Singapore Business News_

February 2014

Record investment: new Exxon Mobil plant

Astellas Pharma arrives in Singapore

Beating heart: life sciences expansion

Pain relief: Mundipharma expands

Conquering the Asian consumer

The race for relevanceThe race for relevance

3 Exxon Mobil plant caters for booming demand

4 Astellas Pharma Singapore opens its doors

INDUSTRY FOCUS

5 State-of-the-heart manufacturing

6 To Asia and beyond from Singapore

Business model innovation for Asia...two leaders discuss: “We said to our brand managers ‘you can’t pull and push moneys in and out of China because of the strength of your business in other parts of the world’. This achieved consistent commitment to that marketplace”

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SINgapORe SeSSIONS

February 2014

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CONTeNTS

7 Western products, Asian-style How are global companies using

business model innovation to bridge gaps and address market-specific needs in Asia?

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singaporebusiness.comINDUSTRY FOCUS

o il and gas giant ExxonMobil has opened a multibillion-dollar plant expansion on Jurong

Island, confirming its commitment to the booming Asia Pacific market. The project doubles the company’s production capacity in Singapore and is its largest-ever chemical expansion.

In his speech at January’s opening ceremony, Exxon Mobil Chairman and CEO Rex W Tillerson described how the rising importance of Asia Pacific has driven investment on this scale.

“Global chemical demand will grow at a faster pace than GDP as people seek higher standards of living and purchase more household and packaged goods manufactured with chemical products.”

“Two-thirds of that growth in chemical demand will be here in the

Asia-Pacific region. ExxonMobil’s expanded Singapore chemical plant is uniquely positioned to serve these growth markets – from China to the Indian subcontinent and beyond.”

The Jurong facility now accounts for about one quarter of ExxonMobil’s global chemical capacity and is one of its most energy efficient sites, incorporating 30 proprietary technologies. It is the company’s largest integrated refining and petrochemical facility globally and represents the biggest ever single investment in manufacturing in Singapore.

Prime Minister Lee Hsien Loong was guest of honour at the opening event. He reiterated his government’s commitment to the energy and chemicals sector, which accounts for one third of national manufacturing output.

PM Loong detailed three central strategies for strengthening Singapore’s energy and chemicals capabilities. The

first is the upgrading of Jurong Island with the introduction

of alternate feedstock sources such as the use of waste heat for water desalination to save energy.

The second focuses on upgrading skills and creating

knowledge through R&D, while the third

strategy uses more energy-efficient equipment, such as

that deployed at Exxon Mobil’s new site, to help tackle climate change.

exxon Mobil plant sets production record

New plant sets manufacturing investment record

“ExxonMobil’s expanded Singapore

chemical plant is uniquely positioned to serve these growth markets – from

China to the Indian subcontinent and

beyond”

ExxonMobil’s Jurong facility accounts for about one-quarter of the company’s global chemical capacity and is one of its most energy efficient sites

4singapore business news_

February 2014INDUSTRY FOCUS

J apan’s second biggest pharmaceutical company, Astellas, has opened a wholly-

owned subsidiary in Singapore. The new office will drive regional growth, leading the commercialisation of the group’s global products across Malaysia, Brunei and Singapore.

At the opening ceremony Mr Yoshihiko Hatanaka, President and CEO of Astellas, described the new office’s strategic role. “Astellas has a business model named Global Category Leader (GCL) based on which we establish a competitive edge as a leader in multiple categories of innovative medicines,

such as urology and transplantation. “Astellas is also focusing on

establishing oncology as the third GCL area. The opening of our Singapore office is important as we would like to have our products and services delivered easily to patients in this area.”

Astellas’ Singapore expansion represents the latest addition to the

city state’s rapidly expanding biomedical sciences sector

– a key focus of the government’s long-term growth strategy. At S$3.7 billion, public investment in research and development between 2011 and 2015 will be 12 per cent higher than in the preceding five years and will benefit basic,

translational and clinical research networks.

Biopharmaceuticals manufacturing is also developing, with eight world-class biologics manufacturing facilities employing close to 1,700 employees across the island.

Speaking at the Astellas opening, Mr Yeoh Keat Chuan, Managing Director, Singapore Economic Development Board, highlighted the general business advantages Astellas can expect to enjoy in Singapore.

