Serving up Ready-to-Eat Delicacies in Asia

Business Activities of OTS Holdings Limited

Established in 1993, OTS Holdings Limited (“OTS Holdings”) is a food manufacturing group in the consumer industry with a strong niche in ready-to-eat and ready-to-cook meat products with key markets in Singapore and Malaysia.

Targeting both halal and non-halal consumer segments, the Group has more than 1,100 Stock Keeping Units (“SKUs”) across 13 main product types under its six house brands and notably the Group’s flagship brands, “Golden Bridge” and “Kelly’s” have become established household names within the market.

Following its recent successful listing, Investor-One caught up with OTS Holdings’ Managing Director, Mr. Ong Bee Chip, to have a better understanding on the business and what is in store for the Group moving forward.

Investor-One: How has the COVID-19 pandemic impacted OTS Holdings? Could you highlight some of the opportunities and challenges?

Mr. Ong: COVID-19 has slowed down our overseas expansion and affected our ability to cater to the growing overseas sales as the local market required additional supplies of our products.

Alongside, we had to adapt to new safe distancing and management guidelines by the authority to ensure that our employees remain safe and healthy.

While these measures posed some initial challenges and learning curves, the pandemic has given us an opportunity to showcase our production capabilities, process innovation and team spirit to overcome the challenges and strengthen our operational capabilities.

Furthermore, we used our established business networks to increase our supplies from new sources and as a result, we even managed to increase our production volume during the COVID-19 pandemic.

Investor-One: Looking back at the IPO prospectus, the company’s past financial performance has been performing exceptionally well. Could you shed more light on this?

Mr. Ong: With our established brand presence, distribution channels and clientele base, we have built a strong sales foundation in Singapore and remained relatively stable and resilient over the past few years.

Malaysia has been a key driver for our strong financial performance in recent years and we are targeting other regional markets, particularly in the Philippines, as new growth markets. Before COVID-19, the Africa swine fever has resulted in food import restrictions by various countries and created opportunities for us to scale our growth in targeted overseas markets.

In Malaysia, we witnessed higher demand for our products arising from a sustained preference by consumers for Singapore-based manufactured food products.

With higher demand potentially from our overseas expansion plans, this will drive more revenue growth and economies of scale, translating to sustainable higher margins.

Investor-One: Which segment is seeing the strongest growth, and which is facing the greatest challenge?

Mr. Ong: We are seeing strong growth from overseas, particularly in Malaysia, where we have a established business presence in west Malaysia and witnessed higher demand for our products arising from consumer’s preference for Singapore-based manufactured food products.

As Malaysia has a large consumer market and the untapped consumer market in East Malaysia, there are opportunities for us to draw on with our brand and product portfolio.

The greatest challenge also come from overseas markets, due to different food import requirements in each country and the need to establish our brands in new markets to win market share.

In addition, there are currently tariffs that affect the marketability and price competitiveness of our products, particularly within the EU countries. However, such tariffs expected to be removed by November 2024 under the United Kingdom-Singapore Free Trade Agreement, which largely mirrors the European Union-Singapore Free Trade Agreement, we expect to increase our market presence over there by leveraging on our experience and strategies for our Malaysia and Philippines market.

In Indonesia, our JV with Hogsworld Pte Ltd (part of the KMP Group) has led us to set up a manufacturing plant in Bulan island, Indonesia. However, with the COVID-19 travel restrictions, it has slowed down our progress and barring unforeseen circumstances, we intend to expand the product range in Indonesia to include canned meat products in the 2nd half of 2022.

Investor-One: What notable corporate developments can shareholders expect from OTS Holdings in the near term?

Mr. Ong: Through our IPO listing, we raised approximately S$6.5 million, where:

• S$2.5 million to be used for expansion of our overseas operations, including the initial investment and set up costs in Philippines.

• S$2.0 million to be used for improvement and/or expansion of production efficiency and capacities, including the acquisition of new machineries and equipment.

• S$0.5 million to be used for developing new products and engaging in research and development.

• S$1.6 million to be used for general working capital purposes.

We intend to create a new brand for our plant-based product, and we target to launch them in early 2022 which will hopefully help us to gain entry into new markets and acquire new customers.

