07 February 2017

Replicating Spritzer's Success in Guangzhou

A mineral water bottler is laying strong foundations for brand recognition beyond Malaysia's borders, expecting long term positive results for investors.

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First published on 19 November 2016 on StarBiz and 21 November 2016 on The Edge Weekly

Spritzer Bhd's entry in the Guangzhou market in China marks a new era in the Malaysian company's strategy, targeting the upmarket segment while staying away from the highly competitive bottled water market.

The idea, says executive director Dr Chuah Chaw Teo, is to sell higher end products with the expectation that the China operation's profit margin will soar.

With global demand for beverages set to double by 2030, according to reports by the United Nations, the China operations could become another major milestone in Spritzer's business orientation, helping it to go beyond China's borders. "If Spritzer wants to continue expanding rapidly, it needs to grow outside Malaysia," says Chuah. Group financial controller Sow Yeng Chong pointed out that Malaysia's 30 million population was not sufficient for the company to grow faster locally. "Here, consumption is not that fantastic," he says. Local competition, which is heating up, has also added to the company's need to move on to greener shores.

Singapore was its first overseas market, but it has expanded to Brunei, Thailand, Hong Kong, Reunion Island, New Zealand, Australia, Papua New Guinea and now China. Chuah believes the China operations will be successful since the company is replicating its Malaysian business model there. "Spritzer is betting on its green image and on an established brand strategy. We thought of entering China for some time, but there were always the negative aspects people talk about," says Chuah. Then came Malaysia External Trade Development Corporation, which was looking for medium sized companies that would be interested in investing abroad. "This started our move," Chuah says.

The company will employ its own staff in Guangzhou, which is a vast port city northwest of Hong Kong on the Pearl River where there is a thriving economy and a population of 14 million. It will maintain a hands-on approach to ensure it gets the most bang for the buck in the highly competitive Guangzhou market. Spritzer has been successful in building its brand value in Malaysia, through the hard work of a team backed by scientists and experts in their fields, including those in marketing and brand strategy. Chuah says the model for the China venture is based on specific ingredients inherent to the main holding company's success in Malaysia.

As part of its strategy, the company will bank heavily on brand equity to build a better future. "The entire branding strategy is basically linked to the company's growth strategy," says Sow. He said this was the actual business model employed in Malaysia, where the market is now saturated with an influx of numerous local brands. Sow said it is based on product presentation, the brand name and the campaign backing the fact that it is sourced from pure, natural water. These are the elements that gives Spritzer an edge over its competitors in the Southeast Asian region.

In the middle of a sprawling rainforest in Taiping, Perak, Spritzer has its headquarters, where it sources its most precious asset; clear, artesian water. With a yearly turnover of RM250 million, the sky seems to be the limit for the bottler, which is a story that began with a singular vision to put healthy drinks on the daily diet of Malaysians. Chuah says this vision contributed largely to the brand's dominance in the country. Focusing on the benefits of drinking Spritzer's natural water, Chuah, a scientist, testifies that it is healthy for the consumers since it is rich in silicon, a trace mineral beneficial for the body. Chuah says he is confident consumers in China will trust the product since it comes from Spritzer, which has been clinically proven to remove aluminium, a known neurotoxin that has been implicated in Alzheimer's Disease. "We came out with the silicon rich water. As a scientist, I looked at the mineral composition of the water and found it had a high level of silicon," says Chuah.

Years ago, Chuah stumbled upon Christopher Exley, a Keele University professor who discovered that silicon was an antagonist against aluminium. This is especially important in China, where fears of pollution and contamination are driving more consumers toward expensive branded bottled water. Strengthened by its discovery, Spritzer believes its water is of a quality that has helped it raised its international standards and recognition.

Nevertheless, Sow said the way the company executed its plans to promote its products played a major role in the company's success. "At the end of the day, you can put a lot of scenarios and thinking in the product promotion, but it is how it is all executed that counts. And that made it known that the product is Malaysian," says Sow. "Right now, our export sales are less than 10% of our total sales. But if Spritzer's China venture works out as well we hope, overseas sales and revenue can only grow," says Sow.

Through its international network, HSBC helps secure Spritzer's cross border transactions, something Sow says will help the company succeed in its foray into China. The support the company gets from HSBC amplifies Spritzer's expansion plans, particularly in the funds transfer segment, payments and receipts. The bank has a strong financial system in place with efficient collection processes, minimising the risk for both parties, says Sow.

This includes online banking services, which Spritzer uses under HSBCnet, a digital platform that offers a suite of always-on services for corporates. It is accessible anywhere, even from Taiping where the company is headquartered, when it deals with its sales outside of Malaysia and also with the transactions involving its new branch in Guangzhou. Sow says the company does not have to send a representative to Guangzhou for example, since with the internet based system, Spritzer stays in control of finances at every level of their organisation.

"It is like an Internet office," says Sow. The bank's clients keep track of their payments, receivables, liquidity and the changing value of their assets - all in one secure, global solution. "We need to get money transferred faster, without delays, and we know we can depend on HSBCnet," Sow says.

HSBC helped in the transfer of funds to China for the creation of Spritzer's local subsidiary. When it comes to foreign exchange, and the renminbi, HSBC is also there to assist them in managing the risk associated with increasing global currency volatility. "HSBC assisted us in transferring the required funds, and overseeing the banking side of the Guangzhou operations for Spritzer," Sow says.

At the end of the day, you can put a lot of scenarios and thinking in the product promotion, but it is how it is all executed that counts. And that made it known that the product is Malaysian.

Sow Yeng Chong, Group Financial Controller of Spritzer Berhad

Dr. Chuah Chaw Teo, Executive Director of Spritzer Berhad

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