| Written by Financial Daily |
| Tuesday, 15 November 2011 11:31 |
Fraser & Neave group is a household beverages and dairies name that has been present in Malaysia since 1883.
In 1972, the Frase & Neave Ltd group ventured into glass manufacturing via acquisition of a substantial stake in Malaya Glass Bhd (MGB). In 1996, the group reorganised and realigned its Malaysian soft drinks and dairy businesses by injecting them into MGB, which later changed its name to Fraser & Neave Holdings (F&N) on March 5, 1996.
Since then, F&N has been regarded as the food and beverage (F&B) arm of its parent, Fraser & Neave, with wholly owned core businesses in Malaysia in soft drinks and dairies.
The group’s soft drink brands include 100Plus, F&N Fun Flavours, Seasons, Fruit Tree, Ice Mountain and Red Bull, while it is a franchise holder for Coca-Cola, Sprite and Aquarius. Its dairy brands include F&N, Tea Pot, Gold Coin, Farmhouse, Magnolia and Alive. It is also a franchise holder for brands such as Sunkist, Ideal, Carnation and Milkmaid.
F&N’s soft drinks factory in Shah Alam, operational since 1996, is one of the largest in Southeast Asia. The condensed milk factory in Petaling Jaya, set up in 1969, is Southeast Asia’s largest with an annual capacity of over 11 million cases. It also operates a can-making plant with a capacity of more than 420 million cans per annum.
A property division was added in 2004 and the group purchased a stake in Cocoaland Holdings Bhd in 2010 to further strengthen and accelerate the development of food products in its existing regional F&B portfolio. In 2010, the glass business was divested.
Datuk Ng Jui Sia, F&N CEO/managing director shares with The Edge Financial Daily his strategies and dreams for the company.
TEFD: What are the group’s competitive strengths and advantages?
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| Ng wants to see F&N establish itself as a leading regional F&B company. |
Ng: Our competitive strengths lie in our people capability, established brands, a comprehensive distribution infrastructure and manufacturing excellence.
With a 128-year heritage, the F&N group in Malaysia has built a wealth of experience and established a legacy with distinctive embedded values. With intimate knowledge of the local market and consumer needs, we have managed to meet those needs for over four generations of Malaysians through product innovation. At the same time, we have built our distribution network to be second to none. F&N brands can be found in any distribution channel, ranging from hypermarket to sundry shops, from road side stalls to high-end F&B outlets.
Surveys have shown that virtually every household pantry and almost every F&B outlet in Malaysia stocks one or more of our products. Indeed, over the past 128 years our brands have become synonymous with the culture and traditions of Malaysia. Our products are affordable staples that are consumed nationally on a daily basis (and especially during Malaysia’s numerous festive seasons) and predominate in the market sectors in which we compete. For these reasons F&N is regarded as a good barometer of consumer confidence and of the national economy.
What have been the achievements of the group in the past four years?
The most significant achievement was Nestle’s canned milk acquisition in 2007. The acquisition propelled F&N into the largest canned milk producer in Southeast Asia. This was a very strategic investment as it enabled F&N to set a foothold in Thailand and a launch pad for expansion into the largely untapped Indochina and Myanmar markets with a population base of over 200 million. Its presence in the Thai market has helped F&N transform almost overnight into a top five non-alcoholic F&B company in Thailand, contributing to over RM1 billion revenue, next to the dairy business.
In 2009, a RM250 million Greenfield liquid milk plant was established in Rojana, 70km north of Bangkok with a total capacity of 3.5 million cans per day or annual production of 24 million cases of products. The plant is fully integrated with outsourced in-situ can manufacturing facility and on-site logistics operations.
The Thai plant became a blueprint for F&N Dairies Malaysia’s new RM350 million plant at the Pulau Indah halal hub in Selangor which is scheduled for completion in the second half of this year. This plant will showcase cutting-edge green technology which minimises carbon footprint via the incorporation of water, energy and environmental conservation technology.
Over the past five years since January 2006, the market capitalisation of F&N has seen a nearly threefold increase from RM2.21 billion to RM6.27 billion as at mid-October 2011.
What are the major challenges your company faced over the years and how did it overcome them? Is there anything else you would have done differently?
Our raw materials purchases are in US dollars. Thus, volatility in the USD/MYR exchange rate will have an impact. We will monitor our currency movements closely.
How is the company positioning itself within your industry? What are your strategies to grow or gain market share?
We are the market leaders in the ready-to-drink (RTD) beverages and canned milk (sweetened condensed milk and evaporated milk) in Malaysia. Our aim is to reinforce this leading position, while expanding our product portfolio towards becoming a total F&B company.
We are making fast and positive inroads into Thailand markets, and establishing a strong brand visibility in Indochina and Myanmar.
We have a two-pronged strategy for expansion. The first is to grow the business organically in the domestic markets that we operate in and seek new ones through exports, while the second is to seek out acquisition opportunities and/or strategic alliances with F&B entities, which will complement and synergise with our existing business model.
The F&N group is also able to leverage on the trained expertise from Nestle in terms of technical capability and R&D resources which have resulted in the introduction of innovative products to the market.
We will continue to launch more products and variants in addition to strengthening the distribution infrastructure of our remaining core products in the country. Our sound balance sheet coupled with strong liquidity will stand us in good stead as we pursue our vision of becoming a regional F&B company.
What are the group’s plans for the future, both short-term and long-term? What are your group plans to compete in the increasingly globalised environment?
With Coca-Cola’s impending entry, we expect the local beverage landscape to change and competition to intensify, both of which will pose challenges as well as provide new opportunities to the group. Noise levels (in terms of advertisement, promotions, merchandising, new product launches) will increase significantly with the entry of such a formidable player. Arising from this, we expect the RTD market to expand.
Presently F&N has a leading advantage in terms of width and depth of distribution and our brands like 100Plus, F&N, Seasons are household names. F&N will vigorously contest to reinforce our position in the market. After all, Malaysia is our home ground and we are homegrown. We expect F&N volume to continue to grow by double digits in the foreseeable future.
As for dairies, we have started the ball rolling by entering the Thai dairy market in 2007. The immediate focus is to grow share in the Thai market and build brand franchise and presence in Myanmar and the Indochina region.
Once there is a critical mass, it offers an opportunity to set up dairy plants in Indochina and Myanmar to cater to the growing demand as the Rojana plant in Thailand will not be able to fulfil demand of a 220-million population base.
How would you like to see the group in 10 years’ time?
We would like to see F&N establishing itself as a leading regional F&B company, with dairy and soft drink plants in the Asean region, particularly in Myanmar and Indochina.
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