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Singapore: Hain Builds Platform for Asia Expansion
By signing an investment deal with Yeo Hiap Seng, American organic
food giant Hain Celestial is aiming to become a major player in the
Asian market. The two companies have also
declared an intention to pursue joint interests in food marketing
and product development.
Hain Celestial is one of the world’s largest producers of organic &
natural products, reporting USD 544 million sales in 2004.
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Company growth has
largely been due to acquisitions, which have seen it expand from organic
& specialty foods to natural personal care products. Hain Celestial owns
a portfolio of American brands and is developing a strong European
presence, however this is the company’s first foray into the Asian
market.
Yeo Hiap Seng is a Singapore-based producer of food & beverages. With
operations in
Singapore, Malaysia, Thailand and China, the company’s brands are
household names in South-East Asian countries. Its product range
includes soya drinks, teas, juices, noodles and sauces. Yeo Hiap Seng
reported about USD 177 million sales in 2004. Like Hain Celestial, it is
a public-listed company.
As part of the investment deal, the two companies will make equity
investments in each other. They will also jointly pursue interests in
research and development in food & nutrition, marketing, branding and
the expansion of distribution channels and geographical markets as well
as cross-selling, spanning
Asia, North America and Europe.
Yeo Hiap Seng will benefit from the deal as it will open up North
American and European markets for its wide product range. Its products
have been largely confined to ethnic markets in countries like the
USA,
Canada and the UK. Hain Celestial’s distribution infrastructure will
allow its products to enter mainstream and natural food channels.
Hain Celestial is looking to become a dominant force in the emerging
Asian organic food industry. Although the company has had no direct
presence in
Asia,
brands like Rice Dream and Celestial Teas have been present in Asian
retailers for years. Indeed, Rice Dream is the leading brand of rice
drink in South-East Asia.
Partnering with Yeo Hiap Seng will open up Asian markets for Hain
Celestial’s plethora of organic & natural products, however this is no
guarantee of market success. The Asian organic food industry faces many
growth impediments. Low production in Asian countries results in most
organic processed foods to be imported from outside the region. High
freight and distribution costs cause organic products to be priced 100%
higher than non-organic products. Consumer demand is hindered by the
high price premium, low understanding of organic products, and lack of
regulations.
Asian
consumers will gain from the strategic partnership as organic products
become more widely available in retailers. Yeo Hiap Seng has extensive
distribution networks that will take organic products into supermarkets,
hypermarkets and small retailers, whereas most organic products are
currently marketed by health food shops. Yeo Hiap Seng will face many
challenges however in marketing organic products to Asian consumers who
are either not aware or not interested in organic products. Getting
organic & natural products into retailers is one thing, stimulating
consumer demand is another, as many Asian organic food producers have
learned.
Posted: August 9th 2005
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