“We are delighted that Astellas has established its sales office in Singapore. Astellas can tap on our ecosystem and capabilities to host strategic regional or global functions such as regulatory, medical affairs, clinical coordination and supply chain management, to seize the growth opportunities in this part of the region.”

astellas Pharma Singapore opens its doors

Japanese pharma specialists to expand regional presence

“Astellas’ Singapore expansion represents the latest addition to

the city state’s rapidly expanding biomedical

sciences sector”

Managing Director of EDB, Mr Yeoh Keat Chuan was joined by Mr Yoshihiko Hatanaka, Global CEO and President of Astellas, Mr Shin-ichiro Katayanagi, Senior VP and President Asia International, Mr Hiroshi Hamaguchi, MD Astellas Pharma Singapore in the Kagarnibiraki (sake breaking) ceremony at Astellas Singapore official opening ceremony

5singapore business news_

singaporebusiness.comINDUSTRY FOCUS

h eart valve and hemodynamic monitoring corporation, Edwards Lifesciences, will cater for

growing global demand for synthetic heart valves from an expanded manufacturing plant in Changi, east Singapore. The new facility will more than double the size of the current building to approximately 24,000 metres. State-of-the-art production capabilities will strengthen Edwards’ position as world leaders in surgical and

transcatheter tissue heart valves. “Edwards’ Singapore facility

was developed to meet the global demands for our

technologically advanced tissue heart valve replacement products and to help us serve the needs of patients worldwide,” said Donald E Bobo, Jr,

Edwards’ Corporate Vice President, Heart

Valve Therapy. “We are proud that

our continued investment in Singapore will result in employment

opportunities for hundreds of additional workers to join the 1,000 employees currently working for Edwards in the region. We are very grateful to the Economic Development Board for their extraordinary efforts in working with us to ensure this success.”

A large clean room and training facilities will compliment additional offices and laboratories at the expanded plant. This latest expansion takes Edward’s investment in Singapore to $95 million since 2005.

“We warmly welcome Edwards’ decision to expand its facility here. This is a strong affirmation of Singapore’s competitiveness as a location for advanced medical technology manufacturing,” said Yeoh Keat Chuan, Managing Director, Singapore Economic Development Board.

Edwards Lifesciences expands Singapore facility

State-of-the-heart manufacturing

“Edwards’ Singapore facility was developed to meet the global demands

for our technologically advanced tissue heart

valve replacement products”

Edwards Lifesciences’ newly expanded manufacturing plant in Singapore will cater for the increased global demand

for synthetic heart valves

6singapore business news_

February 2014INDUSTRY FOCUS

P ain management specialist Mundipharma has announced the significant expansion of its

regional base in Singapore. The state-of-the-art office space at Asia Square will house the company’s growing workforce in Singapore, which currently numbers 70.

“Singapore is an excellent hub for Mundipharma to base its operations. It gives us the combination of easy access with strong reach to support our goal of improving the quality of lives of patients throughout the region and beyond,” said Raman Singh, Regional Managing Director, Mundipharma Asia Pacific, Latin America,

Middle East and North Africa. “Singapore is fast-growing in the

global export of pharmaceutical goods, so this, coupled with its strong infrastructure, makes it best-placed to attract top-in-class talent, which is essential for Mundipharma as we continue to develop in our role as a dynamic pharmaceutical company on

the global stage.” From its roots in a small US pharmaceutical

company acquired more than 60 years ago, Mundipharma has developed into an international network of independent associated companies. They have become leaders in pain management and are

building a growing

To asia and beyond from SingaporeMundipharma drives emerging market growth

presence in the oncology, rheumatoid arthritis and respiratory markets. The team in Singapore will be in charge of expanding the organisation’s presence in Asia and emerging markets worldwide, including Latin America, the Middle East and North Africa.

Mr Kevin Lai, Director of Biomedical Sciences and Consumer Businesses, Singapore Economic Development Board, congratulated Mundipharma on this latest milestone in their development and increased presence in Singapore’s growing biopharmaceutical community.

“Mundipharma’s decision affirms and reflects Singapore’s growing status as a leading hub for pharmaceuticals companies looking to drive and grow their businesses in the emerging markets and Asia. We warmly welcome their decision to establish its regional office here in Singapore.”

“Singapore is fast- growing in the global export of pharmaceutical goods, so this, coupled with its strong

infrastructure, makes it best-placed to attract top-

in-class talent”

Mr Raman Singh, Regional Managing Director for Mundipharma Asia Pacific, Latin American, Middle East and North Africa;  Mr. Kevin Lai, Director of Biomedical Sciences and Consumer

Businesses, EDB shake hands after signing on a commemorative sand art piece

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singaporebusiness.comSINgapORe SeSSIONS

challenge topic: How are global companies using business model innovation to bridge gaps and address market-specific needs in Asia?

