F&N MY's food and beverage loses 42.5% profit despite leveraging new channels

The Movement Control Order (MCO) has not been the easiest for anyone and with lower volume, higher input costs and higher marketing expenditure for new product launches, F&N Malaysia’s food and beverage segment operating profit declined by 42.5% to RM30.3 million, as reported in its Q3 3 2019/20 report. Beverages sales were particularly affected while dairies sales were less affected. With MCO and the restrictions imposed on dine-ins, sales to hotel, restaurants and cafes (HORECA), convenience stores and general trade (GT) channels were affected significantly.

However, these have been mitigated by increase in sales to modern trade channel. Since the government eased the MCO restrictions from early May, the food and beverage segment has seen gradual improvement in sales and stocks movement. HORECA channel which has been more severely impacted is slowly improving as they are now allowed to operate under recovery MCO. Sales to GT channel had started to stabilise since beginning of June 2020.

Despite muted Hari Raya festivities and cancellation of Ramadan Bazaars, F&N’s food and beverage segment leveraged on digitalisation, online eCommerce store and partnership with other eCommerce partners to bring products to its customers’ doorstep and to introduce the brand new teh tarik beverage - F&N Teh Tarik Ori and F&N Teh Tarik Less Sweet variants.

It also hosted Malaysia's first and largest virtual teh tarik session "Mamak Virtual Terbesar Teh Tarik Ori F&N" and “Gerai Rasa Raya” (Taste of Raya) campaign on F&N Life eCommerce store. The latter campaign introduced recipes for Ramadan delights typically found at neighbourhood bazaars so that consumers can re-create them at home, while also providing a platform for people to purchase their favourite F&N products.

Amidst the pandemic outbreak and Malaysia’s Movement Control Order (MCO), food and beverage segment saw quarterly revenue declined by 19.3% to RM461.4 million.

Meanwhile, in Thailand the food and beverage segment saw a revenue decline of 7.7% (11.1% in Thai Baht terms) to RM455.8 million; mainly impacted by contraction in sales in domestic and Indochina markets and partially offset by growth in exports. Operating profit for F&B Thailand correspondingly declined by 7.6% (10.9% in Thai Baht terms) to RM91.6 million due to lower volume, higher input costs, weakening Thai Baht; and partially offset by lower advertising, marketing and operating expenses.

With the pandemic outbreak, the food and beverage segment in Thailand domestic revenue contracted by 14.7% (in Thai Baht terms) compared to last year, especially in HORECA and GT channels. The decline was partly due to higher stocks in trade as products were front-loaded in the second quarter ahead of the emergency decree implemented in Thailand from 26 March 2020.

To mitigate the slowdown in growth momentum in the domestic market, the group focused on driving off take in modern trade and convenience stores by strengthening brand visibility and loyalty, supporting the hawkers/HORECA to get back to business post-COVID-19 and continuously introducing new products. It also launched its first ever milk tablets made from 100% New Zealand milk – MAGNOLIA Milkies and introduced a new limited-edition mango-flavoured Sweetened Condensed Milk variant to the TEAPOT Squeeze range.

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