The domestic rice trade remains profitable despite rising costs because of higher pay due to the state's pledging scheme.

With over 5 million tonnes of rice to trade, competition is likely to heat up this year as packers plan promotional campaigns.

"The profit margin for packed rice is as high as 20%," said Paisarn Tantiponganant, marketing manager of Tanyatip Inter Trade Co.

Modern shops normally demand 10% profit margin and rice packers get another 10%, said Mr Paisarn, who operates home-delivery service for Tanyatip brand packed rice.

High margins have attracted nearly 200 packers to the segment, featuring 250 brands to scrap over 40-50 billion baht of packed rice in the modern trade channel.

But C.P. Intertrade Co projects the value of rice in the commercial market could reach 150 billion baht this year, combining sales from 3 million tonnes of traditional trade and 2 million tonnes of modern trade.

Even as rice prices rise, packers who purchased the commodity before the pledging programme began are enjoying large margins, he said.

"Retail prices haven't increased that much, so it's assumed most packers bought earlier," he added.
He expects prices to rise once stockpiles are used up unless the packer is able to source cheap rice.

The Internal Trade Department reported paddy prices for Hom Mali jasmine sold in the Northeastern provinces last week of 15,000 to 16,000 baht a tonne. This would make the cost for a tonne of milled rice 23 baht a kilogramme. A tonne of milled paddy affords about 660 kg of rice.

White rice paddy was sold at 9,600 to 11,000 baht per tonne, meaning a price of 14.40 to 16.60 baht/kg for milled white rice.

Milled rice sold in Bangkok last week for 3,000 baht a 100-kg sack or 30 baht per kg for Hom Mali rice, and 15.30 to 16.30 baht per kg for white rice.

Meanwhile, retail prices for 5 kg of packed rice is 190-250 baht a unit, or 38-50 baht per kg for Hom Mali rice. Prices for white rice is more varied because of several grades and blends, ranging from 130-165 baht or 26-33 baht per kg.

Rice does not have high brand loyalty because the quality doesn't differ much, making marketing promotions essential, said Mr Paisarn.

Tanyatip is going to stick to home-delivery service with occasional promotions to keep its 20,000 customers intact, he said.

C.P. Intertrade reports the packed rice segment has grown by double-digits the past few years, reflecting the growth in modern trade that is convenient for consumers.

Last year convenience shops rose 12% to 8,450 stores. Medium-sized outlets including Tops rose by 8% to 174, while large shops such as Tesco Lotus, Makro, and Big C grew by 4% to 250.

Source: Bangkok post