20 Bringing People Closer CEO business review • FOOD & BEVERAGE 1 Huang Hong PENG Chief Executive Officer, Beer 2 NG JUI SIA Chief Executive Officer, Non-Alcoholic Beverages 1 2 Business Overview were further boosted by favourable his year, Food & Beverage sales mix, improved production (“F&B”) division continued to yields and a return to profitability in T scale new heights. Earnings Singapore which has benefitted from jumped double-digit, by 27% to operational efficiency. $230m, on the back of a 7% topline This stellar set of results improvement. Faced with higher commodity costs and weaker foreign currency, marks our fifth consecutive This stellar set of results marks our Dairies businesses in Singapore, fifth consecutive year of record Malaysia and Thailand turned in year of record revenue and revenue and profit, attributed to mixed performances. Following a profit, attributed to a strong strong sales momentum and high year of driving topline growth and volume growth across both our margin expansion by focusing on sales momentum and high Beverages (comprising Soft Drinks route-to-market excellence, and Beer) and Dairies businesses, this year, Dairies Malaysia saw volume growth. despite higher input costs, strong volume growth of 7%. stiff competition and adverse In addition to favourable sales foreign currency effect. mix, efficiency gains from the Pulau Indah plant, as well as the This year, Beverages profit before non-recurrence of one-off costs In all, Dairies earnings fell 5% despite interest and taxation (“PBIT”) grew recorded in FY2013, Dairies Malaysia registering a 6% topline growth. 42% to $174m due to higher sales PBIT surged 25%, with margin of beer and soft drinks, as well improvement from 6.1% to 7.3%. Setting our sights on growing the F&B as favourable sales and channel Dairies Thailand, despite seeing businesses, the Group set up a branch mix. In particular, Beer achieved volume and revenue surge 18% office in Yangon, Myanmar to support record volume growth of 34% and and 12%, respectively, profits were our growing non-alcoholic beverages maintained its leading position in adversely impacted by mounting business, and increased our stake in Myanmar. In addition to recording input costs and pricing control by Vietnam Dairy Products Joint Stock higher volumes brought about the Thai government. In Dairies Company from 9.54% to 11.04%, by effective marketing execution Singapore, earnings were adversely through the purchase of an additional and improved route-to-market affected by mainly a one-off 15 million shares of its issued share efficiency, Soft Drinks earnings adjustment. capital at $109 million. Fraser and Neave, Limited & Subsidiary Companies • Annual Report 2014 21 Other ASEAN Revenue ($m) Malaysia 2,068 Singapore 1,928 Other Singapore Malaysia ASEAN Revenue $265m $979m $824m Profit Before Interest & Taxation $7m $91m $132m In addition, we acquired a 70% fast-growing non-carbonated stake in Yoke Food Industries beverages segment, teaming up with Sdn Bhd (“YFI”) for $22 million. YFI offers an increased opportunity 7% YFI is a Malaysia-based company for the distribution and marketing of FY13 FY14 that manufactures, markets and our brands in Southeast Asia going distributes canned beverages in forward. Together with YFI, the Group Malaysia, as well as exports to stands to benefit from greater scale Singapore, Indonesia and Indochina, and from the broader portfolio of Profit Before Interest under brands such as Day Day, SoSoy brands, which will strengthen F&N’s & Taxation ($m) and Juice Secret. Besides securing position as a leading consumer 230 YFI’s production capacity in the group in Southeast Asia. 182 27% FY13 FY14 Profit Before Interest & Taxation Margin (%) 11.1% 9.4% 1.7pp FY13 FY14 22 Bringing People Closer CEO business review • FOOD & BEVERAGE TO BE A STABLE AND SUSTAINABLE LEADER IN SOUTHEAST ASIA Vision 2020 Today, the F&N brand portfolio Towards 2020, to further lift brand ision 2020 sets the Group’s covers a wide spectrum of beverage and category performance, F&N is sights on increasing its size categories: milk (F&N MAGNOLIA, preparing to leverage and optimise V and scale by leveraging the F&N DAISY and FARMHOUSE), the “health and wellness” credentials of strengths of Thai Beverage Plc Limited soya (F&N NUTRISOY), juices (F&N FRUIT its portfolio, positioning the company (“ThaiBev”) and F&N. To achieve the TREE FRESH), canned milk (F&N, F&N to exploit growth opportunities objective of becoming a stable and TEA POT, GOLD COIN and BLUE COW), and innovation to meet changing sustainable player in the ASEAN yoghurt and cereal bars (aLIVE), consumer behaviour. Focusing our countries, a 6-year roadmap was ice cream (F&N MAGNOLIA, KING’S resources on winning in priority developed. and F&N MEADOW GOLD), bottled categories, segments, brands and water (F&N ICE MOUNTAIN), sparkling channels, 100PLUS and F&N NUTRISOY In the 6-year roadmap, F&N shall drinks (F&N), isotonic (100PLUS), have been identified