Brand building the secret to Etika’s success

Sundaram says the company is currently seeing a strong double-digit growth in profit,

YOU might not be familiar with Etika Sdn Bhd, but this unassuming company is the creative force behind an array of cherished local beverages that have been delighting Malaysians for generations.

For one, Etika, formerly known as Permanis Sandilands Sdn Bhd, is the official bottler for PepsiCo, serving both the Singapore and Malaysian market.

This gives Etika the exclusive rights to manufacture, distribute and market a diverse range of PepsiCo’s brands such as Pepsi, Tropicana, Mountain Dew, Revive Isotonic, Mirinda, 7UP, Lipton, MUG, Gatorade, Sting, Evervess and Kickapoo (a Monarch trademark).

Etika has also left an indelible mark on the beverage landscape with in-house brands like Wonda Coffee, Goodday Milk, Dairy Champ, Calpis, Chill Asian Drinks and Bleu.

Etika chief executive officer for Malaysia, Singapore and Brunei Santharuban Thurai Sundaram tells StarBizWeek that in the present beverage industry, the manufacturing of beverages is no longer a well-guarded secret as it may have been many years ago.

“It all lies in brand building. What is here to stay is the brand. For example, if you take a brand like Pepsi, it’s done amazing. Over the course of so many years, it has stood the test of time, stayed in the market, constantly reinventing and refreshing the brand again and again. This is also what we are doing.

“For Wonda Coffee, after launching it for 10 years, we also refreshed the identity, the look and the way Wonda would reach out, touch and connect with consumers. This is how we refresh the brand and keep it relevant,” he says.

Shift in consumer trend

Santharuban adds that it is also crucial for businesses to understand the shift that takes place among consumers. With Wonda Coffee, he notes that a decade ago canned coffee was a relatively small segment while instant coffee held a larger share.

“However, in the span of these 10 years, ready-to-drink coffee, or can coffee has grown significantly. Three-in-one coffee has also gained a more substantial foothold.

“As people get a lot more busy nowadays, there are increasingly more bean-to-cup coffee machines in the market. Hence, this indicates the way in which consumers buy and consume coffee is changing,” he says.

Remaining attuned to evolving consumer behaviours and market dynamics, Etika made the decision to acquire Advend Systems Pte Ltd, a vending machine operator, in 2019. Through this acquisition, Etika now has close to 10,000 vending machines across the country.

A leading operator, refurbisher of vending machines and systems solution provider for the vending industry in Malaysia and Singapore, Advend Systems operates under the name Atlas Vending.

Santharuban said while the vending solutions market in countries such as Japan and Singapore are huge, driven by the fact that consumers would generally walk more than they drive, it is considered to be a booming market in Malaysia, where more players are entering into the space and many convenience stores, for instance, are installing vending machines.

“The primary objective behind our acquisition of Atlas was not so much from the margin point of view to make larger profits, but it is for us to know who our consumers are and learn about their buying and shopping patterns,” he says.

Santharuban adds that vending machines provide two things.

Firstly, in places where it is too expensive to set up a convenience store, one can actually put up a vending machine to sell basic needs.

Secondly, it is a very quick transaction whereby consumers can quickly decide what they want and make the payment. It is almost a seamless and automated retail experience.

“Vending solutions is a completely different channel altogether and it addresses the needs of underserved consumers.

“For example, if you are working in a factory or you live in a condominium where maybe the closest convenience store is a little far away, a vending machine is the solution to meet consumer demand,” he says.

Santharuban says the sales data gathered from the vending machines are not used in launching a product but to determine the kind of products that are placed in the machines.

“Some machines are put in places where the crowd is the same. For example, if I take a factory or university, it is the same group of people. In these instances, we assess whether there is price elasticity or if there’s a unique demand for particular products.

“Based on these insights, we fine-tune the product mix and pricing structure of those machines, ensuring responsiveness to the specific needs of that customer base.

“Then you have places where the crowd is not the same or moving crowds like in shopping malls and hospitals. In such situations, price sensitivity might be less relevant since consumers vary widely.

“But you can gauge, for example, what sort of products people are willing to pay a premium for,” he says.

Impact from Covid-19

Moreover, Santharuban notes that the change in trade as a result of the Covid-19 pandemic also plays a role in consumer buying patterns.

