Below is the transcript of a CNBC Exclusive interview with Suphachai Chearavanont, CEO, Charoen Pokphand Group. The interview played out in CNBC's latest episode of Managing Asia on 14 August 2020, 5.30PM SG/HK (in APAC). If you choose to use anything, please attribute to CNBC and Christine Tan.
Christine Tan (CT): As one of Thailand's oldest and biggest conglomerates, you and your family have been through many political and economic crises. How would you describe the current pandemic and its impact?
Suphachai Chearavanont (SC): Well, this crisis is something we have never seen before. Even though I have passed through this Asia Financial Crisis, but the recovery was sort of like a V-shape because the Thai baht at the time was so weak, so exports became the driving engine behind the economic recovery. This time in the case of Thailand, its impact is on one of the really big industries which is tourism. It actually has impact throughout all the industries. So, I think for Thailand, we will recover just a little bit slower because of the tourism industry, together with the world recovery. But for many countries around Thailand, they may experience some V-shaped (recovery). We believe that China, for example, will probably have a V-shaped recovery, hopefully without too much conflict between U.S. and China. But in ASEAN countries, a lot of them should also have a fast recovery because they are not tourism dependent.
CT: Did you and your and your family ever expect the pandemic to be so? Were you prepared for it?
SC: It really caught us all off guard, but it has become a great teacher. I think crisis always comes with great learning and opportunity. We learned so much from this crisis. A lot of the market behavior has shifted and changed. The digitalization of the new economy has been accelerated. Not only in the business world but in education. It is fast tracking and teaching everyone to really leverage on this digital connectivity. Maybe we can address the problems or the economy much better and also learn from each other much better than before.
CT: C.P. Group is well known for as a global agribusiness but closer to home in Thailand where you are, you also run a chain of 7-11 stores. You are also one of the country's leading telecom operators. As one of the country's wealthiest, tell us about the slew of measures you put in place to help the country right through this pandemic?
SC: It's a five-step strategy. First, definitely, we are talking about protecting and controlling. We have to protect our employees from COVID, including job security. So, including their families. If members of the family are out of job, we actually help them with more food - coupons, necessities including education funds for the children. So, C.P. Group has over 400,000 employees across 20 countries. We actually implement the same policies across the whole group. Second thing is the business continuity. Our food supply, retail and distribution are key infrastructure for people to access necessities during the COVID pandemic for example. We are also looking at how to help the country in terms of the unemployment. So, our Group is actually looking to hire more positions by continuing to invest and expand our business, especially in the area of delivery and e-commerce.
Christine Tan (CT): Keeping those employees on your payroll essentially means you have to be more creative when it comes to cutting costs, where do you look to during this time?
SC: Everything, everything. In fact, as part of the business continuity, we put everyone working at home, for example. That kind of also changed a lot of dynamics: a lot of OPEX related to traveling, a lot of OPEX related to offices, space, electricity, etc. We definitely have to look into business operations which are not really making margins. Maybe we have to stop some of those.
CT: Give me an example.
SC: I think certainly some of the 7-Elevens that are in the area. We have to stop some of the operations and we rotate the people to other branches. We have to do a lot of cost cutting to maintain the full three shifts of people. So, those are the areas that we have to cope with. The food side is actually much better. The telecom and media sides are okay. People are downgrading certain packages, but people are subscribing to more broadband at home for example. So, they offset each other. People are using more 4G and are into 5G for example. So, the most impacted area is the retail area, business area which has been shut down. Now we are seeing the recovery. For example, Makro, they actually have been recovering back to almost pre-COVID (level). Their B2B online ordering business has actually doubled from last year, from 10 percent to 20 percent during the COVID pandemic in Thailand. We have to continue to look into every area including some of the risky investments. Not the fundamental investments but some of the risky investments or high-risk expansions. So, some of the expansions we are doing, we actually have to slow it down a little bit to look at how we overcome this period of difficulty first. But a lot of fundamental things such as the digitalization in the infrastructure to the whole group, we continue to invest. We believe that's the way we have to evolve.
CT: So, as you re-strategize, as you figure out what to do during this time, we know Thailand has actually extended the state of emergency till the end of August. It has also further tightened security controls because new cases have emerged. From where you sit in Bangkok, are you worried about a second wave of infections derailing the Thai economy?
SC: So far, we are very lucky. We think the Government has done a really good job. Thailand has no new cases, only those who actually come from abroad. The death rate is very low. So, the treatment is really good. The hospitals, the doctors and nurses in Thailand, they are really heroes for the Thai people.
CT: So, you're confident the situation is under control in Thailand?
SC: It seems to me. A lot of business is actually coming back to around 80 percent, some of them 90 percent, from the retail point of view. Maybe not in tourist hot spots, but a lot of businesses are recovering.
