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Here’s the Growth Area that Super Group Ltd May be Most Excited About

Super Group Ltd (SGX: S10) had faced tough challenges in 2015.

The instant coffee maker saw its sales slide by 6% during the year. Meanwhile, profit fell further, tumbling by 31%. Consequently, the company’s stock price had been cut by 12% from the start of 2015 to yesterday. Given these as a backdrop, it would be natural to wonder whether the challenges that Super Group faces are temporary or much longer-term in nature.

In an earlier article, I shared Super Group’s thoughts about the key challenges that it’s facing. Despite the challenges, there was one particular bright spot to note, namely, China.

Darren Teo, Super Group’s assistant general manager, had keyed in on one slide during a recent earnings briefing:

2016-03-02 Super Group Presentation
Source: Super Group’s earnings presentation

Teo added the following comments for the slide:

“2015 has been a year of key brand development year for us in China. We launched our new Super Coffee and Cereal packaging as well as having new campaigns to attract the young consumers in China.

We also launched new variants which is in-line with what consumers want. For example, things like salted-caramel coffee, matcha-latte, cocoa hazelnut coffee. So, these are new products that we have pushed out into the market, in order for us to have the first mover advantage.

The result of what we have done in China, for example, the branding efforts and also the new products that we launched in the market, is such that the Super Branded Consumer business in China grew double digit, despite thoughts of China having a slowdown.

One encouraging point we are seeing is that our key category cereal is contributing around 65% of our total China revenue, and our coffee category grew more encouragingly at 40%. And the third thing would be that our China online business, the eCommerce business – something that a lot of people are focused on – grew by more than 50%.”

In Super Group’s latest earnings report, the company mentioned that its Branded Consumer business segment saw sales in East Asia (which includes China) jump by 39% year-on-year in the fourth-quarter of 2015. East Asia’s Branded Consumer sales in the quarter made up 8.2% of Super Group’s total sales in that period. It’s not a huge part of Super Group’s business yet, but this could be an area to watch for the future.

Meanwhile, I will be pondering what salted-caramel coffee would taste like.

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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 Chin Hui Leong owns shares in Super Group