The Distributors serie: Meet Mr. Somyod from SriThai

A few months ago, we launched a new series of article-interviews with our distributors, those business operators who are often behind the scenes but, actually, are the main characters of the industry. They know the market like no one else and have, as in this case, decades of experience as long and deep-rooted as that of their family of origin.

This is the case of our partner Somyod Lertsumitkul, CEO of Sri Thai which was born 70 years ago with his father. A family history that became a business, like those of many Italian companies, like many of us who continued in the footsteps of their parents, growing and renewing their ideas by introducing modernity and technology but honouring heritage and tradition.

Hi Somyod, thanks for your time! When was Srithai founded and what's your background regarding distribution in Thailand?

Srithai was born with my father 70 years ago. Initially he had a street vendor. Then five years later, my father went over and started his own manufacturing activity, which was plastic injection first under “Sri Thai plastic company” and he run that for a few years. Probably ten years later, he started the melamine production. And then we registered the company as a public company under Sri Thai Super ware replacing the old Sri Thai Plastic Company. So, Super ware brand is registered and today the factory is considered 60 years old while the Marketing Company is 65 years old.

How many people are currently working in SriThai?

I would say probably around 200 plus my staff in the marketing company. But as for the factory, my stainless-steel factory is just under 200. For the factory of super ware, we are talking about 2000, I would say.

And we don't count the rest of the joint ventures with our listed company, the mother company. We're a public company so we have joined ventures with over ten different companies like partnership with Lucky Costa, for example, Korea and Taiwan, etc. This is beyond SriThai Marketing scope.

How has the market changed these last years, especially after covid?

In terms of the COVID years, of course, we peaked in 2019. By the time 2020, the COVID start to hit Thailand and the first year of COVID we had a small reduction, about 10% of the peak we reached in 2019. In 2021, we had a reduction of revenue of another 20%. So, we were down by about 30%, which is the bottom. In 2022 we gained back around 10% and 7 % in 2023 so we are now back almost the half.

Now in 2024 we are starting to see the trend moving another minus 5% now. This means that the first quarter doesn't look so promising, even though we have a new government.

The point is when 2021, the reduction of revenue was 30%, the profit margin went down more than 30%. We are now back on track to almost like 70/80% of the peak.

During COVID time, we learned a lesson that we need to cut down expenses even though we were one of those company that never reduced or cut down the salary of all the staff.

How do you expect the future in hospitality?

I would say that the new current consumption, the new consumer both online and offline, and hospitality has changed a lot. In particular, our melamine product, we can see the trend that those flower patterns is no longer popular in horeca. The trend is going towards a plainer color or those stone or ceramic effects. More country look, I would say! Now in four or five starred hotels, they go with the modern trends but, if you ask me what we think for the next ten years, it is difficult because right now the consumer keep changing his behaviour very fast.

They like something for short term and then they may switch, going back to retro again. Let’s take the car automotive industry: it also changed in terms of the taste of the color. Both Audi and BMW, they all come with a non-metallic color. Or our melamine products, the taste is changing except for those Disney and cartoon’s themes.

So, do you think plate shapes and patterns will remain very plain with no decorations, right?

Yes, the trend of making new mould, new shape, ununiform shape has already passed. It's a trend of the past five years. Now they come back to more uniform plane, classic, simple, simple, simplistic.

What about the wine glasses?

I can see for sure it affects a lot on the cost. In terms of quality and in terms of new shapes, as I saw from the beginning of this year in January at Ambiente, I can’t find many new products from Europe. The new items for the exhibition this year were more for home use, instead of horeca. For example, I saw multiple vertical lines on the stem, which is not going to be popular for restaurant and hotel, unless you are using at home.
I mentioned to Vincenzo when I travel around Asia, that I saw a local producer, with its crystalline entering the horeca market in a big way because they have the advantage in the production costs.
They increase their cost roughly 10 to 15%, while the European maker increased their cost by 70 to 80%, to even 100%. I see many of the four, five starred hotels in Asia adapted to put Thai glassware in their short-listed suppliers, which they never did. They improved, they brought in new samples, new production with even crystalline. So, it means that the Thai
glassware will be expected to sell very well among the horeca industry.
In Europe they must start first to keep the price down after they increased because of the excuse of the natural gas energy cost going up during the war, but that's a year ago. The price of the gas comes down in the last 6 or 12 months so there is no excuse to remain at a high cost. But they still do not listen, they keep the price high. That’s why Asian glassware
producers are emerging as major players in Asia because the items are good and half price of other brands. After all, glassware for horeca is a commodity!
If you are the hotel supplier, or a F&B manager of a big hotel chain, of course, it's hard to refuse because you have a budget.