CT: So, dealing with the coronavirus is one thing, but recently, adding to all the uncertainty was a political protest by these young students demanding the resignation of the Prime Minister, how much does all this jeopardize the recovery we're seeing in Thailand?
SC: The second wave is not going to be the COVID itself, from what I see. The second wave for the world economy and not only Thailand, is the unemployment. The freedom of speech and you know protesting is a good thing. I think it's healthy for the society, but people are out of job. New graduates who could find no jobs, I think those are problematic. That is another underlying crisis throughout the world.
CT: Do you worry about the political protests escalating in Thailand?
SC: I think the Government understands the situation very well. They are very, I would say, flexible and listen to the youngsters. They are putting the spending in the right industry such as the agro industry. In Thailand, during economic crises, the agricultural sector, the farmers, they actually are a great absorption for all this unemployment. This time, I think it's going to help Thailand reform the agro industry, help solve this unemployment problem, and put the rest of the industry back on track. I think the mentality and attitude of the government and how they understand how to solve the economy going forward, I'm optimistic.
CT: At the height of the pandemic, you've actually reached a deal with Britain's retail chain Tesco to purchase its Lotus businesses in Thailand and Malaysia for $10.5 billion, what's the latest? Are you close to getting any sort of regulatory approval?
SC: Yes, it's still under the OTCC committee to consider and give the consent for such acquisitions. So, I cannot say much at the moment. We did reach the conclusion with the Tesco U.K., but certainly we have to still look for this approval.
CT: Let's talk more about that because your father Khun Dhanin actually sold the Lotus retail chain way back during the Asian financial crisis to stave off bankruptcy, how does it feel to be able to buy it back after 22 years? Was it your father's wish to bring back what he wants built?
SC: I think certainly he is also excited. We had to give it up during Asian economic crisis which was heartbreaking for him and for all of us. You know that we still operate Lotus in China. We operate 7-Eleven and we also operate Makro. So, we are very keen in the distribution and retail business. This is one of our core businesses apart from the food and agro business. We cannot run it in the same way we used to. We have to make sure that it's going to the omni-channels, O2Os. It has to become e-commerce-driven as well as you know retail- and real estate-driven. So, those are the challenges we have to go through, but we were optimistic.
CT: You and your family have always operated under the notion that every crisis brings opportunity. What else would you like to acquire during this pandemic crisis?
SC: Looking at this crisis, the opportunity for us lies in e-commerce. Going forward, we should be going more and more into the health industry. We believe that data connectivity, genetics technology and food are going to converge. This will disrupt the health industry as a whole. So, we can certainly take part in that. With this pandemic COVID crisis, it has appeared even clearer to us that it is the way to go. This is also the way to help health security for all the people at large.
CT: You were the first foreign company to invest in China. You were the first also to get into China's agri business way back in 1979. Early on this year, you made a donation of ฿220 million or about $7 million to help China's efforts in combating the coronavirus. These donations that you make, it's not the first time. Are they done out of obligation because you have history, you have business there?
SC: I have to say that for the overall group, we donated in many countries that we operate in. Altogether, I think we have donated around $25 million already, and we still continue to do so to help out as much as we can. In the case of Thailand, we invested in a mask factory with the capacity of 3 million masks per month. We also give food to those quarantined people, doctors and nurses. We are donating food right now to more than 100 hospitals for example.
CT: According to economic data, China's economy grew in the second quarter, making it the first major economy to actually achieve growth during this pandemic. From where you sit, given your operations and agri business, supermarkets in China. Do you get a sense that the worst is over for the country, that a V-shaped recovery is actually taking place in China?
SC: I cannot speak on behalf of the whole China economy. I can just speak on behalf of C.P. Group in China. We have no impact in our food business. Our retail business is recovering and, in fact, doing better because of the e-commerce and delivery. So, those are the two key areas. The fundamentals of the business are actually coming back together quite well.
CT: So, you do get a sense that China is actually recovering and that a V-shaped recovery is actually taking place? The worst is over?
SC: I think so. I think China is really decisive, in terms of the Government. They recognize a problem and they make the move right away. But again, I can't really predict the world economy, how it would impact also China because this is a pandemic crisis. I cannot predict the political environments that are happening between U.S. and China at the moment, during this period of election in the U.S. But then, I think we manifest ourselves with what we think. So, we think positively, we're always optimistic. It doesn't mean that we do nothing. All the businesses including C.P. Group are making day-to-day changes. We recognize the change in behavior. Many things will not be the same. The behavior of the market and people will not be the same. So, we have to make the change.
