Nestle Greek Yogurt on the Offensive

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11th March 2014

In Malaysia, Nestle has launched an offensive against its rival Greek yogurts by claiming its Nestle Greek yogurt is supposedly lower in calories and lower in fat. To recap, Nestle Greek yogurt first entered the market with claims of being thicker and creamier, low in fat and a source of protein. According to Nestle Malaysia, “every 2 servings of Nestlé Greek Yogurt Natural 135g provide 24% of adult daily protein requirement.” The first packaging has the image of the Greek island of Santorini, which is often associated with Greece.

The second packaging no longer has the image of Santorini but still has the low fat and creamy claim. During the first two waves, Nestle did not strike at its rivals. Now, in the third wave, Nestle is on the offensive. The latest claim mentions the Nestle Greek yogurt has 72% less fat and 36% less calories than brand X. Who is brand X then? Is it Sunglo Low Fat Greek Yogurt, which is the nearest competitor?

Below is the comparison between Sunglo Greek Yogurt and Nestle Greek Yogurt:

Brand	Sunglo	Nestle	Sunglo	Nestle
Pack size	135g	135g	900g	470g
Per serving (g)	per 100g	Per 100g	per 100g	Per 100g
Energy (kcal)	112	86	107	86
Fat (g)	1.5	2.7	5.4	2.7
Carbohydrate (g)	16	10.5	7.8	10.5
Protein (g)	8.4	5.4	7.6	5.4

It is clear that brand X is not Sunglo because even though Sunglo has higher energy and fat but it is not possible for Nestle to claim to have 72% less fat and 36% less calories than Sunglo. Nevertheless, Sunglo do have higher protein per 100g serving than Nestle. There is no explanation on what the * means.

	Nestle	Brand X
Energy* (kcal)	86	134
Fat* (g)	2.7	9.7

Therefore, brand X remains a mystery.

By the way, Nestle has added a larger 470g pack Greek Yogurt and the availability of the smaller 135g Greek Yogurt has increased, which all suggest Greek Yogurt is now gaining consumer acceptance. However, price promotion is still on going to improve trial and hopefully translating into repeat purchase.

No More Alcohol in Surabaya Minimarts

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Mini Me Insights

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7th March 2014

To ban or not to ban? Indonesia has been seesawing on its policy to curb alcohol consumption. The Islamic-based United Development Party, which is part of the ruling coaling, drafted a Bill for a Ban on Alcoholic Drinks in late 2012. Now, there is an air of certainty after President Susilo Bambang Yudhoyona passed a regulation on 6 December 2013 providing legal cover for the distribution and control of alcoholic beverages in the country.

Under the regulation, alcoholic drinks are classified under three categories – drinks with over 20% alcohol, between 5% and 20% and less than 5%. Drinks with less than 5% alcohol can be sold in Carrefour, Indomaret, Alfamart and in other modern retail channels, while those with over 5% can only be sold in licenced premises such as clubs, hotels, restaurants and bars.

No alcoholic drinks can be sold near hospitals, schools and places of worship. Provincial governors and district heads have been given stronger authority to regulate liquor distribution in their area.

Now, Surabaya, Indonesia’s second-largest city is set to ban the sale of beverages with more than 0.5% alcohol at minimarts and supermarkets. Implementation is scheduled by the end of March 2014. The transition period is three months for retailers to remove alcoholic beverages with more than 0.5% alcohol from their stores. The bylaw is made to protect consumers from drinking bootleg liquor or oplosan.

The ban on the sale of alcoholic drinks has already been enforced in 22 municipalities and regencies including in Indramayu and Depok but only Aceh enforces the Islamic law.

To counter the creeping Islamisation in Indonesia, PT Multi Bintang is pouring additional investment into carbonized or non alcoholic beverages. The latest IDR 210 billion (USD 18 million) investment in January 2014 is for a new factory in Mojokerto, East Java to make non-alcoholic drinks comprising GreenSands, GreenSand Recharge and Bintang Zero. The annual output capacity is 500,000 hectolitres and will be operational in May 2014.

The implication for esetablished carbonated soft drink (CSD) makers like Coca-Cola and PepsiCo is greater competition from Multi Bintang, which is now forced by government regulations to make a stronger push into the CSD segment.

Price check

	Volume (ml)	Rupiah
Bintang Zero Can	330	5,670
Green Sands Can	330	5,670
Coca Cola Can	330	7,000
Pepsi Cola Can	330	5,500

Store check: Carrefour online on 7 March 2014.

