Yeo Hiap Seng brewing up new recipes for F&B growth

Angela Tan
Published Mon, Mar 29, 2021 · 05:50 AM


A YEAR after becoming the group chief executive officer (CEO) of Yeo Hiap Seng Group (Yeo's), Samuel Koh has crafted a clear strategy and roadmap to take the Singapore heritage brand to its next growth stage, with an expanded product offering.

With health and wellness being top of mind for many during the Covid-19 pandemic, Mr Koh, 46, wants to propel Yeo's - whose history dates back to 1900 as a soy sauce factory in China - to become the Asian company that offers innovative and healthy food and beverage (F&B) products to consumers, including the millennials.

"We will focus on our core F&B business, especially in innovating and growing the tea and plant-based dairy categories where we already have a healthy position through our soy and chrysanthemum tea products. We will focus on delivering innovative and great tasting products that promote health and wellness," said Mr Koh in an interview with The Business Times.

The trusted household name, which has been listed since 1969, has elevated its iconic Yeo's Chrysanthemum Tea to a healthier level that resonates with health-conscious consumers, launching newer varieties that include no sugar, reduced sugar and wholesome ingredients such as honey and wolfberry.

Apart from growing its core, the group is looking to expand overseas.

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"Besides our home markets of Malaysia and Singapore, where we have a long history and established market presence, we will also accelerate our growth in the larger consumer markets of China and Indochina," said Mr Koh.

In what is seen as a coup for the Singapore company, as well as for Singapore as a high-tech manufacturing hub, Yeo's has teamed up with Sweden's Oatly - arguably the world's most popular and fast-growing oat-based drinks company - to be its first supply partner outside Europe. The tie-up will see Yeo's producing Oatly oat drink products from its Singapore manufacturing facility at Senoko Way and supplying to Oatly's markets across Asia in 2021.

"This strategic partnership will be value-accretive to our business by providing Yeo's with another growth driver in the fast-growing plant-based milk-alternative segment, and it complements our leading position in the soy milk segment," Mr Koh said.

The group continues to seek strategic partnerships to optimise its portfolio and drive productivity.

"We are in the early innings of Yeo's transformation journey. We are very open minded and keen to work with strategic partners or make a merger and acquisition (M&A) play," he added.

For 2021, Yeo's will focus on its strategic partnership with Oatly, while remaining active in looking for inorganic growth opportunities.

With the increasing global focus, Mr Koh has brought on board "diverse, hungry and experienced world-class talents" into various levels of Yeo's organisation. Today, most of Yeo's leadership team members were either born overseas or have lived and worked abroad.

"This is critical, as increasingly, our growth will come from overseas. Culture is a big piece of our transformation. Hence, my leadership team and I have stepped up our communication and engagement and have been rolling out programmes to support the cultural change," he said.

Yeo's - now one of the publicly-listed arms of Far East Organisation after the Yeo clan lost control of the company to property magnate Ng Teng Fong in 1994 - has a strong balance sheet with cash and cash equivalents of S$264.2 million and no borrowings as of Dec 31, 2020.

"As such, we are well placed financially to fund these strategic goals," Mr Koh said.

In addition to F&B, Yeo's has a portfolio of properties including offices and warehouses in Singapore, China and Malaysia, as well as farming land in Malaysia.

Asked about development plans, Mr Koh said there may be opportunities in its property portfolio but - for now at least - real estate does not drive his agenda. Instead, the F&B industry veteran sees tremendous upside value in Yeo's core F&B business and is relentlessly focussed on innovating and growing this core business.

Mr Koh joined Yeo's on Jan 14, 2020, as Group CEO (Designate) before being formally appointed to the role on March 14, 2020. He is not new to the F&B sector, as he was previously vice-president of The Coca-Cola Company's Greater China, Korea and Mongolia business unit, where he led the setting up of new business ventures and made strategic investments in other emerging F&B players. Prior to that, he held various roles in strategy, business development and finance in Coca-Cola (including its Asean Business unit); Yum! Brands; and Unilever.

While the headwinds from the Covid-19 have slowed Yeo's down to some extent, the group remains "firmly on track to grow and transform", he said.

For the full year ended Dec 31, 2020, Yeo's sank into the red with a net loss of S$10 million, compared to a net profit of S$17.7 million in 2019. However, compared to the first half of 2020, Yeo's net loss in the second half of 2020 was considerably lower. Its core F&B sales for the second half were in line with the second half of FY2019, despite Covid-19 in 2020.

For FY2020, Yeo's generated cash of S$8.3 million from operating activities. Cash and cash equivalent stood at S$264.2 million at the end of December 2020. Cash outflow was deployed primarily to pay shareholder dividends and to fund capital expenditure for its strategic partnership with Oatly.

The group doubled its e-commerce sales, achieved double-digit growth in its China sales for the second consecutive year as well as delivered double-digit growth in its food business.

Mr Koh added that Yeo's has maintained its Asian drinks market share leadership in Malaysia and Singapore, and gained market share in Malaysia after declines over the past two years.

"In a nutshell, topline growth in Yeo's F&B, which enjoyed a higher profit margin, productivity programme and strategic partnership, will help improve our 2021 earnings before interest and tax (EBIT)," he said.

As for concerns over rising prices of raw materials, Mr Koh said Yeo's has initiated several programmes to mitigate this. These include working with suppliers to forward-buy some key raw materials and optimise prices; optimising margins in different channels; and improving product/packaging design, material sourcing and manufacturing processes.

If the pandemic were to drag on, Mr Koh reckoned what is key is that Yeo's "stay agile, innovative and entrepreneurial to accelerate growth, drive transformation and execute well".

"Importantly, balance sheet-wise, we are in a robust position to navigate through the storm," he said.

Based on information as at March 6, 2020, about 21.34 per cent of the issued ordinary shares of Yeo's are in public hands. The stock was last trading at around S$0.785.

READ MORE: Yeo's, Oatly in S$30m tie-up to produce oat drink for Asia in Singapore


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