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Ceo Business Review 46 Annual Report 2016 Fraser and Neave, Limited & Subsidiary Companies CEO BUSINESS REVIEW DAIRIES • CORE MARKET MALAYSIA DAIRIES MALAYSIA: RESULTS despite negative translation effects. to support the growth of Dairies On the back of effective brand In constant currency, its profit would Malaysia in the future. have risen 46%. On the back of strong building programmes, Dairies The Group started a restructuring Malaysia maintained its No. 1 canned profit growth, PBIT margin improved 5 percentage points, to 15%. exercise to integrate its soft drinks milk position with F&N, TEAPOT and and dairies operations in Malaysia. CARNATION brands amid a slowdown in Leveraging its strengthened distribution This exercise seeks to combine the retail and consumer spending and network – more than 63 distributors, strengths of both Soft Drinks rising cost of living. Impacted mainly 37 modern trade retailers and 76,560 Malaysia and Dairies Malaysia brands by the depreciation of the Malaysian stores nationwide – and marketing and streamline their procurement, Ringgit against Singapore Dollar, campaigns focusing on the application distribution, logistics and services to revenue fell 9%, to $325m, on a 1% of its canned milk products in food better serve their customers and decline in volume. While domestic and beverage, Dairies Malaysia improve the scalability of Malaysia volume recorded marginal decline, was able to maintain its leadership F&B’s operations. The integration of the strong performance of its positions in the condensed milk the Malaysian operations will continue Export business cushioned the fall. and evaporated milk segments into FY2017. In constant currency, revenue in Malaysia. would have fallen 1%. Like its canned milk brands, Dairies Aided by lower input costs and Malaysia saw double-digit volume ongoing productivity improvements, growth in its liquid milk brands, Dairies Malaysia PBIT jumped 34% F&N MAGNOLIA and FARMHOUSE, against the previous year, to $48m, in FY2016. FARMHOUSE, in particular, remained the leading premium pasteurised milk in Malaysia. This year, Dairies Malaysia continued Volume (%) to focus its efforts on growing its presence in the RTD liquid milk % segment in Malaysia. Riding on the 1 very successful launch of FARMHOUSE UHT milk and reintroduction of F&N MAGNOLIA Lo-Fat Hi-Cal pasteurised Revenue (%) milk in FY2015, the Group started offering F&N MAGNOLIA UHT milk, 1 % % in different flavours and pack sizes, 9 ( 1 ) to milk lovers in Malaysia. In addition to reinforcing its market Profit Before Interest leading position in the canned milk & Taxation (%) category in Malaysia, Dairies Malaysia will also move forward with a focus % %1 on growing its presence in the RTD 34 ( 46 ) milk category. Building on our tagline ‘PURE ENJOYMENT. PURE GOODNESS’, Dairies Malaysia will continue with Profit Before Interest its targeted marketing activities & Taxation Margin (%) to drive the growth of this segment in the years ahead. The Group believes that F&N MAGNOLIA and 5pp FARMHOUSE are well-positioned to leverage the Group’s in-house expertise, product offering and 1 In constant currency trusted relationships with consumers Fraser and Neave, Limited & Subsidiary Companies Annual Report 2016 47 easy-to-make F&N recipes, to highlight the theme of togetherness. F&B Overview Another key initiative was the launch #1 of “F&N Bake Off Challenge” campaign. The challenge saw 24 students demonstrating their ability to create amazing multi-layered mousse-based cake using F&N Full Cream Sweetened Condensed Milk and Evaporated Creamer, for the coveted title of “Entremet Maestro”. CARNATION Beverages Market Position Canned Milk CARNATION, Nestle’s brand licenced to F&N, has become the leading evaporated creamer brand in Malaysia. CANNED MILK: GETTING In collaboration with, for the second CREATIVE WITH CONDENSED consecutive year, international recording artiste and MasterChef AND EVAPORATED MILK Soo Wincci, the “Go Gourmet” F&N campaign introduced her signature F&N Canned Milk reinforced its dishes using CARNATION Evaporated Malaysia • Dairies No. 1 Condensed and Evaporated Creamer, positioning the brand as a Milk position by focusing its marketing reliable cooking helpmate that allows one to create consistently campaign on the application of canned delicious meals. milk in food and beverage. This year, a major marketing highlight was To further drive in-home consumption, the “Aroma Kasih Sayang” campaign – Dairies Malaysia organised a series a key campaign launched with one of of live cooking demonstrations Malaysia’s celebrity couples aimed at nationwide. At the demonstrations, strengthening bonding moments for CARNATION Evaporated Creamer friends and family. In addition to was used to showcase the ease of TEAPOT