If you’re currently snacking on a Top or Silver Queen chocolate bar, or perhaps a Ceres or Delfi treat you’re likely to be a happy customer of Petra Foods (SGX: P34). The group manufactures its own brands of chocolate and sugar confectionery for distribution throughout South East Asia – with many of its sweet offerings being market leaders in Indonesia and the Philippines. The story behind Petra Foods begins over half a century ago in the fifties. A young man named Ming Chee Chuang had fled Burma with his family and arrived in Bandung, on the Indonesian island…
If you’re currently snacking on a Top or Silver Queen chocolate bar, or perhaps a Ceres or Delfi treat you’re likely to be a happy customer of Petra Foods (SGX: P34).
The group manufactures its own brands of chocolate and sugar confectionery for distribution throughout South East Asia – with many of its sweet offerings being market leaders in Indonesia and the Philippines.
The story behind Petra Foods begins over half a century ago in the fifties. A young man named Ming Chee Chuang had fled Burma with his family and arrived in Bandung, on the Indonesian island of Java.
Taking advantage of an Indonesian law banning the import of chocolate, Chuang and his siblings set about making their own, using locally grown cocoa beans.
More chocolate, less milk
Tropical climates and chocolate tend not to mix – but Ming Chee Chuang realised it was the milk added to Western style chocolate that made it melt so easily. He adjusted his formula by reducing the milk fats, which by happy coincidence also made his chocolate cheaper to produce – and so more affordable for the locals.
The family named their product Silver Queen, added locally grown cashews and Indonesians were soon snapping up their new “home grown” chocolate bars.
Ming Chee Chuang’s eldest son John, who had studied engineering and business at universities in the UK, moved to the USA for six years where he had served as the Vice-Chairman of the Independence Bank of California.
However, in 1984, he decided to return to the family’s business in Indonesia convinced that the South-East Asian market would enjoy the creamier chocolate available in the West.
John convinced his two brothers to join him and together in 1984, they moved to Singapore to set up a new company, “Petra Foods Pte Ltd” distributing Western chocolate to Singapore and Thailand.
The new chocolate proved popular – so much so that in 1987, the brothers decided to buy one of the brands it distributed – the Swiss chocolate manufacturer Delfi.
The brothers were soon also running the family’s business in Java and distributing third party brands in Indonesia. Realising the two companies should be united the brothers arranged for Petra Foods to formally takeover the family’s chocolate manufacturing business in 1989.
The brothers set to work and soon had created a range of Silver Queen products aimed at the lower end of the market. In Indonesia, the affordable chocolate bars proved a hit in a country where the average income was less than $3k a year.
Indeed, price was to prove to be a critical selling point as even when the Indonesian government opened its chocolate market many locals remained loyal to Petra Foods’ products – the higher-end foreign chocolate bars were just too expensive.
Making Competitors into Customers…
This was to prove beneficial in another way to Petra – not only was it not directly competing with the multinationals, but some of them (such as M&M’s manufacturer Mars) decided to ask Petra to do its distribution for them. Swiss behemoth Nestle even started to buy cocoa products from Petra Food’s for processing.
The company also started outsourcing – opening and running cocoa production plants to provide cocoa ingredients for rival chocolatiers such as Archers Daniels Midland (ADM), Cargill and Barry Callebaut.
John Chuang became the Group’s Chief Executive Officer (CEO) in 2004. By 2006, Petra had established itself as Asia’s largest cocoa processor and the world’s fourth biggest.
But did you know…
- Indonesia is the second largest producer of cocoa in the world after the Ivory Coast.
- Petra’s flagship brands in the Philippines are Goya and KnickKnacks
- When asked about competition in the chocolate market Chuang reckons Petra Foods has the edge over his competitors as “For ADM and Cargill, chocolate is just one of many businesses. I’ll think about chocolate at breakfast”.
- There’s definitely money in chocolate – John Chuang currently holds position 22 in the Forbes list of “Singapore’s 40 Richest” with a net worth estimated to be a cool $965m.
- John Chuang really is Singapore’s Willy Wonka – children will be thrilled to know that he always carries a dozen chocolate bars whenever he travels to hand out, explaining “Everyone loves chocolate.”
Petra Foods still markets, manufactures and distributes chocolate confectionery products and is one of the largest food related companies in Singapore in terms of market value. However, the company is no longer in the cocoa ingredient processing business. Petra Foods made a landmark deal in 2013, and sold its Cocoa Ingredients division to Swiss bulk chocolate producer Barry Callebaut for a whopping $950m.
Today, Petra Foods is focussing on its fast-growing and more profitable branded products business, which sells its Top, Silver Queen and Delfi chocolate bars throughout South East Asia and the rest of the world.
Singapore’s Willy Wonka still craves more however, often telling people “If I can just convince everyone to eat chocolate every day I’ll triple my sales”.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Alison Hunt doesn’t own shares in any companies mentioned.