An article by The Business TImes
THU, APR 21, 2022 - 5:50 AMUPDATED THU, APR 21, 2022 - 5:50 AM
Written by SHARON SEE
IRVINS salted egg snacks have in recent years become a favoured souvenir for tourists capping off a trip to Singapore, but this also meant that border closures at the start of the Covid-19 pandemic 2 years ago dealt a drastic blow to the company which saw sales more than halve almost overnight.
“How do you deal with having 50 per cent of your revenue with your base expenses still up there? We had to scramble a lot in terms of cost-cutting and chasing our export business as well,” said Irvin Gunawan, founder and chief executive of Cocoba, the company behind the brand.
This led to a one-time retrenchment of over 30 staff and a streamlining of the company’s facilities, offices and factories. It even had to be mindful of its electricity bills.
“Thankfully at that point of time, our internationalisation effort had already started. At that point, we were already in Hong Kong, the Philippines and Thailand, so it’s not a completely new process for us,” Gunawan said.
Nonetheless, the adverse impact on revenue signalled the need for the company to “fast track” its plans of expanding overseas.
The unexpected silver lining was that the Covid-19 pandemic did not necessarily make the process more challenging, he said, adding that most of the company’s overseas expansion was done over the last 2 years.
“Prior to Covid-19, we had to make physical visits to the countries, it’ll take months, and we’d have to have dinner with the distributors and so on,” he said. “But in the past 2 years, actually we’ve made some deals with the distributors overseas over a Zoom call.
”In February 2020, the company launched its signature salted egg potato chips in the United States, followed by Vietnam in October and Australia in January last year. The United Kingdom is its newest market, and Cocoba is now eyeing other parts of Europe next.
Cocoba’s internationalisation efforts have paid off in a big way. In 2019, exports contributed less than 10 per cent to total revenue, but today, 60 per cent of its revenue comes from overseas. Sales is now on par with pre-pandemic levels, said Gunawan.
As borders reopen globally, taking a hybrid approach still remains a viable option, especially if com-panies are still in the early stages of factfinding or exploration, said Tan Soon Kim, assistant chief executive for global markets at Enterprise Singapore (Enterprise SG).
“However, it is also opportune for companies to start making these overseas trips again where possible. Physical engagement with overseas contacts remains important to build strong relationships and uncover opportunities,” said Tan.
The value of a face-to-face meeting is not lost on Gunawan, who said he will be flying around over the next few months to meet customers he has never met in person, now that Singapore’s borders have reopened.
“Having said that, people adapt to what we thought was very difficult last time, but now this is quite a norm. To be honest, I foresee that even this year, we’ll do a lot of deals over Zoom as well,” he said.
For markets that Cocoba was unfamiliar with, what helped were government programmes that helped to introduce suitable overseas partners.
“A lot of introductions were being done by Enterprise SG because we really don’t know anyone over there. They do,” said Gunawan, adding that the agency introduced his team to distributors in the UK.
The company also leveraged Enterprise SG’s collaboration with German e-retailer Red Dot Grocer and is now selling its products through the platform to European customers hungry for Asian snacks.
Tan said the agency has observed that local companies are increasingly making their first foray beyond Asia.
“Developed markets like North America and Europe are especially attractive for companies looking to establish a strong niche in areas like lifestyle and consumer and technology, given their already affluent and sophisticated consumer base,” he said.
To diversify their markets, Singapore companies should also consider markets further afield and act fast to cement their first-mover advantage, said Tan, pointing to less traditional markets like Africa and Latin America.
For example, Big Data and artificial intelligence company Crayon Data partnered a South African system integrator last year, through Enterprise SG’s facilitation, to cross-sell its personalisation engines to banks and telecommunication providers across Africa.
But China and South-east Asia – particularly Indonesia, Malaysia and Vietnam – also remain popular among Singapore companies.
Said Tan: “This comes as no surprise, as our close proximity affords us an advantage in serving the growing demands of the region. Specifically, we are well-positioned to meet the demands of a burgeoning middle class and offer innovative solutions to meet accelerated digital and infrastructure needs.”
Jonathan Ho, head of private enterprise at KPMG in Singapore, agreed, noting that the Republic, being a business hub at the heart of South-east Asia, makes it best positioned to expand into other neighbouring countries.
“Singapore has internationalisation initiatives to support expansion into new markets and capture growing global demand, from assessing market readiness to securing funding for overseas ambition,” he said.
“We lost the ability to actually have a closer physical engagement with customers, our stakeholders on the ground simply because these are a bit more traditional South-east Asian markets and they required a bit more physical interaction.” - Kevin Sim, founder and business development director, Eigen Energy, on the company digitalising its processes more quickly than before
PHOTO: EIGEN ENERGY
Angling for Asean markets
One company that tapped into such initiatives is Eigen Energy, an engineering firm that designs renewable energy solutions through the use of solar panels and electric vehicle charging stations.
The company was formed in 2015 and always saw the need to expand abroad given the size of Singapore’s domestic market, which Eigen’s founder and business development director Kevin Sim described as “orders of magnitude smaller than the potential market that is out of Singapore”.
“Because of the space that we are operating in, which is basically the infrastructure space, there exists more opportunities in those developing countries and communities,” Sim told The Business Times.
The company currently has foreign offices in the Philippines and Brunei, and is now pursuing projects in Bangladesh and Cambodia. It is intending to expand into Thailand and Malaysia with a satellite office later this year, and if all goes well, Indonesia as well.
