Moving up the value chain


  • Business
  • Saturday, 20 Dec 2003

CEO Outlook 2004 

Our CEO Outlook today features three CEOs who represent big foreign consumer and retail companies in Malaysia. 

They are Sullivan O'Carroll of Nestle (Malaysia) Bhd, Danny Ng of Unilever Malaysia and David Wood of Courts Mammoth Bhd. 

Nestle and Unilever are, of course, among the biggest food and personal healthcare conglomerates, with some of the world's best known brands. 

From their vantage points, O'Carroll and Ng are in a better position than most to recognise the emergence of China and India as competitors to Malaysia for foreign direct investments (FDIs), particularly in cost and price sensitive industries such as food products. 

Their advice to Malaysia: move up the value chain. 

Courts Mammoth, which is British-owned, has found Malaysia to be one of its best profit centres and is rapidly expanding its outlets, despite a very competitive marketplace. Courts started with one store in Johor Baru 15 years ago – today it has 77 stores nationwide. 

Leveraging on the success in Malaysia, Courts is targeting Indonesia and Wood is eminently suited for the task. He was in Indonesia before he was transferred to head Courts Malaysia. 

Danny Ng 

Chairman 

Unilever Malaysia 

Challenges and prospects for Malaysia's economy in 2004. 

Malaysia's economy has enjoyed considerable success over the past several years, with steady high achievement, interrupted only by the Asian financial crisis of 1997/98 and the recent SARS outbreak. 

While these disruptions have forced Malaysia to focus on the issues at hand, such as the use of financial policies to stem the corrosive tide on currency and markets, the real economic implications and lessons must not be neglected. 

Severe competition in the manufacturing sector, especially from China, and perhaps also India, will affect Malaysia's exports and foreign direct investment in the country. We will have to address these challenges at the national and corporate levels and, at the same time, face other challenges in the international political arena. 

Looking at business from a global perspective, we have to become much more competitive through greater productivity and better efficiency. We must focus on innovation, become more creative and enhance our skills. 

As long as we are able to identify opportunities in the globalising market, the prospects for growth will be there. Productivity and quality are key factors to building confidence and relationships among business partners, whether domestic or foreign. 

 

Effects of SARS and the Iraq war on your company? 

While the economic effects of SARS were far-reaching, the degree of its impact varied from country to country. In Malaysia, like other affected countries, the tourism and services sectors were the hardest hit. 

As a global brand builder and marketer of high-profile consumer goods, we were naturally affected by the SARS outbreak due to the impact of dampened consumer sentiments. 

However, as a country we were privileged to benefit from the government’s new economic stimulus package aimed primarily at reducing these effects through measures designed to boost overall consumer sentiment and business confidence in the country. 

Focus of your company/group in 2004? 

Aside from growing our brands and coming out with product innovations and extensions, we will continue to focus on what we have done best over the past 56 years – meet the evolving needs of Malaysian households, and respond creatively and competitively with quality products to enhance their quality of life. 

You can say that we are focused on delighting Malaysians with our household brands. In our continuing quest for this, we pay close attention to consumer insights and feedback. A deep understanding of consumer needs and markets is the first step toward building successful brands. This passion, which drives our brand success, will continue into 2004 and beyond. 

We also believe that success requires the highest standards of corporate behaviour towards our employees, consumers, society and the world in which we live. This year we took a major decision to relocate to an ultra-modern office which represents all that we believe in at Unilever. 

This is a new road to profitability and sustainable growth for our business and long-term value creation for our shareholders and employees. 

 

Do you expect your company/group to do better or worse in 2004, compared with 2003? 

We are confident that Unilever Malaysia will see further growth in 2004, with new business strategies in place. Currently, we are a market leader in many consumer segments – personal wash, deodorant, shampoo, ice-cream and skin care. In 2004, we will reinforce innovation, product development and brand strategy to grow our business and market share. 

We believe that we have a powerful team at Unilever Malaysia and this, together with our portfolio of powerful brands, will ensure that we continue to remain a leader in the consumer market. 

 

Is China an important factor in the management of your operations? 

China has emerged as an important market, more than before, riding high on many counts including foreign direct investment (FDI), gross domestic product growth and international reserves. 

