Thai noodle giant unfazed by minimum wage increase to 400 baht

Image courtesy of Thai By Nature

The imminent nationwide increase in the minimum wage to 400 baht holds little concern for major noodle producer Thai President Foods PCL, the maker of the popular instant noodle brand Mama, which believes the company’s ability to adapt will mitigate any significant impact, highlighting instead the potential challenges this wage hike could pose to smaller enterprises and small and medium-sized enterprises (SMEs).

Thai President Foods PCL Managing Director Phan Paniangwet assessed the potential impact of the minimum wage increase on its production costs for Mama instant noodles to be minimal, at around 1%. The adjustment is not considered a key factor that would necessitate a price hike request to the Department of Internal Trade.

The government’s gradual announcement of the wage increase allows businesses time to adjust. The company already implements an annual wage increase for its employees in January, averaging 5-6 baht each year, accumulating adoration from the masses.

The anticipated change in minimum wage is viewed by the company as a boon for consumer purchasing power, with only a slight effect on its operations.

Currently, labour costs represent just 10% of the company’s direct production expenses. An increase in wages of 10-15% would thus only affect overall costs by 1%. To offset any potential cost increases, the company plans to enhance production efficiency and reduce waste.

For instance, the current production of bagged and cup noodles stands at seven million units per day, with plans to ramp up to eight million units without increasing the workforce proportionately. This strategy ensures that labour costs per unit of production remain unaffected.

While large firms like Thai President Foods can swiftly adapt to the wage rise, the real test will be for smaller businesses and SMEs, which may not have the same resilience or capacity to absorb the additional costs without affecting their competitiveness.

The economic landscape for these entities could become more challenging, sparking concerns over their sustainability in the wake of increased labour expenses.

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