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Mon, May 3, 2010
The Straits Times
   

R&D investment proves its worth for noodle maker

By Francis Chan
 

To grow in an increasingly competitive global market, small and medium-sized enterprises (SMEs) need to stand out. In this new six-part, fortnightly series sponsored by Spring Singapore, FRANCIS CHAN takes a closer look at the local food manufacturing scene and how leading SMEs in the sector succeed by making the most of their resources.

INSTANT noodle maker Tat Hui Foods was almost priced out of the market by cheaper suppliers 15 years ago.

But the Singapore-based manufacturer managed to beat down the competition by upping the ante and going big on research and development.

Today, the company behind long-time local favourites like Koka instant noodles is well-known for its own line of products that do not contain food additives like monosodium glutamate (MSG).

Its low-fat, non-fried and MSG-free instant noodles are now sold in almost 60 countries, including Ireland, where Koka remains a leading instant noodle brand.

That is quite an achievement for a family-run business that started out as a trader of Asian foodstuffs such as noodles and bird's nest products in the 1980s.

Tat Hui executive director James Lim, 48, said the company, like today's start-ups in Singapore, had to look overseas for growth, because of the small local market.

"At the time, we had no choice so we exported to many countries," recounted Mr Lim.

"I remember our first client from Ireland who just wanted to order one pallet of Koka noodles to try, but then his customers liked it so much, it became very popular there."

The firm continues to export more than 90 per cent of its products, including noodle brands such as Koka, Sanwa and Yoodles to Europe, the United States and the Middle East.

It also has contracts to manufacture for international grocery brands and other house brands for supermarket chains like Woolworths in South Africa - a sign that big industry names trust the quality of Tat Hui's products.

The company was founded by Mr Lim's father, Mr Lim Hi Lay, in 1985.

When the 77-year-old retired some years ago, his son Philip, 52; daughter Lim Shiang, 50; and younger sons James, and Sam, 46; came on board.

Last year, the 25-year-old firm generated a tidy sum of $45 million in revenue, up from $39 million during the financial crisis in 2008, and $29 million three years ago. In 2007, Tat Hui doubled the size of its manufacturing facility along Quality Road in Jurong, to 200,000 sq ft, by acquiring a neighbouring factory.

Mr Lim said the expansion was necessary to cope with the increase in orders.

Staff strength also grew from about 30 25 years ago, to more than 300 today, including production staff and food technicians who conduct R&D.

Given all that success, it is hard to imagine that the firm almost lost it all in 1995, when emerging markets started exporting similar products at lower prices.

"Before that, it was mainly just the Japanese and Taiwanese that were exporting noodles, so we were okay because there was still a demand for our products," said Mr Lim. "But then the Malaysians, the Vietnamese and the Chinese also started exporting, and that made the market very saturated."

Fortunately, Tat Hui was already working on developing MSG-free instant noodles in a bid to distance itself from other conventional MSG-filled noodle brands.

"We knew we had to differentiate ourselves from our competitors (because) we cannot compete on prices as China, Malaysia and Vietnam were coming out and selling at half our price," he said.

"There's no way we could compete, so we had to re-position ourselves, which was why we went into R&D."

Apart from being the first manufacturer in Singapore to produce instant noodles that do not contain MSG, Tat Hui also introduced non-fried noodles that were steam-cooked and air-dried.

Its efforts to produce a healthier alternative to regular instant noodles resulted in several industry firsts for the company, including being awarded the Health Promotion Board's Healthier Choice label for some of its products.

Other innovations that followed included purple wheat noodles, while whole- grain noodles with lower carbohydrate levels are also on the cards, he said.

After establishing Tat Hui's presence in the US, Europe, the Middle East, Asia and Australia, Mr Lim said he is now casting his net in new emerging markets.

"Now the focus is on countries in the South Asian and African region," he said.

Despite having already invested an estimated $10 million in R&D since 2002, Mr Lim said Tat Hui will continue to invest and develop new products for new markets so as to remain competitive.


For more information on how to grow your companies, visit http://www.spring.gov.sg or call 6278-6666.

 
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