Business Times 5 Jan 09;
Hu Lee Impex started seeking partners for contract farming in the '90s, and investing in farms abroad in '05, reports CHEN HUIFEN
WAY before the Agri-Food and Veterinary Authority called for Singapore investors to set up farms abroad, a little-known vegetable trading firm called Hu Lee Impex had done so - more than 10 years ago.
Realising that being a trader put it at the mercy of vegetable exporters in other countries, Hu Lee decided to move up the chain to gain direct access to the fruits and vegetables it supplies to wholesalers, restaurant agents and retailers from its base at Pasir Panjang Wholesale Centre.
The company started seeking partners for contract farming in the 1990s, and began investing in farms abroad in 2005. Today, it has stakes in one farm in Vietnam and four in China - in Qingdao, Kunming, Guangdong and Hubei. It also has contract farming arrangements in about eight Chinese provinces.
Altogether, the firm jointly owns and manages close to 350 hectares of vegetable farmland in China and Vietnam, and a 266-ha fruit farm in Qingdao that has achieved the Good Agricultural Practice standard.
'And for those products that we do not grow, we have partners we can call on to import or buy on our behalf to bring to Singapore,' says Hu Lee managing director Jerry Tan.
The idea is to have as many sources as possible - not just to ensure the company can fulfil its commitments to customers but also to help secure Singapore's vegetable supply. Being a net food importer, Singapore is very reliant on overseas sources and should weather changes bring about a bad harvest at one farm, a wider network of sources could help to make up for the shortfall.
'We used to be just a trading company,' says Mr Tan. 'Now we have moved to become a vertically integrated company.'
But vertically integrated means more than owning farms. It also means investing in on-site equipment, imparting knowledge on post-harvesting techniques and developing cold chain logistics from farm to customer.
At the foreign farms, for instance, packing houses had to be set up near crops to select and pre-pack the harvest for export to Singapore. Workers had to be trained to test for pesticide levels and conduct quality-control checks.
At home, Hu Lee also invested in refrigerated trucks and a $10 million factory in 2006 to handle the growing volume of produce it imports. The 80,000 sq ft factory is both a cold store and a processing and packing plant, capable of handling 1,000 tonnes of produce a month. It is also one of the few vegetable and fruit processing facilities in Singapore that is Hazard Analysis and Critical Control Point (HACCP)-certified.
To ensure consistent quality, Hu Lee even has data loggers track temperature changes in all containers carrying its fresh produce. To minimise condensation, it uses anti-frost plastic when shrink-wrapping vegetables. And each pack of vegetables can be traced back to a particular harvest at any farm in its stable through an inkjet-printed code on the packaging.
Hu Lee Impex also pre-trims raw produce such as cabbage, wongbok and other items.
'There's no wastage to the buyer, as the products are already ready for sale upon arrival at retail outlets,' said general manager for manufacturing Michal Lim. 'In normal circumstances, the retail outlets need extra manpower to shave off the first few layers, and that is cost to them. So we go to such an extent to value-add to our vegetables.'
Pre-trimming proved popular with retailers such as NTUC Fairprice, Cold Storage and Giant. Two years ago, the company also started to add value for restaurants.
'If you look at F&B outlets in shopping malls these days, the kitchens are very small,' says Mr Tan. 'Because of high rents, they have to maximise the dining area.'
Seeing a need for pre-cut food ingredients, Hu Lee set up a sister firm Cultured Greens, focusing on pre-diced, pre-sliced and pre-shredded vegetables and pre-cut fruits, customised and pre-packed to restaurants' needs and delivered.
It was a far-sighted move, considering the lifestyle changes happening as people are spending more time at work. As Mr Tan observes, the number of people patronising wet markets is falling, while patronage at F&B outlets is growing as Singaporeans eat out more.
Chains such as Coffee Bean, Subway, Delifrance, Pepper Lunch, Pasta Mania and the Suki Group are already customers of Cultured Greens. Boosted by a 150 per cent jump in sales at Cultured Greens, Hu Lee expects to generate revenue of $28-30 million this year, up from about $24 million last year.
In time to come, Cultured Greens may move into the consumer segment through ready-to-eat salad packs and ready-to-cook ingredients. But the priority in the next few years is brand creation and building. The group is hopeful that it has a chance at clinching mind space, as there is yet a prominent vegetable brand in the world.
'We want to build a brand for Asian leafy vegetables in Singapore and grow it regionally,' says Mr Tan. 'We already sell some of our vegetables at Jusco in Qingdao, unbranded, and at the same price you see in Singapore. We are amazed by the Chinese people's spending power.'
