48 FRASER AND NEAVE, LIMITED & SUBSIDIARY COMPANIES | ANNUAL REPORT 2019

CEO Business Review New Markets • •

NEW IN MYANMAR • 100PLUS ACTIVE • F&N SEASONS Ready-to-Drink Tea • GOLD COIN Condensed Milk

NEW IN VIETNAM • F&N Sweetened Condensed Milk in Squeeze Tube BUILDING A SUSTAINABLE FUTURE 49

NEW MARKETS lower COGs and tighter control on operating expense all contributed to improved 20 New Markets FY2019 performance across profitability from Indonesia this year. CITIES geographies were strong. Despite accelerating Indonesia will remain a key new market and a Our portfolio of competition, ongoing price discounting and products is now currency risks, each market recorded both top- core component in our growth strategy. We are available in 20 cities and bottom-line improvements. Notwithstanding determined to pursue every opportunity to grow in Indonesia ongoing challenges, Southeast (“SEA”) region this important market. This will entail expanding remains the focal point of F&N’s march toward our product range, widening our reach through becoming a leading F&B player in ASEAN. expansion into other cities/regions/channels, Since 2015 when the Group outlined its Vision forging partnerships and driving consumption 2020 business plan, F&N has identified Indonesia, through localised consumer engagement Myanmar, Thailand and Vietnam as its key new activities. We will continuously review our markets. It has also identified core brands to distribution structure to ensure our ability to capitalise on clearly defined market opportunities supply products efficiently and reliably alongside and establish presence in these new markets. the rapid development of the different trade South East Asia’s population of over 640m, with channels in the region. Leveraging our regional an emerging middle-class, presents a sizeable business and brands, we will continue to look potential consumer market to F&N. for opportunities to drive scale advantage.

Our strategy in New Markets is to operate across (B) MYANMAR categories, focusing on the highest growth Despite the slowing global economy and the categories and consumer opportunities most escalating US- trade war, Myanmar’s relevant to our core brands. We will combine economy is expected to witness a slight pick-up, organic growth with selective acquisitions that as the Burmese government remains committed complement our strategy. to creating adequate conditions to attract and facilitate foreign investment to spur economic (A) INDONESIA growth. As one of the fastest growing economies Indonesia is the most populous country in in Southeast Asia, Myanmar’s real GDP rose 1 SEA with over 270m people. Its increasing 6.8% in FY17/18 and is projected to grow 7.0% urbanisation, rising income levels, favourable in the next three years. Increasing discretionary demographic patterns and changing expenditure coupled with the country’s growing lifestyle trends offers very attractive growth middle-class population will present tremendous opportunities for F&N. growth opportunities for the Group.

FY2019 PERFORMANCE FY2019 PERFORMANCE F&N’s subsidiary Yoke Foods Industries Sdn During the year, F&N continued to strengthen Bhd (“YFI”) continued to boost the Group’s its relationship with Shwe Kan Kaw (“SKK”) presence in Indonesia. A streamlined Group, the fastest-growing tea shop operator structure has enabled us to concentrate in Yangon, Myanmar. From 49 teashops a on building our distribution network and year ago, SKK Group has grown to 62 outlets, growing our presence. Today, our portfolio all exclusively using TEAPOT condensed and of products – 100PLUS, F&N Sparkling Drinks, evaporated milk. The successful partnership UNIFRESH, DAYDAY Asian soft drinks – is gave rise to a significant increase in TEAPOT’s now available in 20 cities such as Jakarta, on-premise presence, which led to its sales Medan, Palembang, Padang, Pekan Baru, growth this year. Jambi, Balikpapan, Samarinda, Batam and Riau islands. Distribution is handled through 100PLUS has also grown from strength our direct local network, giving the Group to strength, to become one of the leading direct access to the vast Indonesian market isotonic drinks in Myanmar. This year, and growing our market presence. the Group expanded its isotonic offerings to include 100PLUS ACTIVE Tasty Lemon, This year, the Group delivered outstanding a non-carbonated variant of 100PLUS. Specially growth numbers in Indonesia, due largely to formulated to suit local tastes, the rollout of volume growth in our core brand, 100PLUS, this refreshing isotonic beverage in March was where volume almost doubled from a year supported by a 360-degree campaign that ago. The strong growth was mainly attributed included television commercials, outdoor and to our unrelentless efforts in driving product online advertisements, as well as roadshows, availability in key cities, while collaborating various point-of-sales activations and sampling 100PLUS closely with distributors and wholesalers. activities. 100PLUS remains one Favourable price mix, higher selling prices, Note: of the leading isotonic 1 Source: World Bank drinks in Myanmar 50 FRASER AND NEAVE, LIMITED & SUBSIDIARY COMPANIES | ANNUAL REPORT 2019

