Yeo Hiap Seng Malaysia Bhd.

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Yeo Hiap Seng Malaysia Bhd.

7 Jalan Tandang
Petaling Jaya
46050
Malaysia
Telephone: + 60 3 7787 3888
Fax: + 60 3 7782 2730
Web site: http://www.yeos.com.my

Public Company
Founded: 1900
Employees: 1,700
Sales: MYR 373.24 million (2004)
Stock Exchanges: Kuala Lumpur
Ticker Symbol: YHMS
NAIC: 311611 Animal (Except Poultry) Slaughtering; 112990 All Other Animal Production; 311421 Fruit and Vegetable Canning; 311422 Specialty Canning; 311612 Meat Processed from Carcasses; 312111 Soft Drink Manufacturing

Yeo Hiap Seng Malaysia Bhd. is one of the leading food and beverages groups in the Malaysian and Singapore markets. The Petaling Jaya-based company produces a range of foods and carbonated and noncarbonated beverages under the brands Yeo's, Fizzi, Goodtaste, SoyRich, and Cintan. Core product areas include soy milk, tea, and instant noodles; the company holds the number one spot in its market for the first two, and has targeted the third category for future leadership as well. In addition, Yeo's product range includes canned goods, such as curries, coconut, and the like; sugarcane-based drinks and chrysanthemum tea; and other regional favorites. The company's logistics and distribution network gives it national reach. After a disastrous attempt to enter the U.S. market in the early 1990s (through the acquisition of Chinese food brand Chun King), Yeo has remained closer to home, focusing primarily on Malaysia and, through subsidiary YHS Beverage, Singapore. Nonetheless, the company also operates production and distribution joint ventures in China and Thailand. Yeo Malaysia has been listed on the Kuala Lumpur Stock Exchange since 1975; the company is controlled at nearly 61 percent by Singapore's Yeo Hiap Seng, which has converted itself, in large part, into a real estate and property development holding company. In 2004, Yeo Hiap Seng Malaysia posted sales of more than MYR 375 million.

Early 20th-Century Soy Sauce Maker

Like many businesses in Malaysia and Singapore, Yeo Hiap Seng's origins lay in the vast ethnic Chinese community that helped transform much of the Southeast Asian region in the first half of the 20th century. The Chinese proved to be energetic entrepreneurs, often backed by strong support networks in their business endeavors. Over the course of the 20th century, the ethnic Chinese community, particularly in Singapore and Malaysia, developed into the region's strongest economic players. Although the Chinese avoided political involvement, and thus remained at the mercy of governmental will, they clearly controlled the regional economy.

Among the Chinese who arrived in Singapore in the years leading up to World War I was Yeo Keng Lian. Yeo had founded a soy sauce factory in Amoy, near Zhangzhou, in China's Fujian province, in 1900. Yet the Yeo family's greatest success came only after they immigrated to Singapore in 1935. By 1937, the family had incorporated its new business. The name chosen for the company, set up as a family-controlled partnership with a starting capital of just SGD 51,000, set the tone for the group. The Yeo family called their company Yeo Hiap Seng Sauce Factory (Yeo Hiap Seng literally translated as "Yeo United to Succeed.")

Success was indeed swift, as the city-state's large ethnic Chinese community embraced the Yeo family's soy sauce. By the early 1940s, the company's sauce also had begun developing a market in nearby Malaysia as well. Yeo Hiap Seng formally extended its sales reach to Malaysia in 1942. The manufacturing base of the company's operations remained limited to Singapore, however, into the 1950s.

The years following World War II saw a dramatic transformation of the region, as Singapore and Malaysia emerged from British colonial domination to set up their own independent governments. The Chinese community played an important role in creating a base of relative financial stability on which to build the new countries. As important partners for the country's emerging political elite, the Chinese community maintained their own economic prosperity.

For Yeo, the postwar period became a time of strong growth and expansion into new areas. By the late 1940s, the company had begun to prepare a diversification of its production, launching development of its first new product, a canned chicken curry, in 1950. In support of this effort, the company built a new and larger production facility in 1951. The following year, the company became the first in the region to market a canned chicken curry product.

That successful launch was soon followed by the company's expansion into the production and bottling of beverages, as well as the launch of a wider range of canned foods. Yeo also continued to produce its soy sauce. In the early 1950s, the company sought to leverage its expertise in soy products by experimenting with methods for bottling soy milk. Until then, consumers had to make their own soy drinks, boiling the soy over a fire for long periods. By 1955, however, Yeo had succeeded in developing a method for producing and bottling the soy milk. The launch of that product sparked a revolution of sorts in the region's beverage market. At the same time, the company recognized the potential for bottling another favorite regional beverage, chrysanthemum tea.

