venerdì 31 marzo 2017

Written by Francesco Toschi

Would you believe me if I told you that a vast majority of the canned tuna you buy at the supermarket comes from Thailand? And still, that in Thailand the practice of abusing workers is in use also by multinationals?
Thai Union (TU) is the largest canned tuna producer in the world, owning 35 brands worldwide, among which MareBlu in Italy or Chicken of the Sea in the U.S. This company experienced a large growth in the recent years, exploiting the consolidation trend in the market to enlarge its market share. In fact, through M&A transactions, TU has been able to become a dominant player worldwide, especially in the U.S. and Europe, where they sell respectively the 39% and 33% of their products.



Human rights abuse – a shock in Thai Union business practices
Despite proclaiming itself a strong supporter of human rights and its participation to non-profit organizations such as the Global Compact, TU lacked a firm control over its supply chain. In fact, TU’s suppliers – the fisheries – belong to a highly competitive and fragmented industry: usually, these are very small firms, averaging 3-4 boats and no more than 20 workers. The larger size of the buyers, such as TU, implies a higher bargaining power from them, requiring always lower prices from suppliers. Suppliers are therefore obliged to reduce their costs to afford lower prices and remain profitable – also through unethical practices, such as slavery.



In Thailand, although a recent improvement by local law, regulation is not strict in terms of penalties for firms abusing human rights, and even worse, enforcement of these laws becomes complex especially considering firms operating in international oceans – such as fisheries.
A major threat arose in the beginning of 2015: environmentalist reports showed that TU allowed unethical business practices in their value chain, not only trade of slaves but also pollution of the seas. The consequences for Thai Union were huge: the diffusion of these reports globally affected dramatically not only its image, but also its financial results. In fact, many customers started boycotting TU products, and governmental entities both in the U.S. and in Europe threatened to ban imported canned tuna. Thai Union’s stock price plummeted, and the largest decline happened on the 24th July 2015 (-7%), when the U.S. announced an investigation over its business procedures.



A changing consumer awareness: the opportunity for Thai Union to return on track
Nowadays, consumers are more sensitive towards not only the quality of the product itself, but also the practices in use during the production process. This recent trend can be seen both on the media, with many products boycotted by consumers after discovering bad practices (e.g. Nestlé and its exploitation of children), but also on supermarkets’ shelves: the increase in “bio” products as well as in fresh foods is in the public eye. 
Recently, consumers declared that 70% of the customers had declared willingness to pay more for a product with certified respect of behavioral standards and 88% would stop buying a seafood product if related to human right abuses. Potentially, this trend could represent a great opportunity for Thai Union to return on track, becoming a sustainable company and using this feature as a differentiator for its products: by entering the segment of “bio” canned tuna, TU can leverage on a larger product mix, therefore retaining a higher segment of the market.

Thai Union is already revolving its core business in order to stop the scandal: a process of vertical integration is already in place since the second half of 2015, and for the remaining large parts of suppliers the company is funding a campaign against human trafficking. As part of the new strategy, TU is planning to invest $90M in initiatives that will increase the supply of sustainable tuna, and potentially also the entrance in new segments. In the new business plan, the aim of Thai Union is to ensure 100% of its tuna is sustainably sourced, with a commitment to achieving a minimum of 75% by 2020.
Only the next years will tell us if Thai Union will be able to dismantle a huge threat in both Thailand and the tuna industry; what we can infer today is that becoming a sustainable company is no more a choice, but a necessity. The example of Thai Union explains how companies can turn this change into a business opportunity over which sustaining its core business in the future years.

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