Many convenience stores used to operate 24 hours a day but this is no longer the case due to labour shortages. As such, consumers have to adapt to these changes, altering the times they shop and buy products.

“In response, we begin to identify where consumers are shopping. We also noticed that consumers are changing the way they shop, from large basket sizes and fewer shopping trips to more frequent shopping trips with smaller basket sizes.

“Hence we come to know that the volume of stock-keeping units and pricing strategies may need adjustments,” he says.

Consumers are also increasingly more health and wellness conscious. In this regard, Santharuban says the company has reduced sugar significantly with below five grams of sugar per 100 ml for carbonated soft drinks.

“We began to introduce more zero-sugar options in our products like 7UP Zero Sugar, Pepsi Zero Sugar and Lipton Zero Sugar.

“What is amazing is that with the advancement in technology, we are actually able to offer consumers sugar-free products that closely mimic the taste of their sugary counterparts,” he says.

Headquartered in Malaysia with a distribution network across Malaysia and Singapore, Etika has about 40,000 direct customers.

It also has a presence across key markets in South-East Asia like Indonesia, Brunei, Myanmar, the Philippines and Vietnam.

Moving forward, Etika’s main capital expenditure deployment will be on marketing, upgrading production lines and vending solutions.

Santharuban says the launch of a certain product does not depend on the success or failure of its predecessor but is mainly due to consumer demand.

Strict development process

However, given that a lot of investment goes behind a product, he says product launches cannot be based on trial and error.

“To be fair, there are hits and misses. There are products that we have launched and they did not do very well, and I think this is the norm with the industry.

“We go through a very stringent product development process where we test out the concept to determine pricing, sensory tests, packaging tests and a complete quantitative and qualitative evaluation before the product hits the market.”

He says Etika also put the right investment and the right amount of marketing behind its products.

“From a brand perspective, we have had quite a number of successes; Wonda Coffee was launched about 10 years ago and Calpis was rolled out in 2016.

“For beverage brands to be launched and stay in the market for as long as ours have, it is actually quite good. In terms of new product development, our Wonda Kopi Tarik has done very well and is one of our best product ranges so far,” he says.

Etika has stringent quality control processes for its products. Aside from having a strong internal audit process, it also meets the government’s health and safety requirements.

Other than being certified as halal by Jakim, Etika is also a franchisee of PepsiCo, and thus abides by PepsiCo’s global standards.

The group has three manufacturing facilities – two in Malaysia and one in Indonesia.

Santharuban says the company is currently seeing a strong double-digit growth in profit when compared with last year. Revenue, on the other hand, is registering close to double-digit growth in the same period.

“The business in Indonesia is largely focused on condensed milk. The Philippines is not only a huge export market for us for condensed milk but we also do Goodday cultured milk over there.

“On the other hand, in Vietnam, we used to have a manufacturing facility there mainly producing condensed milk and we have a condensed milk business in Vietnam as well,” he says.

Whether it is through condensed milk offerings or the broader beverage portfolio, Santharuban says the company continues to see growth, going forward.

Huge potential locally

On growth opportunities in the local market, he notes that there is still a huge potential as from a per capita consumption perspective, especially in the context of carbonated soft drinks, Malaysia’s figures are relatively low compared with neighbouring countries.

“Firstly, the local market has many players. In other markets, there may be only two players but over here, there are three or four players across various beverage categories.

“Secondly, out-of-home consumption patterns are very different. In Malaysia, for instance, when you visit a hawker centre or a restaurant during lunchtime, you will notice many people enjoying premix beverages like iced tea, teh tarik or teh o ice.

“This differs from the consumption habits in overseas markets, where ready-to-drink beverages dominate,” he says.

Despite the high frequency of beverage consumption outside of home, there is a large number of people that consume premix beverages.

Santharuban says this is evident from the growth in Etika’s condensed milk business, which is driven by increased consumption of people buying and consuming beverages out of home.

“Our brand portfolio is robust across various categories. We hold a strong No. 2 position in the coffee segment. Pepsi and Mountain Dew are among our fastest growing brands.

“We are also the leader in the juice category. If I were to single out one particular strength, it would be our status as a total beverage solutions company,” he says.