Time for Beer and Fried Chicken

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Mini Me Insights

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7th March 2014

The hugely popular South Korean drama You Came from the Star (별에서 온 그대), which ended its last episode on 27 February 2014, has unintentionally ignited a rising interest for Korean-style fried chicken and beer. The South Korean beer and seasoning industry has to thank the script writer for making the female protagonist a huge fan of fried chicken and beer as her favourite supper treat.

In the drama, Jun Ji Hyun is repeatedly shown eating fried chicken with beer, a common food combination available in the thousands of hof (호프) or Korean style bar or a place that serves fried chicken with beer in South Korea. Local beer and increasingly imported craft beer are sold in such premises.

The fried chicken and beer effect is felt strongest in none other than China where two of the online video platforms have bought the right to screen the drama the same time as it was broadcast in South Korea. Apart from the romance and the star-studded casts, Chinese K-drama fans have developed a strong interest in fried chicken with beer. One of the hottest topic on blogs and BBS in China is eating fried chicken with beer. Even the local Chinese media has caught up with the frenzy but cautioned readers that excessive consumption of beer with fried chicken is bad for health.

“If you love her, just give her fried chicken and beer””

One-off Items Are Mirage

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Mini Me Insights

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26th February 2014

One-off items are best avoided. The sale of an office building, a piece of land and other one-off items gives a temporary boost to the bottom line of a company. Investors who do not read the fine prints might be caught calculating the company’s P/E based on an EPS that has been fatten by extraordinary items. The low P/E may give shareholders an illusion of how cheap the company has become.

The two recent examples are PT Hero Supermarket and Super Group. Hero Supermarket operates supermarkets, hypermarkets, convenience stores and health & beauty outlets in Indonesia. It just announced its full year 2013 results on 25 February 2014. Net income more than doubled to IDR 671 billion (USD 58 million) from IDR 303 billion in 2012, while revenue only increased by 14% to IDR 11.9 trillion. Excluding the extraordinary gain from the disposal of its head office in Jakarta, the underlying net profit only increased by 9% to IDR 330 billion. The underlying operating income fell by 5% to IDR 421 billion due to the minimum wage increase and the pre-opening cost of IKEA, which is expected to open in the fourth quarter of 2014. The minimum wage has impacted the bottom line of a quite number of retailers in Indonesia including the owner of the Indomaret minimart chain.

The other example is Singapore-based Super Group, known of its namesake instant coffee. Its two business segments are branded consumer such as instant coffee mixes and cereal drinks and food ingredients including spray-dried coffee and non-dairy creamer. Revenue rose by 7% in 2013 to SGD 557 million but reported net profit increased by 26% to SGD 100 million. Excluding extraordinary gains from the disposal of associate Sun Resources Holdings and a plot of leasehold land, underlying net profit only increased marginally by 2%.

Key takeaway:

PT Hero Supermarket underlying net profit rose by only 9% (reported net profit surged 122%)

Super Group underlying net profit grew by only 2% (reported net profit rose 26%)

Dutch Lady Milk Industries Bhd overview

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Mini Me Insights

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26th February 2014

Dutch Lady Milk Industries (Dutch Lady) is the leading dairy producer in Malaysia. The company has just announced its 2013 full year results. Below is a summary of the findings:

Cost of goods sold (COGS) is rearing its ugly heads again due to the depreciation of ringgit versus the greenback and other major currencies in 2013 and higher raw material costs. The year 2013 also saw the first increase in the share of COGS to total revenue since 2008, rising to 61.95% from 60.70% in 2012. COGS has been on a downtrend since it spiked to 74.02% during the height of the global financial crisis in 2008. Since then, thanks to the strengthening of the ringgit and lower raw material prices, the company was able to steadily improve its gross profit margin.

As a % share of revenue, 2006-2013. Information from company annual reports

Back in May 2013, the company already warned that it was “cautiously optimistic, as consumer sentiment has been fairly weak due to the uncertain economic climate.” Moreover, “raw material prices have been very volatile. It is our objective to minimise the price increase to consumers.” The company cited the higher costs due to drought in New Zealand. Well, 2013 turned out to be a year where there was a slowdown in profit growth.

