Fraser & Neave Ltd.

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Fraser & Neave Ltd.

#21-00 Alexandra Point
438 Alexandra Road
Telephone: +65 272-9488
Fax: +65 271-0811

Public Company
Incorporated: 1883 as The Singapore and Straits Aerated Water Company
Employees: 11,816
Sales: S$3.48 billion ($1.96 billion) (2002)
Stock Exchanges: Singapore
Ticker Symbol: FRNM
NAIC: 551112 Offices of Other Holding Companies; 311511 Fluid Milk Manufacturing; 311512 Creamery Butter Manufacturing; 311513 Cheese Manufacturing; 311514 Dry, Condensed, and Evaporated Dairy Product Manufacturing; 311520 Ice Cream and Frozen Dessert Manufacturing; 312111 Soft Drink Manufacturing; 312120 Breweries

One of the largest publicly listed companies in Singapore, Fraser & Neave Ltd. has moved to protect its positionbased on its historic core of soft drinks, breweries, dairy products, and other beveragesby diversifying. Fraser & Neave produces, bottles, and distributes soft drinks, including Coca-Cola, Fanta, Sprite, and other brands, although these operations have been reduced at the beginning of the century. The company holds a 39 percent share in the Asia Pacific Brewery joint venture with The Netherlands Heineken, brewing Tiger brand and other beer brands through a network of 14 breweries through the Asian Pacific, including four breweries in New Zealand. F&N Foods is the companys dairies arm, holding a leading share of the Singapore market, with operations in Malaysia, Vietnam, Thailand, and elsewhere. Through Fraser & Neave Holding Berhad, the company also operates glass manufacturing facilities in Malaysia and China. A major revenue producer, and key element in the companys diversification strategy, is its Centrepoint Properties Ltd. subsidiary, one of the largest real estate developers in Singapore, formed around a core of shopping center and condominium holdings. The youngest member of Fraser & Neaves holding portfolio is the Times Publishing Group, acquired in 2000, which is one of the Asian Pacific regions leading English-language publishers. That company also operates a chain of bookstores in Singapore, Malaysia, Hong Kong, and Indonesia. Fraser & Neave, celebrating its 120th anniversary in 2003, is listed on the Singapore stock exchange. The companys sales in 2002 neared S$3.5 billion ($1.9 billion). Fraser & Neave is led by Executive Chairman Michael Fam.

19th-Century Soft Drink Opportunities

The founding of Singapore in the early years of the 19th century offered new opportunities for adventure and fortune, and among the entrepreneurs attracted to the new British colony were Scotsmen John Fraser and David Chalmers Neave. Fraser and Neave founded their first business together, a printing works, in 1865. Yet both Fraser and Neave rapidly began to explore other opportunities in Singapore and Malaysiaby the 1870s, Fraser had earned himself the nickname the Jolly Octopus for his good nature and diversified business interests, which included Fraser & Co. (later Fraser Securities Inc.), the earliest Singapore stockbroker and one of the oldest and longest-lasting financial firms in the Far East.

In the 1880s, Fraser and Neave identified a new, potentially profitable business area in the tropically warm Singapore climatefizzy water. In 1883, Fraser and Neave established The Singapore and Straits Aerated Water Company. The original soft drink company started out with just 20 employees.

By the end of the century, Fraser and Neaves soft drink business had grown strongly. The company went public in 1898, changing its name to Fraser & Neave Ltd. In that year, Fraser & Neave moved to a new, larger facility in Singapore, which then housed both the companys aerated water and printing operations. The company expanded rapidly in the years leading up to World War I, and by 1914 had opened branch offices and production facilities in Kuala Lumpur, Malacca, Seremban, Ipoh, Penang, Bangkok, and Saigon. Fraser & Neave also opened a number of foreign sales agencies, including offices in Port Darwin and Western Australia.

Already a leading soft drink maker in the Asian Pacific, Fraser & Neave turned toward a new market at the beginning of the 1930s. In 1931, the company formed Malayan Breweries Ltd. in a joint venture with The Netherlands Heineken. The new company opened its brewery the following year, and soon after launched the Tiger Beer brand, which grew into one of the leading beer brands in the Asian Pacific region. The acquisition of a second brewery, Archipelago Brewing Company, in 1941 gave the joint venture a second major brand.

By then, Fraser & Neave had raised its soft drink business to a new level as well. In 1936, the company acquired the Coca-Cola bottling franchise for the Singapore and Malaysian markets. The company became responsible for introducing the new carbonated beverage concept into these countries and grew into one of the largest Coca-Cola bottlers in the region. In 1948, Fraser & Neave transferred its Coca-Cola franchise to a newly established subsidiary, Lion Ltd., which went on to develop new carbonated drink brands.

