MW4 • THEEDGE SINGAPORE | MARCH 29, 2010

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COVERSTORY | BY KANG WAN CHERN |

When packets of Frito-Lay potato chips began retailing in Sin-gapore supermarkets next to local Jack ‘n’ Jill crisps years ago, it wasn’t by chance that

the multi-fl avoured snacks quickly became popular among local consumers. In fact, it had taken many months of studying local spending patterns and tastes before the US potato chip maker dared to stage its debut in Asia with a suitably priced product tailored to appeal to local taste buds.

Joerg Wolle, president and CEO of the largest privately held company in Switzer-land, DKSH Group, which had helped West-ern brands like Frito-Lay, Kellogg, Heinz and Nivea find their way into Asian households, is saddling up to help even more firms grow and extend their reach in the region with its new and improved business model, as the economy gains momentum and consumers

begin spending once more.Last week, in a move to unite its Sin-

gapore subsidiaries under the DKSH brand and entrench the company’s position as the No 1 provider of market expansion services in Southeast Asia, Wolle officially announced the name change of local subsidiaries Diethelm Singapore and Harpers Trading to DKSH Sin-gapore and DKSH Marketing, respectively. He also announced the relocation of the com-pany’s global finance centre from Zurich to Singapore, as the company gears up to cap-ture growth in the region. In FY2009, the city-state drew in $400 million in sales for DKSH. Its total sales worldwide were CHF8.6 billion ($11.3 billion). Today, DKSH has more than 5,500 business partners and suppliers and over 550,000 customers, and employs up to 21,000 staff worldwide.

“It is vital for us to clearly communicate the purpose of this new business model to

our clients, customers and staff,” Wolle said during the naming ceremony at Capella Sin-gapore on Sentosa last Thursday. “Market-expansion services symbolise our reinvented business model and demonstrate that DKSH is not simply a new name, but that the compa-ny provides more added value and a broader range of services than in the past.”

Formed through the merger of Asia-based trading houses Diethelm, Keller and SiberHeg-ner led by Wolle in 2002, DKSH has since emerged as an expert in helping Western companies expand into new markets or grow their market share within existing markets. Its services include any combination of busi-ness planning, sourcing, marketing, sales, dis-tribution and after-sales services and focus mainly on four business units — fast-mov-ing consumer goods, healthcare, lifestyle and technology.

“Companies wanting to enter a new ter-

ritory in Asia need partners who know their way around that market,” Wolle tells Manage-ment@Work. “That’s when they can partner with us to expand, without having to worry about the costs of entering into an unknown market.” From generating just US$200,000 ($280,700) in sales volumes within the US, Frito-Lay now pulls in millions in sales after it successfully penetrated the Asian market rid-ing on DKSH’s extensive Asian network.

DKSH partners with healthcare companies like Bayer, Blackmores and Bausch & Lomb as well as medical device company Conmed Corp to market and distribute their products to hospitals, pharmacies and optical outlets in Asia. Its services for other clients, such as chocolate maker Lindt and Sprungli, in-cludes sourcing raw ingredients on behalf of the company and the distribution and sale of the chocolates for Lindt in Asia.

DKSH also offers technical solutions —

A man tends the counter at a local convenience store in Thailand. The country was the fi rst Southeast Asian foray for Nivea, which had help from DKSH in entering the Asian market.

MASTER distributorJoerg Wolle, CEO of DKSH Holdings, is uniting giant consumer goods distributors

Diethelm Singapore and Harpers Trading for further expansion in Asia

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©The edge Publishing PTe lTd 2009 • 150 Cecil Street #13-00 Singapore 069543 • Tel: (65) 6232 8622

THEEDGE SINGAPORE | MARCH 29, 2010 • MW5

sourced from European, American and devel-oped Asian manufacturers and suppliers — to Asian companies involved in machinery, environmental technology, photovoltaics, life sciences and laboratory set-ups. For example, it has an exclusive partnership in Singapore and Malaysia with Lighthouse Worldwide So-lutions, a contamination-solutions provider from the Netherlands.

Since the merger, its transaction value has risen 83% while profits are up 124%, according to company data. DKSH has man-aged to extend its global footprint by up to 131%, boasting business locations in over 35 countries, 20 of which are in Europe and the Americas. “The crisis actually played into our hands, because companies were outsourcing a lot of services to keep capital expenditure low,” Wolle says. “Many partnered with us to lessen the burden of fixed costs.”

Focus on AsiaWith growth having hit a plateau in the West, Wolle is now keen on capturing growth from Asian countries wanting to expand into other parts of the region. “We not only help com-panies from the West expand in Asia, but we can also help Asian corporations wishing to expand within the region and local companies wanting to expand within the local market,” Wolle says. For example, local food manu-facturer Prima Food recently enlisted DKSH’s help to expand into Southeast Asia.