Year on year growth rates, 2007-2013. Information from company annual reports

Looking forward to 2014, Dutch Lady said that it “expects the business environment to remain challenging with high dairy raw material prices and foreign exchange pressure.” The share price really took off in the second half of 2011 coinciding with an expected stellar performance in 2011 where net profit surged by 70% over the same period a year ago. Since early 2013, the share price consolidated at the RM 45 to 50 level. At RM 50 a share in late 2012, the PE (2012) stood at 25.9. As of 26 February 2014, the company was trading at 22.08 times 2013 earnings. The company declared dividend of RM 2.60 per share in 2013, a dividend yield of about 5.4%.

Dutch Lady share price performance until 26 Feb 2014

Dutch Lady paid out RM 166.4 million in dividends in 2013, the same as in 2012. As the net income in both years was lower than RM 166.4 million, such high level of dividend payment at 120% of 2013 net income is unlikely to be sustained in the long run. Therefore, the dividend yield may be compressed.

The positive thing about Dutch Lady is that the company has a healthy cash flow as it does not spend much in terms capex to sustain its operation. The company has zero long-term debt and does not depend on debt to finance its expansion. The current liabilities are mainly in the form of trade and other payables.

It is highly likely that growth will be muted in 2014 given the weakness of the local currency and high raw material prices. The share price is expected to consolidate pending improvement in the external environment.

Rival Greenfields Milk with its dairy farms in Indonesia will be a company to watch in 2014. It plans to aggressively expand in the Malaysian market with its fresh milk where it is already has a 30-35% market share in Indonesia. Greenfields may even set up a farm in Malaysia but the main priority is to first build a market in Malaysia.

The other significant immediate competitor is local Farm Fresh, which is know for its more modern packaging design. This company has the advantage over Greenfields Milk because it has its own local dairy farms in Malaysia, which gives the company a shorter access to the market .

Manufacturers now bet on soup/food-in-a-bag

By

Mini Me Insights

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24th February 2014

A product caught my eye while window shopping at Giant hypermarket recently. This humble product stood out from the rest of its canned brethren as something unique in the Malaysian market. It was a sweet corn in plastic pouch. The Cinta brand sweet corn and other variants including baked beans in plastic pouches are injecting a new lease of life into a category that has always been in the canned format for decades.

Food-in-a-pouch is nothing new. I once saw sardines in pouch when I was in the Philippines in late 2011. I liked the concept because it was handy and the sardine could be eaten straight away by just tearing the pouch. You could even eat it from the bag in the absence of a proper set of cutlery.

In the US, Campbell’s Go Soups was launched in August 2012. Go Soups is a range of microwavable soups perfect for the Millennial who are constantly on the go. Campbell’s, known for its tomato soup, is betting on soup-in-a-bag for 20-somethings to arrest the decline in market share. The Go range has proven to be popular and is even available at the high-end Village Grocer supermarket in Kuala Lumpur.

Plastic pouch is also commonly used in pet food. So, plastic pouch is not something revolutionary but it is ‘new’ for the canned food category in Malaysia. Consumers aren’t accustomed to seeing their usual baked beans or sweet corns in plastic pouch. The Cinta brand even has to convince consumers that it is ‘just like can’ and claims to be really just a ‘soft can.’

Cinta should be more proactive in celebrating the goodness of plastic pouch instead of saying it is just like can, which is akin to a slap on the face. So why bother to use plastic pouch in the first place? One can safety make the claim that the sweet corn or baked bean is a more convenient way to eat. If this product can be microwaved, I am sure consumers will be all too happy to eat hot baked beans straight from the pack.

The best beverage sector to be in is ….

By

Mini Me Insights

-

23rd February 2014

Fruit juice

Fruit juice does not make the cut because the entry barrier is low and consumer loyalty is weak. Consumers can switch from brand A orange juice to brand B orange juice whenever one is cheaper as there is no big difference in taste. No ready-to-drink juice can ever beat the taste of a freshly squeezed juice.

The key to winning in the fruit juice market is package design, distribution and innovative flavours. There are too many products in the market with really poor package design. Besides poor package design, distribution and marketing are keys to success. A company with less than stellar innovation capability can still reap the reward if it has the flexibility to respond to new flavour innovation.

One example is crystal pear juice. In China, Uni-President launched the highly successful pear juice in March 2011. After six months, rival Master Kong (Tingyi) followed suit and managed to eventually win the battle, thanks to strong distribution and marketing. However, the resources devoted to such aggressive marketing can really sap the energy out of the company trying to protect its own turf.