Part of this was enabled by Enterprise SG’s businessmatching programmes, which helps to identify opportunities for Singapore companies through its knowledge base and networks of its 36 global overseas centres. Sim said that was how Eigen found the right opportunities to expand into Thailand, the Philippines and Indonesia.
At the same time, Eigen also got a boost from the agency’s Market Readiness Assistance (MRA) Grant, which provides support of up to 70 per cent of eligible costs, capped at S$100,000 per company per new market.
“It eased the barrier of entry by alleviating some of the implementation costs,” he said.
With borders mostly closed over the last 2 years however, companies had to get creative with managing their operations abroad.
For Eigen, this led to the team becoming fully remote overnight, which meant it “lost some visibility of what is happening on the ground”.
“We also lost the ability to actually have a closer physical engagement with customers, our stakeholders on the ground simply because these are a bit more traditional South-east Asian markets and they required a bit more physical interaction,” said Sim.
This led to the company digitalising its processes more quickly than before, such as pivoting to cloud-based solutions.
Instead of deploying a Singaporean engineer on the ground, as was the case previously, Eigen explored the use of online project management software.
“And then we have our local team upload pictures of the site, or upload issues and logs and audits, and then we can remotely track and manage the projects from there,” he said.
For Gunawan, this episode ironically became the perfect opportunity to foster closer ties with his staff overseas.
“Prior, because we didn’t have this habit of having online meetings, so we just maybe met once a month or once a quarter if I visit them, then we can talk. But nowadays, it’s very common, like I actually have weekly meetings with them and the communication has become actually much closer,” he said.
Diversification is key
While companies have learnt to adapt to the disruption, the pandemic has also forced them to rethink how their business should be run. And for both Cocoba and Eigen, one natural conclusion is that diversification is critical since unexpected events are bound to recur.
Cocoba is looking into storing more finished stock and raw materials in other countries. Gunawan added: “Now that we have a presence in a few of the overseas markets, it gives us a better footing as well in case, in the future, if anything happens, we are already at the customers’ doorstep.”
Likewise, Eigen is considering ways to factor in business continuity and resilience into its processes.
“For example, redundancy in our supply chain or hedging against commodity volatility is something that we now have to consider,” said Sim.
These lessons from the pandemic wasted no time in becoming relevant, now that the Eigen is facing renewed supply chain disruptions and rising commodity prices arising from the Russia-Ukraine war.
Positioning for the future
The long-awaited easing of border restrictions will undoubtedly provide Singapore businesses a much-needed boost, but this alone is not a “silver bullet” for survival, said Enterprise SG’s Tan.
“Companies need to be mindful that competition will be stiffer now – with pent-up demand, there is also pent-up supply competing for new businesses to make up for lost revenue,” said Tan, noting that innovation and internationalisation are crucial to sustain business growth.
Wilson Chew, partner for entrepreneurial and private business at PwC Singapore, said the border reopenings should be taken “opportunistically”.
Stressing that enterprise leaders should quickly continue where they have left off since the endemic began, Chew said: “Such efforts should be both swift and decisive. Here, swift refers to the revival of market development efforts which Covid-19 may have stalled and speed to market is of utmost importance.
”For companies looking beyond Singapore, scaling must continue to remain their focus, and they have to be distinctive to scale, he said.
“By sharpening their differentiation and having a deep understanding of their chosen market segment and its customers therein, companies can better leverage their strengths and set themselves apart from the increasing competition,” he said.
“This is important since the pandemic has accelerated the adoption of digitalisation and omnichannel strategies, which has in turn given customers today easy access to a wealth of options – including from competitors – domestically and globally despite cross-border restrictions.
”But this emphasis on going digital as well as sustainability, underscored by the Covid-19 crisis, also offers “a window of opportunity” for Singapore companies to reframe their products and solutions for the next era, said Vikram Chakravarty, EY Asean strategy and transactions leader.
“Singapore has some natural advantages to leverage these key trends. If firms take this crisis as a catalyst to be ‘risk on’ and take bold steps to make significant changes, it may usher in a new period of global champions from Singapore,” he said.
He added that sectors such as fintech, agriculture, advanced manufacturing and cyber software solutions are areas where Singapore has competitive advantage.
“With the right support from the ecosystem, we can build the next generation of winning MNCs (multinational corporations) from Singapore,” he said.
The Singapore Global Enterprise initiative is precisely designed for this mission. Enterprise SG’s Tan said the agency hopes to identify, nurture and grow more promising local enterprises to become globally competitive.
“Customised and enterprise-centric assistance will be rendered, focusing on areas such as innovation, internationalisation and fostering partnerships with other firms,” he said.
There will also be support in developing global-ready executives, creating new corporate ventures, facilitating mergers and acquisitions, and gaining enhanced access to financing, he added.
Meanwhile, support can also come from industry peers.
Terence Foo, supply chain and network operations leader at Deloitte Singapore, said government-linked corporations and small and medium enterprises (SMEs) should further cooperate and collaborate for overseas expansion.
“The investment required for a resilient, sustainable, carbon-neutral and digital supply network is costly and would be a considerable risk for any one company to invest on their own,” he said.
This is especially critical in today’s business climate, characterised by uncertainty, inflation and a shortage of manpower, noted Tan.
“Singapore companies must work in tandem with others, be it in-market partners or other local businesses, to offer more comprehensive solutions, mitigate challenges and fortify their internationalisation efforts,” he said.
This allows them to ride on their partners’ expertise and connections to navigate a foreign market, he said, adding that companies can start with simple partnership agreements or leverage joint ventures.