SMU478

This case was written by Professor Gary Pan, Dr. Cheah Sin Mei and Lipika Bhattacharya at the Singapore Management University. The case was prepared solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Copyright © 2019, Singapore Management University Version: 2019-02-10

SENG HUA HNG FOODSTUFFS: CRACKING THE CAMEL NUT FOR GROWTH, USING DATA ANALYTICS

Colin Chin, head of Group Finance at Seng Hua Hng (SHH) Foodstuffs Pte Ltd, Singapore, was

pleased with the report he was reading. Harnessing the power of data analytics, the May 2018 report

presented visualisations of the company’s historical data to date, and predictions for the future –

something which had been nearly impossible before the era of big data.

Data analytics was the process in which state-of-the-art technologies such as artificial intelligence

and machine learning were used to process big data, which consisted of massive volumes of highly

complicated information, to identify patterns and draw conclusions from them.

It was more than a year before, in early 2017, that Colin had joined the management team of the

snack producer under the brand name Camel. As a new member, he had to make sense of what was

behind and what lay ahead–the company’s history and its future. He explained, “We need to know

the past to understand the present and to plan for the future.”

As a traditional family business, SHH had in the past relied on ballpark estimates, rather than hard

data from scientific calculations, to make key strategic decisions. Supply of products for the current

year was generated based on past demand; what had worked in the previous year would be repeated

in the following year, and that practice had continued throughout the years. One of the key challenges

was the lack of accurate demand forecasting on a periodic basis.

Colin instinctively knew data analytics could be the solution. In late 2017, he commissioned a team

of accounting students from Singapore Management University’s (SMU) SMU-X initiative1 to build

a financial forecasting model with both analytical and predictive capabilities. Introducing data

analytics to the company was attempting to marry data science and the art of entrepreneurship. Colin

explained,

Data analytics is like trying to put science into art. Doing business is an art. So far we have

been ‘artists’ for the last 40 years.

As the leading nuts manufacturer in Singapore, SHH had sought to be progressive and growth was

always on the mind of its management board. An ambitious goal had been set to achieve S$100

1 The SMU-X initiative offered a powerful curriculum which motivate students to master new leadership skills and apply their knowledge

in solving real-world problems. SMU-X is an experiential learning framework with which students tackle real-world opportunities by

taking on projects from companies and community organisations. https://x.smu.edu.sg/, accessed August 2018

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million (US$72 million) revenue, presence in 100 countries and S$10 million (US$7 million) profit

by the year 2020 – referred to as ‘100-100-10’. It was a highly challenging target, and to this end,

Colin pondered,

How can we grow our existing markets, both domestically and overseas? By how much can

we grow? What are the new markets we could enter? What is the potential cannibalisation

of existing products if I introduce a new product?

SHH Foodstuffs

Founded in 1974, SHH was the company behind the brand name, Camel Nuts. Started by Poh Ah

Seng, his wife and a family friend, a home backyard was its humble beginning. The small setup

initially produced only peanuts and hired fewer than 10 employees.

In 1992, the acquisition of a 10,000 square metre factory marked a turning point for the company.

SHH gradually expanded into the production of a variety of nuts and eventually established itself as

the largest nut manufacturer in Singapore, with a market share of 36% in 2014 (refer to Exhibit 1

for SHH’s share of savoury2 snacks market in Singapore).3 As at 2018, the company had grown to

a staff strength of about 170 employees.

The main line of business of this small-and-medium enterprise (SME) was the manufacturing,

processing and packaging of nut snacks. As the market leader of the nut snack industry in Singapore,

SHH’s competitive positioning lay in offering quality nut products at affordable prices. Simply put,

its target was the mid-market consumers.

Besides producing snacks under the Camel brand for the retail market, SHH also provided private

label packaging for local house brands and contract manufacturing for the service industries, such as

hotels, airlines, event organisers and food caterers.

The Camel Nuts Brand

The Camel brand covered an extensive range of over 40 product lines, including peanuts, green peas,

pistachios, macadamias, cashews, almonds and broad beans. Cashews and pistachios had

commanded a loyal customer following over the years and were among Camel’s bestsellers.

Occasionally, the company would introduce new products to their existing offerings. Muruku

crackers, a favourite snack for the Indian community, and cassava chips, were two examples.