Different types of pear juice in China. Image from China Galaxy International

Loose tea/RTD tea

There is no strong loose tea brand in the world. You drink pu’er tea but any pu’er tea will do unless you are a connoisseur of fine tea. Even if you are seriously into pu’er tea, there are so many producers all claiming to offer the best pu’er tea. When you go into a restaurant, you tell the waiter that you want to drink pu’er tea. You have to accept whatever pu’er is given to you. You can’t be telling the waiter you want to drink brand X pu’er tea because they might not have it in the restaurant. As a pu’er tea producer, you can’t really dominate the market in a category where consumers strongly identify with the type of the tea and not with the brand.

RTD tea is a tough market. As a new entrant or an existing player in the market, you really have to be very strong in marketing. Nobody does marketing better than Mr Tan Passakornnatee, chairman and CEO of Thailand’s Ichitan Group. The company has run an aggressive campaign with cash rewards. In one of its campaigns, Tan is portrayed as a superhero trying to solve the debt problems. One lucky winner would be given a gold bar worth THB 1 million everyday for 60 days during the campaign period. The strong marketing coupled with Tan’s bigger-than-life personally has propelled Ichitan’s green tea drink market share to 50% in June 2013, up from just 17% in July 2012. What will happen to Ichitan if Mr Tan is no longer at the helm?

Ichitan market share: From RHB report

In China, unless you have the resources to cope with price wars, you are bound to enter into one. The RTD tea is famous for the “One more bottle” lucky draw campaign where one get a chance to get another bottle for free. Such price discounting is bad for the margin but can boost sales artificially.

Carbonated soft drinks

This is a market where the big brands usually win. It is either Pepsi or Coca-Cola. So, there is nothing you can do to challenge the domination of these two brands. You can happen to stumble upon a great idea just like what China’s Wahaha did with the kvass Russian fermented drink. In China, kvass is a regional carbonated drink confined to the Northeast particularly in Heilongjiang province where the Russian influence is the strongest. Now, Wahaha leveraging on its strong distribution network has made kvass drink into the next big thing for the carbonated soft drink category. Wahaha kvass is available whenever you go in China. However, kvass still does not have the ability to knock out Pepsi or Coca-Cola in the country.

Coffee (powder/3-in-1)

This is a market where innovation is quite limited. Once the consumer likes the taste, they will usually stick to the brand. This is a market where consumers can really order a cup of Nescafe in a coffee shop in Malaysia, a market Nescafe has been for the last 76 years. Among the top 50 brands on Interbrand 2013 list, Nescafe is the only coffee brand at 37th with Coca-Cola 3rd and Pepsi 22nd. This shows the potential for a coffee brand to excel. Moreover, instant coffee maker can easily export their products overseas as coffee is a universally-accepted drink.

So, the verdict is out. Coffee is the best sector to be in for the long run.

Priciest Water – Air Zam Zam

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Mini Me Insights

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20th February 2014

If you think Evian is expensive, wait a minute, there is one water that is even pricier than the mineral water from the heart of the Alps and that is Air Zam Zam or Zam Zam water. A 1.5 litre of Zam Zam water from Mecca costs RM 20, more than twice the price for a similar 1.5 litre Evian mineral water from France selling at RM 8.60.

The problem with Zam Zam water is that it appeals only to Muslims who believe in the miracle healing power of the water, which originates from a well located a few metres east of the Ka’aba in Mecca. The water was believed to a gift from Allah to Prophet Ismail. The water is also known to have high levels of magnesium salts, fluroide and calcium, according to scientific studies.

“It was reported in Sahih Muslim that the Prophet, said to Abu Dharr, who had stayed near the Ka’bah and its coverings for forty days and nights with no food or drink other than (Zamzam), “How long have you been here?” Abu Dharr said, “I have been here for thirty days and nights.” The Prophet said, “Who has been feeding you?” He said, “I have had nothing but Zamzam water, and I have gotten so fat that I have folds of fat on my stomach. I do not feel any of the tiredness or weakness of hunger and I have not become thin.” The Prophet said, “Verily, it is blessed, it is food that nourishes.” [Narrated by Imam Muslim, 2473]”link

Prophet Muhammad said: “The best water on the face of the earth is the water of Zamzam; it is a kind of food and a healing from sickness.” – See more at: http://www.dailynews.lk/features/zam-zam-water-allah-s-miracle#sthash.l1aFyxty.dpuf

Pilgrims are each allowed 10 litres of Zam Zam water to be taken back to their own country. The water is then distributed among relatives and friends. Due to the popularity of Zam Zam water, a new industry has been created to fulfill the demand for Zam Zam water in Malaysia and Indonesia.

