Super Group Analysis – Part 1

I recently did an analysis on Super Group after reading articles published in March and July editions of Pulses magazine.

Overview of Super Group

Super is well-known for its 3-in-1 instant coffeemix, especially in Singapore and Asia. It is the only company in Singapore and the region with the manufacturing capability for instant coffee, instant cereals and non-dairy products. Super has a distribution reach of over 50 countries and it is one of the top three market leaders in the South-east Asian markets. According to AC Nielsen, Super has a market share of about 37% in Singapore, 13% in Malaysia and above 30% in both Myanmar and Thailand.

The group has more than 300 products such as instant coffee and tea, instant cereal, flavoured can drinks, cup noodles and potato chips. The Super brand alone was valued at $87 million this year and this brand equity increased 67% from $52 mil in 2006. Super is also the only manufacturer in SEA contracted by Procter & Gamble to produce its Pringles potato chips since 2004. Its products are manufactured under stringent conditions in accordance to ISO 22000 and HACCP certifications.

The group has an ingredients division that sold products to the top five milk tea players in China. This division was started in 2007 to have vertical integration to better control the quality of raw materials. Half the ingredients are produced for internal usage while the rest are sold to external parties. This allowed Super to move into the business-to-business segment.

Super has 12 manufacturing plants located in Singapore, Malaysia, Myanmar, Thailand and China which cost a total of $188 million. The sophisticated facilities provide barriers to entry to potential competitors.  The highly automated facility also reduces manpower costs and provides high quality product control. Its plants also have a successful system in place which gives the instant coffee the aroma of a freshly brewed cup. The plants are also scalable to double the annual production volume for ingredients.

Super has also won numerous awards including the Brand Laureate “Best Brand in Food and Beverage – Coffee” and “Best Brand Category, Brand Communication – Coffee” in 2009 for consecutive years. It also won Finance Brands Award’s “Singapore Top 100 Brands” this year.

Economic moat: Quite a wide moat, especially in Asia. Has pricing power (will be discussed later), lots of awards won, high barriers to entry (sophisticated manufacturing plants) and brand value. Super is in a highly competitive industry but it has created a brand for itself.

In Part 2, I will discuss the financials and the future growth factors.

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