Thomas White Global Investing
Emerging Leaders

Emerging Leaders

November 2011

Dhanin Chearavanont, CEO & Chairman of CP Group

Dhanin Chearavanont

Image Credit: CP Group

“C.P. is always looking for opportunity. We saw opportunity in Taiwan and China. We went to Indonesia. We always see opportunity first.”

— Dhanin Chearavanont in an interview to New York Times

Lee Kuan Yew, the founding father of Singapore, frequently praises those virtues that have made ethnic Chinese businessmen successful across Asia and beyond. Importantly, Yew points out, Chinese businessman possess a respect for the family, an undiminished appetite for hard work and the uncanny knack of guanxi, the Chinese word for ‘connections’. In guanxi, Yew says, no one can beat the Chinese. “The Anglo-Saxons do it, the Jews do it, and so do the Hindus and the Muslims”, he says. But for the Chinese, Mr. Yew says, “networking is the natural thing to do”.

Indeed, many ethnic Chinese businessmen have likely advanced by tapping these attributes, but perhaps none more so than Dhanin Chearavanont. The Thai-born Chearavanont is Chairman of CP Group, a Bangkok-based conglomerate whose interests now straddle agriculture, real estate, telecommunications and a multitude of other industries across Southeast Asia.

Today, Chearavanont may be the richest man in all of Thailand with a personal wealth of $7 billion, but when he was born in Bangkok in 1938, his family was still humble in many ways. Chearavanont’s father, Chia Ek Chor, had left China only a decade earlier carrying with him a small ration of seeds to grow cabbage, turnips, radishes and cauliflower that were much in demand among Chinese immigrants but so rare to get hold of in Thailand.

China in the 1920’s was no place to run a business. Largely run by warlords, the country drove out small time farmers and traders like Chia Ek Chor. When he, along with his kid brother Chia Seow Hui, landed in a small lodge in the Chinatown of Bangkok, the situation in Thailand was not much better than in their homeland. Anti-Chinese sentiment was still rife in the streets of Bangkok. Still, thanks to the camaraderie and the bond that knitted the Chinese together, the family survived. Slowly, the two brothers managed to get a toehold in Bangkok, selling seeds and agricultural chemicals. While the younger brother stayed in Thailand, Ek Chor travelled widely to China, Hong Kong, Singapore and Malaysia, sourcing and supplying seeds. Along the way, he also made those connections that would later make his business one of the largest conglomerates in Southeast Asia.

It was against this backdrop that Chearavanont, the youngest of Ek Chor’s sons, grew up in Thailand. As the Thai government closed Chinese schools in the wake of a nationalist movement, Ek Chor sent his son back to China to complete schooling. Meanwhile, Ek Chor and his eldest son were busy expanding their budding Thai-based business into feed mills and other businesses across Asia. In 1949, Ek Chor faced a setback: the Chinese Communists who took over China subsequently nationalized Ek Chor’s trading business. But the family’s geographically diversified business meant that the setback was not a major one.

As the 1950’s bloomed, there were ample opportunities waiting for Ek Chor’s family in Thailand. While there was some discrimination against the Chinese in Thailand, the country certainly needed the economic and business expertise of the Chinese to move itself forward. It was in this environment that Ek Chor’s family thrived. When the Thai government actively began encouraging commercial poultries, Ek Chor’s business was in the lead to capitalize on such initiatives. It was around this time that Chearavanont, returning from Hong Kong, joined the government-controlled slaughterhouse on his family’s insistence.

I was prepared to use any means to ensure our survival. It felt bad, but I always believed we’d get it back tomorrow.

— Dhanin Chearavanont to Time Magazine on his decision to sell key assets
to repay debt in the aftermath of Asian currency crisis.

After his nearly five year stint with the government, Chearavanont returned to the family business much wiser. Despite being the youngest of Ek Chor’s sons, Dhanin Chearavanont proved to be the one endowed with one of his father’s most enduring qualities: the ability to make the lasting connections so central to growing a business. When the 25-year old quietly joined the company in 1963, other family members stood by Chearavanont, ready to elevate their bright new star to fresh challenges.

At work, Chearavanont pursued a two-pronged strategy to grow the burgeoning family business. While on the one hand he nurtured the connections to drive the trading business, he also introduced new technology and modern management to spearhead its operations at home. Chearavanont, who is said to have a fondness for Feng Shui, also promoted managers who were not from his own family, ensuring that the business was driven by meritocracy and not nepotism. Through a spate of technology ventures from the U.S. and contract farming initiatives, Chearavanont vertically integrated the company, making CP Group an agricultural behemoth by the end of 1970’s.

The biggest breakthrough followed in the 1980’s. After years of isolation, China was throwing open its doors to business around the world. While many outsiders were hesitant but eager to invest in China, Chearavanont moved with an audacity that made many Western firms gawk in wonder. Chearavanont used his Chinese roots deftly, dining with Deng Xiaoping and expanding his business empire at a furious pace. In China, a country that lacked a developed legal framework to do business, Chearavanont showed the newcomers the way to do business.

Naturally, Western firms jostled to be associated with Chearavanont. With his guidance, CP Group diversified, dipping its toes into other businesses including autos, retailing, and real estate. Many famed brands such as Honda, Wal Mart, and Tesco joined hands with Chearavanont. CP Group even ventured into the brewery business. At home, the company successfully entered the telecom industry, winning lucrative contracts. In the three years between 1992 and 1995 alone, CP Group’s revenue doubled to $6.5 billion. But to support this expansion, the company’s debt too was growing rapidly.

Just when Chearavanont had appeared to have mastered business in China, the same country in which his father’s business was nationalized, the plot turned dark. In 1997, when the Asian crisis struck and the Thai bhat lost value, CP Group’s debt looked worse on paper than it actually was. Panicky creditors knocked on Chearavanont’s doors and demanded their loans be repaid immediately. Unlike his creditors, Chearavanont did not panic. He sat down for an honest reassessment of his past mistakes. He resolutely trimmed his interests and sold of all those assets that were not central to his business, keeping only the most prized ones. Survival was the need of the hour.

Around this time, Chearavanont and CP Group witnessed a spate of bad press. Allegations about a campaign funding scandal in the U.S., the complexity of the group company’s structure, and even the company’s political connections were dug up. The rise of other politically connected businesses also intensified competition for CP Group in industries like telecom in Thailand.

Wisely, Chearavanont turned the crisis into an opportunity, infusing transparency and focus. Although both Chearavanont and CP Group lost a great part of their wealth to the currency crisis, the clever business leader was able to now lay the foundation for a much sturdier company in the years ahead. Partially because of these efforts, the company nimbly navigated an avian bird flu scare that threatened its poultry business in 2004. Starting in the mid-2000s, CP Group has opened thousands of 7-Eleven convenience stores in many parts of Southeast Asia. The company is cautiously planning its entry into palm oil plantations that will serve its core agri-business.

The revival of the company has been attributed to the genius of Chearavanont’s vision. And Chearavanont is now back on top of the richest Thais list, and for that he has been quite grateful. Although he looks to China for his ethnic roots, he considers himself a businessman from Thailand. The walls of his office are adorned with the portraits of Thai royalty.

Chearavanont’s company is still expanding briskly in many other emerging market hotspots such as Russia, the Philippines, and Indonesia. Clearly, the 73-year old visionary, who still puts in nearly 14-hour workdays, still has some fire in the stomach. Ask him about doing business in Russia; he might offer a lesson or two.





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