 

 

But what about cutlery and pans?

Cutlery right now is mostly from Vietnam. Korea and Vietnam, there are about five factories. Even China by itself is not doing so well because the cost has gone up. Some of them even closed down recently because it's an industry which is changing. So, at the beginning of 2023 horeca people said “let’s welcome our guest back after Covid” so they invested a lot, but after six months, the customers came but they were not big spenders. So, it means that they were investing too much. Customer started travelling because they had never been outside their home for two years. They are no longer in the “holiday mood”!

Pinti corner at The Mall BKK

I agree, I can see also in Italy, something is changing. Also, in the habit of the customers. They used to spend a lot of money in the boutiques of the centre. For example, Chinese tourists are spending less than a half. Of course, they come because they've been locked up in their country for so long.

Thailand peaked at 16 million in 2019. Now they are back like last year, about 5 million. This year they expect to be about ten. So, ten from 16 sounds good but the problem is that ten million will probably spend less than 5 million.

I think overall, now for houseware we need to have new items, and if we can select new items with an affordable price, of course we are winners. At least we can start with the old stock and then introduce new items. But we need to get some support from Europe, from the manufacturer, because of course the buying power is still very weak worldwide, not only Thailand. The GDP is like end of last year, the government forecast, says 3,5%. It's a strange situation everywhere.

Is there something that happened to you during these years you want to talk about?

Ok, so I am the agent of thermos, for example. They were at a high boot during the 2017 and 2018, almost hitting the peak of 2019. They expanded the production with two new factories, one in Malaysia and a brand-new factory in Philippines. So, in total they had 6 factories. The problem is they did not realize that the big storm was coming. The tsunami, the COVID was hitting the world. But they didn't realize (and not only them) that they were overproducing.

So, if the factory management had understood the situation, they would have avoided the pressure to their sales team to make the order and to make the numbers. But if they had not understood this situation and had started pumping out the production and start keeping big production promotion by reducing the price, they would have gone into bankruptcy soon.

They were going to lose a lot of money because they got debits for their new production facilities and, of course, pushing the products, means selling at a lower price. So, their profit margin will be rolled away and will not manage to pay the interest of the loan of the new factories. They were making personal vacuum bottle but in China, there were thousands of factories doing the same things, so they were blind, and they didn’t accept they made a mistake.

That’s what happened during covid. Companies were selling less but they increased the prices…

Yes, it’s just another so called industry crisis. In Thailand, we have gone through this crisis back in the Asian crisis, back in 1997. The Asian crisis started from Thailand, I was much younger then! My father told me that with this kind of big crisis financially, for many of the manufacturer, it's time to test time.

What do you mean by testing time?

It means to know how to manage your company financially, especially. My father taught us to make sure the company had enough cash flow to survive through the crisis. In 1997 the crisis lasted 2 years, almost like Covid; that’s why when COVID hit, we had to make sure that we clear a lot of their stock straight away to keep the cash. So if you have enough cash to survive through this bad time, then you survive and you can restart after the crisis is over.

This time we just created a stock and kept the cash so that when businesses emerged back again at a slower pace, we could slowly have our cash. Also, to bring in new stock at a smarter way means buying probably new product at a better price. because many of the manufacturers want to start to sell. So, they must give you more discount or if it's not possible, at least get a better product!

Last question: how do you see and where you see yourself in ten years?

Well, for me, I have gone through the company for the last 30, 40 years. Every ten years, of course, we expect an improvement. And, at SriThai we see the improvement every 5 or 10 years. I would expect that. First, we learned the lesson that being in houseware industry, we don't want to oversize our company. We want to make sure that we slowly grow at a very steady and solid base. First, we will invest in automation, which is the future and then, at the same time, if you have another kind of investment is to go solar for saving energy. In conclusion we want to improve our quality and efficiency with automation and other systems to cut down costs.

 

We say goodbye to Somyod, promising to see each other soon in Bangkok, a destination that never gets us tired even after several visits. Many people are choosing it as their "home" by moving from other countries in Asia. Is it the Promised Land? Follow us and we'll find out!