COVID-19 has impacted the business world in many ways. For Spritzer Bhd, a market leader in the manufacturing and selling of a range of bottled water products, it is navigating through the uncertainties by adapting and creating opportunities from new launches to exploring further growth outside the country.
Group chief executive officer Kenny Lim Seng Lee says the pandemic has pushed the company to accelerate its e-commerce transformation so that it can continue to thrive in the new normal.
Likewise, it has driven Spritzer – whose key brands include Spritzer, Cactus and Summer – to carry on its initiatives on sustainability, a concept that is becoming mainstream with Covid-19 triggering not only a shift in shopping behaviour, but also turning many into more environmentally-conscious consumers.
“Following the outbreak of Covid-19 and movement restrictions, demand for bottled water has certainly been affected as it is still very much consumed out-of-home.
“For 2020, we recorded a year-on-year decrease of 17% of our bottled water revenue. However, we immediately focused on improving our e-commerce business segment,” Lim tells StarBizWeek.The goals for this are two-pronged. First is to create a platform to provide better service and conveniences to its consumers, and second, facilitate more product-focused promotions.
Notwithstanding the challenges, he says the focus remains on sustaining sales and improving further its market share, which stands at 40% for bottled water in Malaysia.
The strategy appears to be paying off for the Taiping-based company where water is sourced from a 330-acre site that is surrounded by pristine tropical rainforest.
“We have been focusing a lot on our dispenser series product sales, which is very suitable to the public who are staying and working from home. “Specifically, our new water pump dispenser has been enjoying good sales,” he shares.
Besides the portable and rechargeable Spritzer water pump dispenser, which was launched this year, the company also launched its range of So Tinge carbonated flavoured water in January.
According to Lim, Spritzer continues to defend its market share through aggressive marketing and promotions.
“We will also further strengthen the differentiation of our products by highlighting its quality, in particular the absence of microplastics in Spritzer natural mineral water in laboratory tests conducted by Sirim earlier this year.
“Another is the importance of hydration during this mass vaccination drive to keep our immune system strong through the silica (silicon)-rich Spritzer natural mineral water sourced from the original tropical rainforest,” he says.
Results in terms of sales are flowing in, albeit marginally, going by the first quarter (Q1) ended March 31, 2021 numbers.
For that quarter, revenue increased 5% quarter-on-quarter (q-o-q) to RM76.1mil mainly due extensive promotion and marketing activities during the recent Chinese New Year festival.
Additionally, the company saw an increase in sales in China, where it has ventured into selling a wider range of sundry goods.
Analysts note that its operating profit increased to RM12.7mil, a rise of 21% q-o-q on the back of lower depreciation as well as better cost management.
Lim says Spritzer will continue to exercise financial prudence as headwinds remain.
This is because while Perak and some other states have moved into the second phase of the National Recovery Plan, the company’s main business comes from the Klang Valley, which had been under the enhanced movement control order.
However, demand for bottled water is expected to pick up when enough people have been vaccinated to allow for the safe reopening of society and the economy.
Apart from steps to grow its online channel and keeping an eye on cost, Lim says the company is also looking to expand its overseas market.
“As we are faced with a global pandemic, overseas markets are also unavoidably affected.
“As such, we have not recorded significant improvement in our export sales.
But we have plans to improve our market coverage in both Guangzhou in China and Singapore,” he says, adding that the company is working closely with its business partners to grow the sales of its bottled water products in the respective markets.
Spritzer currently generates the bulk of its revenue locally, while export sales make up less than 10% of the group’s top line.
Outside Malaysia, it has a presence in Singapore, Brunei, Hong Kong, China, the United Kingdom and the Netherlands.
“We have a wholly owned trading company in Guangzhou, which since April 2016 has been selling and doing wholesale distribution of bottled water products around the surrounding areas. “We also export mineral water products under the brand name ACILIS by Spritzer to the UK and the Netherlands,” Lim says.
A successful expansion overseas, analysts say, could be the re-rating catalyst for the stock, which was last traded at RM2.10 yesterday.
As the largest bottled water producer in the country, Spritzer has championed the protection and preservation of the environment, which is crucial to sustainable water resources.
For example, Spritzer bottles are 35% lighter, which means less material is needed to produce the bottles and the use of polyethylene terephthalate (PET), including for the label and cap, ensures that the bottle can be fully recycled.
Going forward, Lim says the company will continue to explore ways to reduce packaging and waste.
And while PET is the most sustainable and viable material of choice as an alternative it will continue to explore other packaging materials produced from renewable resources.
Spritzer is also readying to scale up its operations for the future. Towards this end, in March this year, the company signed a sale and purchase agreement to buy 1,227.6 acres of land in Perak for RM76.1mil.
“We like its strategic location, accessibility and the surrounding infrastructure, but we are in no hurry to put up a new mineral water plant there as our existing three bottled water plants have very comfortable capacities to satisfy the current market demand,” reveals Lim.
As a market leader, he says the company needs to ensure its supply chain is secured, not only in the short term but also in the longer term.
“However, looking at the current demand of bottled water and our existing capacities, we are unlikely to set up the new plant in the next two years,” Lim adds.
Spritzer has a yearly production capacity of 700 million litres from its plants in Taiping, Shah Alam and Yong Peng in Johor.