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Publication Date : 02-03-2014
F&B giant Suntory CEO Henry Park knows something about deal-making and the corporate equivalent of a close shave
Back in 2003 he was executive chairman of the North American water business out of Atlanta, Georgia, and Suntory Water Group was a healthy second place to Nestle, the dominant player in home and office water delivery.
But the market was changing before his eyes; companies such as Coca-Cola and PepsiCo were launching their own water while supermarkets like Walmart, recognising that Nestle and Suntory made good money by leasing water coolers for which they also provided supplies, had begun to sell coolers directly to customers.
Park had two options. He could feed his ego by buying out No. 3 player Groupe Danone's water business to ease past Nestle as the top player, or sell his own division. The shifting landscape suggested the latter was the better option.
Having convinced his board of directors, Park negotiated the sale of Suntory Water Group to Danone for a little over US$700 million and returned home to Japan.
Sure enough, three years later Danone had folded up the business, writing off the entire amount it had paid Suntory as well as its own investments in that segment.
"You could see people were shifting to buying half-litre PET (plastic) bottles while we were still pushing 5-gallon bottles," says the 55-year-old Park, now the Singapore-based chief executive officer of Suntory Beverage & Food Asia. "The US water market is expanding but the home-office delivery business continues to shrink even as I speak."
Suntory, founded at the turn of the 20th century by a Japanese whisky enthusiast, has grown into a $23 billion group with more than 200 companies and nearly 30,000 employees worldwide.
Last September it bought the Lucozade and Ribena brands from GlaxoSmithKline and, in January, announced its takeover of the famed bourbon maker Jim Beam and several associated labels in a $16 billion deal.
Founder Shinjiro Torii's constant exhortation - Yatte Minahare (Go For It) - became Suntory's internal theme song, a half-century before Nike came up with its "Just Do It" slogan in 1988. Today, its products run all the way from the famed Hibiki 17-year-old blended whisky and the Yamazaki single malt to food and beverages such as Mirai green tea, oolong MYTEA and Orangina carbonated juice.
It also includes health foods and supplements, such as Brand's Essence of Chicken - labels it acquired through Singapore-based Cerebos Pacific, a business that contributes more than $800 million in turnover and which Suntory took private in 2012.
While the home market continues to dominate, the business is growing worldwide, with the rest of Asia in particular showing accelerated expansion. Food and beverages contribute more than half the company's sales, which were 2.04 trillion yen ($20 billion) in the financial year just ended, an increase of more than 10 per cent from the previous year.
Suntory Food & Beverages Asia (SBFA) was set up in 2011 to tap into this opportunity and is run as a separate division from the spirits business. Among its key mandates is mergers and acquisitions.
Since its launch, it has established two joint venture companies in emerging markets, Suntory Garuda in Indonesia and Suntory Narang in India. In addition, SBFA manages Tipco Food & Beverage in Thailand, a joint venture established in 2007 with Tipco Foods.
It is aiming to expand its penetration in Southeast Asia through these companies and also through an ongoing M&A strategy in the region, which, the company reckons, is poised for explosive growth at a time when the home market is shrinking.
"We are looking at between 15 per cent and 28 per cent growth in some of these markets," says Park.
"And we continue to expand our products in each category. We need to launch more products to keep up with demand."
SBFA says its research shows that when per capita gross domestic product crosses $1,200, the market for ready-to-drink products enters a "hot zone".
Today, hot zone nations include Thailand, Indonesia and the Philippines, an opportunity that cannot be missed.
Appearing on the horizon is Myanmar, the last big Asian market yet to flower. So too is India, a water-cola-juice market where Suntory has deliberately started small and may soon launch a citric-flavoured drink. Given its acquisitive hunger, Suntory may well announce deals in the Philippines and Myanmar soon.
The strategy is to develop its products in Japan - where it has many active ingredients - and migrate them to its markets, tweaking the products for taste and looks along the way.
The TeaPlus brand of oolong tea it sells in Thailand, for instance, comes in three variants - sugared, sugar-free and gardenia lemon, which contains a bit of sweetener.
"Consumer tastes are changing in Southeast Asia," says Park. "Asians in hot climates tend to be more sweet-tongued than their Japanese and Korean counterparts, but that's less of an instinct now. People are also looking for products that lower blood pressure and prevent fat absorption."
Given the thirst for bottled water in Asia, Suntory could find rich pickings in that segment, but for now it is hesitant to sell anything but the natural spring water it sources from Japan.
"We have an image to protect," says Park. "In Japan, we have over 30 big water sources and our natural spring brand is the No.1 there. Something that sells for $1.40 in Japan could perhaps only be sold for 30 cents in Vietnam, but we cannot compromise on quality, raw materials or packaging."
Married with two children - his son is a student at Singapore Management University while his daughter is finishing school in Japan - Mr Park says Japanese such as him find life in Singapore the next best thing to living in their own country.
"I am not kidding, the Japanese food is actually better here," he says, listing Shinji in Raffles Hotel and Ooi Japanese Dining at the Holiday Inn as his favourite eating places.
It might come as a surprise to see a man whose full name is Park Hong Sik running a company so storied in the Japanese business landscape. But there's an easy explanation.
A third-generation Korean-Japanese whose grandfather migrated from Korea in the 1930s, he belongs to the second biggest ethnic group in Japan.
"I am 99 per cent Japanese," says the Suntory veteran of three decades. "The other 1 per cent is where I get my temper from."