Source: OTS Holdings Limited (From left) Managing director Ong Bee Chip, Executive Director Ong Chew Yong, Sales Director of Golden Bridge and Ellaziq Singapore Ong Bee Song

Investor-One: How does OTS Holdings play a part in terms of food security here in Singapore?

Mr. Ong: With Singapore importing over 90% of its food supply, she is vulnerable to food supply disruptions such as export bans, transport routes disruptions and food safety incidences overseas.

Majority of our products are canned food which has a longer shelf life and does not require refrigeration. This makes them a good option for padding up the national stockpile.

In terms of technology adoption, we adopted certain modules of an Enterprise Resource System (“ERP”) system in 2003. Since then, we have made several upgrades and improvements, which led to the implementation of an ERP system today which connects every step of the manufacturing process.

We have also progressively built up our production capabilities through our integrated food manufacturing facilities in Singapore spanning across around 9,131 sq m with an average annual production of around 2,500 tonnes.

Creating production efficiency is another key part of our strategy, which we adopt process innovation and increased automation. We have our in-house research and development team. Part of their responsibilities is exploring technology innovations to enhance efficiency and quality in our manufacturing processes.

In manufacturing, we have the capability to manage and process as many as four (4) product categories – chilled, frozen, dried and shelf-stable ready-to-eat and ready-to-cook meat products – within one single facility.

Overall, we believe that the various strategies adopted by us will contribute meaningfully to Singapore’s food security strategy.

Investor-One: In the IPO prospectus, the company has earmarked part of the IPO proceeds towards expansion in The Philippines. Can you share more insights on why venture into this market?

Mr. Ong: In the Philippines market, we are attracted to its huge consumer market which is supported by a population of more than 100 million.

The retail sales in the Philippines packaged food market had been estimated to reach US$17.2 billion in 2024. At the same time, packaged food/canned food is well-accepted by the Philippines consumers who are influenced by the American culture.

With the leverage of our brands and made-in-Singapore products, combined together with our Malaysia and Singapore operating experience, we are confident in our venture into the Philippines market.

We will be building up a local team to focus on marketing and brand promotion activities in the Philippines so as to add new sales channels and customers base.

Investor-One: OTS Holdings intends to introduce plant-based food products by early 2022. What sort of strategies are in place to capture market share?

Mr. Ong: The global plant-based meat market size by revenue is estimated to cross US$12 billion by 2025.

The growth is mainly driven by growing public awareness and social consciousness of the sustainability of animal-based protein consumption.

COVID-19 has also accelerated the shift to meatless alternatives as consumers become more health conscious as well.

Currently, most of the plant-based meat products are mainly in raw form, which means they have shorter shelf life and requires refrigeration for logistics, distribution and sales.

Our R&D team is developing a shelf-stable (ie canned) plant based ready-to-eat luncheon meat product, which will have a longer shelf life of up to 3 years. These products will not require cold storage conditions, therefore eliminating the need for costly refrigerated shipping, logistics and distribution. We are also working to ensure the taste, flavor and texture of our plant-based products are similar to our popular luncheon meat product.

It will be our major breakthrough with the recipe and technological process to be proprietary to us. It will also enhance our knowledge and experience in this area.

Investor-One: Lastly, what are the company’s competitive advantages? Where does OTS Holdings see themselves in 3 – 5 Years' time?

Mr. Ong: We believe that we can compete effectively due to our competitive strengths, such as:

• Established heritage with strong market brand recognition and resilient business model

• Multi-category, multi-brand product portfolio catering to different customer tastes and price points

• Strong track record of product innovation and successful introduction of new brands and products

• Technology driven manufacturing capabilities in our modern production facilities

• Stringent quality assurance and food safety standards in our Singapore production facilities

• Established sales and distribution network in Singapore and Malaysia allows us to tap on the highly scalable export business

• Profitable business, managed by experienced management team, with a strong track record of growth

In the next 3-5 years, we believe that we will have a stronger presence in Southeast Asia markets with our own team on the ground undertaking branding and marketing activities. We may also explore the possibility of developing local F&B products tailored for the individual overseas markets.

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