CEO Business Review New Markets Indonesia • Myanmar Thailand • Vietnam

In addition to rolling out new flavour, we also FY2019 PERFORMANCE 100PLUS teamed introduced a new pack size for the current F&N operates in the Thai soft drink market up with influential Thai celebrity, Toon flavours – Berry, Orange and Original – in through its licensee, Thai Drinks, a subsidiary Bodyslam, for the 380ml PET replacing the 500ml PET bottle. of Thai Beverage Public Company Limited, third consecutive Designed for consumers who are always for the manufacture, marketing and year, to drive brand on the go, this convenient pack size was so distribution of 100PLUS in Thailand. reach and awareness well received that it generated strong top line growth for 100PLUS. 100PLUS continued to strengthen its unique positioning as the healthier carbonated soft Throughout the year, 100PLUS reinforced its drink in Thailand with a new communication image as the enabler of active lifestyles by campaign, celebrity endorsements and supporting major sporting events and national event sponsorships. For the third consecutive sports bodies, such as the AFF SUZUKI CUP, year, 100PLUS teamed up with influential 100PLUS ACTIVE RUN and YOMA YANGON Thai celebrity, Toon Bodyslam, to drive INTERNATIONAL MARATHON. This year, brand reach and awareness. The new 100PLUS and Sagaing United Football Club communication campaign for 100PLUS was (“SUFC”) signed a sponsorship agreement supported by television commercials that to cement 100PLUS as the Official Hydration featured the up-and-coming teen superstar, Sponsor of SUFC from 1 June 2019 to Lee Thanat, who exemplifies young Thai 31 December 2020. As part of the sponsorship, consumers who adopt active and healthy 100PLUS receives full branding and selling lifestyles. rights of Myanmar Football Federation and Myanmar National League events. 100PLUS’s Throughout the year, 100PLUS sponsored logo will also be on the front of the player’s numerous sports-related events such as 370ml jerseys. The sponsorship also gives 100PLUS the CROSS COUNTRY CHARITY RUN (KAO New pack size drove the right to use the National Team players’ KON LA KAO) BY TOON BODYSLAM, KHAO sales of 100PLUS image on product packaging, promotional YAI MARATHON RUN, 12TH AUGUST HALF materials and various marketing activities. MARATHON and AFF SUZUKI CUP 2018. 100PLUS was also the exclusive isotonic drink (C) THAILAND (SOFT DRINK) and sponsor of HAPPY AND HEALTHY BIKE Thailand’s fast-moving-consumer- LANE, a world class outdoor cycling track. group (“FMCG”) industry grew 6% this It also supported several sports sponsorships year, compared to a shrinkage in 2018. via the THAIBEV THAI TALENT projects in Consumption rebounded across all macro- sports such as tennis, badminton, basketball, categories due to improved consumer and cycling. sentiment, more celebrations and festivities which induced spending, as well as public Since the launch of 100PLUS in 370ml last year, programs such as welfare cards. Beverages, 100PLUS managed to capture and recruit new in particular, recorded double-digit growth. consumers. This pack size has demonstrated high growth and contributed strongly to While the outlook of Thailand remains 100PLUS’s total volume. This year, we have positive, consumers continue to show caution also reformulated the entire range of 100PLUS with their spending due to uncertainties to less than 6g/100ml of sugar. The lower- of the economy and rising cost of living. sugar range drew strong consumer support Public policies, growth in the domestic and was endorsed by the Thai Food & Drug economy and impact from global economies Administration with the Healthier Choice logo. will continue to play a role in the future rate of recovery of the FMCG industry. The return of F&N Sarsi in a retro-styled 100PLUS has been 250ml glass bottle in August 2018 generated reformulated to buzz in the Thai beverage market. Riding on contain <6% of sugar BUILDING A SUSTAINABLE FUTURE 51

