2011 OPERATIONS REVIEW
Oldtown Berhad (“the Company” or “the Group’) is one of the fastest growing cafe operators and beverages players in Malaysia at present where the Group commands in the business segment within the respective industries.
The revenue of the Group is primarily divided into two major segments, i.e. the operation of cafe chain and
manufacturing of beverages. The operation of cafe chain segment continued to be the main and dominant
revenue contributor to the Group, attributing 62% of the consolidated revenue for the financial year ended
31 December 2011 (“FY2011”) (65% of the pro-forma consolidated revenue for the financial year ended 31 December 2010 (“FY2010”)); whereas, the remaining 38% of the FY2011 consolidated revenue (35% of the pro-forma consolidated FY2010 revenue) was contributed by manufacturing of beverages segment.
In terms of geographical breakdown for consolidated revenue achieved in FY2011 of RM285.424 million, 76.3% was derived from the local market and the remaining 23.7% was from the export market. Within the export market segment, South East Asia contributing 9.8%, other Asian countries contributing 11.7% and others contributing the balance of 2.2%. On the other hand, for the pro-forma consolidated revenue of RM255.133 million registered in FY2010, 80.7% was derived from the local market and the remaining 19.3% was from the export market. Within the export market segment, South East Asia contributing 8.0%, other Asian countries contributing 8.9% and others contributing the remaining 2.4%.
The Group’s consolidated revenue in FY2011 derived from cafe chain operation were RM177.155 million (pro-forma consolidated revenue in FY2010 was RM166.035 million). The increase in revenue in FY2011 as compared to FY2010 was mainly due to the higher number of cafe outlets opened by the Group in 2011 (total outlets as at the end of FY2011 and FY2010 are 196 and 175 respectively) and the higher average selling prices for the Group’s cafe chain operation during the year.
The Group’s manufacturing of beverages segment reported consolidated revenue of RM108.269 million (proforma consolidated revenue in FY2010 was RM89.098 million). The increase in revenue in FY2011 as compared to FY2010 was mainly due to the increase of export sales for the Group’s beverage products and rapid expansion of distribution networks across the various regions.
The cafe chain operation revenue has grown by leaps and bounds over the past 5 years, which grew from the pro-forma consolidated revenue of RM47.889 million in FY2007 to the consolidated revenue RM177.155 million in FY2011, i.e. an increase of close to 269.9% over the past 5 years or has grown at the compounded annual growth rate of 38.7% over the past 4 years. This signified that the Group has managed to consistently achieve a larger scale of operation capability over the years.
The manufacturing of beverages revenue has equally achieved fast growth pace over the past 5 years, which
grew from the pro-forma consolidated revenue of RM31.296 million in FY2007 to the consolidated revenue
of RM108.269 million in FY2011, i.e. an increase of close to 245.9% over the past 5 years or has achieved a compounded annual growth rate of 36.4% over the past 4 years. This indicated that various pragmatic marketing strategies implemented by the Group have bear fruits over the years.
Integrated Business Model and Strategies Overall, the Oldtown Group is an established and reputable
operator of chain cafe since 2005 and manufacturer of beverages since 1999. As at the end of FY2011, we
operated a total of 196 cafe outlets in Malaysia, Singapore, Indonesia and China. Amongst the 196 cafe outlets, 79 are fully owned cafe outlets, 18 partially owned outlets, 96 franchised and 3 licensed outlets. All the 196 cafe outlets in Malaysia, Singapore, Indonesia and China are based on the traditional coffee shop in Ipoh with contemporary settings with some modification to suit the local landscape especially for the overseas markets. We are specialised in our own formulation of hot and cold coffee and tea beverages using high quality coffee beans roasted with our proprietary roasting process. All our cafe outlets are well supported by three centralised food processing centre fully owned by the Group.
Additionally, the Group is also involved in manufacturing, marketing and sales of coffee and other beverages
where our products are exported to countries such as Hong Kong, Singapore, USA, Taiwan, China and etc. Our products includes instant coffee mix, roasted coffee powder, instant milk tea mix, instant chocolate mix and ready to drink canned coffee. As at the end of FY2011, we have a total of 18 distributors in the local and overseas markets specifically for our retail packed coffee and tea.
By leveraging on third party retailers and intermediaries, the Group is able to widen our market reach via their network without investing heavily into sales, marketing and logistics infrastructure. The Group has 11,390 retail outlets as at the end of FY2011 which carry and distribute our beverage products. Amongst others are Tesco, Jusco, 7-Eleven, SOGO, Isetan, Giant, Mydin, Carrefour, Wal Mart, Petronas, Shell, Fair Price, The Store, Cold Storage and etc., various types of hypermarkets and retail outlets located in
Malaysia, Singapore and Hong Kong.