With more than 3 billion new middle-class consumers hitting the shops in Asia by 2030, Western companies are

vying for space in an increasingly competitive market.

Asian consumers are a diverse group and strategies that have succeeded in

the West do not always translate in the East. It’s a challenge that is prompting companies to use business model innovation to stay relevant and ahead of the competition.

In this Singapore Sessions, we hear from leaders from two of the world’s best-known brands and biggest family-run companies: Andrea Illy,

Chairman and CEO of Illycaffè S.p.A and William Lauder Executive Chairman of Estée Lauder, both of whom are grandsons of their respective companies’ founders.

The asia story so farIllycaffè and Estée Lauder are benefitting from the rapid emergence

Western products, asian-style

‘‘Osiao has a very Asian sensibility, as opposed to most of our other brands that are global. Why leave the authenticity of Asia to Asian companies only?William LauderExecutive Chairman and Chairman of the Board of Directors at Estée Lauder

‘‘We don’t do localisation.

The product we offer is the same

worldwideAndrea Illy

Chairman and CEO of Illycaffè S.p.A

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February 2014

market. Estée Lauder research shows that on average Asian women use 17 beauty products a day, compared to North American women who use 10. Demand from Asian men is greater too, with another study from Euromonitor predicting that Asia-Pacific will account for 66 per cent of global product sales by 2016.

Different routes up the asian mountainBoth companies are making fundamental changes in response to the emerging market challenge. For William Lauder, innovation has been instrumental to the company’s success in Asia.

“It’s an effort that goes back more than 10 years when we recognised we

We recognise that the aesthetic and cultural content of our product

requires us to get as close as possible to

the consumer and to develop a direct

relationship with them

Andrea Illy

We said to our brand managers ‘you can’t pull and push moneys in and out of China because of the strength of your business in other parts of the world

William Lauder

SINgapORe SeSSIONS

of Asia’s middle class. Historically, demand for coffee and beauty products has risen in line with greater disposable income, so Asia represents huge opportunity for both companies.

Six million cups of Illy coffee are sold every day in 140 countries around the world with increasing consumption in Asia since the brand first launched in Hong Kong 15 years ago. Illy expects mainland China and the so-called “Tiger Cub” economies of South East Asia to follow markets like Korea, Taiwan and Japan in acquiring a greater taste for coffee, thus strengthening the company’s focus in this region. In 2012 coffee consumption in emerging markets jumped 10 per cent, one of the largest increases on record.

Estée Lauder has been in Asia for more than 40 years. In 2004, 65 per cent of their customers were in North America but since then global business has doubled from US$5 billion to US$10 billion, of which 70 per cent comes from outside North America. Asia represents the fastest-growing

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needed to make a real commitment to investing in emerging Asian markets, particularly, China. China’s now the third-largest market for us in the world, and it will soon be the second, and perhaps someday it’ll become the largest.

“In order to grow China within our organisation we ring-fenced the investment there. We said to our brand managers ‘you can’t pull and push moneys in and out of China because of the strength of your business in other parts of the world’. This achieved consistent commitment to that marketplace and that sort of internal management policy has made a huge difference to us. Our Chinese market is so good because of a consistent commitment to investment.”

Illycaffè is changing its traditional model of selling to trade professionals, which is key to accessing new Asian consumers according to Andrea Illy.

“We are in the process of more and more becoming a retailer. We recognise that the

aesthetic and cultural content of our product requires us to get as close as possible to the consumer and to develop a direct relationship with them. We do this through our own point of sales, in our branded cafes, in department stores and through e-commerce.

“We already have about 50 stores in Asia with our partners and we want to grow this to at least 200. But in order to get recognition we have to educate the nose and the palate of consumers. So the educational effort is our number one and is the reason we founded a University of Coffee. It is present in

25 countries, including five different places delivering training for coffee growers, hospitality professionals and the consumers themselves.”