China’s entry into the World Trade Organisation has been a boost for its economy, and projections show that before long, it will become a US$10 trillion economy, second only to the United States. 

China is more willing, and ready, than the Asean region for its own free trade area (FTA). The proposed Asean-China FTA is a win-for-all situation for making South-East Asia attractive again for FDI with its huge domestic market of 1.3 billion people and low labour cost, an important consideration for our operations. 

 

What should be the priorities of Prime Minister Datuk Seri Abdullah Badawi? 

We believe the new Prime Minister will build on the successes of Tun Dr Mahathir Mohamad. We have every confidence that he will lead the country into continued growth, prosperity and stability. It is early days yet, but the country should benefit from his stated policies of transparency, openness and moral responsibility. 

As for the industry we are in, the Malaysian government has always been business-friendly and willing to do whatever it takes to keep consumer confidence on an even keel. 

As a company with a long history in Malaysia, we welcome such policies and we ensure that we operate in accordance with the aspirations of the Malaysian government for the well-being of all Malaysians. 

Sullivan O'Carroll 

Managing director 

Nestle (Malaysia) Bhd 

 

Challenges and prospects for Malaysia's economy in 2004. 

With the advent of the Asean Free Trade Area (Afta), I am certain the region, and Malaysia in particular, is prepared to maintain its competitiveness in the global environment. The economy needs to continue to grow and overall productivity to improve, especially with the advancement of China and the emergence of other new players in the battle for investment dollars. 

Malaysia will need to bolster its value chain, identifying more value-added opportunities as the country cannot compete with China and India on price and cost competitiveness alone. 

As far as the food industry is concerned, Nestle can be assured that prospects remain promising, with consumers continually looking for better value products, and new food and cooking ideas to help them in their busy daily lives; and for mothers, to find more nutritional products for their families. 

As part of the largest food group in the world, with extensive research and development (R&D) resources to call upon, Nestle is well placed to cater to these needs. However, with the increased competitive environment, we must be able to anticipate consumer trends and create demand for our products. 

 

Effects of SARS and the Iraq war on your company? 

In the first quarter 2003, Nestle’s products registered higher sales in the household segment as people opted to eat more regularly at home due to the outbreak of SARS and also due to the uncertainties of the Iraq war. 

Over time, public fears subsided and we saw a gradual improvement in consumer demand in the out-of-home sector with hotel occupancy increasing and Malaysians returning to food courts, stalls and restaurants. 

 

Focus of your company/group next year? 

Nestle will continue to remain relevant to our local consumers by offering them more functional, value-added products to satisfy current and future needs, based on consumer insight and our strengths in nutrition and R&D. 

We want to position Nestle as a food, nutrition, health and wellness company that meets the needs of our consumers, not only by providing taste and pleasure but also to help manage their health and well-being as well as enhance physical and mental performance. 

We will grow through new business opportunities and will focus on protecting and gaining market share for our major brands in the different categories through better consumer insights and communications as well as improved distribution. 

We will also strive for sustainable, capital-efficient and profitable growth to enhance shareholder value, to ensure our shareholders continue to receive a fair return on their investments. 

Our strategies are in place. We have the right tools and systems but more importantly, our people will contribute the impetus to achieve our targets in 2004. This is why the company will continue to develop and motivate its people to allow for it to grow further. 

In its commitment to nourish Malaysia, the company will contribute to the well-being of Malaysians and support nation-building and sustainable development for the long term via investments, training and development of locals and various social commitments. 

 

Do you expect your company/group to do better or worse in 2004, compared with 2003? 

With support from key brands like Milo, Nescafe and Maggi, which are market leaders in their respective categories, I would expect the company to fare better next year. We will also reap benefits from our new business excellence project, Globe, which will provide us with improved efficiencies and the necessary information and tools to compete in a complex global environment. 

Our results are on target and, barring any unforeseen circumstances, I am confident we will match our growth to the forecast growth of the national gross domestic product of 4%–5%, particularly with improved consumer demand. 

 

Is China an important factor in the management of your operations? 

China has no direct impact on Nestle's business, although we import some raw materials ex-China. China may be attractive to foreign investors with its abundance of low-cost labour and ready market but Malaysia has more to offer due to the government’s good relations with the private sector, access to modern technology and infrastructure as well as a well-developed labour base. 

