OBG talks to Christopher Po, President and CEO, Century Pacific Group

Interview: Christopher Po

How can operators in the Philippines sustainably expand the tuna fisheries industry?

CHRISTOPHER PO: As the industry grows, sustainability will stand front and centre as a critical issue, especially as the global trend towards healthy living continues. Whereas demand for marine products has consistently grown, sustainability efforts are restricting supply; raw material prices have been increasing steadily over the last few years. If the industry does not self-regulate, we risk depleting resources, even if the Western Pacific remains the most fertile ground for tuna. As a result, a consortium of processors, fishing firms, regulators and governments – as well as regional regulators like the Western and Central Pacific Fishing Commission – have come together to ensure sustainability.

The first set of measures involves regulating the fishing capacity, which includes control over fishing licences issued and strict registration of vessels. The second is regulating fishing methods, including net mesh size and use of fish aggregating devices. These restrictions are vital, because juvenile fish do not stand a chance against the rapidly developing fishing technology. Identifying no-go zones where fishing is not allowed also enables nature to recover. The third is diversifying our choices to supply the market, such as developing mariculture.

How can policy incentivise manufacturing activity in the Philippines for consumer goods?

PO: We need to see how we compete with other countries in the same line of business such as Thailand, which is the largest processor of tuna in the world. For an industry player operating in Mindanao, our primary disadvantage would be on the power side, given recurring brownouts throughout 2012 that severely increase power costs, which are on average already up to 60% higher than those in Thailand.

A second concern is logistics, particularly given the island geography of the country. We also lack economies of scale, which lead cargo companies to offer our Thai competitors much more competitive rates – shipping prices from General Santos to the US are 20% to 30% more expensive than shipping from Bangkok to the US. In the case of domestic logistics, an example I can give is our mariculture farm in Mindanao. We find it expensive to serve the larger Luzon market. Unless we cluster to situate supply closer to the market, we can hardly be competitive. This is the challenge facing businesses in the countryside, especially in the Visayas and Mindanao.

In what specific ways can ASEAN economic liberalisation help access regional markets?

PO: From a business-building standpoint, the first few countries that joined ASEAN have already seen liberalisation and exhibit mature consumer food industries with strong existing players. This is the case for Thailand, Malaysia and Indonesia. The countries that offer opportunities are the new entrants – Cambodia, Laos and Myanmar. However, the principal challenges for these ventures would be the market education process. The strategy is adapting to what the local market wants, rather than just using the same format and template, especially in countries where preferences are traditionally not towards canned, ready-made foods.

Given the trajectory of the local economy, industrial players are looking for opportunities to expand domestically in the upcoming five years, whereas in the past they would look to grow abroad. Even from a risk and reward standpoint, local players minimise risks as they know the domestic market.

As the Philippines’ economic situation improves, people start moving up the income ladder, and as consumer behaviour changes, they will opt for products that are better and healthier, generating a multitude of opportunities locally. We see significant potential in the health and lifestyle platform, whereas, six to seven years ago, it was less relevant to the market. Ultimately, we hope to adapt as the consumer landscape changes, which is when opportunities arise.