Yeo converted from its partnership status to that of a limited liability company in 1955. Two years later, with the declaration of Malaysia's independence, the company formalized its operation in that country as well, establishing a sales subsidiary there, Yeo Hiap Seng (Sarawak) Sdn. Bhd. Yet, with the new Malaysian government promoting the country's economic independence as well, Yeo quickly added a production component in that country. The new Yeo subsidiary, Yeo Hiap Seng Canning Factory (Malaya) Sdn. Bhd., opened in Petaling Jaya in 1959.

Canning and Bottling Innovator in the 1960s

Through the 1960s, Yeo continued expanding its range of products. By the early 1970s, the company had branched out into instant noodles, chili, and tomato and oyster sauces, among others. Yeo was also the first in Singapore and Malaysia to begin packaging a newly developed long-life UHT soy milk in disposable paper-based containers, starting in 1967. The popularity of the new packaging type led the company to launch a similar packaging for its chrysanthemum tea. In 1974, Yeo adopted the latest generation of paper-based packaging, the Tetrabrik. In support of its packaging conversion, the company acquired its own tetrabrik packaging machine in 1974. In the meantime, the company had begun to establish its brand name elsewhere in the world, launching exports of its canned curry in 1967.

Yeo went public on the Singapore Stock Exchange in 1969, at which time Alan Yeo, grandson of the company's founder, took over as CEO. The company by then also had gained the bottling franchise for Pepsi Cola in Singapore and Malaysia, boosting the company among the region's top beverage groups. Meanwhile, the determination for developing self-sufficiency by the Malaysian government led to the enactment of a new series of legislation governing the import sector. As a result, Yeo Malaysia built a new factory in Johor Baru in 1971, becoming a major Malaysian beverage and food producer in its own right. This led the company to go public in 1975, as Yeo Hiap Seng (Malaysia) Bhd. Yeo Hiap Seng maintained a controlling stake in its Malaysian counterpart, however, and the companies continued to evolve in parallel for some time. Gradually, however, the focus of the group's food and beverage manufacturing operations shifted to Malaysia, as the Yeo Hiap Seng group itself grew to include a range of diversified interests, especially real estate.

During the 1970s, Yeo launched a variety of new tetrapak beverages. In 1976, the company became the first to introduce herbal teas in tetrapaks. Yeo also unveiled its successful line of bottled sugarcane drinks in 1978. Into the 1980s, Yeo sought to expand its beverage offering. The company entered the carbonated beverage category in 1984 with the production of a range of "Fizzi" brand tropical fruit-flavored soft drinks. In that year, as well, Yeo became the first in Malaysia to offer a smaller format 100 percent juice for the childrens' market. The "Junior Juice" brand featured 125 ml tetrabriks.

By the end of the 1980s, Alan Yeo had developed the Yeo name into a major player in the food and beverage markets in Malaysia and Singapore. By 1987, Alan Yeo himself had earned recognition as Singapore's "Businessman of the Year."

Yet Yeo already faced dissension among the ranks of Yeo family members, many of whom remained active in the company's management. Tensions began to gather when Alan Yeo led the company on an attempt to enter the U.S. market in the late 1980s. Yeo accomplished this by buying the Chun King brand of Chinese food from Nabisco for $52 million.

The purchase proved to be a big mistake, and Alan Yeo's downfall. Nabisco had had the marketing clout to ensure Chun King a prominent place on supermarket shelves and in the minds of U.S. consumers. Yeo, however, lacked both experience in the U.S. market and sufficient funds to properly market the Chun King brand. Of importance, the success of the Chun King brand had come during a period when there were relatively few Chinese restaurants outside of the country's urban centers. By the early 1990s, however, Chinese restaurants had found their way throughout every segment of the American landscape. In this way, the Chun King brand lost its novelty, and sales began to slip.

Company Perspectives:

Our Vision: To be the No. 1 Asian Food and Beverage Company in Malaysia. Current Achievements: No. 1 in Soy Milk Category; No. 1 in Tea Drink Category; No. 1 in Canned Meat Range. Targets: No. 1 in Instant Noodle Category; No. 1 in Canned Food Category.

The problems at Chun King quickly caught up with Yeo itself, and the company slipped into the red in the early 1990s. The Yeo family, whose shareholding interests in the company were bound together in a jointly owned private holding company, split into factions. One faction, led by Alan Yeo's nephew Charles, began calling for the ouster of Alan Yeo as head of the family. In response Alan Yeo won the right to break up the family holding company, which enabled him to sack Charles and other members of the dissenting group.

Yet Alan Yeo's victory was only temporary. The breakup of the holding company also enabled family members to sell off their stakes in the company. By 1995, the prominent Singaporean real estate family led by Ng Teng Fong had amassed 24.9 percent of Yeo, just below the threshold that would have triggered an automatic takeover offer. Yet during that year, Yeo, which owned some highly valuable properties, had found another suitor, Malaysian banker and industrialist Quek Leng Chan, head of the Dao Heng Bank in Hong Kong and the Hong Leong Group, among others. Quek was also cousin to the Singapore-based Kwek family, which controlled real estate and hotel group CDL. By the middle of 1995, Quek had quietly built up a stake of more than one-third of Yeo's shares, triggering a takeover battle with the Ng group.

