THE king of fruits has made quite a stir in the market in recent years. Prices of durian continue to spike with each passing season and demand is set to grow, both locally and internationally.
Consequently, durian exporter Hernan Corp Sdn Bhd has seen tremendous growth in its business since the company was founded by group chief executive officer Anna Teo in 1996.
But as demand for the fruit grows, Teo wants to also push the market for more downstream products like durian-based mooncakes, ice-cream and other confectionery.
“We don’t need to hard-sell the fruit. Demand is picking up. But we are also focusing on our downstream, especially when we have a good R&D team. So they are coming out with more exciting products.
“But downstream takes time for the market to accept. Like ice-cream, for example, people view it as processed products, so they prefer to have the fresh fruit instead. But we are using real durian flesh in our ice-cream. We want to introduce consumers to other ways of eating durian.
“Local consumers are used to eating durian at small stores. We can change the consumption to other products as well such as frozen durian fruits and other fruit-based products when durian is not in season or when prices are high. So we are launching new products this year, ” she says.
Hernan received a boost late last year following a majority-stake acquisition by private equity (PE) firm Navis Capital Partners. Navis said it plans to invest up to RM400mil in its expansion plan of Hernan.
The injection of new funds couldn’t have come at a better time. This means there would be better support to bring Hernan’s products out to the market. The manufacturer recently relocated to its new RM35mil facility in Bandar Puncak Alam which is six times the size of its previous capacity.
The new factory is built to meet more stringent internationally-recognised certification standards, which will give Hernan better business opportunities.
“Navis has mega plans. With their support, we can have bigger dreams and plans, ” says Teo.
Navis will focus on its upstream investments to support the company with their supply needs. The PE firm had earlier announced that it is looking to acquire up to 10,000 acres of durian plantation in Pahang, in partnership with a local agriculture company.
“Our job here is to scale up our marketing side and the downstream to support the demand. So now it’s about synergising the upstream and the downstream to grow Malaysian durians as one of the future commodities for the country. We are going big-scale, ” she adds.
With the new funds, Hernan is also exploring more acquisition opportunities to build up its resources and capabilities to serve a wider market. These companies are both in the upstream and downstream segments that would add value to Hernan.
Teo believes the synergy would help the company hit its big target of RM500mil sales in five years.
Hernan is aiming to close over RM100mil in sales this year.
Teo notes that the coronavirus disease (Covid-19) outbreak in China will not have much of an impact on the company’s performance this year, provided the situation does not extend beyond March.
“It actually won’t have so much impact on us because the timing of the outbreak came after the (peak) season was over. It did affect our downstream business. The numbers dropped and we are putting some production on hold.
“But it’s also a good time for us. We’ve always been busy fulfilling orders and whatnot. So this is a quiet time to sit down and do some housekeeping and re-strategise our plans for the future, ” she says.
While the durian remains as Hernan’s core product, Teo says the outbreak has also taught the team to explore opportunities with other tropical fruits which would expand its export market to other countries and reduce the focus on China.
It is currently carrying out R&D efforts to develop more downstream products with other local produce such as strawberries, cempedak and bananas.
“We need to have other products for sustainability. We need to know our back up plans. We are not getting out of durian but when we plant durian, we need to wait five to six years to get the harvest, so we can plant bananas in between for our next cash crop, for example, ” she says.
She points out that this is a good development as the company has previously been more focused on exporting fruits. This shift to R&D will enable it to be more innovative with its products.
Additionally, Hernan will be able to leverage Navis’ portfolio of companies to do more research and work with the relevant partners for further automation of its factory.
“At the moment, our factory is semi-automated. We need to test out and customise components and processes as we work towards full automation.
“But our dream for IR4 is materialising. And Navis is sending in a lot of support in terms of expertise, consultants, building our management team and strategy planning.
“With Navis behind us, we can definitely grow faster and stronger. We have a blueprint for the next five years and we will see what is next after we achieve that, ” she says.
She is also optimistic that the local durian industry will grow by leaps and bounds in the next three to five years once more plantations become mature. Teo notes that more and more oil palm and rubber plantations are being converted into durian orchards and idle lands in the fertile region of Pahang are being put to work. This will boost Malaysia’s production and ensure that prices of local durians will be more competitive with Thailand’s fruits in the coming years.
She adds that local durians currently only make up about 1% of durian consumption in China. If prices were more competitive, the market will see a bigger switch from Thai durians to Malaysian durians.
Certainly, the growth of the industry as a whole will be a positive for Hernan.
Making a mark
Teo has come a long way from her days as an air stewardess when she started Hernan. These days, she is fondly known in the industry as the “Musang Queen”.
Having made her mark in a male-dominated sector, Teo hopes to empower fellow ambitious women to stay strong and true to their cause.
At the recent Star Outstanding Business Awards 2019, Teo took home the Female Entrepreneur of the Year trophy for the above RM25mil revenue category. The award, she says, validated her capability as a role model for others to follow.
“That was a very surprising win. We only applied for that one category, not having full confidence of winning. But this award is meaningful for me.
“I want to do more women empowerment work. But, honestly, who am I to do women empowerment? So this award has encouraged me to think that I can go further in this, that I should do more women empowerment work and encourage more young women to come out and achieve their dreams and go further.
“Women are already impressive, they just need a little lift. Give them the experience, opportunity and mentoring, and that will give them the confidence they need, ” she says.
The 47-year-old wants to teach others to live by her mantra of making the impossible possible. She points to Hernan’s new factory as an example – she almost gave up building it.
“Two years ago, when I saw the ground that we were building on, I thought the project was not possible. But somehow we persevered and we now have a factory with automation and we want to go more into IR4 technologies.
“After going through all that, I want people to question me about how a woman can run a durian business, how to use technology in this business, how to build this factory from zero to full-automation. I want to share my experience and encourage others not to think so lowly of themselves.”
Teo also hopes to inspire her own employees to seek out entrepreneurial opportunities.
“They don’t need to be with me all the time. If I can empower you and support you, I will do it for you. But I believe that they will create something of their own someday, ” she says.
The Breakfast Grille with BFM 89.9
Hernan Corporation, one of the country's biggest names in durian exporting, has just been acquired by private equity firm Navis Capital. What lies in store for them now, in the face of climate change, new labour legislation, and rising demand from China?
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