Mama noodles warns of capacity cutback
Bangkok Post: 26 Jan 2011
Mama warns of capacity cut, looks to neighboursThai President Foods Plc, the manufacturer of Mama instant noodles, is threatening to reduce its production capacity by half next week due to the growing shortage of palm oil.Pipat Paniengvate, the company's CEO, said the daily capacity of Mama instant noodles will be cut by half to only 3 million packages next week.
"The palm oil shortage is more serious than I expected. The problem is not only the high palm oil price but also a lack of palm nuts for refining. Some refining plants have been closed temporarily because they don't have palm nuts to refine," he said.
TF has ordered palm oil from seven factories, but they cannot deliver.
"If Mama noodles disappear from retail shelves in the near future, I want consumers to understand we aren't hoarding. I'm very worried about our brand image, which has been built over 38 years," Mr Pipat said.He urged the government solve the problem by classifying a quota of palm oil for consumer consumption (including industrial use) and bio-diesel production.
"No country in the world supports the free use of palm oil for energy production ahead of consumer consumption," he said. "Another measure is to allow manufacturers to freely import palm oil."
The government should also arrange quotas of soybeans, corn and maize to ensure sufficient supplies for consumer consumption before alternative energy production is considered, he said.
TF is now looking for a new strategy to reduce business risks. It may establish a new instant noodle factory in a neighbouring country, claiming it would take only a few weeks to set one up, but would not disclose which country it is considering.
"We've lost about 100 million baht per month from the higher palm oil and wheat flour prices. If this situation continues, the amount lost could be used to build a factory," Mr Pipat said.
Palm oil in Malaysia is priced at 37 baht per litre while in Indonesia, Japan and South Korea it is about 32 baht. The controlled price in Thailand is 47 baht.
A market analyst said the government should upgrade the country's technology to increase the yield at palm plantations, in addition to enhancing refinery production know-how.
To reduce logistics costs, the Commerce, Agriculture and Industry Ministries should work to find measures to move refineries near palm plantations.
Apichart Jongskul, secretary-general of the Office of Agricultural Economics, said food processors including instant noodle makers have requested the government import 50,000 more tonnes of palm oil, mainly for use in the food industry, because the 80,000 tonnes already ordered is not enough.
They said it was likely the first 30,000 tonnes of crude palm olein expected to reach the country this week would be insufficient for both public consumption and industrial uses, instead being used for retail.
Palm oil output fell to only 45,000 tonnes in December, far lower than earlier estimates of 80,000 tonnes.
"The government will consider larger imports to prevent any impact to the local palm industry," said Mr Apichart.
TF shares closed unchanged on the SET at 1,000 baht in trade worth 700,000 baht.
http://www.bangkokpost.com/business/economics/218200/mama-warns-of-capacity-cut-looks-to-neighbours --------------------------------------------------------
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