Malaysia Base in the New Century

The Ng family ultimately emerged as victorious, with the Yeo family becoming the ultimate loser, removed from the company founded by their grandfather nearly a century before. Under Chairman Robert Ng, Yeo increasingly split its Singapore and Malaysian operations, with the Singapore wing focusing on real estate development, and the Malaysian wing becoming the base for the company's continuing food and beverage operations. This transition was confirmed in 2001 when Yeo Hiap Seng in Singapore received permission to transfer control of its beverage business, YHS Beverage (International) Pte. to Yeo Malaysia in 2001. At the same time, the Ng family brought in France's Danone as a new major shareholder in Yeo Malaysia to assist in developing its food and beverage wing.

The arrival of Danone also played a part in Yeo's increasing interest in once again expanding beyond the Malaysian and Singapore markets. This process had begun in the early 1990s. Yet the company's new effort turned away from the U.S. market (the Chun King brand was sold) and focused instead on expanding Yeo's reach in Southeast Asia through the Yeo and other brands.

Joint ventures played a prominent part in the company's international expansion. In 1993, for example, the company formed a joint venture with World Grain Co. in Thailand to launch WY Co. Ltd., which launched a variety of teas, fruit juices, and other noncarbonated soft drinks under the Eliza brand. By then, the company had been manufacturing soy milk under license in mainland China. In 1994, the company launched the Rengo International holding company joint venture in Hong Kong, which then launched the manufacturing and sales of instant noodles on the mainland. The launch of Xiamen Rengo marked a return of the company to its roots, of sorts, as the company set up a production plant in the Fujian province. By the end of the decade, Yeo operated six food and beverage production facilities in China.

Yeo turned to the Persian Gulf region in the early 2000s, setting up a subsidiary in Bahrain. The new unit provided sales and marketing support for Yeo's effort to extend its brand reach into the West Asian region. At the same time the company continued to look for opportunities to expand its product range at home as well. This led to a marketing and distribution agreement with Hain Celestial Group, a U.S.-based maker of organic and natural foods, as well as personal care products. Yeo appeared to have set its sights on remaining a major Asian foods and beverage group for its second century in business.

Principal Subsidiaries

Bestcan Food Technological Industry Sdn. Bhd.; Esin Canning Industry Sdn. Bhd.; Leong Sin Nam Farms Bhd.; Rengo International Investment Ltd. (Hong Kong; 54.83%); Sarawak Coconut Enterprise Sdn. Bhd.; Senawang Edible Oil (Sendirian) Bhd.; WY Co. Ltd. (Thailand; 50%); Xiamen Rengo Food. Co. Ltd. (China; 54.83%); Yeo Hiap Seng (Middle East) Co. Ltd. (Bahrain); Yeo Hiap Seng (Perak) Sdn. Bhd.; Yeo Hiap Seng Trading Sdn. Bhd.; YHS Beverage (International) Pte. Ltd. (Singapore).

Key Dates:

1900:: Yeo Keng Lian begins producing soy sauce in Amoy, near Zhangzhou, in China's Fujian province.
1935:: The Yeo family immigrates to Singapore and establishes Yeo Hiap Seng.
1942:: The company establishes a sales operation in Malaysia.
1953:: The company launches its first canned chicken curry; bottled soy milk and chrysanthemum tea are introduced.
1957:: The Malaysian office is incorporated as Yeo Hiap Seng (Sarawak).
1959:: The Malaysian branch begins food production in a facility in Petaling Jaya.
1969:: Yeo Hiap Seng goes public on the Singapore Stock Exchange.
1975:: Yeo Hiap Seng (Malaysia) goes public on the Kuala Lumpur Stock Exchange.
1984:: The company launches the Fizzi brand of carbonated fruit-flavored beverages.
1989:: The Chun King brand in the United States is acquired.
1990:: The company launches production of soy milk under license in China.
1993:: The company enters the Thai market through the WY Co. joint venture.
1995:: The Ng family acquires control of the Yeo companies; noodle production begins in the Fujian province.
2001:: The company establishes a Bahrain sales and distribution subsidiary.
2005:: A sales and distribution alliance is formed with Hain Celestial, a U.S.-based organic foods and natural products company.

Principal Competitors

Nestlé S.A.; Procter & Gamble Co.; Unilever PLC; Japan Tobacco Inc.; Coca-Cola Co.; Philip Morris USA; Taian Taishan Brewery; Groupe Danone; Lamson Sugar Co.; Xiamen Cannery.