F&N to expand its soft drink business in Asia
Heineken has every reason to feel concerned about Fraser and Neave’s (F&N) future plans. At the end of September 2011, the Singaporean conglomerate, whose interests range from food and beverages to real estate, ended a 75 year partnership with The Coca-Cola Company. Or rather, it was Coke which did not want to renew their contract.
Could Coke’s decision have been in anticipation of Japan’s beer and beverage firm Kirin buying a major stake in F&N in 2010? Then Heineken will need to watch its back. Or Kirin, one day, could crowd out the Dutch in their beer joint venture with F&N, Asia Pacific Breweries.
As BRAUWELT International argues in an upcoming report (“Like a rabbit in the headlights”), Japan’s beverage conglomerates are looking overseas for growth, which could result in tectonic shifts in competition in Asian markets.
The termination of F&N’s partnership with Coke certainly points in this direction. F&N has held a contract with Coca-Cola for the past 75 years, through which F&N bottled and sold Coca-Cola’s drinks in Malaysia, while Coca-Cola did the same for F&N in Singapore. The two firms officially ended their transition contract in September 2011, after Coca-Cola decided back in 2009 not to extend it further.
In a filing to the Singapore stock market, F&N said it has now regained control of all local sales and distribution operations for its beverages business, allowing it to "reap the growth opportunities available in the Singapore beverage sector".
As a result of the contract end, F&N’s subsidiary F&N Foods will become the sole distributor of all beverages in Singapore, while the company’s Malaysian subsidiary, Fraser & Neave Holdings, will cover Malaysia and Brunei. Coke will continue to bottle its own drinks at its plant in Singapore.
The tie-up placed certain restrictions, for instance, on the brands which F&N could sell. Following the end of the arrangement, F&N has plans for new lines of soft drinks including the launch 100Plus Edge and F&N Clearly Citrus.
Moreover, its Malaysian unit expects to start exporting its own soft drinks to the Middle East by the end of this year, something the contract with Coke prevented them from doing. Soft drinks from Muslim Malaysia could carve out a large niche in the Middle East.
It’s interesting to note further that not only does F&N aim to ramp up its sales in the ASEAN countries, it also plans to have a soft drinks factory in every country in the region. Currently, it has a plant in Malaysia and is building a soft drinks factory in Yangon, Myanmar, it was reported.