According to a recent market survey completed by Nielsen, an international prominent market research and
survey company, which covered the period from 1 July 2010 until 30 June 2011 on a rolling 12-month basis, our products commands a relatively high ranking and market share value in Malaysia, Singapore and Hong Kong market. For instance, our white coffee ranked No. 1 with 42.3% market share value and our coffee mix ranked No. 3 with 9.5% market share value in Malaysia. Our coffee mix ranked No. 2 with 15.8% market share value in Hong Kong and our coffee mix owned 11.5% market share value in Singapore.
Oldtown Berhad is one of the very few players in the market place that operate under an integrated business
model where both cafe operation and manufacturing of beverages operation complement each other in terms
of support services, marketing campaign, promotion, business strategies and advertisements. This proven
business model has enabled the Group to grow both business segments tremendously since 2005 to become
one of the leading beverage manufacturers in the white coffee segment and the largest Oriental style cafe operator in terms of number of outlets in Malaysia as at today. The integrated features are essential to erect an invisible wall to fend off competition and create higher entry barriers for other potential and existing competitors from expanding their market share easily.
In view of the integrated business model pursued by the Group, we can adopt integrated business strategies in expanding our business ventures by focusing on five key important areas. First, we place emphasis on branding by strengthening and promoting the ‘OLDTOWN’ brand name which is essential in building up brand equity and uphold customer loyalty. Second, we shall continue to expand cafe network via our franchise programme locally and internationally, besides solely relying on the establishment of our fully owned outlets. Third, we shall focus on market positioning by strengthening our position as an operator
In the domestic market, while the Group’s beverage products are currently focused on the market segment
comprising professionals, managers, executives and businessmen for the age group between 30 and 50 years
old, we are also planning to penetrate into the Malay market segment for the age group of between 30 and 50 years old. Our recent “Jom Heboh” marketing campaign in 2011 aimed to expand the Group’s share within the Malay market.
With a rising number of more healthy conscious customers amongst consumer group nowadays, the Group also introduced healthier choices of beverage products into the marketplace, such as “2 in 1 No Sugar Added” and “3 in 1 with Natural Cane Sugar” coffee products.
On the domestic front, we consistently invest in advertising, promotional and marketing campaigns to uphold
OLDTOWN’s branding and to enhance its brand equity value in the marketplace. Our advertisements are easily located and identified in printed media such as major stream newspapers and magazines; digital media such as radio and TV commercials; as well as outdoor media in the form of road signboards and poster wall. We also organised various on-the-ground events such as consumer contests, productstesting and sampling, road shows; and participated in expos and exhibitions. The recent and more prominent events are “Cut the Sugar” campaign and “Win an i-Pad 2” contest, besides our self-organised “Jom Heboh” marketing drive
and our participation in the Petronas coffee break campaign during the festive season.
The Group is adopting various adaptive strategies by customising its marketing campaign and product mix
when venturing into the international markets. We are enhancing and expanding our market share in the existing markets where the Group already has market presence such as in China, Singapore and Thailand. We are also looking into the right opportunity to expand further intonew markets, such as South Korea and Vietnam over the next few years.
For instance, we are introducing new packaging of OLDTOWN’s products for the China markets as seen in our products, such as OLDTOWN white coffee classic, hazelnut, cane sugar, coffee & creamer and OLDTOWN milk tea with 8 sticks packaging. The Group is gradually expanding to penetrate into various territories in China over the next 2 years. For the northern region, we plan to cover large cities such as Beijing and Tianjin; for central region, we plan to map into Shanghai city, Jiangsu and Zhejiang provinces;
and last for southern region, we are aiming for Guangdong province. Nowadays, most of China major retailers are selling OLDTOWN’s various products, such as in international and local retail chain like Wal Mart, Carrefour, Jusco, Auchan and RT Mart and other smaller retail outlets.
For the Singapore market, the Group has launched its new packaging size in the first quarter 2012 for our products such as OLDTOWN white coffee classic and hazelnut 8 sticks pouch pack. Our target distribution channel includes large provision shops, minimarkets and convenience chain stores.
In the Thailand market, new packaging launch and new product launch is expected to be undertaken in the
second quarter of 2012 for our series of products such as OLDTOWN white coffee 3 in 1 classic 30 gram pack, coffee & creamer 20 gram pack and hazelnut 30 gram packaging.
Our target distribution channel includes all modern trade and selected convenience chain stores.
