Focus

Monday, 3 August 2015

Adding fizz to family biz

Lim and Lee Choong San showing off the various products made by Yuen Chun Industries.

Lim and Lee Choong San showing off the various products made by Yuen Chun Industries.

A new breed of professional managers is just the thing needed to take an old family business to new heights, and that’s precisely what soy sauce company Yuen Chun got with the fourth generation taking over.

LEE Choong San, director of Yuen Chun Industries Sdn Bhd, is proud to be a part of his family’s century-old company, saying that his goal is to continue “building a company that would be around for another 100 years and more”.

It was no small decision on the 48-year-old’s part when he left his well-paying job as a tax consultant with a multinational company to join the family business in 2012.

Lee’s great-grandfather Lee Nam established the fermented and formulated soy sauce company in 1910, naming it Yuen Chun, which means “original and special”.

The company has a waste water treatment plant, which is essential in complying with today’s stringent environmental and certification standards.
The company has a waste water treatment plant, which is essential in complying with today’s stringent environmental and certification standards.

Lee Nam, the nephew of business magnate Loke Yew, came to Malaya in the 19th century to assist in his uncle’s business empire. Eventually, he struck out on his own.

Yuen Chun makes soy sauce and bean paste (also known as tauchu) by fermenting soya beans, and also produces formulated sauces like oyster sauce and abalone sauce. Apart from having its own brand of sauces, the company also operates as an original equipment manufacturer (OEM) for supermarkets as well as companies supplying to supermarkets.

According to Lee, the fourth generation running the company, the business started as a sole proprietorship with the name Yuen Chun Chan. It was basically a sundry store located on Petaling Street, in Kuala Lumpur’s Chinatown.

The fermentation tanks are covered 24/7 for hygienic reasons and to comply with internationally recognised certifications.
The fermentation tanks are covered 24/7 for hygienic reasons and to comply with internationally recognised certifications.

“My great-grandfather brought the culture of making soya sauce from the town of Heshan in Guangdong province and manufactured the soya sauce in whatever available space in the shop,” says the 48-year-old.

In time, it outgrew the confined spaces of the shop, and the soya sauce manufacturing operations moved to a 1.25 acre factory on Jalan Chan Sow Lin in 1934. And as business thrived, Lee’s uncles, Datuk Lee Tak Lum and Lee Tak Suan, who were managing the business at the time, incorporated the existing entity as Yuen Chun Industries Sdn Bhd.

“Tak Lum, together with my cousin Philip Lee, also oversaw the establishment of our second factory in Batu Caves in May 2000 to cater for the extra manufacturing capacity required for the export markets that the company had just embarked into,” he recalls.

Interestingly, the company keeps to its humble roots – it still operates a sundry store that occupies three shophouses in Ipoh’s Old Town. It is managed by Tak Lum, who is now 81.

Staff working packaging the sauces.
Staff working packaging the sauces.

According to Lee, he only actively participated in the Yuen Chun’s management in 2012 when his cousin Philip, who was running the business, decided he wanted to start his own business. Someone had to step up and fill the position he was leaving behind.

“So in that year, as a culmination of a family business restructuring plan that took place over several years, my older brother, Lee Ming San, 51 and I took over full ownership of the company. Ming San is not involved in the day-to-day operations of the company, but as majority shareholder, he advises on the strategic directions of the company,” Lee explains.

Lee and his brother are professionals in their own right, with the former having been a tax consultant for 25 years.

He spent 14 years with Arthur Andersen in Kuala Lumpur and Melbourne, and 11 years as a tax partner with Ernst & Young (EY) Malaysia, while Ming San was once the CEO of CIMB-GK Securities and currently manages an independent value-investment fund in Singapore.

The new factory in TechparkEnstek, Negri Sembilan is expected to be operational by the end of this year.
The new factory in TechparkEnstek, Negri Sembilan is expected to be operational by the end of this year.

His older brother also brought in Lim Yew Hock, 57, formerly a stock analyst, as a director and general manager to help grow the company.

So what motivated Lee to leave his high-profile consulting career to venture into an entirely different industry?

“Although giving up a partner’s remuneration in EY may seem a significant sacrifice to make in pursuit of the company’s goals of expansion and modernisation, I have no regrets. And most importantly I have enjoyed the support of my family and friends in making this career change,” he replies.

Lee recalls attending the EY World Entrepreneur of the Year (WEOY) event in Monaco in 2012 when he was still a tax partner of EY Malaysia and meeting Tan Sri Liew Kee Sin (now Eco World Development Group Bhd chairman), who was Malaysia’s representative at the event.

“At the time, SP Setia, under his leadership, had just won the bid to develop the Battersea Power Station land in London. I guess some of his incredible entrepreneurial spirit rubbed off on me and gave me that final impetus to take the plunge,” he says.

One of the first few things that the two brothers did when they took over was to acquire a 3.5-acre industrial land in Techpark@Enstek, Negri Sembilan in late 2012.

Packed sauces waiting to shipped overseas.
Packed sauces waiting to shipped overseas.

“We recognised the need to expand and modernise the business, and we immediately began working on designing a modern plant built to international food manufacturing standards,” says Lee.

The company invested about RM15mil in the new plant, and construction commenced in 2013. It is expected to be fully commissioned by the end of this year.

Lee says they both invested substantial amounts of their personal funds for the acquisition of the land, construction of the plant and the purchase of equipment.

“We were also extremely fortunate to have supportive banks, especially Public Bank and other leasing companies that provided loan and equipment financing,” he adds.

In Malaysia, Lee points out, there are more than 300 independent soya sauce makers, led by not more than 12 large companies. Many are small operators selling to a particular geographical location.

“The domestic market is very small, incredibly competitive and margins are very tight. We recognise this from the outset and decided to target the export market,” he explains.

Some of their products are sold in larger volumes, usually to restaurants.
Some of their products are sold in larger volumes, usually to restaurants.

Yuen Chun, which first began exporting in the 1990s, has embarked on a programme to certify its production facilities and operations in line with international standards under Lee’s leadership.

Aside from the obligatory certifications, like Halal Malaysia, Hazard Analysis & Critical Control Points (HACCP) and Good Manufacturing Practice (GMP), Yuen Chun has also secured certifications from the British Retail Consortium (BRC), US Department of Agriculture (USDA), and Supplier Ethical Data Exchange (SEDEX).

These additional internationally recognised certifications are important as companies exporting to the UK have to comply with the BRC standards as they are an industry-wide benchmark for quality and food safety in the UK.

“Based on a review of other industry players’ websites, we believe that Yuen Chun is one of only two Malaysian soya sauce companies with the BRC Certification,” Lee stresses.

Multinational buyers are also increasingly expecting their suppliers to be members of SEDEX, which is a not-for-profit membership organisation dedicated to driving improvements in ethical and responsible business practices in global supply chains. Yuen Chun became a member of SEDEX in 2014.

Today, exports comprise 55% of the company’s revenue. The future is international and Lee says the certifications, together with the new Enstek plant, will provide them with a firm footing to sell their products to large export markets like the US, UK and Europe.

Tags / Keywords: Central Region , Yuen Chun , soya sauce manufacturer , entrepreneurship

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