FOOD EMPIRE: From Computers to Coffee

Food Empire founder and Executive Chairman Tan Wang Cheow.
(Photo by Sheryl Sim)

Nearly three decades ago, Tan Wang Cheow embarked on an odyssey that spanned two continents and turned the computer salesman into a coffee kingpin.

Tan, founder and Executive Chairman of SGX-listed food and beverage manufacturer Food Empire Holdings Ltd, started out as a dealer in personal computers and disk drives in the 1980s, exporting electronics products to Eastern Europe.

Monthly chartered flights from Singapore, carrying consumer electronics goods ranging from video recorders and hard disk drives to TVs and fax machines, were offloaded to local distributors in both Moscow and Almaty.

"In the '80s, telephone directories didn't exist, and phone lines were few and far between. We built our network from scratch, and many of these distributors became our friends," he recalled.

This network later played a key role in Tan's transition to the food and beverage industry.

Winters in Eastern Europe and Central Asia - where temperatures sometimes plummet to as low as minus 30 or 40 degrees Celsius - can be brutal. Aside from drinking shots of vodka and buying coffee from hotels, there were few convenient ways of getting a hot beverage to keep warm.

On one of his trips to Kazakhstan, Tan brought along a few sachets of instant 3-in-1 coffee mix. "I got my Kazakh distributors to try them, and they were interested. Their first order turned out to be 22 container loads!"

That proved to be a fortuitous turn of events. At the time, margins in the consumer electronics distribution business were razor-thin and shrinking continuously.

"In 1994, we decided it was way too competitive to continue our electronics distribution business - the technology was changing so quickly, and it was becoming extremely risky, considering the long-distance logistics factor," Tan said.

"In comparison, the distribution of instant coffee products was relatively stable. We felt this was something we could build on, and create a brand of our own."

As a result, the MacCoffee trademark was born.

For 80% to 90% of these consumers, their first taste of MacCoffee is like their first love, something they remember for years, even if they've migrated to other beverages.

- Tan Wang Cheow
Executive Chairman

Food Empire
(Photo: Company)

Food Empire listed on the Mainboard of Singapore Exchange in 2000. It exports and sells its products to over 50 countries globally, and has established 24 offices - representative and liaison - across Eastern Europe, Middle East and Asia. The Group also operates six manufacturing plants and three production facilities located across the two continents.

The MacCoffee flagship label has been consistently voted as the leading instant coffee brand in the Group's core markets, including Russia, Ukraine and Kazakhstan. Food Empire holds a dominant 50% share in the Russian instant coffee mix segment, and the country is the Group's largest market, accounting for nearly half of total revenues in 2016.

Food Empire has also been recognised as one of the "Most Valuable Singapore Brands" by IE Singapore. It was named twice by Forbes Magazine as one of the "Best Under a Billion" companies in Asia, and awarded one of "Asia's Top Brands" by Influential Brands.

For the year ended 31 December 2016, the Group swung to a net profit of US$13.8 million (S$19.1 million) from a net loss of US$131,000 the previous year. Revenues rose 4.2% year-on-year to US$242.2 million (S$334.5 million).

In the 2017 year-to-date, Food Empire shares have generated a total return of 44.9%, outperforming the broader Straits Times Index's 13.4% and the FTSE ST All-Share Index's 13.1%.

The Group, however, has experienced its fair share of speed bumps along the way.

The first was the 2008 Global Financial Crisis. "Asia's recovery from the mother of all financial crises was relatively quick, but that was not the case in Eastern Europe and the Commonwealth of Independent States - the process was much slower there," Tan noted.

The second blow came in early 2014, when Russian military incursions into Ukraine and annexation of Crimea prompted the US and EU to apply sanctions against Russia and Ukraine. This in turn spurred Russia to respond with sanctions of its own.

Together with the near-halving in crude oil prices in the second half of the year, these developments contributed to the collapse of the Russian rouble and the onset of the Russian Financial Crisis.

"In the old days, the rouble was trading 31 or 32 to the US dollar. It sank to 80 to the dollar, before rebounding to around 59 to the dollar now," Tan said.

"While the Russian economy has not seen a full recovery, and sanctions are still in place, there are signs of stabilisation. Despite the difficulties in this market, the Group managed to return to profit last year."

We were banging our heads against a brick wall in Vietnam, losing money for many years, before we found a niche - iced coffee.

- Tan Wang Cheow
Executive Chairman

Food Empire

It's about building customer loyalty, and facilitating the shift from shelf space to mind space, Tan pointed out. "The question is how do you implant the values of your brand into consumers' minds, such that they will go and look for your brand on the supermarket shelf?"

Finding the right talent is another hurdle. "We need independent, enterprising and passionate people to do business in emerging markets," he said.

"Many decisions are made on the fly, and on the ground. While there's a lot of freedom, there's also heavy responsibility, because in these unstructured markets, regulations can change at the drop of a hat."

MacCoffee has been the official sponsor of European Figure Skating Championships, one of world's oldest and most prestigious sporting events, for more than decade. (Photo: Company)

 
Tan's epic journey has been nothing short of exhilirating, with multiple lessons learnt along the way.

"The one thing I developed was perseverance - even if you fall, you have to get up and move on. If you want to fight in a market outside your comfort zone, you need to be very aggressive - moving faster than the locals, and thinking ahead of them," he said.

Living life without regrets is also essential. "In primary school, and all the way through university, my teachers called me a daydreamer. Sometimes, while the lesson was going on, I would stare into space, and my mind would wander, thinking of what I should do next, what I had planned for tomorrow."

The father of four - three sons and a daughter aged 21 to 31 years old - is a firm advocate of Confucian values. "Parents can educate their children all their lives, but are they teaching them what is important? Are you imparting to them the virtues of righteousness, integrity, compassion and filial piety?"

And in business, your word must be your bond, he added. "One is one, and two is two. A contract is never as good as your spoken word. It's all about integrity and building trust."

When he's not thinking about business, Tan, 60, enjoys travelling, reading, and of course, sipping his favourite brew.

The self-confessed coffee addict admits he has developed rather distinctive taste buds over the years - certainly a job hazard. "I enjoy Columbian coffee - it has a unique aroma and acidic taste, which blends well with me."

At the same time, Tan appreciates pungent brews that pack a punch, produced mostly from roasted Robusta beans, at the local kopitiam.

"I'm very Singaporean - I still go for my cup of kopi-o at the coffee shop with friends."

• As currencies of the Group's key markets - Russia, Kazakhstan and the CIS countries - begin to stabilise, together with the possible recovery in oil prices, the Group expects the economies of its key markets to fare better compared to a year ago.
• The Group continues to look for opportunities to expand into new geographies outside its core markets, so as to provide a more balanced portfolio. Building on the Group's successful diversification efforts in Indochina, the Group plans to replicate its proven business model in other markets in Asia.
• The Group's upstream projects (non-dairy creamer plant and the instant coffee plant in India, as well as its snacks manufacturing facility in Malaysia) continue to gain growth momentum. The successful vertical integration of its supply chain has provided the Group with greater control over the supply and production of raw materials. The Group plans to ramp up its production scale to improve profitability.
• Besides organic growth, the Group also intends to tap on strategic mergers and acquisitions to expand upstream and downstream, as well as enter new markets.