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Saturday April 21, 2007

Power drinks take root

Nat Bio proves small players can build big brands. 

IF there is a company successful in brand building and positioning itself in the local beverage market in the last seven years, it has to be Natural Bio Resources Bhd (Nat Bio), the investment holding company for the Power Root drinks business. 

From left: Toh, Natural Bio GM Loh Chai Seng and chairman Tengku Shamsulbhari Tengku Azman Shah with some of the group’s products
This second board candidate has not only built the Power Root brand in a niche segment since it started operations in 2000, but has also developed its products and marketing competently enough to wrestle in the fray where the big boys are. 

“The task of penetrating the multinational corporations-dominated local beverage market and gaining substantial market share in ready-to-drink coffee is not trivial,” says Nat Bio executive director Clement Toh.  

Nat Bio has four wholly-owned subsidiaries – Power Root (M) Sdn Bhd, Power Root Manufacturing Sdn Bhd, Power Root Nnergy Sdn Bhd and Power Root Marketing Sdn Bhd. Except for Power Root Marketing, all the outfits are involved in the manufacture of ready-to-drink coffee, tea and energy drinks. 

The group registered RM98mil revenue last year, nearly a two-fold jump from that achieved in 2005. 

Toh says in an interview with BizWeek that apart from being a big spender on advertising and promotional (A&P) activities, the group owes most of the merits to having developed and established the essential marketing components.  

Apparently, Nat Bio made a good start when it introduced canned drinks like Power Root Extra Honey Tongkat Ali, Power Root Ginseng Tongkat Ali, Power Root Ali Café and Per'l Kacip Fatimah. The accompanying herbs, coupled with attractive and user-friendly packaging, made the products very appealing to many Malaysian male adults. 

“We never positioned the products as aphrodisiac. The herbs are meant solely for health reasons and are suitable for people of all ages and walks of life,” he says. 

Due to a well-developed distribution network nationwide, it has access to most outlets and thus effectively found the end-users. 

“We have a networking of key dealers, wholesalers, supermarkets, retailers and overseas distributors. Today, you can find our products almost everywhere in 7-Eleven stores, petrol stations, Giant, Tesco, Carrefour, Jusco, just to name a few.”  

There is no official statistics on the first beverage company that introduce herbs like tongkat ali in ready-to-drink coffee or tea but the Power Root products became so ubiquitous at that time for anyone to remember anything like it showing up before.  

To date, the group has expanded the range to include Carbonated Power Root Extra Honey, Carbonated Nnergy, Oligo coffee containing digestion-friendly oligofructose as well as low-sugar Ali Café and Per’l Café. 

“I think we are the first to introduce carbonated energy drinks,” Toh says. 

He also attributes the success story to consistent research and development efforts as well as effective management. The group was founded by a group of businessmen who are F&B veterans – Low Chee Yen, Wong Fuei Boon and How Say Swee in 1999. Koperasi Permodalan Felda Bhd later joined as a major shareholder. 

The shareholders recently decided to take Nat Bio public to propel the company growth further. 

Nat Bio, according to Toh, spent close to RM20mil – 40% of the revenue achieved in 2005 – on A&P last year. The bulk of the advertising expenditure (adex) went to media advertising, including the World Cup sponsorship and the ambassador programme. 

Future annual adex will be maintained at 10%-15% of yearly revenue. Nat Bio to date has a group of eight product ambassadors comprising mainly winners or finalists of the TV reality show Akademi Fantasia. 

Aiming at selecting popular artistes who have large fan group or followings, the group started the celebrity endorsement programme in 2004 with radio deejays Halim Othman and Linda Onn. 

“It has been a success as we can see today that more and more FMCG companies are starting to embrace this method compared to when we first started it four years ago,” he says.  

Toh says each ambassador has his or her own followings and fans, and the group wants to see them working as a team. 

Ironically, being popular does not guarantee that the ambassador will carry out the duty effectively, he adds. 

On the risk of the ambassadors facing bad press or adverse controversies that can affect marketing, Toh says that depends on the kind of controversies. Purely personal matters will have minor effect on the principal. 

Some of the ambassadors with the group are also endorsing various other products.  

“Moreover, our contracts with ambassadors are renewed every year and thus the impact may not be long-term if any problems arise,” he adds.  

Although Nat Bio has made a big impact with the ambassador endorsement programme, it depends much more on the right marketing mix to promote the products – constant upgrading of the taste and quality of products, maintaining a good distribution network and work out promotional activities in many other ways such as sponsorship, sampling, trade fairs and contests. 

Toh says the group started rewarding loyal customers with Gold Pendant in 2004 where it gave away prizes worth RM400,000. 

“Each year, we will raise the total prize value,” he says, adding that the group has just launched its Win & Win with Bank Simpanan Nasional Bhd contest, which carries a total value of RM2mil in prizes.  

These handsome rewards by Nat Bio lead many into believing that the series of contests over the last three years have done a great job in luring new consumers, but the group faces the risk of attracting more contest-driven end-users than genuine buyers.  

Toh argues: “Our market share is mainly achieved through our long-term effort to promote the brand, while contests will normally lead to an increase in sales during the contest period and help attract new consumers.” 

“It is a win-win situation. Our loyal consumers win valuable prizes and we win substantial market share. It’s simple!” he said. 

Toh says the group's success shows how a small player can influence the landscape of coffee and tea products positioning in Malaysia.  

“Big coffee players too have shown interest in herbs lately,” he adds. 

Nat Bio conducts regular live ground events where it reaches out to direct consumers as well as surveys. Here, it gathers direct feedbacks on taste and quality for further enhancement of the products or help the group unveil quality products like Oligo

“We are competing with the top coffee brands. I think we must have gotten things right,” he says.