Aiming for a bigger bite
Food manufacturer adopts new retail strategy for growth
ALEX Tiong Swee Lee is beaming with pride as this year is turning out to be an eventful one. Besides celebrating the arrival of his first child, his decade-long quest to popularise the halal version of a traditional Chinese cuisine is also starting to see some major turning points in its growth story.
Co-founded by Tiong and his elder brother Datuk Tiong Su Swan in 2004, TSL Bestmas Manufacturing Sdn Bhd, a Kepongbased halal Chinese dim sum and pau manufacturer, will oversee a large expansion in production capacity, increase in export volume and a stronger drive for business diversification.
“Any food manufacturing company must understand the challenges and opportunities facing their own market segment. The ones who will succeed are those who are able to introduce new product ranges in order to maintain growth and fight off competitors,” he says.
Bestmas currently has over 145 pau and dim sum varieties. It is looking to add at least six new varieties to its product lines every year.
Its production rests on a backbone of 135 staff members operating on double shift.
Bestmas supplies its wide variety of products to wholesalers around Malaysia, who then distribute them to other caterers, restaurants, hotels, canteens and supermarkets. The company also carries out contract manufacturing for other suppliers.
But the company is now eyeing the consumer market.
Long-time customers of Bestmas may have already noticed a shift in the way its products are packaged and advertised to suit the retail segment.
This, Tiong acknowledges, is in response to the fast changing landscape of the food manufacturing industry thanks to the rise of e-commerce. Demand is growing, he says, and the company needs to cater to the growing market.
The company will focus on its new retail strategy to make its products more accessible. Its new marketing plan will include rolling out ready-to-eat pau and dim sum kiosks, vending machines and smaller sized steamers to make its products readily available to consumers.
Our main target is on urban areas, he says.
However, challenges remain for the company.
While demand is picking up, meat and meat products remain one of the most highly regulated food segment with regard to halal requirements. There is also a large number of ingredients directly added to food which needs to be certified halal, adds Tiong.
Gearing for exports
According to Tiong, the Malaysian government is starting to see the export potential for local food such as dim sum and Bestmas is keen to explore overseas markets for growth. Their maiden foreign stops will be Singapore and Indonesia.
Bestmas is also negotiating with potential partners in several European markets to export its dim sum products there.
Tiong hopes to explore opportunities in Indonesia and China in order to expand its footprint and become a regional player.
Bestmas is in the midst of building its new factory to cater to the export market. The new factory is twice the size of its current one and will be dedicated to manufacturing products that will be exported. It is expected to be ready by next year.
The timing of the expansion is turning out to be spot on as demand for halal products is beginning to show.
In delivering an export-led growth strategy, Tiong is expecting the company to generate up to RM35mil revenue in 2019.
But as promising as the export market holds for Bestmas, Tiong cautions that markets overseas have its own set of challenges. Finding product differentiation in a saturated marketplace and adhering to consumers’ constantly changing demands are only some of the obstacles that Tiong knows he will have to tackle.
The biggest challenge many food manufacturers face is to stand out in a crowded market. A lot of innovation has taken place in the food industry over the past 14 years and plenty of products have come and gone. Customers are spoilt for choice and it takes an extra special something to get their attention.
Tackling the pace of change in customer demand and expectation is proving to be one of the hardest things to do, he says.
Tiong also notes that customers are demanding more products with better quality control.
“Many of our customers are rejecting foods that contain artificial dyes. In response, food manufacturers like us are testing out natural ways of colouring processed foods. We have to be able to prototype, test and launch new products that accommodate consumer trends and taste preferences,” he says.
Bestmas is now striving to develop clean label products, and will prioritise the use of ingredients that are perceived as natural. It is not just about repackaging for a more natural and holistic look, he says, but to also develop more wholesome products that are aligned with their consumers’ demands.
“Failing to produce industrial-scale batches that are of the same standard and quality can see you miss out on opportunities.
“Scaling up recipes for mass production can be a complex process that takes into consideration numerous factors. This was when we realised that there is a need to set up a properly designed and managed factory,” says Tiong of its move to look into a new factory for its export market.
Bigger things to come
Food manufacturing businesses have been around for a long time. They may appear to be an unattractive segment in comparison to the wider attention given to tech-driven companies, but Tiong notes that food businesses are among the most sought after companies in the region.
The main draw for these outfits is the growing appetite for quality food. Additionally, rising incomes would mean that a bigger part of the population is able to afford quality food.
With a proven track record and established business model, Bestmas has not gone unnoticed. The company has received serious interest from several potential investors. Some of them are firms that have the focus and financing needed to undertake a turnaround that can push the company to the next level.
As part of the way forward, the company is open to the idea of selling a minority stake of up to 30% to raise capital for growth, says Tiong, who is also a director of the company.
According to Tiong, Bestmas was recently approached by two local funds that are interested to take up minority stake in the com- pany. In return, Bestmas is to turn over control of their finances.
Bestmas has also received buyout offers from funds and private investors, but Tiong says he is not ready to exit the business.
The company is currently wholly owned by Tiong and his brother.
The company has not made any decision on whether it will be taking up any of the offers made by potential investors thus far. Nevertheless, Bestmas will consider strategic investors as the company needs capital for growth and to modernise the management of the business to take advantage of the rising demand for halal food.
At the moment, Bestmas’ expansion is mainly internally funded.
Bestmas will consider the offers after taking into account the fiveyear projection on potential synergies and possible support from the investors apart from growth capital. Tiong welcomes approaches from interested parties with experience and expertise in the food business.
Anchored on innovation, Tiong aims to transform a traditional business as it rides on the growing global appetite for halal food. Tiong makes it clear that Bestmas wants to stay on top of this growing trend.