Yeo Hiap Seng, better known as Yeo’s and one of Southeast Asia’s largest and oldest F&B manufacturers, has come a long way since it started in 1900, having survived World War II, a battle for control within the founding family and the GFC.
Now, with the Covid-19 pandemic, Yeo’s is digging deep into its roots for inspiration and strength to overcome the crisis by tapping higher consumer demand for healthier and more sustainable F&B choices.
Samuel Koh, CEO of Yeo’s, in an interview with The Edge Singapore, says, “Yeo’s has a long history of product innovation and we are already a key player in the dairy alternative segment via our soy portfolio. We believe that this segment will continue to grow exponentially as consumers become more aware of the impact of their F&B choices on their health and the environment.”
From producing soy sauce to becoming a household F&B brand with a large range of products, Yeo’s now is set on bringing more innovative and healthier products to the market amid an ever-increasing health and wellness conscious society.
“Our focus here at Yeo’s is our consumers. At the end of the day, there may be developments in the company but we want to make sure that our main focus is addressing the need of the consumers,” says Koh, adding that the pandemic has shed a light on the importance of health and wellness, which is what consumers are now concerned about.
Koh, who took over the helm at Yeo’s in March 2020, adds that demand for healthier and more sustainable choices have seen its core soy milk and chrysanthemum tea business grow in 2H2020 despite the impact of the Covid-19 pandemic.
Yeo’s has therefore spruced up its iconic ready-to-drink chrysanthemum tea beverages to cater to the health-conscious. New items in the market now include lower- and non-sugar variants of its chrysanthemum tea as well as the chrysanthemum tea with wholesome ingredients such as wolfberry and honey, all of which have gained considerable traction with consumers, according to Koh.
Being in the F&B manufacturing space is nothing new for Koh. Previously holding senior management positions in leading global F&B companies like Coca-Cola, Unilever and Yum! Brands, Koh is familiar with the global F&B manufacturing scene.
“It feels good to come back to Singapore and be with Yeo’s. My roots are here in Singapore. And I appreciate that the board [of Yeo’s] and myself share the same values and that is very important. At the end of the day, if we have the same values and vision, we can all work more smoothly,” says Koh, who is also a self-professed foodie.
Strategic partnership with Oatly
Yeo’s has also decided to expand its health and wellness offerings by partnering with Oatly, a Sweden-based oat milk company that is steadily gaining popularity worldwide. Increasingly popular with the Millennial and Gen Z crowd for being a more sustainable alternative to regular milk, Oatly has already made its way into cafés and restaurants.
“We are constantly monitoring consumer trends through a variety of methods and sources. Looking at the trends in other key markets like the US and China, on social media and among bloggers, feedback from consumers, suppliers, customers and trends in adjacent fields,” says Koh, who noted that some current food trends in the market now include local flavours, sustainability, products with natural ingredients, and health and wellness.
Apart from also being a great milk alternative to those who are lactose-intolerant, allergic to nuts or vegan, Oatly claims to be more nutritious than its animal by-product counterpart, since oats are high in beta-glucans — a soluble fibre that helps lower levels of blood cholesterol while strengthening the immune system. On top of that, Oatly oat milk is also free of trans fat and low in saturated fat while being rich in calcium and vitamins.
In this partnership, Yeo’s will be Oatly’s first supply partner outside of Europe and Yeo’s will be producing Oatly drink products in its local manufacturing facility located at Senoko Way. This will be the first time Oatly’s products will be produced outside Europe and North America. Additionally, Oatly will be investing, alongside Yeo’s some $30 million into the manufacturing equipment and facility.
Yeo’s will begin production of Oatly’s products in 2H2021 with oat milk earmarked for China and subsequently the rest of Asia.
Expanding overseas footprint
Since joining Yeo’s last year, Koh has put in a strategy for the business to be more focused on “what matters” to the company — its consumers. He has also conducted somewhat of a restructuring, bringing on a new team to expand overseas. This new team, according to Koh, is made of people from diverse backgrounds with a more “global” mindset.
Already in countries such as Singapore, Malaysia, Vietnam, Indonesia, New Zealand, Australia, Europe, Indochina and the US, Koh intends to increase the group’s footprint in China, home to 1.3 billion consumers and much bigger consumer brands. Koh is unfazed though. “There are tremendous opportunities for us there,” he says.
“I am here to grow and transform the business,” says Koh. “For now, we will focus on innovating and growing our core F&B business, especially in our tea and plant-based milk segments, where we already have a strong presence in the market with our soy milk and chrysanthemum tea products.”
FY2020 ends in losses due to pandemic
Yeo’s listed on the Singapore stock exchange in 1969. Since then, the company has gone through several ups and downs. It even survived an internal battle within the Yeo family to gain control over the company. In what was described as “one of the most colourful takeover struggles in Singapore’s history”, Far East Organization’s (FEO) Ng family took advantage of the Yeo family’s squabbles to acquire a majority stake in Yeo’s.
Today, FEO holds a direct stake of more than 50% but if other smaller shareholdings held via other entities are tallied, the Ngs control nearly 80% of the company.
As at April 12, shares in Yeo’s are trading at 90 cents, about 16.2% higher year to date, giving it a market capitalisation of $521.9 million.
In its latest FY2020 ended December 2020, Yeo’s recorded a loss of $10.1 million compared to earnings of $15.8 million in FY2019 as the Covid-19 pandemic disrupted and affected sales in the group’s key markets. The bottom line was also affected by the absence of one-off gains on asset disposals and fair value gains on financial assets totalling $14.8 million, fair value gains on investment properties of $2.3 million and higher impairment of trade receivables.
Revenue for FY2020 was also 10.3% lower y-o-y at $321.9 million. Core Yeo’s F&B sales declined at a slower rate than the overall group revenue. Sales slowed down due to channel shifts, softer consumer spending as well as lower agency sales. To improve overall portfolio margin, the group has been focusing on its core Yeo’s F&B sales business and rationalising agency products that have lower margin.
Although supermarket sales increased during the height of the pandemic, a large portion of the group’s revenue from F&B outlets such as restaurants, coffee shops and food courts were hurt by the lack of dine-in customers.
“The sales for our beverages and canned foods in supermarkets did pick up for us, but it was not enough to offset the loss in sales from the rest of the avenues such as restaurants and events, especially when our key markets went into lockdowns,” explains Koh, who adds that the majority of the group’s sales comes from dining outlets.
“While Covid-19 will continue to pose uncertainty and pressure on our business, we are encouraged to see traction with the strategies which we have put in place,” says Koh, elaborating that some of his strategies include ramping up e-commerce sales and introducing the new chrysanthemum tea products.
“In FY2020, we doubled our e-commerce sales, achieved double-digit sales growth in our mainland China business for the second consecutive year and delivered double-digit sales growth in our food business. In addition, we have been improving market share in our key markets and our new product launches such as chrysanthemum tea variants have been well received,” he adds.
As at end December 2020, Yeo’s had zero bank borrowings or debt insecurities while its cash and cash equivalents stood at $264.2 million. This places Yeo’s in a good position to grow via M&As.
“We have grown organically through our new products and internal efforts, but we are also open to inorganic growth, be it through M&A or a partnership,” says Koh, adding there are no immediate M&A targets as of now.
With the worst of the pandemic behind, Koh can afford to be upbeat, given how there was a significant improvement in 2H2020. “I am confident that we can build on that positive momentum into 2021. We will continue to focus on driving the growth of its core Yeo’s F&B portfolio through adapting commercial strategies and new product innovation while continuing to strengthen agility of its supply chain and drive productivity,” he says.
