Case Example:

Introduction of Vitasoy International Holdings Limited

Vitasoy (SEHK: 0345) is a brand of beverages and desserts in Hong Kong. Founded in 1940, it now operates under the Vitasoy International Holdings Limited based in Hong Kong.

The products marketed by Vitasoy are available under two major brands: “Vitasoy" products were centered on the high-protein soymilk drink that the company first produced. Over the years the company expanded beyond the soy drink products and started to produce a wide variety of beverages. Some of them (such as the fruit juice) were given the derivative brand name "Vita".

Both brands are sold widely in Hong Kong, China, Australia, New Zealand, North America, Europe, South East Asia and other markets throughout the world.

Issued Problem & (Diagnosis the need for change)In 2007, operating cost will be an increasingly thorny issue in view of the escalation of raw material cost, which would likely be aggravated by fluctuations in supply. Competition was intense and operators’ profit margin was constricted by the rise in operating costs. Furthermore, the rise of wages and other operating expenses will accentuate the challenge of cost management while the profitability of businesses could possibly be subject to depletion in a volatile foreign exchange market.

Changing In ManagementVitasoy recognize that change is crucial to organizational survival, particularly in the fight to maintain competitive advantage. The Executive Chairman of Vitasoy, Mr. Winston Yau-lai Lo, had deployment the changing in the Board few years ago. In 2005, the Executive Chairman of Vitasoy, Mr. Winston Yau-lai Lo, had transferred the Australia’s Chief Executive Officer of Vitasoy, Mr. Laurence Patrick Eisentrager, to Hong Kong. Mr. Eisentrager was appointed an Executive Director of Board with effect from 20th July 2007. On 1st August, 2007, Mr. Eisentrager was promoted from his former position of Chief Executive, Hong Kong to the newly created position responsibilities for the Vitasoy Group’s major markets and operating units.

Mr. Eisentrager was appointed a Director of the Vitasoy International Holding Ltd. in 2007. Mr. Eisentrager graduated from the University of Queensland with a Bachelor degree in Applied Science. He is the Group Chief Executive Officer and is currently responsible for the overall strategic planning, business development and general management of all the Group’s operations in Hong Kong, Mainland China, Australia and New Zealand, North America and Singapore. Mr. Eisentrager joined the Vitasoy Group in 2002 and was the General Manager of the Group’s operation in Australia and New Zealand until 2005. He then became the Chief Executive Officer of the Group’s Hong Kong Operation and was promoted to Group Chief Executive Officer in 2007. He has very extensive experience in the food and beverage industry in Hong Kong, Australia and internationally.

The ChangingProducts Increase:

In 2007, Vitasoy rolled out a wide variety of new products and flavours to stimulate demand growth. They developed and launched several new products to ride on the current trend of healthy dieting. On top of that, they also expanding into the dessert and cooking ingredient segment by launching the organic VITASOY SAN SUI Tofu range of products and VITASOY Soya Bean Hot Pot Soup during the year, the former of which in particular has attracted very keen response from the market since its launch in May 2007.

During the year, Vitasoy special emphasis was placed on the introduction of more healthy and wholesome variants of existing product lines covering soymilk, dairy milk, ready- to-drink tea and juice drink by enriching them with new features such as low-sugar, rich-soy content, low-fat, zero- cholesterol and zero-preservative. Examples are Low-sugar VITASOY Soymilk, Low-sugar Malted VITASOY Soymilk, VITA CHOCOLATE MAGIC Low-fat Milk Drink, CALCI-PLUS Soya Collagen Skin Health Soymilk and SAN SUI Low-sugar Soymilk.

They also added to their range of ready-to-drink teas VITA Ceylon Lemon Tea, which has been very successful. In the wellness segment, they introduced VITA TSING SUM ZHAN Fig & White Fungus Drink and Rock Sugar Lily Bulb & Papaya Drink. They also launched two tofu desserts – SAN SUI Osmanthus Tofu and SAN SUI Ginger Lemon Tofu. As for packaging formats, those for both VITASOY Soymilk and VITA Distilled Water were revamped during the year. Meanwhile, in view of public concern over the safety of dairy products, they stepped up their promotion of the benefits of soy-based products to help stimulate demand.

All New Vitasoy Packaging:

The new VITASOY packaging provides a whole new refreshing look. The designer has skillfully combined VITASOY’s Chinese and English trademarks, making the design look more contemporary. The new packaging highlights the VITASOY brand emphasizing and retained the original packaging colours of Regular and Malted flavor of VITASOY. They targeted at teenage consumers, the new VITASOY packaging design uses vivid graphics of the ingredients to feature each flavor, in turn portraying a sense of youthfulness and vitality.

Marketing commercial strategy:

Vitasoy has launching a series of marketing and advertising activities to support the revamping programme and to reinforce the market position of the VITASOY brand. VITASOY is staging a major campaign in Fiscal 2008/2009 including a new TV commercial, a new packaging design and various new products to meet consumers’ diverse needs. The new package’s colours and graphics are meant to appeal to the consuming public at large, particularly the younger generation. They rephrase using “VLT” instead of the “VITA Lemon Tea” in Cantonese, which created a new young fashion modern word for the

teenager. In 2009, the company had used VLT to show up in first TV commercial for Vitasoy. For the young new image, company used MC Jin,

famous rapper, and Wan Kwong, old famous singer in Hong Kong, to do a Rap Battle at the commercial, its enhance their new slogan deep inside to consumers.

Market Penetration and expansion:

In early April 2008, Vitasoy have acquired the entire equity of Unicurd Food Co. (Private) Limited (“Unicurd”), which is a leading soy food manufacturer and marketer in Singapore. This acquisition represents a major step taken by Vitasoy in enhancing its market presence in Singapore.

Before the Group Management changing

We had analysis three years annual report of Vitasoy, from 2004 to 2007. We observed that the total turnover and gross profit of each years before the Group management had changed, it just grow up less than 10% each year.

After the Group Management changed

Since Mr. Eisentrager has promoted to the new Group Chief Executive Officer of Vitasoy International Holding Ltd. He is currently responsible for the overall strategic planning, business development and general management of all the Group’s operations in Hong Kong, Mainland China, Australia and New Zealand, North America and Singapore. After the management department had changed, we observed a sharp increased in both turnover revenue and gross profit from 2007 to 2012. Although in 2009 to 2010, the annual report showed that the total turnover had only 7% growth, but the gross profit has increased at least 10% or above each single year, which indicated that group management changing gain a great success in Vitasoy’s Company.

Resistance to changeDuring the changing, even though we observed a successful increased on their gross profit. However, the company internal had resistance to change. It is because the management department had cut lost the commission of delivering VITA distilled water. Therefore, it created a conflict between the labors and company’s new policy.

The management not just decreased the commission of deliver department. They also have increased the workload of labors and reduce the promotion of lower profit products. Management wanted to minimize the operation expenses in their tactical plan.

In the end, Mr. Chyi, Chief Executive Officer Hong Kong, had calm down the conflict by negotiation.