Growing a rice brand from scratch

PHOTO: Growing a rice brand from scratch

SINGAPOREANS are hungry for rice, with the grain holding the number one position among all things Singaporeans consume. Few, however, would know the difficulties of running a rice business, and even fewer would know it as well as Tong Seng Produce's Richard Chee.

The executive director has been with the company - known for its Songhe rice brand - for 18 years, and has seen the company go through ups and downs.

"Doing business in rice is not simple," says Mr Chee. "When we just started off, Tong Seng was just a very small company. Of course, it's tough for an unknown company to market its brand."

While advertising channels were available back in 1990 when Tong Seng first started up, the company's lack of funds in advertising meant that its salesmen had to go from door to door to introduce its rice products.

Some of them even got told off during their visits, recalls Mr Chee. Getting people to know the company's brand was Tong Seng's greatest challenge then, and it relied heavily on word-of-mouth as part of its publicity strategy. "It was a very tough stage," he says.

Today, Tong Seng's brands not only include rice but also sugar and cooking oil. It imports the completed products from its suppliers located mainly in Thailand which do both production and packaging, and then distributes them to its local clients.

It does this because labour costs here are high and it is not competitive to source for material locally. In addition, the company exports a small fraction of its products "when there is a need".

Its flagship brand Songhe rice is not an uncommon sight in supermarkets, minimarts, and petrol kiosks, and a Reader's Digest consumer survey recently found that it was one of Singaporeans' most trusted brands.

One of the two things that Mr Chee credits most for bringing the company to where it is today is his hardworking sales team. In addition to going around Singapore to promote the company's products, the sales team maintains close contact with Tong Seng's clients.

The effort of the team helped to differentiate it among its competitors, says Mr Chee. "Anybody can come up with a brand. To market a brand and get people to trust your brand is not easy. There are hundreds of brands out there."

The other thing that he credits most is the way the company maintains the quality of its products, which builds trust among consumers. The company works towards maintaining the freshness of its products after it is imported here. Aside from having a team to check the contents and amount of moisture in its rice, Tong Seng owns a chiller warehouse to store rice before it is delivered to retailers and consumers. This is something that is done by "no other company here", says Mr Chee.

It also has a packing plant that can be used to clean and repackage rice, in the event its packages are inadvertently damaged. The set-up of the plant was subsidised through the government's Productivity and Innovation Credit (PIC) scheme.

Quality comes first

While he acknowledges that the quality of products is dependent on the suppliers, he stresses that the management is "very strict" with suppliers. "Most of our products are sourced from reliable suppliers. We make sure that they have high-tech machinery and equipment in order to comply with the quality of rice that we want," he says.

"Before we start any business with any supplier, we make multiple trips to check their plant, their machinery, their control, and their whole system."

Tong Seng's heavy reliance on imports from other countries can also be a potential vulnerability in the event of supply shocks from its sources. In 2008, a potential shortage of rice led to what Mr Chee calls a "mad rush" here.

"Every week, the price kept going up. Everybody sensed that they might be a shortage, so everybody started to panic and snatch rice. Shelves in supermarkets were all empty. So we need to have a backup plan," he says.

To cope with this, it exports from a wide variety of countries. Aside from Thailand, it imports rice from countries such as Vietnam, Cambodia, Myanmar, India, Japan, Korea, and even the United States. Though some of these countries export rice at a much higher price than Thailand, Mr Chee says, "Sometimes you have no choice. We are forced to take rice from other places, and you still have to buy when the price shoots up."

He also reveals that Tong Seng owns stockpiles of rice to cope with such situations. However, he estimates that the stockpiles are only useful for a short period of four months, and what they can do is "quite limited". "Yes, you can stockpile, but how many times can you stockpile? You have to invest in a big warehouse, and all your money is sitting there. I don't think it's advisable to do that for the long term," he says.

However, when asked if he intends to own suppliers and expand overseas, Mr Chee's answer was a resounding no.

Aside from recognising a lack of manpower to send overseas, he believes that the locals from source countries have "a better picture" of rice production than Tong Seng, and prefers to leave issues of harvesting to them. "If the local guy cannot settle the problem, do you think we foreigners can settle the problem?" he asks.

Looking forward, Tong Seng faces a different set of challenges as competition becomes more intense. "You can see that there are more and more players coming in. We try to maintain or increase our market share," says Mr Chee. "We have to look for new products that fit us and go along with our distribution networks, through the same sales and delivery channels."

While Tong Seng can afford to advertise its brands through newspapers, television, and radio, it is also looking into social projects to make itself more widely known and also give back to society. It launched a campaign to donate one bowl of "Songhe" rice to charity for every paper crane folded in 2006, and currently works with North West Community Development Council (CDC) and various schools on community projects. "We are not just selling rice, we also care for the society," he says, adding that other rice businesses here are following its footsteps in giving back to the community.

The 80-member Tong Seng also faces another challenge in an increasing tight labour market. "Today, it's not easy to get workers. The government has started to tie up (the supply of) foreign workers. Levies are going up, and quotas are tightening. Everybody is feeling the pinch," he says. A quarter of its employees are foreigners.

Hence, he is looking at improving logistical processes to improve productivity. "Now, what we are trying to do is to minimise our extra labour costs. We try to limit (our customers') minimum delivery quantity, plan our delivery routes, and tie up our logistical control," he says.

While the hard work of Tong Seng staff is of utmost importance in this labour-intensive business, the management also needs to do its part. "We have to look at our manpower arrangement. If your salesperson must be able to sell 100 tonnes (of rice), your delivery guy cannot only deliver 60 tonnes," he says. "Manpower is very important for any business."

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