YEO HIAP SENG LIMITED YEO HIAP SENG LIMITED Yeo Hiap Seng Limited (Company Registration No.: 195500138Z) 3 Senoko Way Singapore 758057 ANNUAL REPORT 2019 Tel: +65 6752 2122 | Fax: +65 6752 3122 www.yeos.com.sg Healthier Lifestyle Through Better Choices ANNUAL REPORT 2019 YEO HIAP SENG LIMITED Annual Report 2019 01 TABLE OF CONTENTS Chairman’s Statement 02 Financial Highlights 06 Corporate Information 07 Profile of the Board of Directors 08 Corporate Governance Report 13 Sustainability Report 40 Financial Statements 71 Statistics of Shareholdings 169 Notice of Annual General Meeting 171 Supplemental Information on Director Seeking Re-election 178 Supplemental Information on New Directors 181 Proxy Form Healthier Lifestyle Through Better Choices 02 , CHAIRMAN S STATEMENT DEAR SHAREHOLDERS, 80 per cent of Yeo’s beverage sales in Singapore are from healthier choice products, we will continue to work I am honoured and humbled to serve Yeo Hiap Seng closely with the regulators to ensure that we comply with Limited (“YHS” or the “Group”) as Chairman of the the new regulations and guidelines. In Cambodia, we Board. 2020 marks the 120th anniversary of Yeo’s, recorded a strong growth of 37% in sales as we worked a household name with a rich history in bringing closely with distribution partners to drive product visibility happiness to consumers with our quality and innovative and availability in the market. In China, we refreshed food and beverages of authentic Southeast Asian taste. our packaging and ran interactive QR code promotions I look forward to working with the team as we start a to increase engagement with our consumers and to new chapter of Yeo’s journey together, building on our drive sales. 2019 net profit grew 47% on prior year to strengths and competences to innovate, delight and $17.7 million. exceed the expectations of our customers. The Group’s balance sheet remained healthy with cash On behalf of the Board of Directors, I would like to and cash equivalents of $295.8 million and no borrowings thank Mr Koh Boon Hwee, who has served the Group as at 31 December 2019. The Group is well placed to as Chairman since April 2010, and Mr Melvin Teo as seize growth opportunities via strategic collaborations Group Chief Executive Officer (“Group CEO”) since or acquisitions. We are continually prospecting and 2015. I would also like to welcome Mr Samuel Koh as evaluating and I am delighted to share that in 2019, we our new Group CEO. Samuel brings with him extensive have concluded new collaborations with well-established executive experience in the food and beverage industry brands to leverage our production and distribution with well-established consumer brands across multiple capabilities and to complement our offerings to our geographies and he will help bring YHS to a new growth customers. In early 2019, we commenced bottling of phase with his business acumen and expertise. Kickapoo brand carbonated drinks and American brand mixers for distribution in five markets including Malaysia, On behalf of the Board of Directors, I am pleased to Singapore, Cambodia, Vietnam and Indonesia. We have present the annual report for the financial year ended also started distributing Dutch Lady products in Singapore 31 December 2019. since third quarter of 2019. We have teamed up with Oatly from Sweden, one of the world’s leading plant-based milk FINANCIAL OVERVIEW companies, to supply their oat milk products out of The Group’s revenue increased 5% to $364.3 million, Singapore for their regional needs from fourth quarter of driven by stronger sales in Singapore, Cambodia, Europe 2020 onwards. and China. In our two main markets of Malaysia and Singapore, we maintained our Asian Drinks market BUSINESS STRATEGY EXECUTION leadership positions amid intensifying competition, with In 2019, the Board and the management team continued volume shares of 28% and 32% respectively based on to execute our multi-year strategic plan with thematic Nielsen data. focus on targeted product categories – Asian Drinks, Soy, Ready-to-drink (“RTD”) Tea, Carbonated Drinks and Food In Malaysia and Singapore, we have continued to develop – as well as on the Cambodia market as a whole. In line and launch healthier beverages and food to cater to with these growth themes, we have the growing demand for healthy living and to support the lower sugar consumption initiatives advocated by • launched new offerings across all the targeted the governments. On 1 July 2019, Malaysia effected product categories to broaden our product range an excise tax on beverages containing five grams or and set pace for growth; more of sugar per 100 millilitres. We have reformulated our products in Malaysia swiftly to achieve the lower • curated product offerings with nutritional benefits sugar level while maintaining the good taste profile. In scheduled for launch in the upcoming months Singapore, the Ministry of Health also announced plans to continually delight consumers with healthy to promote lower sugar consumption. As