Malaysia should instead view China as a vast potential market for Malaysian products. Nestle Malaysia already derives more than 12% of its turnover from Asian countries, including China. We also see opportunities of untapped market in China, particularly for halal food. 

 

Prime Minister Datuk Seri Abdullah Ahmad Badawi's priorities for the country and the industry you are in? 

Datuk Seri Abdullah Ahmad Badawi has made the fight against corruption one of the priorities on his agenda. With his personal attributes and leadership style, the new Prime Minister can create a positive impact in this matter. 

We appreciate his focus on corruption because, for a company like Nestle to prosper in the long term, as with any other company, it needs to be free of corruption, which like cancer, serves to only inhibit growth. 

David Wood 

Chief executive and managing director 

Courts Mammoth Bhd 

 

Challenges and prospects for Malaysia's economy in 2004. 

One of the challenges ahead is the uncertainty in the world economy and its possible impact. However, we are optimistic that Malaysia's economy will experience sturdy growth under the leadership of our new Prime Minister. 

The government’s prudent focus on providing a conducive and business-friendly environment will not only spur domestic trade and consumption but also attract foreign direct investment. 

 

How badly was your company affected by SARS and the Iraq war? Has your company recovered from these events? 

Fortunately, Courts Mammoth’s business was not affected by external factors beyond our control. By remaining steadfast in nurturing our strong fundamentals in what was inevitably a challenging retail environment, Courts Mammoth was able to continue recording positive results. 

Cognizant of the more competitive marketplace, the company continues to invest in long-term growth by capitalising on our strong store network – 77 stores as at October 2003 – and implementing aggressive marketing and promotional initiatives that will allow us to better penetrate the market and enhance our competitiveness. 

 

The focus of the company in 2004? 

Courts Mammoth is in Malaysia for the long term and will continue to invest in the business here, based on a strategy that will ensure the competitive advantage remains in our favour. 

We shall continue to focus on enhancing the overall shopping experience for our customers by exploring and maximising all avenues for growth – from store expansion, refurbishment of existing outlets and improved marketing and promotional activities to better merchandising efforts and customer service. 

The other area of focus will be PT Courts, our Indonesian operation, which was acquired by Courts Mammoth Bhd in late November 2003.  

Our objective here will be to quickly turn the business around and restart the store expansion programme. 

There are many obvious and significant synergies between Courts Mammoth and PT Courts, such as similar core business activity, payment terms and a mission to make our products readily available to the widest possible customer base. 

These similarities also open the door for the streamlining of retail management and operations, human resources development, information technology enhancement and buying and marketing between the two businesses and, in turn, can be translated into better efficiencies and cost savings. 

 

Do you expect your company to do better or worse in 2004, compared with 2003? Why? 

The sales trend so far has been encouraging and we believe the festive season can provide momentum for growth as we enter 2004. We continue to explore and maximise all avenues for growth, from store expansion, refurbishment of existing outlets and improved marketing and promotional activities to better merchandising efforts and customer service. 

We are committed to enhancing the overall shopping experience of our customers, and to be the No. 1 retailer of choice for furniture and electrical items. 

 

Is China an important factor in the management of your operations? 

There is a trend that a greater proportion of products are now coming from China with many international brands now having their products made in China while Malaysian brands have increased their sourcing from China as well. Given this scenario, Courts Mammoth does source some products from China (the amount is negligible), such as VCDs, DVDs, kitchen appliances and some furniture models as well. 

We are, however, very selective as we have to ensure we offer our customers quality products and choices. All our products come with at least a one-year supplier’s warranty, so we only deal with suppliers who can provide us with full after-sales service. 

 

What should be the priorities of the new Prime Minister for the country and the industry you are in? 

Courts Mammoth started with one store in Johor Baru 15 years ago. Today, we are listed on the KLSE main board and have 77 stores nationwide and a staff strength of more than 2,000. 

This would not have been possible if not for the very conducive and business-friendly environment promoted by the government. 

We are positive that this will continue to be the government’s policy and look forward to making our mark as the No. 1 retailer of choice for furniture and electrical items and to becoming a leading player in Malaysia’s retail landscape. 

CEO Outlook 2004 Stock Watch On NESTLE Stock Watch On COURTS


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