trade promotions, the campaign incorporating the product into In FY2016, TEAPOT refreshed its New Market also offered eight deliciously everyday dishes and beverages. brand imagery and rolled out a nationwide consumer promotion, “Tradition in a TEAPOT”, to communicate its brand heritage and consistent quality. To maintain brand visibility and strengthen its brand positioning, the campaign employed above-the- line advertisements, sampling opportunities and in-store displays. LIQUID MILK: NEW GROWTH PILLAR F&N MAGNOLIA Having established a foothold in the pasteurised and sterilised milk segments, F&N MAGNOLIA further entrenched its presence in the local 48 Annual Report 2016 Fraser and Neave, Limited & Subsidiary Companies CEO BUSINESS REVIEW DAIRIES • CORE MARKET MALAYSIA UHT milk segment – the largest in In the food service industry, or Hotels, terms of market size in the RTD milk Restaurants and Cafés (“HORECA”) segment – with F&N MAGNOLIA UHT segment, F&N MAGNOLIA introduced Milk. Available in full-cream, low-fat the trade to its Barista Fresh Milk. and chocolate milk variations, in 1L Through sponsorship and participation and 200ml packs, the new product in barista competitions, latte art offers Malaysians a wider choice workshops and coffee expos, F&N MAGNOLIA aimed to encourage and convenience when it comes to conversion of HORECA customers to its RTD milk. specially formulated Barista Fresh Milk. As part of its integrated campaign FARMHOUSE which included television, radio and print advertisements, as well as FARMHOUSE continued to focus roadshows, F&N MAGNOLIA also communication of freshness and partnered brand ambassador Farah creamy texture of its Australia-sourced milk in its above- and below-the-line Ann in educating consumers about the advertisements for its pasteurised importance of drinking milk daily for a and UHT milk. To drive higher brand healthy body and mind. Farah Ann is awareness and acceptance of Malaysia’s national youth gymnast, FARMHOUSE UHT Milk, which was a medallist and a role model for youths. launched last year, samplings were To create further awareness and trials conducted in stores and at offices. for F&N MAGNOLIA UHT Milk, product A cross promotion with breakfast sampling was carried out in schools, cereals was also conducted to drive retail outlets and shopping malls breakfast consumption, the main nationwide. consumption occasion of milk. Fraser and Neave, Limited & Subsidiary Companies Annual Report 2016 49 DAIRIES • CORE MARKET THAILAND improved operational efficiencies and Volume (%) more cost-effective trade distribution. Consequently, PBIT margin improved F&B Overview % 5 percentage points, to 12%. 3 One of Dairies Thailand’s success factors is its ability to harness its Revenue (%) extensive distribution network, which is supported by 18 distributors, % %1 350 retailers and 137,000 stores. In 0 ( 2 ) FY2016, Dairies Thailand continued to expand its distribution coverage, mainly in the convenience channel, in Profit Before Interest line with the shift in consumer buying Beverages & Taxation (%) behaviour from planned purchase to frequent and spontaneous purchase % %1 based on convenience, promotions 65 ( 68 ) and product range. Dairies Thailand’s effective distribution strategy has allowed it to reap positive sales growth Profit Before Interest particularly in the convenience channel. a testament to the strength of & Taxation Margin (%) F&N MAGNOLIA brand and Dairies While the canned milk market in Thailand’s route-to-market abilities. Dairies • Thailand recorded single-digit growth 5pp rate, Dairies Thailand saw a double- In the coming year, Dairies Thailand digit volume growth in its canned milk will continue to fortify its market leading Thailand business, supported by TEAPOT and position in the canned milk category 1 In constant currency CARNATION brands. The strong in Thailand. It will continue with its performance was due to focused targeted marketing activities to drive marketing campaigns and initiatives, the growth of this segment in the year as well as effective distribution DAIRIES THAILAND: RESULTS ahead. As a reflection of our commitment strategy. Consequently, as at FY2016, and confidence in the canned milk Growth of the Group’s best performing F&N’s market share improved to retain segment, Dairies Thailand invested operation, Dairies Thailand, continued its No. 1 total canned milk position in a new filling and packaging line for New Market unabated in FY2016. Volume grew 3%, in Thailand. evaporated milk, which was ready in despite lost sales from Nestle’s BEAR February 2016, following the renewal BRAND and MILO UHT milk products, Dairies Thailand’s first functional UHT of the Nestle’s trademark licence due to strong demand for its RTD milk milk, F&N MAGNOLIA Ginkgo
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