Camel enjoyed a prominent brand presence in both local and overseas markets. In Singapore, the

Camel brand was a household name as its snack products lined the shelves of major supermarkets

and retail stores (refer to Exhibit 2 for Camel’s brand share of savoury snack market in Singapore).

In 2002, after securing a strong foothold domestically, the company began to export its products

2 Savoury snacks include a variety of products including potato crisps, corn chips/tortillas, puffed and baked snacks, crackers, pretzels,

savoury biscuits, popcorn, meat snacks, peanuts and other snack nuts. 3 Euromonitor International, “Seng Hua Hng Foodstuffs Pte Ltd”, via Passport database, accessed 28 May 2018.

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overseas; and as at 2018, Camel could be found in 29 countries, particularly in Asia and the Middle

East.

In recognition of its outstanding achievements over the years, Camel Nuts was conferred the

Singapore Promising Brand Award by Singapore’s Association of Small-and-Medium Enterprises in

2003 and 2005, as well as the Singapore Asia Pacific Brands Award by Singapore’s Trade and

Industry Association in 2012. Camel Nuts was a Tasty Singapore endorsed brand, and one of the

brand ambassadors under a government initiative to bring Singapore’s F&B brands to the

international stage.4

The camel had been chosen as the brand’s mascot as it symbolised resilience and embodied a fighting

spirit to survive in harsh weather conditions. The founder of SHH hoped his business had the same

tenacity to be able to weather through storms and stay afloat amidst increasing competition. Indeed,

the company with more than four decades of history had survived major crises, such as the economic

recession in 2008.

Hailed as the worst ever financial crisis to hit Singapore, the recession in 2008 left many small

businesses struggling to survive. SHH was no exception and its performance suffered a dip (refer to

Exhibit 3 for SHH and the savoury snacks industry’s performance for the period from 2009 to 2016).

Data Analytics in Food Manufacturing

Singapore’s Food Manufacturing Industry

The food manufacturing industry was a prominent sector in Singapore, contributing US$2.75 billion

(S$3.8 billion5, approximately 1% of the country’s GDP), and employed about 30,000 workers.6

More than half of the industry’s annual output was exported to other countries, such as China and

Japan.

The industry had been performing well even during difficult times. In 2017, many businesses,

particularly SMEs, were affected by a sluggish economy due to a lower sales turnover and a crunch

on foreign labour, which formed a sizeable proportion of the local SMEs’ workforce.

Despite the short-term optimism, the economic climate in the long-term remained challenging, both

domestically and internationally. On home ground, SMEs had to grapple with a tightening labour

market, rising operating costs and infrastructural restrictions; globally, markets remained turbulent

and uncertain. The question then arose as to how SMEs could compete under such market dynamics.

The opportunities for businesses in the food industry to tap on data analytics were numerous. For

example, the Dansk Supermarket Group, a retailer in Denmark operating a chain of grocery stores,

4 Tasty Singapore was an initiative of Enterprise Singapore to promote Singapore food products, with an emphasis on the high level of

quality and safety, to the world. https://ie.enterprisesg.gov.sg/Assistance/Industry-Partnerships/Tasty-Singapore/What-is-a-Brand- Ambassador, accessed 28 May 2018.

5 US$ 1 = S$1.38, annual average for 2017, www.oanda.com, accessed August 2018

6 Enterprise Singapore, “The Food Manufacturing Industry in Singapore”, https://spring.enterprisesg.gov.sg/Developing- Industries/FM/Pages/food-manufacturing.aspx, accessed 28 May 2018.

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analysed consumer buying preferences from past sales trends, and used the insights derived from the

analyses to stock its inventory level such that it matched demand in a timely manner.7 As a result,

the retailer overcame the twin problems of understocking and overstocking, thereby increasing

customer satisfaction and minimising wastage.

The other areas where data analytics supported the making of critical business decisions included

new product development, investigation of supplier or production issues, formulation of product

pricing and promotion strategies, to name a few.

Challenges and Opportunities towards Data Analytics Adoption

Many SMEs were operating as traditional, non-digital businesses, and they perceived data analytics

as ‘mumbo jumbo’. SME business owners felt intimidated about using data analytics capabilities due

to lack of knowledge. They simply did not know how they could leverage their existing data to make

better decisions. Another obstacle that impeded data analytics adoption was the low priority of

allocating budgets in SMEs for long-term planning and data analysis.

