Changing tastebuds offer snack food maker opportunities for growth

  • SMEBiz
  • Saturday, 15 Feb 2020

Not just a volume game: Thang says the game plan is to scale up its stock-keeping units rather than volume to grow customer base.

SNACKING is one of Yuyi Low’s favourite pastimes. But when she and her partner Nicholas Thang decided to start producing their own snacks, little did they know that the business would grow that fast.

“It has definitely grown beyond our expectations, ” says Low.

Hofu joined the ranks of local small snack food producers slightly over two years ago. But the brand has already established a sizeable presence in the market with a good portfolio of products. Last year, Hofu generated some RM3mil in sales and revenue is expected to grow another 50% this year.

The brand hit the shelves in late-2017, not too long after Low tried out salted egg fish skin in Singapore, where it was all the rage. In between jobs at the time, Low figured she could start a business instead and capitalise on the trend.

Thang, a chef and F&B consultant, wasn’t so enthusiastic about the idea. He had been in the food business for a number of years helping clients set up restaurants and develop recipes. Manufacturing snack food was somewhat out of his league.

Handled with care: Its fish skin snacks are still carefully tossed in woks so that they don’t break.Handled with care: Its fish skin snacks are still carefully tossed in woks so that they don’t break.

But Low was insistent. She did some research and somehow convinced Thang that they needed to get on the bandwagon before it fizzles out.

They got to working on recipes and developed the brand under Niche Flavours Marketing Sdn Bhd. They also fundraise some RM100,000 from family and friends to secure a 1,300sq ft manufacturing lot in Sungai Buloh to begin production.

Thang wasn’t particularly confident about their venture.

“We split the lot in three; one-third for our production, one-third for our office, and one-third for a hotdog and bubble tea kiosk as a back-up plan in case this doesn’t work. We bought a coffee machine and tables and chairs for the retail kiosk, but we ended up not using any of it because we were busy with the snack food business, ” he laughs.

Within four weeks, Hofu’s salted egg fish skin found its way into Ben’s Independent Grocer and they made about RM20,000 in sales during the Chinese New Year festive season of 2018.

With things looking up, they increased production and started supplying to other retailers.

But not long after, complaints started coming in that their products were turning rancid. This, they found out, was due to the way it was packaged.

“Our products were packed in plastic bottles at that time. We’ve always been in the F&B line but we’ve always been dealing with fresh food so there was no problem with food going stale and rancid. This was new to us, ” admits Low.

New products: Thang and Low are excited about their product line-up for this year.New products: Thang and Low are excited about their product line-up for this year.

They had to recall their products from the shelves, including those that had been supplied to Singapore. And this turned out to be one expensive lesson they had to learn on product packaging.

“But if other chips in the market can last a year, surely there must be a solution for this. So we tried other packaging materials and finally settled on our current one. It’s got the right layers and we also pump in nitrogen to keep the product crisp. We needed the right packaging to lengthen the product shelf life, ” she adds.

Hofu is currently present in about 200 high-end grocers and souvenir stores nationwide, which has helped the brand garner interest and generate new leads and enquiries for distribution.

Go with the flow

As business picked up, Thang began developing new flavours with new products such as truffle and japanese curry flavoured snacks. However, these new flavours failed to take off as consumers were still hung up on salted egg.

Although puzzled by the long-standing salted egg fad, he was not about to fight the market. The numbers indeed speak. About 60% to 70% of its sales are derived from salted egg snacks.

“So we shelved the other flavours. But now we have a whole bank of flavours that we can use in the future and when the market is ready, we will launch them, ” he says.

Low notes that most of the major food trends in Malaysia are generally influenced by what’s happening in Singapore. It is not as easy to introduce new trends locally.

“There is still room for local creativity. We have seen some trends that were started locally like when home-based producers started making fried crabsticks. But for something to grow and boom, you still need to follow the trend and what’s happening outside.

Building reserves: Thang enjoys developing new products and is hoping to launch them when the market is ready.Building reserves: Thang enjoys developing new products and is hoping to launch them when the market is ready.

“Like when all the hotpot restaurants started coming up, hotpot-flavoured snacks also came up. So, we launched our mala-flavoured snacks as well, ” shares Thang.

Notably, a lot of these trends have brought in more small players into the market, all vying for a bite of the growing snack food market. But many of these are home-based snack makers who are only active during the festive season, which means that there is still room to grow Hofu’s presence on retail shelves.

Additionally, its wider range of products opens up a bigger market for the company.

“There is definitely competition in the market but it is about how we work around that to make sure our products have turnover. Apart from fish skin, we have other products like mushroom and okra crisps. So we can list our products in organic shops or pharmacies as healthy snack options and we can target and cater to more consumers, ” says Low.

Both of them note that there are still a lot of opportunities to explore in the artisanal products space.

“There is a very big gap between homemade producers and mass manufacturers. There are not that many other players in between.

“We can’t fight the big manufacturers. They have machines that can run 24-hours. So what we can do is come out with good snacks at reasonable prices.

“Product development is our forte, so we prefer to offer our customers quality instead of fighting the price war. Our products use real herbs and ingredients rather than powdered flavouring, and that differentiates us from the market, ” says Low.

Diversifying products

This year, the pair is looking to grow their product range further by venturing into the nuts and Korean instant noodles segments.

This time, they are a lot more confident about what they are offering the market.

“We’ve informed our buyers about our Korean instant noodles and they are already quite excited about it. That will be our focus this year. We will first introduce the salted egg, chili crab and mala flavours.

“This is part of our diversification plan but it is also what is trending now, ” she says.

She notes that there is a market for high-end Korean instant noodles with unique flavours and they are hoping to get the products into the hands of consumers by the second half of the year.

For those who can’t wait, they have also set up a Hofu pop-up store in USJ, Selangor to get feedback on its new products.

“The diversification makes sense for us because we are already in the industry. We are not starting something completely new. We have the technology to make the sauces and all for the instant noodles and we will use good ingredients for that too, ” says Thang.

Hofu recently moved into a new space not far from the old lot, but at twice the size, they are able to do a lot more with the business. This includes exploring the opportunity to relaunch some of its shelved products.

“We are trying to relaunch the truffle-flavoured snack. I think there is demand for this. But if we can’t sell it here, we will sell it in Singapore, ” says Low.

Currently, Hofu’s products are available locally and in Singapore. But there have been enquiries coming in from China and the Philippines to bring their products there.

Hofu produces about 2,000 packets a day on a single shift and it can still cope with any new demand.

“We can just add more people to increase production. Our products are still prepared manually. The fish skin is still tossed in woks.

“It’s a bit hard to automate because we don’t have the space or the volume for it. And our snacks are not standardised size and they could break if they are tossed in the machine, ” says Thang.

Although the duo had some kinks to work out in the beginning, the venture has paid off pretty well.

“Manufacturing wasn’t our forte. We had to figure out things like shelf life, packaging, optimising production, timing of raw material supply and all that. But maybe it was the right timing and we also somehow persevered through the ideas. Things turned out quite alright, ” Low concludes.

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