In 1997, Munchy Food Industries found itself staring at the abyss just as its new factory was about to come online. The Asian Financial Crisis and the ensuing fluctuations in currency exchange meant they could not pay for their new equipment. LIM WING HOOI revisits this turbulent episode with the managing director.
BEING an entrepreneur is a way of life, a never-ending story — not something that people who like to make a fast buck can stomach, if Tan Chuan Kok’s experience is anything to go by.
The 47-year-old managing director of Munchy Food Industries (Munchy’s for short) says it was a real roller-coaster ride for him and his family, especially during the Asian Financial Crisis in 1997.
The biscuits and wafer company had just invested RM30mil, mostly raised from bank loans, in a spanking new factory and was ready to embark on a new phase of growth when the dark clouds rolled in and the economy went south.
Currency fluctuations at the time meant that the cost of equipment suddenly soared out of reach.
It was a very stressful time for everyone.
“We were at the height of our expansion, with equipment suppliers and bankers to answer to,” Tan recalls at the company’s factory in Tongkang Pecah, Batu Pahat, Johor.
“Due to currency fluctuations, the costs had ballooned and we were not able to secure additional financing for the equipment. We told the equipment suppliers that they could take them back or they could let us use them, and when we had the money, we would pay them,” he says.
This was make-or-break time. They knew they would like to soldier on, but the call was not theirs to make.
Well, it’s 2016 now, and they are still around to tell the stories from a turbulent time. Munchy’s didn’t just survive; they have positively thrived in the years following the crisis.
In 2015, the company’s revenue came in at nearly RM500mil.
Sharing Munchy’s early history, Tan says his brothers started the business in 1991 at the urging of their father, who invested RM80,000 in it.
Tan Sr wanted to give his sons a headstart in doing business by helping them to venture out on their own. He did not want any complications at his existing biscuit manufacturing business, which was managed by his brothers.
“Hence, my two brothers started the company in 1991 with a staff of five, renting a one-acre factory at my father’s existing biscuit manufacturing premises in Tongkang Pecah, Batu Pahat, Johor (about 3km away from their factory today). One condition he set was that we should not manufacture the same products,” Tan remembers.
And so Munchy’s manufactured wafer rolls instead of the conventional cream crackers.
He says his brothers’ resourcefulness were vital in the new company’s growth. Tan relates how they purchased refurbished equipment for RM2.7mil to begin production. But being refurbished goods, they did not come with the necessary supporting structures.
“My brothers worked with the engineer that was assigned to help us to set up the equipment to build the structures as well,” he marvels. When Tan graduated with a degree in international business in 1994, his father asked him to come back and grow the business with his two brothers.
“While my brothers handled operations and manufacturing, I was naturally tasked to do sales, being designated the export manager,” he says.
In 1995, the company began exporting to Indonesia, Singapore and Thailand. Apart from producing their own wafer sticks, they also did contract manufacturing for multinational food companies.
In 1996, his father’s company was acquired and the new owner wanted back the land where Munchy Food Industries had been set up. This meant they had to move.
As his father had a 20-acre plot of land in nearby Tongkang Pecah, Batu Pahat, Munchy’s could now set up a proper biscuit factory. Moreover, since their father was no longer making biscuits, there was no longer any restriction on the kind of products that they could manufacture.
And that was how they came to borrow the millions that year. Just a year later in 1997, the new factory was ready to roll... and they promptly found themselves in the eye of a financial storm. They just had no money to pay for the equipment they had ordered.
Fortunately, the supplier decided to take a gamble on them.
Cranking up their new factory, Munchy’s started by producing four varieties of biscuits with the help of 130 workers. Despite now being able to manufacture the popular cream cracker, they chose not to as they did not want to go head-to-head with the competition.
By the end of 1997, Munchy’s had posted RM14mil in revenue.
The economy may have been in a doldrum, but they certainly weren’t. They kept at it, kept the machines firing on all cylinders and push their staff to do the best. Munchy’s had another good year in 1998, with revenue doubling to about RM28mil, and the year after that, they hit RM58mil.
“And when the economy was recovering in 1999, we settled all the debts and the suppliers were satisfied,” reveals Tan.
In 2012, Tan decided they would expand to larger markets and the company began operations in China. This year, they also set up operations in Indonesia in January.
Today, the company, with about 1,600 workers at its three manufacturing plants in Malaysia, Indonesia and China, exports over 100 wafer and biscuit products to over 50 countries, including Japan, China, Indonesa, the UK, India and Australia .
Their RM500mil revenue last year shows that they are maintaining their incredible growth.
Tan says they are investing in a highly automated warehouse that should be ready by end of the year. This will be followed by three more production lines by next year.
“We need to continue to understand market demand. In Malaysia, consumers might prefer chocolate but in China they might prefer fruity tastes like lemon,” he says, adding that they learn all the time through consumer tests, as well as market research.
Tan says getting it right involves a lot of trials and errors, which, while costly, is necessary.
To Tan and his pioneering team, it’s all about finding a solution and having the stomach to carry on no matter how bad things may seem.
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