ANALYSTS who track the consumer sector generally applaud Yeo Hiap Seng (M) Bhd's (YHS) move to upgrade its products and aggressively tackle the growing youth market.
An analyst from Mayban Securities sees YHS' new products as a move to expand their range due to competition in the food and beverage (F & B) market, particularly from Fraser and Neave Holdings Bhd's (F&N) whose Seasons health drinks have become very popular.
She said YHS' focus on health drinks was not surprising as consumers in general had begun to emphasise healthy lifestyles.
“Growth for the health drinks market is quite high...better than the carbonated segment. The base for health drinks is small, thus growth will be high,” she said, adding that YHS had a large market share in the packet drinks segment.
Meanwhile, a consumer analyst at CIMB Securities is sceptical on how the new products, Justea and SoyKids, could contribute to the company's bottom line.
“Sure, they will be able to capture 10% to 15% market share of the new products in the next one to two years but they could erode the market share of existing products,” he commented.
He added: “YHS has to come out with new products anyway to counter competition. And they are trying to segment the products. It is a good strategy to start with, but only time will tell if this will be successful.''
The analyst said YHS' core business, F & B, was very traditional and gradually losing market share. The challenge now is to grow the market.
He sees YHS gradually entering the competitive canned drinks market. However, that will be a tough fight with multiple existing players and a continuing battle between canned and packet drinks.
“The younger generation is prone to drinking soft drinks and juices. By entering that market, YHS will face a cut-throat market as it needs to fight with other producers of soft drinks,” said the analyst.
He said that although consumers were warming up to the health drinks concept, he foresaw it would take a lot of work to penetrate the younger market.
However, coming up with the new products is a good strategy as it also reflects a change in management attitude. “Tan is there to transform things. YHS' management team underwent a lot of change in trying to alter the way things were done.”
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