Spritzer to create new niche products


IN today's unforgiving business climate, many mineral water producers are scrambling to get their bearings. With earnings being clobbered by competition and poor sales, many a beleaguered company has faded into oblivion. From over a 100 manufacturers to the current 10, this creates some depressing math for those in the business.  

Nevertheless, the same cannot be said of Malaysia's largest natural mineral water manufacturer, Spritzer Bhd. After 15 years in the water business, the group is still holding its number one spot with 26 per cent of the fast growing Malaysian water market.  

It is comfortably ahead of its nearest rival, “Alpine” and “Seamaster” and is tipped to increase annual output to about 180 million litres, thus increasing its market share to the 30 per cent level.  

Per capita consumption wise, Malaysia is a growing market. With an annual consumption of 4 litres compared to 45 litres per year in developing countries, Malaysia does have room for growth. As the industry has not reached saturation point, theoretically all players should be enjoying above average profits. 

The growth for Spritzer basically stems from a simple shift among consumers from tap water to bottled water. Spritzer clearly has big plans. Its managing director Lim Kok Boon says there are plans afoot to turn Spritzer into a total beverage company as opposed to one focussed on mineral water only. Lim is quick to add, however, that they don't plan to compete with the big players. 

“We will be doing aggressive marketing for our carbonated water, but we do not intend to go head on with the big boys,” 

The plan has gone down well among analysts who prefer to see Spritzer take a proactive stance in positioning itself.  

“Being number one alone is not enough. It should take advantage of the growing market and attract people to try Spritzer,” says an analyst. 

Currently, the group has 2 main brands under the name “Spritzer” and “Cactus”. It has a total of five products, ranging from mineral water to carbonated mineral water. 

The group grew from Chuan Sin Sdn Bhd, an enterprise founded 26 years ago to make biscuits, confectionary, toiletries and beverages. Lim first became aware of the potential market for bottled water during a trip to northern Kelantan, where he noticed locals drinking bottled water from neighbouring Thailand.  

Lim then bought land adjoining a reservoir at Mukim of Tupai, Air Kuning, Taiping, Perak and commissioned a hydro-geological survey. When the surveyors found mineral-rich water beneath a stratum of granite, he knew he had made the right decision. 

“We did not strike oil but it was close to it,” says Lim. 

A complex restructuring was carried out to prepare the group for going public.  

Spritzer Bhd took over four companies and satisfied the purchase 90 per cent in shares and 10 per cent cash. The four wholly-owned subsidiaries included Chuan Sin, which was valued at RM38.8 million, Golden PET Industries Sdn Bhd which was valued at RM22.5 million, Chuan Sin Cactus Sdn Bhd at RM3.76 million and PET Master Sdn Bhd RM800,000. 

Last year, Spritzer acquired a Johor-based mineral water plant Angenet Sdn Bhd for RM2.1 million. 

“With the mineral water plant located in Johor, there would be savings in transport and distribution costs and more efficient delivery to the group's customers in the southern region, especially Singapore,” says Spritzer executive director, Dr Chuah Chaw Teo. 

Currently, Chuan Sin, which produces and bottles Spritzer mineral water, contributes 60 per cent of total revenue. Golden PET, which specialises in the manufacturing of PET (polyethelene terepthalate) bottles and toothbrushes under the name “MorningKiss”, comes in second with a 40 per cent contribution. 

In 2000, Spritzer was listed on the second board of the Kuala Lumpur Stock Exchange. By then, it was already the largest mineral water producer in the country. Its initial public offering of shares recorded the highest subscription rate of the year, with shares being 800 per cent oversubscribed.  

Presently however, as with most second board companies, the share price has dropped below its initial public offer price of RM1.70 to RM1.42.  

But there could also be a fundamental reason here.  

One analyst points out that Spritzer's margins have dropped drastically compared to its pre-listing days.  

“Before listing, profits used to grow at 30-40 per cent annually. In 2002, profits only recorded an average annual growth of 24 per cent. I have no idea why”, he says. 

For the financial year ended May 31, 2002, the group recorded a pre-tax profit of RM6.60 million against RM10.02 million the previous year. Turnover was maintained at RM51.69 million against RM51.65 million.  

For the first quarter ended Aug 31, 2002, pre-tax profit fell marginally to RM2.11 million from RM2.29 million, while revenue dropped to RM13.98 million from RM14.80 million. 

The analyst describes Spritzer's quarterly performance as erratic. “Its earnings potential is tough. There is lack of information and disclosure to the public. Being the only listed bottler, it is hard to forecast its future earnings. I also foresee it facing intense competition from lower range brands.”  

Chuah attributes the decline in profits largely to the decline in sales of PET bottles for cooking oil and in the margins of bottled mineral water. Greater competition and the higher outlay in advertising and promotional activities are yet other factors.  

Nevertheless, Lim adds that the group will continue to look at new niche products to complement its existing product range. The group would prefer to create new niche products rather than compete with similar products produced by the existing giants. The new products would be targeting the segments of health, new age and sport drinks such as iron fortified drinks and beverages that would be free of artificial ingredients, flavours and preservatives. 

“We plan to introduce about 3 new drinks every year. We are also looking into more export markets,” says Lim.  

Currently, Spritzer exports 5 per cent of its total products overseas. Some of these countries would include Singapore, Maldives, Mauritius and Guam Islands. 

As the group's factory operates on a vast 100-acre site, management is now toying with the idea of creating a tourist area. The idea has been brewing, although nothing solid is in the pipeline. Lim says that the group will be giving it some serious thought soon. 

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 18
Cxense type: free
User access status: 3

Did you find this article insightful?


100% readers found this article insightful

Next In Business News

Fitch sovereign rating revision due to Covid-19, political developments
Fitch downgrades Malaysia to BBB+
INIX signs MOA to buy stake in a glove producer�
Singapore picks Grab, Ant Group, others for four digital banking licences
Widad bags 5-year contract to manage ferry terminals in Perlis, Kedah
Trading volume on Bursa at 2-week high of 14b shares
Activist funds scupper Singapore firm's merger in rare victory
Oil prices jump after Opec+ inks supply compromise
Boilermech sees 20.64m shares traded off-market
Japan Credit Rating Agency affirms Maybank A ratings

Stories You'll Enjoy