Right ingredients for successful brew

PHOTO: Right ingredients for successful brew

SINGAPORE - For many investors, grabbing a 10-bagger, in which the value of the stock you hold grows by 10 times, is a once-in-a-lifetime investment.

One local firm which achieved that distinction is home-grown instant coffee and cereal maker Super Group.

The company's shares were trading at a low of just 32 cents in early 2009, hit by the financial crisis.

The stock hit $3.17 last Friday, nearly 10 times its lowest in 2009.

The company manages several brands, including its own Super Coffee as well as the Owl brand instant coffee mix.

The firm's chairman, Mr David Teo, believes that the firm's success is down to two factors: becoming focused on its core product and having a strong regional strategy.

Back in 2008, the firm took a decision to sell off its non-core businesses, such as its vending machines enterprise, and put its energy and talent fully into its coffee business, said Mr Teo, 62.

At the same time, the firm also decided to start making a business out of selling the ingredients it was producing for its instant coffee mixes.

Mr Teo said the firm had decided early on that it wanted to produce its own ingredients to ensure the quality of its products.

"We are unlike other instant coffee makers, which take from different producers and simply pack it together. We are integrated from start to finish," he said.

But while the ingredients unit started out as a means to retain the quality and consistency of Super's products, it has also become an immense source of revenue for the firm in recent years, said Mr Darren Teo, the firm's corporate strategy manager and Mr Teo's son.

When the Chinese milk melamine scandal broke in 2007, the firm, which has an ingredients plant in China, got flooded with requests to produce ingredients from its customers.

"It was a big break for us. And we thought if our other rivals were selling ingredients directly to other firms, why not us," said Mr David Teo.

The ingredients business brought in $3 million in the first year. In just four years, its ingredients business grew to $120 million in 2011.

Super Group sells ingredients such as creamers to customers such as ice cream makers and bottled drinks companies.

The ingredients part of the business accounts for about 31per cent of revenue, while its branded consumer segment contributes about 69 per cent.

The second thing that the company has done and will continue to do is to focus on its regional strategy in Asia.

Mr Darren Teo said that Super is in the top three in several instant coffee markets, including Myanmar, Thailand and Singapore.

In fact, its dominant presence in Myanmar is part of the reason analysts have become excited over the stock.

The company has been in Myanmar for over 15 years, building a strong distribution network with a partner based in the country.

"The country doesn't have many supermarts or hypermarts and a lot of the shops are mom-and-pop stores. So we took a long time to build our presence and sell directly to them," said Mr Teo.

And he is confident that its first-mover advantage and strong network in the frontier market will be enough to ward off increasing competition from other international brands, such as Nestle, which is also eyeing the market.

"Even if you had the money, it would be difficult to build the network we have," he said.

For now, the company is focused on increasing its presence in the region, including China.

"There's a lot of potential in the low- to middle-income group, which sees coffee as a luxury item. And that's where we want to be, where growth is strongest," said Mr Darren Teo.