Indeed, Asia has been generating the lion’s share of DKSH’s business. Last year, it con-tributed 96% to the company’s sales volumes, with its single-largest market, Thailand, rep-resenting 43% of sales volumes, followed by Malaysia with 14.4% and China with 13.8%. “Western companies who did well before now need to branch out overseas, because their home markets have tanked,” Wolle says. “So, there is very clearly more interest in expand-ing into Asia, where the living standards are improving and innovation is thriving.”

To function effectively in the region and improve operational efficiency, DKSH is in-vesting $50 million to $60 million to build a new logistics facility in Singapore that will in-crease its distribution capacity by about 50%, Wolle reveals. The facility will combine and manage the transport and distribution logis-tics of mass-market products in DKSH’s fast-

moving consumer goods and healthcare units, where inventory turnover is high.

“As a market-expansion services provider, we must have a deep understanding of the needs of different customers in each market,” Wolle says. “Singapore is a logistics hub for us in Southeast Asia, which has the highest growth rate in the world. [The city-state] has a very good location and connection to the neighbouring countries and is ideally situat-ed for our needs.”

Growth through acquisitionsDKSH is also expanding through the acqui-sition of capital assets, following a 12% de-cline in global trade during the recession last year. “We are looking to expand by purchas-ing smaller companies that do not have the financial muscle to reinvent themselves, as we did,” Wolle says. “Acquiring our own in-frastructure gives us a bigger jump, because it’s not just the one brand you take on, but hundreds of sales and services people and a range of brands.”

On March 9, DKSH announced the acquisi-tion of Hagemeyer-Cosa Liebermann Group, a Swiss luxury goods and lifestyle trading house founded in Asia, making it the fourth such company to become incorporated into DKSH. Hagemeyer, which markets and distributes high-end brands like Bally and Rolex, will en-hance DKSH’s position as a services provider of premium luxury products in Asia. Currently, DKSH carries out sales, marketing and distribu-tion services for luxury watch brands Arnold & Son and Maurice Lacroix in Singapore.

It also bought Taiwan-based Chiao Tai Logistics — which specialises in the trans-port arrangements of consumer goods — ef-fectively strengthening its operations in the country and opening up potential opportu-nities to serve businesses not just in Taiwan but in Hong Kong and South China as well. The acquisition also involved taking on three separate distribution service centres, which spared DKSH the time and money needed to build such hubs. “After taking over Chiow Tai, we have jumped from No 3 in Taiwan to being No 1.”

Yet another acquisition involves the take-over of Biolife, a leading vitamin and health supplements company in Malaysia, which will enhance DKSH’s existing portfolio of health-

care clients and customers. Through the trans-actions, DKSH is acquiring some 700 new em-ployees, while the distribution network and market coverage will be expanded by more than 80 additional subsidiaries.

Facing challengesOf course, embarking on such an ambitious growth path presents challenges. For one thing, penetrating the different countries that make up Southeast Asia involves a deep un-derstanding of the varying cultures, languag-es and national issues, in order for a foreign company to operate successfully. Then, there is competition from local companies as well as protectionist measures taken by different governments.

Based in Switzerland but having helmed SiberHegner and DKSH in Asia for over 20 years, Wolle is only too aware of the limit-ed knowledge companies in the West have of the region. “Today, in Europe and the US, the only thing you read about is China and India — there is very little awareness over other parts of Asia,” he points out.

As Diethelm was set up in Southeast Asia over 140 years ago, while Keller and Siber-Hegner were incorporated in Japan and Hong Kong, respectively, Wolle believes DKSH has a firm enough grasp of the business environ-ment in the region. “We believe Southeast Asia has a good environment for business and recommend it to our clients, so we can help them grow.”

Indeed, although it is headquartered in Zurich, DKSH is deeply rooted in communi-ties across Asia-Pacific. Wolle points out that around half of DKSH’s new business port-folio is usually recommended by existing clients who are happy with the company’s service. “Our clients and customers become like ambassadors for our company, which is good because it means they are happy with us,” he says.

For now, Wolle intends to sharpen the company’s core specialisation in serving ex-isting business units, while actively expand-ing its base of suppliers and customers. One thing is for sure, though. DKSH certainly has its roots secured in a region teeming with po-tential for growth.

“We have a clear strategy for growth in Asia,” Wolle says. “We are No 1 in many coun-tries, but we believe that we can still grow from our current position. So, we want to fo-cus on what we do best at this point.”

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Companies wanting to enter a new

territory in Asia need partners who know

their way around that market. That’s when they can partner with us to expand, without having to worry about the costs of entering

into an unknown market. — Wolle

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DKSH offers various services to its customers, for example the distribution and sale of Lindt chocolates in Asia

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©The edge Publishing PTe lTd 2009 • 150 Cecil Street #13-00 Singapore 069543 • Tel: (65) 6232 8622