the excitement surrounding the return of accordance with the Financial F&N Sarsi is now this much-loved beverage, we supported the Reporting Standards. Consequently, effective available in over 10,000 7-Eleven launch with in-store sampling and out-of- 16 April 2017, the Group started to equity stores nationwide home advertising to drive awareness and account for its share of Vinamilk’s profit under in Thailand encourage trials. We also tapped social media the equity accounting method. platforms and used influencer marketing to reach younger consumers. F&N Sarsi also In FY2019, Vinamilk contributed $110.9m to sponsored events such as THE BYRD & HEART F&N’s bottom line, accounting for 39.1% of HIGH SCHOOL, CLASS REUNION CONCERT the Group’s $283.5m profit. in February. F&N Sarsi was so well received by Thai consumers that it gained significant Vinamilk, one of the top listed companies share of market within a short period of time. by market value on the Ho Chi Minh Stock F&N Sarsi is now distributed to HORECA and Exchange, is Vietnam’s largest dairy company, provision channels, and is available in over primarily involved in the production, supply 10,000 7-Eleven stores nationwide. and distribution of dairy products including powdered, liquid and condensed milk and (D) VIETNAM yoghurt, as well as beverages including soy F&N operates in Vietnam through: milk, fruit juice and tea. Vinamilk is present in 1. its 20.01% investment in Vietnam Dairy 40 countries around the world, with 13 dairy Products Joint Stock Company (“Vinamilk”) factories and 12 dairy farms in Vietnam. and 2. its wholly-owned subsidiary, F&N Vietnam (ii) F&N Vietnam Limited Company Limited Company (“FNV”). (“FNV”) Since its incorporation in 2016, FNV has been Vietnam is one of the most profitable regions, laying the foundation for the Group’s business accounting for 38.7% of the F&B PBIT. expansion in Vietnam. Extending its operations beyond a representative office, FNV has been The Vietnam beverage market remains driving go-to market executions that saw attractive due to increasing purchasing power F&N’s popular canned milk brands, TEAPOT and favourable demographics. Its real GDP and F&N, penetrating the local market via 39.1% is projected to expand 6.8% this year, before successful sales and distribution strategies. In FY2019, Vinamilk moderating to 6.7% in 2020. The sound contributed $110.9m economic conditions are expected to drive to F&N’s bottom This July, FNV brought F&N Sweetened another period of sustained growth in the line, accounting for Condensed Milk in squeeze tube format to Vietnamese FMCG market. 39.1% of the Group’s Vietnam. Available in three flavours – Milk, $283.5m profit Chocolate and Strawberry – F&N’s squeeze The Group incorporated F&N Vietnam Limited tube packaging is the first of its kind in Liability Company in August 2016, to lay the Vietnam. Sold exclusively at Emart in Ho Chi foundation for expanded business operations beyond the functions of a representative office Minh City, FNV promoted the launch of F&N which was set up in June 2015. F&N Vietnam Sweetened Condensed Milk Squeeze Tube currently distributes, markets and conducts through on-ground activations and sampling trading of non-alcoholic beverages in the activities across 12 days. country. This operation is in addition to the Group’s investment in Vinamilk. FNV continued to leverage 100PLUS’s healthy and active brand image to strengthen its (i) Vietnam Dairy Products Joint Stock presence at selected sports venues and Company facilities like football fields, tennis courts, F&N’s investments in Vietnam date back to private gyms and universities in Ho Chi Minh February 2005, when it first took an approximately City and Hanoi. At these locations, 100PLUS 5% stake in Vinamilk. In December 2016, the booths were set up with eye-catching posters Group completed its acquisition of additional in a bid to educate and engage consumers shares representing approximately 5.4% interest on the benefits of consuming100PLUS . in Vinamilk through a competitive bid process. They were also treated to samples of 100PLUS Thereafter, through further purchases from the Original, Lime and Berry flavours as they market, the Group continued to increase its participated in sporting activities. stake in Vinamilk. As at 30 September 2019, the Group owns a 20.01% interest in Vinamilk. 100PLUS also continued to raise its brand visibility On account of the Group’s shareholding in as the enabler of active lifestyles by supporting major sports and lifestyle events such as Vinamilk and its appointment of a second F&N Sweetened representative to its board, the Group was VIETNAM MARTIAL ART FESTIVAL 2019, Condensed milk in deemed to have a significant influence RMIT 4X4 VOLLEYBALL TOURNAMENT and squeeze tube was over Vinamilk for accounting purposes in DANANG INTERNATIONAL MARATHON 2019. launched in Vietnam