New offerings brewing at Yeo Hiap Seng

After Mr Teo took the helm at Yeo Hiap Seng over a year ago, he implemented an initiative to boost the frequency of new product roll-outs.
After Mr Teo took the helm at Yeo Hiap Seng over a year ago, he implemented an initiative to boost the frequency of new product roll-outs.PHOTO: SGX

Mr Melvin Teo is a seasoned troubleshooter who thrives on pressure. Some 13 months ago, the veteran banker took on the role of chief executive officer of Singapore-listed Yeo Hiap Seng because he was intrigued by the challenges facing the fast-moving consumer goods (FMCG) industry.

After more than 20 years in banking - almost half of that time with DBS Bank, handling functions ranging from front, middle and back office - Mr Teo was contemplating the idea of a career switch.

At the time, the opportunity with Yeo's came up.

"I found Yeo Hiap Seng's business interesting," said the 46-year-old.

"It's one that will keep me actively engaged for a good many years to come because of the challenges. That was what made me finally decide to take the job."

Founded by Yeo Keng Lian in 1900, the company began as a small shop selling soya sauce in Zhangzhou in China's Fujian province. Thirty-five years later, the family moved the business to Singapore to establish the Yeo Hiap Seng Sauce Factory. By 1950, the group had begun selling a wide range of food and beverage products.

In 1969, Yeo Hiap Seng Ltd listed on the Stock Exchange of Singapore. Its Malaysian subsidiary listed on the Kuala Lumpur Stock Exchange six years later.

The group, with a market capitalisation of about $786 million, has averaged annual revenues of $453 million between 2006 and 2015. It has grown its net profit from $1.8 million in 2006 to $36.8 million in 2015, while reporting net losses in two of those 10 years.

The Yeo's stable of products ranges from carbonated soft drinks, Asian beverages, fruit juices and culinary sauces to noodles and canned food. Its popular brands include Yeo's, H-TWO-O, Justea and Pink Dolphin. The company is also the distributor for Dairy Champ, Uni-President, TaoTi and A1 in Singapore.

Last week, Yeo's announced that its exclusive agreement with PepsiCo to bottle and distribute Pepsi products - including 7-Up and Mountain Dew - in Singapore had ceased as of June 30. While losing the deal is likely to hit its earnings for financial year 2017, the impact is expected to be moderated by contributions from new products and agency brands, it added.

Over the decades, the group has adhered to a painstaking manufacturing process for its Asian drinks, abstaining from shortcuts.

For its renowned soya bean drink, it continues to buy beans from Canada and ship them to its Singapore and Malaysian plants. The beans are soaked in water before undergoing various degrees of grinding procedures to extract liquid soy, after which it is processed and packed.

For its signature chrysanthemum tea, staff are dispatched annually to Hangzhou, China - which has the best chrysanthemum flower plantations in the region - to buy blooms. They are then shipped back to Singapore and Malaysia, and stored in chilled rooms before being placed in huge tanks for brewing.

"The production processes for all these drinks are costly and laborious. It is clear we put our hearts and souls into making them, to ensure they are of the best quality and standards for the consumer," Mr Teo said.

After coming on board, he also implemented an initiative to boost the frequency of new product roll-outs.

"Consumer tastes change very quickly and many consumers are keen to experiment, so we need to be more proactive in introducing new products," he noted.

In the food segment, the company will soon add a boneless version of its signature canned curry chicken, and plans to launch premium noodles before the year is out.

"Even though Yeo's started in the 18th century as a soya sauce maker, we're now known more as a beverage manufacturer than a food company. That's not a bad thing, and while we want to continue to grow our beverage operations, we don't want to let our food business stagnate," Mr Teo said.

Over the next three to five years, Yeo's will beef up its food offerings and penetrate new food service channels, including industrial food packaging, as well as catering to hotels and canteens.

The company plans to leverage its large direct-sales force to carry third-party products, along with its own brands. "We want to take on more agency products to fully maximise our sales network," Mr Teo said.

Outside Singapore, the company plans to ramp up operations in Cambodia. Yeo's is a popular and established brand in Phnom Penh, and business is chugging along well there, he added. Its new factory, with a gross floor area of about 40,529 sq m, is scheduled for completion by the year end. Commercial production will begin in early 2017.

Yeo's board of directors expects the group's performance this year to be stable, despite challenges in the macro environment.

For now, margin pressure appears unavoidable, given the slowing domestic economy. Raw material costs are rising largely due to foreign exchange impact, as items such as aluminium and soya beans are priced in US dollars.

To cushion some of these increases, the company is boosting productivity. This includes running production lines with greater efficiency, as well as controlling the amount of waste from manufacturing processes. This spirit of integrity - both at a corporate and personal level - is something very dear to Mr Teo's heart. "Integrity is critical - once you lose it, you will almost never be able to get it back."

• This is an edited excerpt from the Singapore Exchange's Kopi-C: The Company Brew column that features C-level executives of firms listed on SGX. A longer version can be found on SGX's My Gateway website: www.sgx.com/mygateway

A version of this article appeared in the print edition of The Straits Times on July 07, 2016, with the headline 'New offerings brewing at Yeo Hiap Seng'. Print Edition | Subscribe