Fraser & Neave Holdings Bhd Annual Report 2019

A N N U A L R E P O R T 2 0 1 9 03 Management Discussion & Analysis 075 Food & Beverages Malaysia’s (‘F&B Malaysia’) overall performance in FY2019 was underpinned by higher beverages sales from successful festive promotions during Chinese New Year, Hari Raya Aidilfitri and Harvest festival, continued efforts in strengthening and deepening the route-to-market; especially in East Malaysia and the successful reformulation of ready-to-drink (RTD) products. Despite operating in a market environment that experienced two tax regime impositions within the same financial year, the overall growth in domestic sales cushioned the effects of volatile export environment and competition in the canned milk category. A key focus in Malaysia during the year was to lower the sugar content of our beverages. This has been an overriding strategy over the last few years, but was accentuated in 2019 by the imposition of an excise duty on sweetened beverages by the government that took effect on 1 July 2019. Efforts to reformulate our sweetened beverages were successful and by the end of our fiscal year, 90 per cent of the RTD beverages sold in Malaysia were healthier options, with less than 5g/100ml of sugar. More importantly, consumers have responded positively to our healthier choice products. At the same time, the team continued to drive Excellence in Execution, which helped counter intensifying competition and led to an overall increase in beverage sales while forging stronger ties with our consumers and customers. Through collaborations, on-ground activations and effective promotions, we were able to maximise opportunities to capture sales during the key festive seasons, namely Chinese New Year (CNY), Hari Raya Aidilfitri and the Harvest festival (in East Malaysia). Compared to FY2018, sales during CNY and Hari Raya increased at double-digit rates to hit a three-year high. Significantly, for every 10 cans of carbonated drinks sold during CNY, four were 100PLUS. Meanwhile, ongoing emphasis on strengthening and deepening our route-to- market expanded our active outlet penetration, with greater coverage of increasingly popular convenience stores, cash and carry and discount outlets. We also targeted the HORECA channel to enhance our presence in hotels, restaurants and cafes. Additionally, we made greater inroads into more rural areas and achieved very encouraging results in East Malaysia, now a growth engine for sales in Malaysia. The Sales Excellence Programme introduced in 2018 enabled our people to enhance portfolio sales in every outlet while the Enterprise Workflow system introduced this year created greater efficiencies by cutting down on administrative work and processing time. We believe the combination of the above and the ease of doing business for our trade partners and customers have contributed to F&B Malaysia recording growth throughout multiple categories and across all regions in FY2019. To meet consumers’ evolving preference due to varied factors that included higher costs of living, smaller households and portion control, we introduced a series of differentiated pack sizes and value offerings such as; 100PLUS flavours in 250ml bottles (at RM1), F&N Fun Flavours and 100PLUS in 1.2L PET bottles, F&N Sweetened condensed milk in single serve stix and squeeze tube as well as 20kg pouch for industrial usage. Innovative product launches, combined with initiatives to defend and grow our markets, enabled us to further entrench our leadership positions for core brands. We maintained our market leading positions in Malaysia, within the carbonated soft drink category1, ready-to-drink tea segment in asian drinks category2, sweetened condensed milk category3 and evaporated milk category4. Our market leadership was reflected in various industry accolades. In 2019, 100PLUS received its eighth GOLD for Non-alcoholic beverages in the Putra Brand Awards while F&N SEASONS was recognised for its Product, Service & Solution, and Organisation & Culture by the International Innovation Awards 2018 (IIA). In terms of environmental stewardship, F&N Dairies Manufacturing Malaysia (Pulau Indah Plant) won the Solid Waste Corporation Management (SWCorp)’s Best Practices On Solid Waste Management 2018 award. New products in FY2019 1 F&N Lychee Pear, which has the distinction of being Malaysia’s first Healthier Choice Logo-certified non-cola carbonated soft drink with 4.9g sugar per 100ml 2 F&N SEASONS Apple Pomegranate Tea and Watermelon Lychee Tea 3 F&N SEASONS Pu Erh Chrysanthemum, free from added preservatives, colouring and sugar 4 F&N Full Cream Condensed Milk in Milk Stix and Squeeze Tubes in three flavours: full cream milk, chocolate and strawberry 5 CARNATION Sweetened & Condensed Creamer 6 OYOSHI Sakura Strawberry Tea 1 2 3 4 4 5 6