as the core play an integral role in converting cordials (F&N), tea (F&N SEASONS) brands for Vision 2020, complemented the ThaiBev F&N Group’s ambition and Asian drinks (F&N SEASONS and by the remaining brands. into reality. The roadmap centres on F&N NUTRITEA). Many brands have the Group building a solid platform category leadership and have existed Through innovation and renovation, for overseas expansion, focusing on for several decades. In addition to its constant support and investment Southeast Asia (“SEA”), via a two- portfolio of strong brands, F&N is also in our core brands, we will continue pronged approach: a distributor of successful third party to maintain as well as grow our • Strengthening market positions brands such as Carnation. market shares. By moving brands into in Singapore, Malaysia and adjacent categories, the core brands Thailand: Leveraging both F&N A brand like F&N, which has a heritage themselves can be invigorated, as can and ThaiBev’s portfolio of brands, of over a century, has tremendous be seen by the successful example of as well as distribution and bottling brand recognition among consumers 100PLUS, moving from its established systems, one of the largest and in SEA. The Group’s flagship brand, isotonic category in Malaysia into most extensive in SEA. 100PLUS, sold in many parts of the carbonated soft drinks market. • Overseas expansion: Using its SEA, is the most loved soft drinks Nurturing our secondary brands is also operations in Singapore, Malaysia brand in Malaysia and Singapore valuable in growing market share and and Thailand as the platform, (isotonic). For more than 75 years, managing a strategic portfolio F&N intends to replicate its F&N MAGNOLIA has been a trusted of brands. successful business models in other choice by consumers, nurturing ASEAN countries, in particular generations with its delicious, smooth Vietnam, Myanmar and Indonesia and creamy taste. Offering more than in the next three years. The Group the traditional milk, F&N NUTRISOY aims to establish itself as a top 3 (Singapore’s Number 1 Fresh Soya food & beverage player in key Milk) offers all the goodness of soya markets outside of Singapore, with even more benefits. Malaysia and Thailand. Fraser and Neave, Limited & Subsidiary Companies • Annual Report 2014 23 TO BE A STABLE AND SUSTAINABLE LEADER IN SOUTHEAST ASIA ThaiBev F&N Vision 2020 goals outline what ThaiBev and F&N need to accomplish, together with our stakeholders, to accelerate the achievements and convert our ambition into reality. Growth Reach To be the largest and most profitable To strengthen and build our route- beverage company in Southeast Asia, to-market in priority markets, and to differentiated through innovation be the most trusted and preferred by developing beverages that meet beverage partner. consumers’ evolving needs and preferences. Brands To be amongst the top 3 players Diversity in our markets. The ThaiBev F&N To diversify revenue and earnings Group’s core brands for the through geographic expansion non-alcoholic beverages are: and product diversification, • 100PLUS focusing on Soft Drinks, Dairies • F&N NUTRISOY and Beer. • EST • Existing Markets: Thailand, • Oishi Singapore and Malaysia • New markets: Vietnam, Myanmar, Professionalism Indonesia and Philippines To be the employer of choice. 24 Bringing People Closer CEO business review • FOOD & BEVERAGE Soft Drinks withdrawal of government subsidies oft Drinks continued to leverage and a weaker Ringgit, Soft Drinks its strong brand equity and Malaysia PBIT rose 23%, supported by S extensive distribution network favourable sales and channel mix, and to solidify its leadership position in higher efficiency in its production and Soft Drinks continued to the ready-to-drink (“RTD”) segment in supply chain management. In constant leverage its strong brand Malaysia, as well as regain and expand currency, Soft Drinks Malaysia PBIT its business in Singapore and other grew 26%. equity and extensive parts of Southeast Asia. In Singapore, the focus remained on distribution network to solidify Soft Drinks PBIT surged 31% on widening and deepening distribution its leadership position in improved margins of 2.3pp, due to of the Group’s soft drinks products. favourable sales mix, improved Coupled with well-executed brand the ready-to-drink (“RTD”) production yields and a return to building initiatives, Soft Drinks profitability in Singapore which has Singapore sales continued to improve, segment in Malaysia, as well benefitted from operational efficiencies. especially for its key brands 100PLUS as regain and expand its and F&N ICE MOUNTAIN. Improved Soft Drinks Malaysia reinforced brand sales and lower cost-of-sales returned business in Singapore and visibility amongst consumers through Soft Drinks Singapore to profit, innovative marketing campaigns, after an operating loss in the previous other parts of Southeast Asia. working actively to strengthen its year caused by start-up logistic costs.