Made In Sarawak
by Jonathan Wong,firstname.lastname@example.org. Posted on June 10, 2012, Sunday
Nourishing a niche market
A branch of the Eastern Alliance group of companies, East Asia Palm Products Sdn Bhd (EAPP) is a Sarawakian company fully run by Sarawakians employing only local workforce. Starting off as a trading company in mid June 2005, it has evolved into a force to be reckoned with in the East Malaysian market.
The company started off as a trading company focusing on food items such as cooking oils, Munchy’s biscuits and Ajinomoto products before shifting towards more ‘IT’ based products such as Celcom’s prepaid cards and a host of other retail items.
The success of its trade and distribution channels in Sarawak led to the company being given the distribution rights for these products in Sabah as well. EAPP is the recipient of numerous Celcom performances awards and amongst the top three in Celcom’s performance awards.
“We started this company because we were granted the opportunity by the state government to deal with cooking oil alongside Assar Refinery Services Sdn Bhd. The reason was because our trading company was already dealing with cooking oil for the past 20 years,” explained Pang Yin Cheng, general manager of EAPP.
“In total, we have a staff force of over 50 in our factory and a 400strong workforce in our distribution team that distributes our products throughout Sarawak from Kuching, Sri Aman, Sibu, Bintulu, Miri, Limbang and Lawas,” Pang explained.
From its humble beginnings with an initial turnover of RM17 million, it registered a RM40 million in returns in 2011, with a RM50 million projection for the current financial year.
Pang stated that export of specialty fats contributed 23 per cent of the total turnover which translated to an estimated RM11.5 million.
According to him, the company started producing its own cooking oils from September 2007 and has never turned back since. By 2008, the company realised that it had to expand its horizon as cooking oil was a controlled item and the company already held a lion’s share of between 30 per cent and 40 per cent of the Sarawak market.
Due to the quota imposed by the government (seeing that cooking oil is a subsidised product) this limited the profit margins and market share, so the company started exploring other markets such as specialty fats like specialised margarine and shortenings that would take it to the next level.
After receiving the specialised machines imported from Italy and the UK, the company started commissioning the machines by 2008/2009 and that set the wheels in motion.
“In terms of cooking oil, when we started off in 2007 we focused only on the local market and Brunei.
When Andrew Nguang our Business Development manager joined us after he returned from Australia in 2008 that’s when we started thinking of expanding and exporting our products. We started production of our specialty fats in 2009 and currently this segment is expanding rapidly,” said Pang
“On the palm oil side involving processed oils, we hold three brands which are ‘Twin Leaves’, ‘Reiser’ and ‘E-Com’. So going from there we are specialising in texturising products which include multipurpose margerines, cake margerines, whipping cream, butter and butter oil substitutes and many others products that we can formulate from there,” Nguang elaborated.
He added, “Among the first products we produced at that time was a multipurpose shortening, which is widely used in bread and biscuit making as well using the machinery we purchased from Italy.”
In terms of innovation, Pang explained that unlike most companies that focused on process innovation, EAPP focused on innovation by experimenting on multiple aspects of the product.
“Eastern Alliance as a group is quite big but EAPP as a company is small compared with the likes of Cargill Malaysia Sdn Bhd, which is a subsidiary of a global group. So to compete with the likes of such a company we need to differntiately ourselves, we need identify our buyers and cater to their needs.
“However being smaller than these companies also gives us an edge as we are able to provide clients with smaller quantities and customise these products as per their requirements, we can offer them bespoke services.
Nguang who is in charge of the special formulations for clients said, “The baking fats and specialty fats are specially customised for each of our clients and that’s what gives us the edge that we need. They need specific and precise mixtures in order to get the right texture and taste for their pastries, breads and other goodies.
“Gone are the days when one magarine or specialty fat suits all products, people are discerning and demand a lot more in terms of taste and texture and companies worldwide are hard pressed to fufill these gastronomic requirements if they want their products to be successful.”
With strong appeal for its products EAPP’s main export markets now include the Middle East with countries like Mecca and Jeddah, Sri Lanka and even exotic Madagascar. Closer to home, Sabah is also becoming an important market.
“Not only do we supply the IT stuff such as prepaid cards to Sabah but we also supply our specialty fats there. On the peninsular side the market is already saturated and our aim is supply top notch quality bespoke products to a regular client base,” Pang elaborated.
On transportantion costs, he reasoned that it cost as much to send a shipment to West Malaysia as it did for an overseas consignment, so why not take advantage of the overseas markets instead of being confined to the domestic market.
“Sabah on the other hand is a lucrative market and I am given to understand that there aren’t any plants producing shortenings or specialty fats there, so it is a large window of opportunity for us as their alternate supply comes from West Malaysia and in terms of logistics, we are definitely in a position of advantage,” he added.
The duo explained, though specialty fats accounted for between 10 per cent and 20 per cent of total output, this market was rapidly expanding.
“Considering that the fats we produce are specialised and cooking oil is a general food item, the market demand for our specialty fats is increasing at a gratifying rate. Our specialty fats are made specific to the customers’ requests based on what they are making which is what makes them so unique.
Nguang cited an example of a client in Sri Lanka that wanted specialised baking fat for pound cake which was a local hot seller. EAPP actually concocted a customised mix that was accepted by the client. A lot of research and development was required for bespoke products and this was a vital ingredient for the company’s success.
Apart from exporting specialty fats, EAPP was also involved in the packaging and design aspects as well if required.
“One of our clients from Madagascar requested puff pastry margarine so we designed the packaging and imprinted its logo for branding there, we took charge from the manufacturing stages until the delivery of the product to the republic,” he elaborated.
As with any industry, the processed oil and specialty fats sector is also fraught with its own issues including the recent tax reduction for palm oil in Indonesia. He explained that this move was affecting the local industries here. Pang clarified that two companies from peninsular Malaysia had already shifted their factories to Indonesia due to the tax reductions there.
He also elaborated that the upcoming general election was also putting some pressure on the market as many investors had started speculating the impact that it would have on palm oil taxes and subsidies.
“Though the issues are prevailent, there has been a minimal impact on EAPP. I admit that exports have slowed a little but generally for the local market there hasn’t been any significant impact. However the cost of running the plant is increasing due to cost of electricity. Unlike the peninsula, Sarawak does not have an off peak period tariff hence we are at a disadvantage.
“Local-based companies deserve some attention from the state government, we are the backbone and an engine of growth for the local economy. We generate jobs and livelihoods for the locals and promote our products as ‘Made in Sarawak’ providing exposure to the state both domestically and globally, yet we are not given a level playing field as we need to bear higher costs of production than our Pan Malaysia counterparts.”
Nguang added, “It’s a double edged sword, but on a positive note with rapid progress in the Sarawak Corridor of Renewable Energy and the massive strides in the Tanjung Manis Halal Hub, the state is moving forward. At EAPP we will continue to concentrate on our core activities and pursue greater global market share.”