Diversification in the 1960s

Fraser & Neave continued building up its beverages businesses. In 1955, its Malayan Breweries joint venture acquired South Pacific Brewery of Papua New Guinea, which gave the company a new premium beer label, SP Lager. In 1959 Fraser & Neave was granted the franchise for another growing soft drink brand, Seven Up. Meanwhile, the companys thirst had been whetted for other beverage areas, and in 1959 the company began construction of a plant in Petaling Jaya, Malaysia, for production of sweetened condensed milk. That operation got underway in 1961, in a joint venture with Beatrice Foods. After Carnation Milk joined the joint venture in 1966, its name was changed to Premier Milk. Production then expanded to include evaporated milk. In 1986, Premier Milk began production in Singapore as well.

Premier Milk, which manufactured its own cans, had introduced Fraser & Neave to the packaging industry. In 1967, the company decided to go further in that sector, establishing a new subsidiary, Fraser & Neave Containers, which began manufacturing PVC and polyethylene containers.

During the 1970s, the company continued building up its growing business interests. In 1971, Fraser & Neave secured the franchise for the Fanta soft drink brand and introduced a new brand, Zappel. The companys dairy products group expanded to include ultra high-temperature long-life milk, under the Daisy brand. The following year, the company extended its packaging wing with a stake in the Malaya Glass Factory in Berhad, Malaysia. By the early 1990s, Fraser & Neaves stake in Malaya Glass had reached 36 percent. In 1974, the joint venture with Beatrice Foods deepened with the launch of the Meadow Gold Label brand of ice cream. In 1979, the company acquired a stake in the Singapore branch of Metalbox, filling out its packaging operations with the start of metal container production.

Packaging remained a relatively minor part of Fraser & Neaves operations, however. Instead, the company relied heavily on its soft drink and brewery businesses, which in turn were focused especially on the Singapore and Malaysian markets. Yet the drafting of Malaysias National Development Policy, which sought to restrict foreign ownership of the countrys market, placed Fraser & Neaves long-term prospects in jeopardy. Faced with divesting major portions of its operations, the company decided to seek out a new growth engine.

In 1985, the company moved from its previous soft drink and brewery sites, which by then had become prime real estate locations. Fraser & Neave then began developing these sites into two condominium projects with a total of 1,500 apartments. At the same time, the company constructed new, more modern production facilitiesthe new brewery gave the company an annual production capacity of one million hectoliters per year.

Changing Focus in the New Century

In 1990, Fraser & Neave boosted its dairy business, by then operated as F&N Foods Ltd., with the acquisition of Cold Storage Dairies. The purchase made Fraser & Neave the largest dairy producer in Singapore. More important, the acquisition of Cold Storage gave Fraser & Neave control of Centrepoint Properties Ltd., an important developer and operator of shopping centers and residential properties set up in 1987. Property development now became one of the companys core growth areas.

In 1992, Fraser & Neave attempted to take its soft drink business to the next level, forming the joint venture F&N Coca-Cola with the intent of expanding throughout the Asian Pacific region. Fraser & Neaves share of the joint venture was 75 percent. Meanwhile, the companys real estate projects were well underway, and in 1994 the company inaugurated its first two company-developed projects, the Valley Park and Anchorage condominiums.

In 1994, Fraser & Neave announced its intention to spend some S$1.2 billion on new developments through the end of the decade; in particular, the company eyed other markets, such as Vietnam and Malaysia. For its regional real estate expansion, the company planned to repeat its Singapore successthat of relocating its plants to lower-value properties and redeveloping the high-value sites. In 1995, the companys Malaysian project commenced as F&N Coke began construction on a new, $60 million bottling plant in Shah Alam. Production at that plant began in 1997.

Company Perspectives:

Our mission is: To be a world-class multinational enterprise providing superior returns to our shareholders, excellent value for our customers and a rewarding career for our employees.

Our long-term vision and strategic direction is: To be a world-class multinational enterprise with an Asian base, providing superior returns with a focus on the Food & Beverage, Properties and Publishing & Printing businesses.

Meanwhile, Malaysias National Development Policy at last forced Fraser & Neave to restructure its Malaysian holdings. In 1995, the company agreed to sell its Malaysia operations to Malaya Glass in a deal worth M$965 million. As part of the agreement, however, Fraser & Neaves own stake in Malaya Glass rose to 90 percent initially, before sinking back to 51 percent by 1998.

