Fraser & Neave Holdings Bhd Annual Report 2020

056 FRASER & NEAVE HOLDINGS BHD COST COMPETITIVENESS INVESTING FOR FUTURE We continuously expand our capabilities while optimising our operational and cost efficiencies as we believe in the long-term attractiveness of our market. As more of our capital expenditure (capex) projects come to fruition, the added capability to expand our product offerings, as well as the capacity to fuel export business, will improve our economies of scale. I am pleased to share that despite the inevitable delays caused by movement restrictions, we completed three significant capex projects during the year. In February 2020, we commercialised a newmilk candy tablet line to produce Magnolia Milkies at our plant in Rojana, Thailand. This was followed by the commissioning of a new solar photovoltaic (PV) system at the plant in April. The 30 million Baht solar roof, with a generating capacity of 1MWp, has reduced the plant’s energy offtake from the grid, lowering both our energy cost as well as our carbon footprint. In April, we also commercialised a new pasteurised product line at our Pulau Indah plant as part of a general shift towards in-sourcing for better management of costs, quality and supply guarantee. Two other capex projects are still ongoing and expected to be completed in FY2021, namely: • RM182 million integrated warehouse in Shah Alam equipped with an Automated Storage Retrieval System (ASRS) which will have a capacity to store over 50,000 pallets • RM20 million drinking water line and warehouse in Kota Kinabalu Industrial Park (KKIP). Additionally, we embarked on two significant projects that are also expected to be completed in FY2021: • A 20,000-square metre Regional Distribution Centre (RDC) in Rojana to be equipped with an RM40 million ASRS. • A renewable energy programme that entails the setting up of solar PV systems at Shah Alam, Pulau Indah and Bentong plants in Malaysia. VALUE-ADDING FOR CONSUMERS, CUSTOMERS & BUSINESS PARTNERS Value creation for consumers and customers is always given top priority at F&NHB, and we continued to find new ways to do this. For consumers, we offered value trade-up deals such as 1.75L bottles of carbonated soft drinks for the price of the 1.5L versions. We also ensured a presence in every price tier, especially the more affordable ones in the current climate of growing cost-conscious consumers. We also work closely with our customers on product and application development to meet their specific needs. This resulted in innovative packagings such as the 1kg stand-up pouch of evaporated milk for the foodservice channel in Thailand. Carnation and TEAPOT Evaporated Milk in 1 kg pouch were highly sought after by hawker customers to gain savings, who have been especially impacted by COVID-19. By September 2020, we were selling about 25,000 cases per month compared to 5,000 cases at launch. For the exportmarket, we introduced 1metric tonne packaging for sweetened condensed milk (catering specifically to F&B manufacturers); and 160g cans for evaporated milk. Along with co-branding, the differentiated pack sizes that could cater to every need has helped us expand our global customer base and drive higher growth for our Exports business. INNOVATIVE MARKETING TO STRENGTHEN CUSTOMER & CONSUMER TIES The new normal means a shift in marketing investment, resources and strategy to quickly adapt to consumers’ new consumption behaviour. At F&N, we continued to focus on meeting customers and consumers’ satisfaction by adopting innovative approaches to boost customer experience and e-commerce engagement. In Thailand, we intensified efforts in building brand loyalty and visibility with our hawker customers through a loyalty programme that utilises innovative digital media. The team also kept our large community of hawker customers in Thailand, Cambodia and Laos updated with the latest campaigns and recipes through LINE app, which now has more than 8,000 members. This year, we have also started a web-ordering system in Thailand through F&N Dairies Thailand’s website to target foodservice customers as well as online shoppers. In Malaysia, the team went out of the way to ensure Ramadan and Hari Raya celebrations would be as festive as usual despite the different circumstances. We offered special bundles for a wide range of products on F&N Life, our new e-commerce store; and helped consumers re-create their favourite Ramadan Bazaar food and drinks at home through the ‘Gerai Rasa Raya’ (Taste of Raya) Campaign. The launch of F&N RTD Teh Tarik in April 2020 was especially meaningful as this was in the middle of the Movement Control Order (MCO) when Malaysians could not frequent their favourite mamak hangouts. Unable to organise a physical event, we introduced the product on social media with an online mamak teh tarik session which gained entry into the Malaysia Book of Records for the largest participation for an event of its kind. Undeterred by restrictions on outdoor activities, the 100PLUS team, through live #StayFitwith100PLUS online workouts, continued to encourage Malaysians to stay fit during the pandemic by maintaining an active lifestyle at home. STRATEGIC REPORT: Chief Executive Officer's Statement (Cont’d.)