Taste test: to localise or not to localise?Illycaffè and Estée Lauder are among those global brands harnessing the increasing body of pan-Asian consumer studies to strengthen brand positioning and product development. Estée Lauder has identified distinct differences between Caucasian and Asian skin types, while Illycaffè is investing in better understanding different taste-recognition. Illycaffè’s research so far suggests there may be more “supertasters” in Asia who can’t tolerate bitterness, a central

characteristic of coffee. The two companies are reacting

to these insights in different ways, with Estée Lauder launching an entirely new product tailored to Asian markets while Illycaffè sticks ardently to one global

recipe. “We don’t do localisation,” says

Andrea Illy. “The product we offer

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February 2014

is the same worldwide. Illy’s ambition is to deliver the best coffee in the world and we’ve perfected this unique blend over decades. The adaptation is around how it is prepared and served. In some parts of Asia they prefer the traditional, authentic, Italian styles, like cappuccino, or-cafe macchiato, in other parts they like Latin macchiato. But we don’t have a specific recipe for Asia.”

In 2012 Estée Lauder launched Osiao, a cosmetics line aimed specifically at customers in China. It was developed at a company research institute in Shanghai, manufactured in Japan and launched initially in Hong Kong.

“It’s our first effort to create a brand from scratch aimed at the Asian consumer”, says William Lauder. “Osiao has a very Asian sensibility, as opposed to most of our other brands that are global. A lot of that effort has to do with the rise of Asia and with the Asian consumer being so demanding and somewhat different from her counterparts in North America and Europe. Why leave the authenticity of Asia to Asian companies only?”

looking to the futureLooking to the future, both Lauder and Illy agree on the importance of refining their business models continually, as Asian markets emerge and evolve. The region’s rapid development holds opportunity and challenges, as William Lauder is acutely aware.

“Every few years there seems to be another important market emerging and growing. In 10 years’ time I imagine we’ll be talking about Myanmar the way we’re talking about Vietnam today. And the Vietnam we’re talking about today is going to be like Malaysia. And Malaysia will be like Korea.

“As these economies blossom the core thing for us, which has been true for 50 years, is that emerging middle-class consumer, who when she has disposal income will start to spend it on herself.”

Want to see how the experts’ discussion unfolded? Get an insider’s view at Singaporesessions.com

William P. Lauder has been Executive Chairman and Chairman of the Board of Directors at Estée Lauder since July 2009. Under his leadership the Origins brand was created and Clinique’s Dramatically Different Moisturizing Lotion became the best-selling prestige skin care product in US department stores.

Andrea Illy is Chairman and CEO of illycaffè S.p.A. Andrea spearheaded the company’s global expansion, bringing the illy experience to cafes, restaurants, hotels and retailers in more than 140 countries. He is also a trained chemist and co-authored “Espresso Coffee: the Chemistry of Quality”, a leading text in its field. He also serves as president of the Association for Science and Information on Coffee (ASIC).

“ “

WilliaM lauDerExecutive Chairman and Chairman of the Board of Directors at Estée Lauder

anDrea illyChairman and CEO of illycaffè S.p.A

I made my first trip to Singapore in 1982 when I was 22 years old and it was one of the earliest markets we entered in Asia. Many of our regional functions are in Singapore because the workforce is so capable. We run all the markets that surround Singapore – Vietnam, Thailand, Malaysia, Indonesia and the Philippines – from here and it’s a fascinating, very competitive place

We have partnered with Singapore Airlines to serve Illy coffee on board and are just waiting for the next opportunity. We have so much admiration for Singapore’s willingness to increase competitiveness, and to deliver service and excellence and we look forward to developing new markets – especially Australia and India – from Singapore in the years to come

SingaPore exPanSion PlanSWilliam Lauder and Andrea Illy are both acutely aware of the importance of recognising cultural nuances around the region and within markets. Six of the top 10 market research firms – Nielsen, Kantar, Ipsos, GfK, IMS Health and INTAGE – have their regional headquarters and practice leaders based in Singapore, where Illycaffè and Estée Lauder have plans to expand.

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Singapore Business News_

Singapore Business news is a monthly publication that updates readers on the latest industry trends in Asia from a uniquely Singaporean perspective. Highlights include Singaporean business stories and special opinion pieces on opportunities in Asia, how global companies are leveraging Singapore to tap into pan-Asian growth opportunities and how Asian enterprises are globalising via Singapore. Singapore Business News also provides case studies on how Singapore partners businesses to deliver future-ready solutions.

Singapore Business news is a publication of the Singapore Economic Development Board.

Singapore: future ready articulates the nation’s aspirations to be a partner for global businesses as they develop their ideas for tomorrow’s solutions. Singapore does so by recognising the value of long-term partnerships, adopting a forward-looking approach, taking on challenges with a can-do spirit.

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