Recognising the difficulties they faced, the Government of Singapore had implemented initiatives

aimed at helping SMEs understand and acquire data analytics capabilities to potentially increase sales

and grow revenue. Additionally, in 2016, the government had introduced a national plan to develop

the country into a food and nutrition hub in Asia by 2025.8 A Transformation Map was built for the

food manufacturing industry as part of the plan, under which food manufacturing companies could

tap on schemes to accelerate their technology adoption. Companies could also leverage the ‘Go

Digital’ programme, launched in 2017, to strengthen their digital capabilities, particularly in the area

of data analytics.9 The programme aimed to assist SMEs adopt digital technologies to automate and

streamline their operations by providing off-the-shelf digital solutions that were pre-approved by the

government for funding support.

SHH’s Data Analytics Journey

The Quest for Growth

SHH’s commitment to produce high quality nuts for the mass market was the foundation of the

company’s growth to become the domestic market leader. Leveraging on its strength, the firm aspired

to continual growth, hoping to capture larger market shares and make debuts in new markets.

In 2016, SHH made a strategic decision towards global expansion and formulated a vision map for

their ‘100-100-10’ growth target, which included concrete goals with specific timelines.

7 Hewlett Packard Enterprise, “Developing a Taste for Big Data”, October 12, 2017,

https://www.hpe.com/us/en/insights/articles/developing-a-taste-for-big-data-1710.html, accessed 2 July 2018. 8 Enterprise Singapore, “Food Manufacturing”, https://spring.enterprisesg.gov.sg/Developing-Industries/FM/Pages/food-

manufacturing.aspx, accessed 28 May 2018. 9 Infocomm Media Development Authority, “SMEs Go Digital Programme”, https://www.imda.gov.sg/smesgodigital, accessed 28 May 2018.

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In the same year, the board made a bold decision to transition SHH into a professionally-managed

company after four decades of operating as a family-run business. Professionally-managed

businesses were widely believed to be capable of achieving higher performance and better

governance than their family-managed counterparts. The board had hoped the change would help to

accelerate growth from within.

The move also sparked a restructuring of the company’s business units. Four critical business

functions were reorganised as groups – finance, human resources (HR), sales and marketing, and

operations. Colin’s appointment to head the Group Finance in January 2017 made him one of the few

people outside of the family to hold a senior management role in SHH.

A Giant Pile of Data: The ‘Mini Monster’

The initial few months on board the SME were a mixture of surprise and confusion for Colin. He

recalled,

When I first joined, the biggest challenge was that I did not have a tool to help me understand

our data.

SHH had accumulated a voluminous amount of data over its four decades of operation. On product

information alone, the company had to keep track of more than 40 varieties of retail products in

different packaging designs and weight. The nuts came in resealable and single-use packs, small cans,

bottles and gift boxes during the festive period, for example, Chinese New Year. The packs were

available in retail stores as small party packs of 40g, handy packs of 125g, 130g and 150g, standard

packs of 300g and 400g, bigger family packs of one kilogram and so on (refer to Exhibit 4 for a

selection of Camel’s products and retail packaging).

In addition to the various retail packaging formats were the customisations for private labelling, again

in different packaging, weight and quantity. Colin explained,

Every customer had his own requirements. We emphasised on customer service and became

so accommodating to all our customers that it created a problem for us. We had too many

SKUs to manage. We also had to hold so much raw materials and packaging materials.

Different customers wanted different ways of packaging, and it led to wastage. It became a

really big headache.

These complications underscored Camel’s spiralling data volume over the years. Managing the stock

keeping unit (SKU) for each product became a phenomenal task, so much so that Colin referred to it

as a “mini monster”. However, he soon realised that taming the monster may lead to insightful

discoveries from data buried deeply in silos. Remarked Colin,

If you don’t have the correct tool to help you understand where you are going and what you

will need to get to it, you will never succeed.

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Colin decided to engage with SMU’s UOB-SMU Asian Institute for their data analytics platform

design and implementation.10 By January 2018, work on the data analytics project had begun.

Looking Back at the Tried-and-Tested Path

SMEs typically had limited financial resources, and when it came to allocation, strategic planning

was often made the sacrificial lamb and received the lowest priority, despite it being a critical process

towards achieving the firm’s goals. For SHH, never before had the board set aside funds to carry out

financial planning towards accomplishing long-term goals. Hence, it was highly unusual when in