8 things I learned from the 2019 F&N AGM

In December 2017, Fraser & Neave Limited (F&N) incorporated a new joint venture company called Emerald Brewery Myanmar to explore beer production in Myanmar. By November 2018, F&N further increased its ownership in the joint venture from 49% to 79.32%. This year, I decided to attend the 2019 F&N AGM to find out more about Emerald Brewery Myanmar and F&N’s overall business performance.

Here are eight things I learned from the 2019 F&N AGM:

1. F&N is working with its partner, Thai Beverage, to penetrate the beer market in Myanmar. Chang Beer, which is owned by Thai Beverage, is currently the second best-selling beer in Myanmar and is seeking to challenge Myanmar Brewery for the top spot in the local market.

2. CEO of F&N’s beer business, Edmond Neo, shared that Emerald Brewery Myanmar will be starting with a production capacity of five hundred thousand litres first to be prudent with capital expenditure. Myanmar Brewery had a production capacity of two billion litres when F&N sold it in 2015. The management is confident in competing with Myanmar Brewery because the team knows the market well and were originally behind the success of Myanmar Brewery.

3. F&N has a 20% stake in Vinamilk, Vietnam’s largest dairy company. Vinamilk is doing well but the management doesn’t plan to increase the stake at the moment. In terms of shareholding, the other foreign investor in Vinamilk is Asian conglomerate Jardine Matheson which owns a 10% stake.

4. F&N is still in the investment phase in new markets like Vietnam, Myanmar and Indonesia. The company is investing to grow its market share and is still making losses there at the moment. In Myanmar, F&N continues to do well with its 100PLUS isotonic drink and Teapot creamers.

5. F&N’s beverages segment made a PBIT loss of S$0.23 million. Despite having narrowed the loss in 2018, the management expects challenges in the beverage segment to continue due to the strong competition, low margins, and the sugar war. The Singapore and Malaysian governments have stepped up their efforts to push people toward healthier, low-sugar beverages. The management thinks that will be period of adjustment where consumer preferences gradually shift toward healthier options.

6. The management mentioned that the new sugar tax in Malaysia will take effect on 1 April 2019. Beverages that contain sugar exceeding five grams per 100 millilitres face an excise tax of 40 sen per litre. F&N’s Sugar Index has fallen 31% over the years and F&N’s beverages have 6% sugar content on average.


Source: F&N 2018 corporate sustainability report

F&N has been reducing the sugar content in its drinks from six grams per 100 millilitres to five grams per 100 millilitres, which the management has previously said ‘is not difficult.’ In comparison, some competitors have had to cut their sugar levels from as high as 11 grams per 100 millilitres.

7. However, raw material costs for F&N’s beverage business did not drop despite using less sugar. F&N has to add natural flavour enhancers in order to maintain the taste of its beverages after reducing the sugar content. Because of this, costs actually went up as F&N prefers not to use any artificial sweeteners.

8. Maintaining the dividend is a main focus for the management. F&N has a policy to pay up to 50% of total profit as dividends to shareholders. In the last few years, F&N exceeded the 50% payout ratio because the management wanted to keep their promise of not reducing the dividend per share. In the last three years, F&N has maintained a dividend per share of 3.5 cents.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

Vicor Chng is an equity investor and co-founder of The Fifth Person. Victor has also appeared on national radio on Money FM 89.3 for his views and opinions on how to invest successfully in the stock market, and his investment articles have been published on The Business Times and Business Insider. Victor represented Singapore in the 2008 TAFISA World Games in Busan, South Korea and was the 2008 IFMA World Muay Thai Championships bronze medalist, kicking some serious ass along the way.

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