Fraser & Neave Holdings Bhd Annual Report 2019

WWW . F N . C O M . M Y 054 F R A S E R & N E A V E H O L D I N G S B H D THE MACROENVIRONMENT T he Malaysian economy has m a i n t a i n e d a s t e a d y mome n t um , w i t h g r o s s domestic product expected to come in at 4.7 per cent for the year 2019, equaling growth recorded in 2018. This has been driven primarily by domestic demand, particularly household spending, thanks to a stable labour market and low inflation.1 However, the consumer sentiment index is normalising following an extraordinary peak post-general elections in the second quarter of 2018.2 Malaysian consumers have always been thrifty and even now maintain cautious optimism in terms of spending, with close to nine out of 10 Malaysians saying they have adjusted their purchasing habits to save on household expenditure.3 In contrast, economic growth in Thailand has been slowing down and is forecasted by the Finance Ministry to come in at 3.0 per cent for the year, as opposed to expansion of 4.1 per cent in 2018. A key reason is the strengthening Baht, which has negatively impacted two primary economic drivers: exports and tourism.4 Consumer confidence, meanwhile, has been on a downward trend since February 2019, measuring 72.2 in September 2019.5 However, a USD10 billion stimulus package from the government is expected to boost the economy, as well as consumer sentiment. 1 https://www.edgeprop.my/ content/1597691/economic-outlook- 2020-report-malaysian-economy-grow-48- 2020-vs-47-2019 2 https://www.mier.org.my 3 https://www.thestar.com.my/business/ business-news/2019/06/03/consumer- confidence-stabilising 4 https://www.bangkokpost.com/ business/1733675/finance-ministry-cuts- 2019-gdp-growth-forecast-to-3- 5 https://tradingeconomics.com/thailand/ consumer-confidences 6 Intended Nationally Determined Contributions (INDC) under the UN Framework Convention on Climate Change, https://magazine. scientificmalaysian.com/issue-13-2017/ tackling-climate-change-malaysias- emission-reduction-target/ Market Trends Af fect ing Us In our two core markets – Malaysia and Thailand – consumers are becoming more cautious about spending money due to higher costs of living. They, therefore, will wait for promotions or sales, and are becoming more strategic in their shopping behaviour, frequenting cash and carry as well as discount stores and favouring value packs. At the same time, the emergence of smaller households and a generally more harried lifestyle has resulted in smaller basket size, more frequent shopping trips and greater popularity of convenience stores near homes and workplaces. CONSUMER BEHAVIOUR Along with a faster pace of life, today’s consumers are also becoming more digitalised – working remotely and carrying out daily transactions such as banking and making purchases online. Asian consumers are now going online to buy books, clothes, gadgets, homeware and even groceries – including food and beverages. What they seek is the convenience of having goods delivered to their doorstep. Online reviews also help to make purchasing decisions amid the growing number of choices available. Social media is becoming a powerful influencer, with more people being swayed by online perception and interaction. DIGITAL REVOLUTION Our Response Highlights In both Malaysia and Thailand, we partner with our customers to offer attractive and sometimes exclusive promotions as well as on-ground marketing activities. These are accentuated during the festive periods, when demand has always peaked. While we continue to strengthen our presence across more stores, we are paying particular attention to outlets that offer greater value, such as cash and carry and discount stores as well as convenience stores and outlets that serve consumers in out-of-town locations. We are also developing new channels of targeting customers in the food service and B2B segments to ensure we capture growth opportunities in these markets. In addition, we are developing value-for-money packaging options that cater to customers’ and consumers’ distinct needs. We see digital platforms as opportunities to engage more personally with consumers and get instant feedback, helping us to feel the pulse of the marketplace more quickly and efficiently. We have been investing more in our digital systems, with a particular focus on enhancing our online presence. We have just launched our own F&N Life App and e-store through which customers will be able to make purchases, be updated on great offers and enjoy benefits from the loyalty programme. In China, where online retail is huge, we are establishing an e-commerce shop in T-mall, one of the nation’s biggest business to consumer (B2C) players. At the same time, we are enhancing our hawker engagement via a Line app in Thailand. • F&N sweetened condensed milk are available in single serve ‘Stix’ packs, convenient squeeze tubes for better flexibility in portion control, to 20kg pouches for bulk industrial usage. • +43% increase digital ad spend in FY2019 compared to FY2018 st rategic repor t > MARKET REVIEW