Nestle’s Rights Expansion Allows F&N To Expand Portion Of Liquid Milk Market

An extended rights as the exclusive manufacturer and distributor for Nestle’s Bear brand sterilised milk in Cambodia would allow Fraser & Neave Holdings Bhd (F&N) to increase its market share in the liquid milk segment, said MIDF Research.

F&N, which currently manufactures and distributes the Bear brand sterilised milk and Bear brand Gold beverages for Thailand and Laos ― has obtained the extended rights from Societe Des Produits Nestle SA and Nestec SA (Nestle), effective March 1, 2023 through to 2037.

The contract expansion is part of licence agreements originally granted by Nestle in 2007 and subsequently renewed in 2015, said MIDF Research in a note.

“We are optimistic that the manufacturing of Bear brand sterilised milk at Rojana Factory would result in economies of scale given that the factory is the largest canned liquid milk factory in Thailand and Asean.

“The Rojana Distribution Centre in Thailand also connects the factory to a vast Southeast Asian supply chain network, reducing transit time and promoting effective manufacturing,” it said.

The research house noted that the announcement would broaden F&N’s geographical footprint, thereby mitigating downside risk and allow the company to expand its revenue portfolio in the liquid milk segment and capture a larger market share, hence supporting its top-line growth going forward.

Overall, F&N’s medium to long-term outlook is likely to remain intact, underpinned by emerging out-of-home beverage consumption, fuelled by tourists’ returns to Malaysia and Thailand after the border reopening.

Additionally, the company’s prospects also would be supported by the expansion of its revenue base by expanding its liquid milk segment and a return to normalcy in export sales following the border reopening.

“As such, we maintain our ‘Buy’” stance on F&N with an unchanged target price of RM33.50,” MIDF said.

As of 11.20am, F&N rose six sen to RM26.02 with 17,500 shares traded.

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