Export Project - SUGARSUGARGroup 1 – MS15CMGMG557 Strategy and Global CompetitionCollege of Management Mahidol University

Instructor : Aj.Karuna Aksaravut

ContentsContents-Introduction-Opportunity for Thailand- Example : KSL Group-Five Forces Analysis-Market Target-Channel Selection-Costing-Pricing

Introduction

- Sugar as sweeteners commonly used widely in the food industry and drinks.

- Commercially produced from Sugar Cane, Sugar Palm, Coconut Palm, Sugar Maple and Beets.

- Cane vs Beat

- Sugar Production

- Global Sugar Production and Consumption

World sugar consumption (mm tons, source: Illovo Ltd)

World sugar production (mm tons, source: Illovo Ltd)

Top sugar exporters (mm tons, source: Illovo Ltd)

http://soberlook.com/2012/12/brazil-flooding-world-with-cheap-sugar.htmlhttp://www.mslimalicious.com/2012/04/white-raw-brown-sugar-what-are.html

- Global Sugar Production and Consumption

Foreign Agricultural Service, United States Department of Agriculture, November 2013

Global Production Is Estimated To Outpace Consumption Although at Lower Rate

- Global Sugar Production and Consumption

Foreign Agricultural Service, United States Department of Agriculture, November 2013

- Global Sugar Exporters

Foreign Agricultural Service, United States Department of Agriculture, November 2013

- Sugar Futures

Raw sugar - New york (“ICE”)

- Sugar Futures

White sugar - London (“Euronext”)

Opportunityfor Thailand

Sugar Industry …Sugar Industry …

Sugar Industry …Sugar Industry …-An important agricultural industry for the country.-Brown sugar organized in tariff line 1701, both import and export.

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Example : KSL Group

KSL Group-Standard : SQF 2000, ISO 9001:2000, HACCP

-Product : Raw Sugar, High Polarization Sugar, White

Sugar, Refined Sugar

-70% of revenue comes from the sale of sugar.

-Major customer is industries.

-The fourth largest sugar exporter of Thailand.

-Quota of sugar exports is 4.8 million bags in 2012.

Five Forces Analysis

1. Rivalry Among Current Competitors (Moderate force)- Competitors from the same country.- Competitors from other countries.

2. Bargaining Power of Suppliers (Weak force)- Production uncertainty, depending on the season.- Each company has a group of farmers who delivered cane by

agreement.

3. Bargaining Power of Customers (Strong force)- Imported from other countries, such as Brazil, Cuba, Indonesia.- Not import sugar for domestic consumption only. It is a hub of

import and export.

4. Threat of Substitute Products or Services (Weak force)- Health issues.- Property is not equivalent with natural sugar.- Almost demand come from industry.

5. Threat of New Entrance- Foreign investors see potential of business.

Market Target

Where is the potential market ?

Point to ConsumptionThe biggest Halal market.

Point to ProductionManufacturing base and big food industry.

Point to ConsumptionThe most consumption.

Market Target : China

Market Target : China- Ranked 4th of world sugar production. - Source of production concentrated in Shandong, Guangdong,

Guangxi and Hainan and Xinjiang.- Guangxi produces the most sugar, accounted for 67 percent.- Sugar output will increase in the first 2-3 years and decrease in next 2-3 years.- Domestic sugar prices higher than import prices.

Import- Consumption 12-15 million tonnes, Production 10-12 million tonnes per year.- Import quota for sugar trade around 1-2 million tonnes per year. (70 percent for enterprises)- Import tariff for internal quota is 15 percent and external is 50 percent.

Market Target : China

Industrial Consumption 70% Household consumption 30%

China : 9.6 Kg per year, per person(20 Kg within year 2020)

World : 18.6 Kg per year, per person

China's sugar imports from overseas.

Market Target : China

Total consumption and production of sugar in China.

Market Target : China

Market Target : ChinaTrade Liberalization- Normal Products- Sensitive Products - Highly Sensitive Products (Including sugar)

Market Target : China

TransportationTruck / Train / Freight ship / Container ship

Channel Selection

Distribution channelsIndustry / Modern Trade / Trader

Tops Ranking Of China's Biggest Chain Stores 2011

1. Bailian Group, 118 billion yuan2. Suning Appliances, 110 billion yuan3. Gome Electrical Appliances, 110 billion yuan4. China Resources Vanguard, 82.7 billion yuan5. RT-Mart International, 61.6 billion yuan 6. Chongqing General Trading Group, 47.8 billion yuan7. Carrefour China, 45.2 billion yuan8. Yum! Restaurants (China) Investment, 43.3 billion yuan9. Walmart China, 43 billion yuan10.Wumart Stores, 41.1 billion yuan

2011 Greenpeace Supermarket Ranking in China

1. Carrefour2. Auchan3. Shanghai City4. Chaoshifa5. Huapu6. Ito Beijing7. Walmart

8. Lianhua (Hualian, Century Mart)9. Wumart10. Nonggongshang11. Lotus12. Vanguard13. Aeon (North), Jusco (South), PARKnSHOP, Jingkelong, Rtmart, Suguo14. Ito Yokado, Chengdu, Tesco

Costing

CostingFactors

Types

Production CostTransportation Cost

Exporting Cost

CapacityLocationProcess

Production Time

Costs and Expense

Average sugar production cost is 2,315 baht / tonnes, with a standard deviation of 1,377 baht.

Freight Surcharge Basic-Weight Ton-Dimension Measurement

Freight shipping rates comparison

1.V (Ad Valorem Goods)2.Special freight

- Surcharge- Terminal Handling Charge : THC - Bunker Adjustment Factor : BAF - Currency Adjustment Factor : CAF- Congestion Surcharge - Bill of Lading Charge : B/L Charge - AMSC : Advance Manifest Security Charge

Pricing

PricingFactors

Types

Fixed PriceSeller’s Executable Order (S.E.O)

CostsSupply

DemandMarket

Pricing Methods

- Thailand – Fixed Price

- SEO (Seller Executable Order) to New York Futures Exchange (NYFE:NY#11) Pricing of raw sugar exports for Quota B (ข)

Sugar prices of domestic and import

China sugar (Wholesale price) 5,491 Yuan/tonnes

Raw sugar from Brazil (CIF) 4,329 Yuan/tonnes

Raw sugar from Thailand (CIF) 4,406 Yuan/tonnes

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