Domestic rice consumption is expected to reach an all-time high of 10 million tonnes this year, thanks to an influx of foreign workers and tourists. Rice exports hit a record 11.2-11.3 million tonnes in 2017, due to rising demand. Analysts, though, say exports will dip to 9.5 million tonnes this year, in part because of lower output of fragrant jasmine rice.
Like the domestic market, the export market has undergone dramatic changes in the last few years as Cambodia and Vietnam increased their production of low-cost rice.
“Cambodia has very good quality rice and it is cheaper than Thailand’s,” Mr Teerin said. “In markets like Europe, people may not be able to differentiate high-quality Thai rice from other products.”
Part of Kaijae’s strategy abroad focuses on expanding its rice catalogue, which now includes close to 400 varieties, up from four just 10 years ago.
Varieties like sticky rice allow Kaijae to carve a niche, instead of competing headto-head with lower-priced competitors on white rice.
“The rice business has low margins already,” Mr Teerin said. “I will not participate in a price war.”
Thailand recently launched the “Think Rice: Think Thailand” campaign, which aims to promote premium-grade rice over “commodity priced” grains.
“The government is setting more stringent quality standards for exporters,” Mr Teerin said. “Producers have to strike a balance between quality and price to succeed abroad.”