SFI – BT

Food firms under SATS umbrella to reap big gains

An SFI-Country Foods entity seen as a sizeable regional player



AN integrated pan-Asian food giant with a footprint stretching from India, through South-east Asia and into China.

That is the vision of Frankie Tan, founder and CEO of Country Foods, the frozen food subsidiary of Singapore Airport Terminal Services (SATS)

Country Foods was set up in 1989 by Mr Tan as a processed food and sauce maker.

After a decade of strong growth, the company caught the eye of SATS, which paid about $6 million for a 66.7 per cent stake in 2002.

Realising the market potential of frozen food, especially in the low-cost airline segment, SATS bought the other 33.3 per cent of Country Foods for another $5.6 million last year, making it a wholly owned subsidiary.

‘By 2000, we had reached the stage where we needed to scale up for further expansion,’ said Mr Tan, who is a minority shareholder of SATS. ‘SATS gave us that scale and exposure.’

Country Foods seems to have been somewhat of an appetiser for SATS, which six years later has moved to acquire the much larger listed Singapore Food Industries (SFI).

BT understands that SATS looked at SFI in 2001 but decided to go after the smaller Country Foods first.

The decision seems to have paid off.

Today, Country Foods, with revenue of more than $30 million, is one of the fastest-growing suppliers of frozen and processed food in Singapore.

Besides fast-food outlets such as McDonald’s, Pizza Hut, 7-Eleven and Burger King, its customers include hospitals and several hospitality industry players.

Its Macau unit dominates the frozen and processed food market for staff eateries and food outlets in the territory’s casinos. Plans are already underway to expand into Hong Kong.

Mr Tan envisages similar opportunities at Singapore’s two integrated resorts, which will employ some 20,000 people.

Meanwhile, Country Foods is already in talks to supply frozen meals to budget carriers including Tiger Airways, Cebu Pacific and Jetstar.

It already provides in-flight meals and frozen deserts to several Asian and Middle Eastern full-service carriers.

‘In Europe, virtually all the airlines serve frozen and chilled food on board,’ Mr Tan said. ‘But the concept is still in its infancy in Asia, largely because catering costs are still relatively low here.’

But with costs, quality and consistency of supply (or food security) becoming hot-button issues not just for airlines, but other businesses too, Mr Tan sees huge growth in Asia.

And this is where SFI comes into the picture.

‘SFI is a huge player, especially in logistics, procurement and mass volume catering,’ he said.

‘It also has a presence in other markets. We see huge synergies in teaming up with it under the SATS umbrella. There will be big economies of scale from the combined operations. And we will have the critical size to provide end-to-end support to customers.’

SATS has moved to buy Temasek Holdings’ 69.6 per cent of listed SFI at 93 cents per share.

And with a general offer a certainty, the total purchase price will be $509 million.

SATS reckons SFI will make it a world-class group powered by the twin engines of airport and food services, lessening its exposure to the vagaries of the aviation market.

Mr Tan sees an integrated SFI-Country Foods entity as a sizeable regional player with a footprint stretching from South Asia, through South-east Asia and into North-east Asia.

Indeed, the numbers seem to point in that direction.

The Singapore in-flight catering market is worth about $500 million, of which SATS controls 80 per cent or $400 million.

With the takeover of SFI, SATS food business will immediately grow by $700 million. Then there is Country Foods, whose revenue is more than $30 million.

Looking ahead, new growth will come from the expansion of the frozen and chilled food segment, said Mr Tan.

‘The food business is relatively stable,’ he said. ‘Because barriers to entry are low, it is a competitive business. But if you have the size and technology, you will have the economies of scale to dominate the market.’

And that is exactly what SATS seems intent on doing with the takeover of SFI.

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