Guan Chong targets global cocoa market

  • Business
  • Monday, 04 Apr 2005


IT started as a cocoa beans trader in Parit Jawa, Muar – a place famous for its fiery and sourish asam pedas gravy in Johor - way back in 1980. 

Three years later, Guan Chong Food Industries Sdn Bhd ventured into processing cocoa beans by setting up a plant in the quaint fishing village. 

Business was so good that in 1990 the family sold the Parit Jawa plant and built a new one in the Pasir Gudang industrial estate. 

“My father Tay Chin Chuan and uncles Tay Cheng Guan and Tay Kam Sam had a vision to turn Guan Chong into a market leader,'' said GUAN CHONG BHD chief executive officer Brandon Tay Hoe Lian. 

Guan Chong became a market leader in the country's cocoa-derived food ingredient segment, capturing a 35.4% share of the market worth RM1.05bil in 2003. 

The company was also a major earnings contributor to Malaysia's cocoa-derived food ingredient exports between 1999 and 2003. The country's exports increased from RM552mil to RM991mil within that period while the company's exports rose from RM73mil to RM345mil. 

Brandon Tay Hoe Lian with some of the company's cocoa-derived food ingredient products.

Guan Chong also prides itself on being one of the leading manufacturers in the region providing high-quality cocoa-derived food ingredients to the international market. 

The company is en route to a listing on the Bursa Malaysia main board on Friday. Its subsidiaries are Guan Chong Cocoa Manufacturer Sdn Bhd which produces cocoa-derived food ingredients; Guan Chong Trading Sdn Bhd which procures cocoa beans; and Enrich Mix Sdn Bhd which processes blended cocoa-derived ingredients. 

Brandon said Guan referred to the family's ancestral home in Parit Jawa and Chong to his late grandfather Tay Chong Swee, who was also the founder. 

“I am the third generation of the Tay family running the business now together with two of my cousins,'' Tay said in an interview with StarBiz

His two cousins who sit on the board of directors are chief operating officer Alan Tay How Sik and production manager Ben Tay How Yeh. 

Brandon said his late grandfather would be a proud person if he were alive today knowing that his grandsons were running the business. 

“Our aim now is to become a global player. We want to become one of the major ingredient suppliers in the international chocolate fraternity,'' he added. 

Guan Chong's laboratory technician testing fat content in cocoa liquor.

Brandon said that if Muar furniture makers could make it big globally, there was no reason why Guan Chong, which originated from the same town, could not achieve a similar feat. 

He said the company exported 94% of its products under the brand Favorich to over 20 countries, with the Netherlands, Singapore and the United States as its major foreign markets. 

Brandon said it had established business relationships with multinational corporations such as Unicom (International) BV, ED & F Man Asia Pte Ltd, Atlantic Cocoa Co, and Masters Foods Australia New Zealand. 

“We are proud to say that cocoa-derived ingredients from our Pasir Gudang plant are widely used by big chocolate makers in the world,'' he said. 

Guan Chong sources the bulk of its beans supply from Indonesia, Papua New Guinea, Ghana, and Ivory Coast. Less than 5% are sourced locally. 

Brandon said the quality of the cocoa depended on the quality of the beans, adding that the best cocoa beans came from Ghana. 

“People living in the different regions of the world have different taste preferences when it comes to cocoa,'' he said. 

Brandon said Asians, for instance, liked highly roasted-smell cocoa, Middle Easterners loved dark coloured cocoa while Europeans and Americans settled for mild flavoured cocoa. 

He said the prospect of the industry was good as world consumption of chocolate grew 3% annually.  

Brandon said the company was looking to penetrate China, Eastern Europe, Middle East and Russia as these markets showed promising growth. 

He said Guan Chong also planned to open a marketing office and a centralised warehouse in New York and appoint agents in Russia and Eastern Europe this year. 

“Having a centralised warehouse shortens delivery time to our US clients and we are setting up a similar facility in Europe later,'' he said. 

Brandon said Europe and the US were the world's major markets for chocolate makers as people there consumed more chocolate than elsewhere. 

He said that in 2003, Europe contributed 35.4% of the company's sales, Asia 33.83%, North America 24.45%, the Middle East 0.74%, South America 0.14%, Australia-New Zealand 0.12%, Africa 0.08%, and Malaysia 5.16%.  

Brandon said the company did not worry about competition from other players locally or in the region, as it had a strong footing in the industry.  

He said Guan Chong welcomed competition, as there were not many cocoa-derived food makers in the world to cater for 3 million tonnes of cocoa grinding required by chocolate-making companies yearly. 

“This is a niche market and only those who consistently produce high-quality cocoa ingredients will survive in the industry,'' he added. 

He said if cost was the main criterion, cocoa-derived food makers from countries with lower operating cost would have flooded the industry by now. 

Brandon said the company's share was just 2% of the world's market and there was plenty of room to improve. 

In line with that, the company will increase its annual cocoa bean processing capacity from 52,000 tonnes now to 60,000 tonnes by year-end. 

From the initial public offering, the company aims to raise RM38.5mil, of which RM20.8mil will be used to finance its expansion programme, RM13.7mil for working capital and RM1mil for purchase of equipment for research and development activities. 

A total of RM1.4mil will be used to repay bank borrowings and RM1.5mil for listing expenses. 

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