Fraser & Neave Holding Bhd (F&NHB), the Malaysian subsidiary of Singapore's Fraser and Neave Ltd, will spend 300 million baht to increase its dairy product capacity in Thailand to drive business growth here over the next five years.
Executives from Fraser & Neave Ltd and Nestle (Thai) attend yesterday's signing ceremony. From second left, Ng Jui Sia, F&N's chief executive for non-alcoholic beverages; Nophadol Siwabutr, corporate affairs director at Nestle (Thai); and Lim Yew Hoe, chief executive of F&NHB.
The company hopes its business growth in Thailand will be at least 10% a year over the five-year period.
The new production lines will produce Carnation evaporated milk at a factory in Ayutthaya's Rojana Industrial Estate to cater to growing demand, as its current capacity is near full.
Carnation evaporated milk capacity will be increased by 30%.
The dairy business in Thailand is under F&N Dairies (Thailand). F&N in Singapore is controlled by Thai whisky tycoon Charoen Sirivadhanabhakdi.
In Thailand, Carnation is the leading condensed milk brand in the premium market, controlling two-thirds of the segment. The Carnation brand also enjoyed strong double-digit sales growth in Malaysia and Singapore in 2013.
Ng Jui Sia, F&N's chief executive for non-alcoholic beverages, said Thailand remained the biggest market in Asean for F&N dairy products, as it was a gateway to Indochina.
Last year, sales by F&N Dairies (Thailand) rose 20% to 12 billion baht.
For condensed milk, the overall market value in Thailand was down slightly to 10 billion baht last year. However, F&NHB expects industry growth of 4-7% this year.
F&NHB hopes its condensed milk sales will rise beyond the industry's growth this year to reach at least 10%.
Mr Ng said the growth of the condensed milk market was due to many factors such as the improving economic situation, booming tourism and improved retail sentiment.
Condensed milk is used as an ingredient for tea and coffee as well as cakes and other desserts.
Apart from Thailand, F&NHB decided to open a new factory in Vietnam. It also sees high potential to grow in Indonesia and plans to use Malaysia as a base since its culture is similar.
Yesterday, F&NHB and its dairy subsidiaries renewed a licence to produce and distribute Nestle liquid milk brands until 2037.
The 22-year licence will cover the manufacturing and distribution of Carnation, Bear Brand, Bear Brand Gold, Ideal Milk and Milkmaid in Singapore, Thailand, Malaysia, Brunei and Laos.
The licence saw the F&NHB group acquire Nestle's canned liquid milk, UHT and chilled dairy and juice business in addition to acquiring relevant Nestle production facilities and equipment in Thailand and the Tea Pot brand.
Under the new arrangement, F&NHB will continue to manufacture, promote, sell and distribute the Carnation brand in Thailand, Laos and Cambodia; and Carnation sweetened condensed milk and evaporated creamer, Ideal evaporated milk, Milkmaid sweetened condensed milk and sweetened beverage creamer in Malaysia, Brunei and Singapore.