With the onset of the Asian economic crisis, Fraser & Neave was once again faced with difficult decisions. Particularly hard hit by the recession was the companys soft drink operations. In 1999, the company decided to end its association with Coca-Cola, selling its 75 percent stake in F&N Coca-Cola to the Coca-Cola Co. Instead, the company began looking about for a new area of operations. At the end of 1999, the company announced a new strategy group around the three areas of food and beverages, properties, and new ventures.

By 2000, the company had found one of those new ventures. In that year, Fraser & Neave acquired a stake in Singapores Times Publishing Group, a major newspaper, magazine, and textbook publisher, which also operated bookstores in a number of countries in the region. By 2001, the company had gained 100 percent control of Times Publishing. The company also gained 100 percent control of Centrepoint that year.

By the end of 2002, Fraser & Neaves revenues, which had stagnated in the late 1990s, were once again rising strongly, nearing S$3.5 billion for the year. Much of that growth came from the companys properties division, which produced some S$l billion in revenues. The company then began to target China for future growthFraser & Neave had already entered that country in late 2002 with the opening of a glass plant through its Malaya Glass holding. After 120 years in business, Singapores soft drink company showed that it still had plenty of fizz left in its bottle.

Principal Subsidiaries

Asia Pacific Investment Pte Ltd. (50%); Centrepoint Properties Limited; Fraser & Neave Holdings Bhd (Malaysia; 60.7%); Fraser & Neave Investments (HK) Ltd.; Fraser & Neave (Singapore) Pte Ltd.; F&N Investments Pte Ltd.; F&N United Ltd. (Thailand; 95%); F&N Vietnam Foods Co. Ltd.; River Valley Properties Pte Ltd.; River Valley Tower Pte Ltd.; River Valley Apartments Pte Ltd.; River Valley Shopping Centre Pte Ltd.; F&N Foods Pte Ltd.; Premier Milk (S) Pte Ltd.; Asia Dairies (S) Pte Ltd.; F&N Dairy Investments Pte Ltd.; Interflavine Pte Ltd.; International Theme Parks (Singapore) Pte Ltd.; Lion (Singapore) Pte Ltd.; Myanmar Brewery Ltd. (55%); Phoenix (Singapore) Pte Ltd.; Fannet Online (S) Pte Ltd.; Times Publishing Ltd.; Centrepoint Properties Ltd.; F&N Boncafe Beverages Pte Ltd. (60%).

Principal Competitors

Coca-Cola Enterprises Inc.; Heineken NV; Anheuser-Busch Companies, Inc.; PepsiCo, Inc.; Asahi Breweries, Ltd; Diageo plc; South African Breweries pic; Bass plc; Interbrew SA.

Key Dates:

John Fraser and David Chalmers Neave arrive from Scotland and set up a printing partnership in Singapore.
Fraser and Neave found The Singapore and Straits Aerated Water Company and begin producing carbonated beverages.
The beverage business changes its name to Fraser & Neave Ltd. and goes public on the Singapore stock exchange.
The company forms the Malayan Breweries Limited joint venture with Heineken.
The company receives a Coca-Cola bottling franchise for Singapore and Malaysia.
The company acquires Archipelago Brewing Company and its Anchor beer brand.
The company acquires South Pacific Brewery of Papua New Guinea.
The company forms FN Beatrice Foods joint venture to produce sweetened concentrated milk in Malaysia.
The company begins packaging operations with the establishment of Fraser & Neave Containers.
The company acquires a stake in Malaya Glass, that countrys largest maker of glass products.
The company launches property development operations with the re-development of its Singapore bottling and brewing plants.
The company acquires Cold Storage Dairies, which also gives it a controlling stake in Centrepoint Properties.
The company forms a 75-25 FN Coca-Cola joint venture with Coca-Cola.
Fraser & Neave sells the Malaysia operations to Malaya Glass, boosting its share in that company to 51 percent.
The company acquires 87 percent of the Times Publishing Group.
The company acquires full control of Times Publishing Group and Centrepoint Properties.

Further Reading

Kaur, Sharen, F&Ns Growth Will Depend on Economic Prospects, Consumer Sentiments, Malay Mail, February 10, 2003.

Malaysias Fraser and Neave Considers New Businesses, Asia Pulse, February 25, 2000.

Malaysias Fraser & Neave Eyes Glass, Food Cos. in SE Asia, Asia Pulse, September 7, 2000.

Seward, Christopher, Coca-Cola Acquires Asian Bottler, Atlanta Journal-Constitution, June 12, 1999, p. F3.

M.L. Cohen