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Banking on its bread and butter brands

Auric Pacific Group's chief executive, Dr Andy Adhiwana, has big plans for nourishing the business after taking Indonesia's Riady family's first listed vehicle in Singapore private.

Although Auric's flagship brands SCS butter and Sunshine bread have been household names since the 1900s, the company has set its sights on being the nation's bread and butter supplier for the next 100 years as it prepares to expand its footprint in Singapore as well as in South-east Asia.

With a turnover of $423.9 million last year, the investment holding firm - part of the Lippo Group of companies - is preparing to build a greenfield production factory and is eyeing potential acquisitions in the region.

"One challenge facing big local companies is whether they should go beyond Singapore or expand their footprint here. We choose to do both... because Singapore has a population of only about five million. If small countries like Switzerland and New Zealand can reach out globally in terms of products, we can try to do that as well," Dr Adhiwana, 32, told The Straits Times.

"There is a lot of potential in inorganic expansion. We have a newly set-up corporate development division that analyses countries, industries and companies, so we can move faster and be more active with mergers and acquisitions."

While studying for his doctorate degree in Germany, Dr Adhiwana, then 25, married Dr Stephen Riady's eldest daughter. He pursued an MBA at the National University of Singapore in 2012, and upon graduation, joined Auric in 2013 as its business development manager.

Dr Andy Adhiwana says Auric Pacific hopes to make SCS the go-to butter brand for young adult consumers. It also plans to invest in capabilities and market research to grow the Sunshine bread brand.
Dr Andy Adhiwana says Auric Pacific hopes to make SCS the go-to butter brand for young adult consumers. It also plans to invest in capabilities and market research to grow the Sunshine bread brand. PHOTO: AURIC PACIFIC GROUP

SUCCESSFUL STRATEGY

The main reason is that we closed all the loss-making restaurants and food retail outlets, and began focusing on our core retail expertise, which is foodcourt management. We also implemented rigorous processes for capital allocation and became more disciplined in our investment decisions. The bread and butter business also required very low capital expenditure.

DR ANDY ADHIWANA, on how Auric Pacific raised net profit for the first quarter of this year to $5.5 million from $3.6 million a year ago.

After a year of working in the trenches across all business units, he was made executive director in 2014, and then chief executive in May 2015.

Within a year of taking over, Dr Adhiwana succeeded in bolstering the group's cash position to $90.1 million in 2016, from $47.7 million in 2015. Net profit for the first quarter this year jumped to $5.5 million from $3.6 million a year earlier.

"The main reason is that we closed all the loss-making restaurants and food retail outlets, and began focusing on our core retail expertise, which is foodcourt management. We also implemented rigorous processes for capital allocation and became more disciplined in our investment decisions. The bread and butter business also required very low capital expenditure," he added.

Dr Adhiwana has his work cut out for him. Auric began refreshing its corporate strategy and brand in November, starting with Sunshine, and then following up with other consumer products it owned.

"Our grand plan is to develop the potential of this company and its products," he said. "We want to make SCS the default butter for the young generation."

To that end, Auric has launched an exercise to refresh the 112-year-old SCS brand in hopes of making it relevant to young adult consumers.

"We want consumers to recognise our bread and butter brands," he said. "We are focusing on SCS spreadable butter and cream cheese, before taking the brand to the next level."

SCS butter, whose roots go back to 1905, is the market leader in its category with a 40 per cent market share here, followed by Golden Churn and Lurpak, according to market research firm Nielsen.

SCS' corporate clients include five-star hotels such as Marina Mandarin. The butter is also supplied to kaya toast shop chains and big bakeries famed for their artisanal breads, cakes and tarts.

Auric also plans to invest in capabilities and market research to grow the Sunshine bread brand.

Sunshine, which began in 1930, is a strong No. 2 in the bread category, having gained market share by introducing a healthier range of whole grains. Nielsen data shows that Sunshine has a 32 per cent market share behind top seller Gardenia.

To counter fierce competition from supermarket house brands, such as those from FairPrice and Giant, and small manufacturers in Malaysia, the group is focused on improving its product offering.

"Bread remains a competitive category but we differentiate our products by using the highest quality ingredients and constantly innovating, leading to the launch of consumer favourites such as Hokkaido Milk bread, Australian Oat Grain, and Canadian Sprouted Wholemeal bread," Dr Adhiwana said.

He also paid tribute to the Health Promotion Board's initiatives such as the Healthier Choice Symbol, which he says has inspired the group to continue to develop healthier products.

Even before Prime Minister Lee Hsien Loong's call on Sunday to fight diabetes, Sunshine had already taken steps in that direction with the launch of its low-sugar, smart-carb, low-GI (glycaemic index) bread.

"The movement towards healthier grains, where we are particularly strong, has allowed Sunshine to gain market share over the last few years. Our smart-carb, low-GI bread is very difficult to make, but very healthy, especially for diabetics. We know we won't make millions of dollars from it, but we still launched it because it is good for health."

Dr Adhiwana is also focused on increasing margins from the group's distribution and manufacturing business, which accounts for the lion's share of total revenue of $423.9 million in full year 2016.

Auric currently supplies more than 100 consumer brands, including Kellogg's, Post, Fonterra, Twining's and Kraft, to supermarkets in Singapore and Malaysia.