This year’s AGM was at 4 Points by Sheraton. It took me about 40 minutes from work to reach the place and cost me $7 for the parking!

Is it worth it then to attend the AGM?

Definitely yes!


For one, I was pleasantly surprised by the goodies bag given out. Also, there ware sufficient finger food for all the end of the AGM.  Most importantly, thanks to the questions by a few shareholders, I gain more insights of the company’s business.

Core Business

The group did well in their key markets.

The growth in Russia came not only from the strengthening roubles but also actual revenue gain. Due to a new trade law, the cost in advertisement was re-classified from the manufacturing side to the sales side. Without this re-classification, top line would have grown by about 10% instead of the stated 8%.

The management is comfortable with the current fluctuation of roubles. CEO shared that sanctions from US will never be directly on food supplies but on other sectors. But it might still indirectly affect the group.

My sense is that they are not overly concern about current tension between US and Russia unless it escalates further.

The drop in Ukraine market is attributed to the transition of distribution mode to multi-modal distributions last year which will not recur this year.

So we should see a better performance in 2018.

Management is satisfied with the performance even though competition was fierce. Chairman shared that based on AC Nielsen survey,  they have garnered about 80% (if I heard it correctly) of the market share for ice coffee in 2017. While at the beginning of 2014, they only had about 10%.

Both CEO and Chairman explained the drop in 2017 Q1 result were due to CNY holidays. Due to the early CNY in 2017, most stocked up earlier, resulting in a stronger 2016 Q4 and weaker 2017 Q1.

With this year CNY in February, the coming Q1 results we should see an improvement for IndoChina market.

The group is still sensing the ground at the moment. A team is deployed there but not putting in more resources yet.

Other Businesses

Mixed performances. With strong growth in the ingredient business but wrote off investment in Cafe Bene and just participating in capsule business.

While the growth was tremendous last year, CEO shared that the company is still primarily a B2C company, supplemented by the B2B segment. Having the ingredient plant provides the group with more in depth control, such that they can better compete.

Chairman shared that the current plant in India contributed roughly 5 million. The recent investment at Andhra Pradesh which should start to contribute in 2020 will be more substantial.

Cafe Bene
Chairman shared that due diligence was done before investing in Cafe Bene but the 20 million pumped in was insufficient. While they were ready to invest more, they decided not to do it unilaterally as the second largest shareholder (with a 20% share) when the top shareholder decided not to contribute.

So they finally decided to just stay as an investor and not to take up a majority stake. Also, because of the uncertainty of the share of loss which will cloud the group’s financial, they decided to take a full impairment.

The qualified opinion issued on 26 March is due to the inability for EY Korea to complete their audit for Cafe Bene in due time.

Right, so if Cafe Bene can extract any value from the rehabilitation process, it will be a bonus for the group.

Single Capsule
CEO shared that this is a small and niche market. Key markets for capsule coffee is in Europe and US but not in the current markets that the group is operating in. They are planting the seeds to learn more about it such that if there is a change in consumer pattern in future, the company will be ready for it.

Interesting Snippets

When queried about the low dividend payout when the group has generated much cash last year, Chairman explained that he needed to set aside money for the various investments. He will think about the payout if the group continue to do well this year.

Difference in the types of coffee
CEO explained to a shareholder that it is not that capsule coffee is of higher quality than that of instant coffee but it is stronger. He shared that not many can take strong coffer and hence the large market for instant coffee.

Challenge on payment of director fees
A shareholder challenge on why should there be an increase in director fees. Chairman calmly responded that the fees if benchmarked again other companies is already quite low.


I am satisfied with how the management is growing the company currently. The business is inherently competitive and the markets they are in are more volatile. I am hopeful that they will continue to do their best for the company and 2018 will be another good year.

However, I will probably keep my exposure to this company within 10% of my portfolio (currently at 7%) until further diversification of their business from the Russia market.