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Growing with the customer

Bottled gas distributor Union Energy is expanding into diesel, electricity, and even health supplements

"Brands have come and gone, but we stayed, because we knew the industry intimately. To us the relationship is very important. If you’re fine, I’ll be fine too." - Teo Hark Piang, Executive Director of Union Energy Corporation

AS A teenager, Teo Hark Piang was learning the ropes at his father's bottled gas distribution business: repairing stoves, laying pipes, welding, and even driving a truck delivering the goods. The close relationships he built with customers would serve him and his company Union Energy well in the years ahead. In 2005, the firm notably broke into the government monopoly of supplying liquefied petroleum gas (LPG) to hawker centres, after offering better pricing and service.

Now almost 40 and the executive director of the firm, Mr Teo says he is preoccupied with taking the family-run small- and medium-enterprise (SME) to the next level. "Our aim is to develop to become a total energy provider - LPG, compressed natural gas (CNG), diesel, natural gas, and electricity," he says in Mandarin.

The firm ramped up its diesel distribution business this year on the back of low oil prices, after some of its LPG customers switched to the cheaper fuel. It is now supplying millions of litres of diesel a month. The firm is also planning to enter the electricity distribution market, which is being liberalised by the government.

Meanwhile, it is offering value-added services to its retail customers as they age. Union Energy is bundling groceries like rice, oil and dishwashing detergent along with LPG cylinders for delivery to customers' homes. More significantly for the firm's bottom line, a health supplements business the company purchased two years ago, Health Domain, is now consolidated into the group.

Health Domain is selling premium oatmeal product Dr Oatcare and tonic Bone BioPro in NTUC supermarkets and is making S$1 million of revenue a month. Health supplements like calcium and shark liver oil as well as honey could be on the way. "For health products, 'Made in Singapore' is a brand in itself," says Mr Teo.

Providing what customers want

By expanding into other parts of energy distribution and the health business, Union Energy is following the traditional script that made it so successful as a bottled gas distributor: It gives customers what they want.

The grocery delivery service, for instance, came about as Union Energy realised a lot of its customers have aged and needed help with bulky items, be they LPG cylinders, oil bottles or bags of rice. "Consumers want approachable service at a reasonable price. Just because you have a brand name does not mean you can sell," Mr Teo says. He would know, for his family used to distribute gas bottled by Caltex Gas, a subsidiary of US energy giant Chevron.

His father Teo Kiang Ang first started the business in 1972, distributing one LPG cylinder a day. His company, then called Choon Hin, eventually became the top Caltex Gas distributor and was appointed its official distributor.

But Caltex Gas pulled out of Singapore when the Asian financial crisis of 1997 came around. As customers and dealers stopped buying Caltex gas, Mr Teo bit the bullet and bought the distribution business from Caltex, while negotiating payment terms with equipment suppliers to survive.

Union Energy's big break came in 2000 when it bought a bottling plant, became more competitive, and began to acquire its distributor competitors. Union Energy was formed in 2004 when the family consolidated and restructured its businesses.

A year later, in a daring stroke, Mr Teo managed to convince hawkers near their Defu Lane distribution centre to sign up to Union Energy's gas supply over that provided by then-Temasek owned City Gas - before getting government approval for his deal. The deal was fortuitous as Union Energy's old business of supplying bottled gas to households has been shrinking as newer estates use piped gas.

Yet through the years, the firm's customer base among factories, coffee shops, restaurants and consumers held firm. Today, it supplies customers like the Newton Food Centre, Holland Village Food Centre, Old Airport Road Centre, and Tung Lok Group. "Brands have come and gone, but we stayed, because we knew the industry intimately," Mr Teo says. "To us the relationship is very important. If you're fine, I'll be fine too."

Doing things well

Today, Union Energy is making around S$120 million a year, and has a workforce of 500. It prides itself on not needing to outsource any component of its gas services: from getting the business, to pipe laying, to delivery, billing and after-sales service.

"Our greatest resource in the company is our staff. People are important as this is a traditional business," Mr Teo says. "Gas is a very traditional business, innovation won't change the way we supply. The cylinder is shaped like that. You can't even change the colour, it's all regulated. Why would a customer want to switch to us? Sometimes it's service," he says.

Now with numerous potential business lines, Mr Teo wants to grow each of them to become as strong as possible. "We want to service people from when they're young till they're old," he says.

Listing the business is still a goal, but he is happy to reinvest profits into new businesses for now. Ultimately, he is gunning for all his business lines to be at the top of their industries. "If you want to do things, you must do it well," he says.