Agents needed to sell Zam Zam water in Malaysia

Zam Zam water ready for order on Facebook or on the telephone, Malaysia

The holy water has become increasingly common, thanks to the tiring efforts of Zam Zam distributors to ship the precious water from Saudi Arabia. Now, Zam Zam water is available in stalls in shopping malls but it has yet to penetrated supermarkets and hypermarkets. It will only be a matter of time that Zam Zam water makes its appearance in the modern trade channel.

Fake Zam Zam water factory busted in Batang, Central Java

The key problem with Zam Zam water is that it is hard to verify its authenticity. It cannot be ruled out that unscrupulous vendors may be using piped water and pass it on as Zam Zam water. Authorities in Indonesia had just uncovered a factory in Central Java in January 2014 where fake Zam Zam water was made using piped water. The factory in Desa Kaliwareng, Batang had been operating for six years.With a market price of Rp 300,0000 (RM 85) for a 10-litre Zam Zam water and Rp 40,000 for a 0.5-litre bottle, the operator must have made a fortune from selling fake Zam Zam water over the years.

There is no official regulation on Zam Zam water, making it is hard to determine the standard and quality of Zam Zam water. Therefore, the industry tends to operate through word-of-mouth and trust. Until authentication is put in place, Zam Zam water will remain a buyer-beware market.

Milk-based Coffee Shaking Up the Market

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Mini Me Insights

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19th February 2014

The local domination of canned coffee in Malaysia is slightly shaken by the new milk-based coffee from Farm Fresh. The Farm Fresh Café Latte Double Espresso uses 100% fresh cow’s milk and real Arabica coffee to deliver the extra caffeine kick. The price is slightly upmarket at RM 3.00 per 200ml. It is stored in a plastic container and has to be chilled at 4 degree Celsius. The short shelf life gives the product the fresh halo and therefore the premium pricing.

Farm Farm owner The Holstein Milk Company Sdn Bhd has made a big impact on the local fresh milk scene with its catchy product design in plastic container to differentiate itself from other carton-based fresh milk. Similar to other fresh milk producers, the company has extended its product line to include chilled dairy products with mass appeal such as flavoured milk and yogurt drink. Unlike other fresh milk companies, The Holstein Milk further builds upon its reputation as a fresh milk company with a new milk-based coffee drink – Café Latte. The only possible competitor in this category is the imported Switzerland’s Emmi Caffee Latte range comprising macchiato, espresso and cappuccino selling in a similar 200ml plastic bottle for nearly twice the price at RM 5.89.

Farm Fresh Café Latte is chilled and has to be kept in a refrigerated state. Due to the need for chilled storage, the product is usually placed where fresh dairy products are displayed, thus restricting the product to a small group of consumers who enjoy coffee made from fresh cow’s milk.

The key to expand the acceptance of milk-based coffee drink in Malaysia is to market the drink as coffee-flavoured fresh milk or simply iced coffee. This approach leverages on the existing strong demand for flavoured milk, chilled and non-chilled, in Malaysia. Coffee has the potential to become one of the popular fresh milk flavours targeting young adults and adults. This mainstream approach will then help to create demand for more premium milk-based coffee drink such as Farm Fresh Café Latte.

Doreamon – no stock!

By

Mini Me Insights

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17th February 2014

Aeon Big, formerly Carrefour, has become the latest hypermarket chain to jump into the bandwagon of collectibles. The promotion was launched in conjunction with the 100 Doraemon Secret Gadgets Expo in KL from 14 December 2013 to 23 March 2014

According to the company:

These 3″ Doraemon figurine are for sale at the price of:

RM5 each with purchase of any AEON BiG products worth RM50
RM9.90 each without purchase any AEON BiG products

New 10 designs will be released every 10 days!

However, shoppers are venting their frustrations over lack of stock on the Aeon Big FB page.

Even after official announcement that all stores had been restocked, it seemed some customers still failed to get hold of the figurine.

The key lesson from this is make sure the stock level is adequate and the staff in each store should be adequately informed on when the new stocks will arrive.

Mini Me Insights

Nestle Greek Yogurt on the Offensive

No More Alcohol in Surabaya Minimarts

Time for Beer and Fried Chicken

One-off Items Are Mirage

Dutch Lady Milk Industries Bhd overview

Manufacturers now bet on soup/food-in-a-bag

The best beverage sector to be in is ….

Priciest Water – Air Zam Zam

Milk-based Coffee Shaking Up the Market

Doreamon – no stock!

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