CT: As one of the world's biggest conglomerates and an agri-food giant, what's your sense of when a global recovery will actually take place? When will things start to return to normal?
SC: One to two years. One to two years, that's how we see it. With those who have been very decisive and made a strong move, it could be one year. Those who actually have more problems to deal with, maybe two years.
CT: Two years is a long time, Khun Suphachai. What will the new post-pandemic world look like for business?
SC: For our business group, we are moving very much into e-commerce, data-driven and technology-driven. Our people are being reskilled and upskilled. We have to do this. Our business is also working much closer with the Government in a PPP (public-private partnership) concept because of the crisis. All this working together towards common issues are bringing in a lot more innovations and changing the way we think. For example, let me talk about schools today. The schools are closed, and students are learning from home. Companies are closed, and people are still working from everywhere. In fact, with upskilling, reskilling, employment will change now. People can learn from everywhere, every institution around the world. People are doing more jobs freely. So, it's an evolution, revolutionizing the whole world economy.
CT: You've actually said in June that C.P. is actually going to be carbon neutral and zero waste by 2030. You don't think the impact of the pandemic is going to make it difficult for companies like C.P. to stick to these commitments?
SC: No, I think we just add health issues into one of the key pillars for sustainability. Dealing with the infection and this kind of outbreak of disease is part of sustainability. I think sustainability is the big issue. The way we are running the world, the way we are consuming the world is not normal. It's not sustainable. So, the zero waste should become the world agenda. All the listed companies should be measured against it.
CT: As a third-generation heading Charoen Pokhand Group, you've actually unveiled "CP 4.0", where you want to transform the conglomerate by embracing innovation, the digital revolution, what business structure have you put in place to drive that 4.0 strategy? What leadership will you provide to make it happen?
SC: Within the next 10 years, we have to be a technology-driven conglomerate, in every area including food and agro. Then people will say, well, we are in this 2.0 food industry, how can we technologically lead?
CT: It will mean a total transformation?
SC: Of course, you know, plant-based meat, cell-based meat. Genomic technology versus food. What food is actually good for you? Makes people healthier and have longevity, for example. So, all of those involve innovation and technology. Well, we have to be data-driven. So, the first thing you have to do is you have to go online. You have to be on e-commerce. In that case, then your KPIs: what is your new KPI? Your new goals and targets? What is the conversion rate? How much do you know about data? What do you measure about analytics, including how you apply A.I., for example. So, all of those come with the right goals and the right visions. So, I'm not saying that overnight, we're going to become a technologically-driven company or becoming a 4.0 company. But I think our people understand it, and they are learning and making changes.
CT: Will CP 4.0. make the company more resilient to future pandemics and crisis? Is that the plan as well?
SC: It has to, not only at the very top but empowering the younger generation is very important. Actually, the younger generation, they are 4.0. We can actually learn from them. If we empower them and learn from them and have them learn from our mistakes, that will be the best thing. So, empowering the younger generation and adding new skills for them.
CT: Any plans to ask the fourth generation Chearavanont family to help make that transformation for you?
SC: No, there is just a handful of Chearavanonts in the business. I think we have to rely on the professionals. We have to understand that to really promote and empower all these younger people who have the talent, the will, the right mindset, then they can cope with every change. So, not just a Chearavanont. Actually, even my son, I told him since he was young, you will not join the Group. You will build your own business. Maybe I'll give you advice but you will build your own business. That is not to give him the vision and give him the comfort zone. Once you are in a secure comfort zone, you will not have any kind of imagination and you will not learn. So, it's better that he tries something new, learns something, makes mistakes and does his own business. Maybe one day if he becomes a successful businessman, we'll say, please come and work for C.P. and help C.P. But no, we're not encouraging family members to work in the Group.
CT: And finally, you're steering C.P. through this very difficult time during the coronavirus pandemic. The company is approaching its 100th anniversary next year, do you think C.P. has what it takes to last for another 100 years?
SC: I think one lifetime is very short. Even though 100 years seem long but one lifetime is what? 80-85 years? It's very short. The problem is we haven't had the chance to transfer the knowledge between the one lifetime. To build a corporation that will last another 100 years, the knowledge that has to be transferred is the core values of the company, that is the highest knowledge. The values that we have to continue to transfer is in three areas. One is love and compassion, the moralities of the company and how we operate the business. How our leaders will be. Second is the dream which we talked about: imagination, innovations and thinking about better lives. Third is security: how can we actually make sure that we are productive enough, competitive enough. So, those are the three major pillars that we have to continue to transfer to the next generation, to make us last 100 more years.
CT: Khun Suphachai, thank you so much for talking to me. Please, stay safe and well during this time.
SC: Thank you, Christine. Thank you very much. Honor for me to meet you.
END
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