It’s executing long-term initiatives to boost fundamentals.
Super Group is poised to enjoy a gradual recovery this year, as long-term initiatives underway point to improving fundamentals.
According to a report by UOB Kay Hian, this year will likely be teeming with new product offerings targeted at the “masstige” level (prestige for the mass segment).
Already, recently launched products like Owl Kopitiam Roast coffee are enjoying promising results following repeated purchases from distributors. Previously launched only in Singapore and Malaysia, these products will be introduced to other key markets over the next few quarters. There will likely be new launches beyond coffee products as well, especially in high-margin segments like cereal and tea.
Further, Super’s China segment has grown from a low base to outpace Singapore as the fourth-biggest branded consumer revenue generator. While the group focuses more in the Jiangsu area, there may be potential partnerships with distributors to widen the network to tier-one cities in the medium to long-term.
UOB is also upbeat on Super’s e-commerce play in China. It translates to a wider consumer outreach, as well as possible cost savings in selling and distribution (S&D) compared with traditional print and TV ads. In 2016, S&D expense as a percentage of turnover is seen to land at the range of 11-13%.
Additionally, though Super is likely to see upward cost pressure in raw materials in 2016, its strategy of buying its key raw materials forward should improve cost visibility. UOB also forecasts raised utilisation of existing plants, which will partly ease production cost pressure as economies of scale kicks in.
UOB warns though that Super will meet sustained stiffness in price competition for Singapore and Malaysia this year as established players like Nestle guards its market share by adopting discounts. On the flip side, key markets like Thailand remains relatively resilient to price competition and stable product categories continue to be in demand.
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