more than beverages that are also delicious; YEO HIAP SENG LIMITED Annual Report 2019 03 , CHAIRMAN S STATEMENT • extended our food offerings by introducing canned In Malaysia, we collaborated with the Ministry of Tourism Cuttlefish in Soya, Cuttlefish in Curry, Hot & Spicy and Culture to sponsor the Night at the Museum Program, Sardines and Black Bean Fish as well as various new reaching out to over 3,200 students in 37 locations across flavours for Cintan Noodles; the country. Through this program, we collaborated with Jabatan Muzium Negara (or Department of • evolved our brand defining and building activities Museums Malaysia) to jointly conduct educational talks with focused consumer studies and Yeosome on sustainability and healthy living targeted at teenage Campaign – which served to connect to the students. The Night at the Museum Program received wide younger consumer groups while we revitalise our media coverage across major broadcast, online and print brand with our loyal customers; and media which boosted our brand exposure and stature. In November 2019, we unveiled a new Yeo’s Soy Bean • deepened our distribution footprint and reach Milk campaign – “Boost for your Moments” – to increase into provinces in Cambodia through stronger brand relevance amongst the younger consumers and to collaboration with our distributors and wholesalers. expand consumption occasions. As part of the campaign, we released a series of anime-styled videos featuring a Putting all the initiatives together, we will build a huggable mascot of Yeo’s Soy Bean Milk which has been sustainable business that will continue to innovate and well received. meet the needs of evolving consumer tastes and healthier consumption demand. CHAMPIONING WELLNESS AND HEALTHIER CONSUMPTION BRANDING In 2019, we continued to launch new products that We thank our loyal consumers in Singapore and Malaysia promote healthy living and consumption. In line with our for their steadfast support in making Yeo’s Asian Drinks strategy to strengthen and restage our RTD Tea portfolio, the “Number One Asian Drink” as measured by Nielsen for we launched a premium range of RTD Tea in various five and seven years running respectively. flavours such as Chrysanthemum Pu’er Tea, Lychee Pu’er Tea, Red Date Black Tea, Osmanthus Green Tea, Elderberry In Singapore, we launched the Yeosome Campaign Black Tea and Rose Black Tea. These freshly brewed across multiple media platforms as part of our ongoing premium teas of botanical ingredients are low in calories brand revitalization efforts and to maintain brand with zero or very little added sugar. Soy is a good source saliency, especially amongst the millennials. During the of plant protein and is a popular alternative for people month-long National Day celebrations in August 2019, who are lactose-intolerant. To enable our consumers to which was also celebrated as Singapore Bicentennial to enjoy the benefits of our soy drinks – made from whole mark the 200th anniversary of Sir Stamford Raffles’ arrival non-GMO Canadian beans – and to experience different in Singapore, we invested in an outdoor media blitz to flavours, we expanded our soy range to include bandung associate the joy of celebrating our nation’s birthday with and matcha flavours. For consumers who enjoy carbonated the feeling of being awesome and hence “Yeosome”. drinks, especially in hot summers, we launched the Juscool The Yeosome Campaign brought back fond memories for Sparkling Juice Drinks range a few years ago, which many Singaporeans who have grown up consuming Yeo’s contains real fruit juice at lower sugar levels and endorsed products. In September 2019, we extended the Yeosome with the Healthier Choice Symbol in Singapore. We Campaign to Makan Match, where we encouraged the continuously refresh the range and in 2019, we launched public to choose Yeo’s as their go-to drink during meal new flavours to include Citrus Blue and Blood Orange times and engaged consumers to share their pairing of which are infused with real citrus and blood orange juices Yeo’s drinks with local dishes on Facebook and Instagram respectively. Last but not least, we introduced H-TWO-O over a period of six weeks. The Makan Match reminded Unleashed, which comes in a fresh new pomegranate our consumers of how Yeo’s drinks complemented the flavour with the same functional benefits of hydration local food fare and the sharing on social media also and electrolytes replacement as other offerings in our encouraged consumers to try different Yeo’s drinks and H-TWO-O range. local dishes pairing based on what has been shared. Healthier Lifestyle Through Better Choices 04 , CHAIRMAN S STATEMENT In Malaysia, there is also an increased focus on revenue growth management practices to improve our health. The government implemented an excise tax on commercial capabilities. In our supply chain, we also have ready-to-drink (“RTD”) drinks containing five or more separate work streams to improve our manufacturing grams of sugar per 100 millilitres.