Oishi’s founder Tan Passakornnatee deploys a superhero, social media and sugary bottled teas to build his second beverage empire Ichitan. The only thing in his way? His first beverage empire.

4/03/2013 @ 7:00AM |383 views

Thai Beverage Man Tan Passakornnatee Is On a Mission

By Susan J. Cunningham

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As he clowns around for a photo shoot in front of the giant fiberglass animals adorning his restaurant compound off of tony Thonglor Road, Tan Passakornnatee is sporting vivid yellow pants and a polka-dot shirt, his customary style for addressing college students or business groups. When he’s in an even more casual mood, he wears T-shirts with the image of a pig (he was born in the year of the pig). But either way he always dons a captain’s hat–not least when he flies amid tall buildings wearing a caped costume in the commercials for his company’s current promotion. The tubby superhero “Tan Man” is on his way to change the lives of 60 people–one a day for 60 days–who are about to win 1 million baht ($33,000). As consolation prizes, he’s also giving away 1,250 iPhone 5s.

Tan is the 53-year-old founder and chief executive of Ichitan Group, which started making flavored tea drinks less than two years ago. With his chubby face under the captain’s hat, the marketing is working. It’s gaining fast on Thailand’s No. 1 brand, Oishi, which Tan himself founded almost a decade ago. Last year Oishi controlled 34% of the country’s $385 million ready-to-drink tea market, while Ichitan was second at 19%, according to a Euromonitor estimate. And the market grew 38%.Tan insists that his latest monthly data show Ichitan now capturing 40% of the market and Oishi behind at 38%. He may be getting well ahead of himself, even with his promotions goosing sales, but he’s certainly in a hurry to dominate the refrigerators of the country’s 6,600 7-Eleven outlets and 700 Family Mart convenience stores. He’s vying to best position Ichitan for its planned listing in Bangkok late this year. When the road show to flog the shares begins, he wants to be able to tell investors that Ichitan will reach $150 million in sales this year, up from $123 million last year. He’s aiming for between $17 million and $24 million in profits this year, up from $10 million last year.

Tan made one fortune, in real estate and wedding-photo studios, and then lost it in the 1997 financial turmoil. He made another with Oishi and now he’s building a third. The initial public offering could value the company at anywhere from $200 million to $350 million, and he now owns most of it. But this time he says it’s not just about making money. The listing will allow him to reward his 1,000 employees under a share scheme, especially the nine young executives he recruited on Facebook and YouTube in the fall of 2010. And he’ll be able to funnel much of his proceeds into his Tan Pan Foundation, which focuses on education and environmental causes. “Ichitan is a company with a mission to give back to society,” he maintains. “My old image was more the businessman. Oishi was a business to make money. Now I’m part teacher, part entertainer.”

A master of marketing and social media, Tan combines the two in his campaign to give away millions of baht and hundreds of iPhone 5s. He used the idea of bottle caps with prize-winning numbers underneath when he was at Oishi, and Oishi’s response to the Ichitan campaign has been to run a copycat bottle cap contest at the same time. In Tan’s latest twist, customers use text messaging to send in the numbers they find. Each day, after he announces a winning number, there’s another human interest story for the 2.7 million fans of his TanMaiTan, the most popular Facebook page in Thailand.

One of the first winners of the 1 million baht was a young man from the poor province of Buriram who could suddenly afford to marry his sweetheart. Tan, of course, will attend the wedding. He also flew down from Bangkok to present the prize to a schoolteacher in Yala, one of the southern provinces that has been wracked by the Muslim insurgency since 2004. Schoolteachers are frequent murder targets and addressing the plight of the South is one of Tan’s pet causes. He has donated more than $1 million to schoolchildren, schools and soldiers in the three provinces.

In a meeting at Tokiya, his sleek Japanese steak restaurant in the Thonglor compound, Tan flips open his iPad to explain the art of creating and maintaining a popular Facebook page. At that moment more than 1 million people were engaged with TanMaiTan–reading, commenting or sharing a post. Each post is brief and includes an image: Tan handing out a prize; Tan shadowboxing in a helmet and gloves as he watches the Olympics bout of a Thai boxer on TV; Tan’s young daughter executing a backbend. On the corporate Ichitan page there are ads and products, but not here. “Using Facebook for marketing or selling doesn’t work, but if you use it for [philanthropy] or activities, it works really well,” he explains.

The TanMaiTan page notes that one recent post drew a few hundred thousand “likes.” “Don’t pay attention to those. Pay attention to ‘shares,’ ” he says. A popular Ichitan post generates 10,000 shares. “ It doesn’t matter how many people you reach but how many talk about and share this topic. Same with YouTube,” he says. (One example of how to go viral in both old and new media: When devastating floods were surging though central Thailand in the summer of 2011, Tan demonstrated in a YouTube video how to make life vests out of empty plastic bottles. The print and over-the-air media noted approvingly that he didn’t use only Ichitan brand bottles.)

 

Next he checks Oishi’s most popular Facebook page. It now has 778,000 fans–less than a third of TanMaiTan. Most OishiNewsStation posts consist of images of meals, Oishi drinks and the three handsome young TV actors appointed as brand representatives to compete with the captain for familiarity with consumers. “The main reasons they are so small online is because what they talk about is mostly commercial, not lifestyle,” he says.

Tan also has opened nine Japanese restaurants and ten chocolate-and-gelato outlets but won’t be facing off against Oishi’s restaurants, now 154-strong and on a nationwide expansion binge. Restaurants are excellent testing grounds for new products, he says, but the low profit margins per diner–around 10%–might be half that on the sale of a bottled drink. In fact, he recently split the food operations from the drinks profit engine so that the listed Ichitan will include only beverages.

A serial entrepreneur from the age of 22, when he started a newsstand in his hometown of Chonburi, Tan backed into the beverage business less than a decade ago. Japanese cuisine was largely the preserve of expats and Japanese tourists when he opened his first Oishi Buffet restaurant on Sept. 9, 1999 near Thonglor Road. Yet his intuition about the leisure tastes of the budding Thai middle class was dead-on. The all-you-can-eat sushi buffet for 500 baht ($12.65) was an immediate hit. Only two years earlier he had been $2 million in debt in the wake of the baht crash as he frantically sold off real estate holdings.

Scores of budget and luxury Oishi restaurant variations in Bangkok and elsewhere followed in the next four years, as well as Oishi Delivery, Oishi Skytrain kiosks and a chain of bakery cafes. Oishi’s green tea flavor, sweetened to suit Thai tastes, was created to be served hot and cold at the restaurants. It proved so popular that customers asked to buy it to bring home. Oishi quickly won the ready-to-drink tea market, surpassing genuine Japanese brands such as Kirin and Pokka, and fending off foreign and local newcomers that also conveyed messages of a clean, green Japanese lifestyle.

“The Oishi brand resonated well with his characteristics,” says Krittinee Nuttavuthisit, a marketing professor at Chulalongkorn University. “Tan is a celebrity, so people like to know what he does. He knows how to turn it into story.” She adds that he projects the qualities Thais associate with leadership: “He’s a very decisive business leader. He can greenlight a project in an instant. And he knows how to seize opportunities.”

In 2004, the year Oishi went public, net profits rose 2,000%. Ready-to-drink tea was the main driver; food sales accounted for only 15% of revenue. (“RTD tea,” the industry term for the trendy East Asian drink, is a bit of a misnomer for the sugary, fruity drinks that come in flavors such as Ichitan’s butterfly pea, pandamus and midori punch.)

Then, toward the end of 2005, foreign-flagged companies controlled by the beer and land billionaire Charoen Sirivadhanabhakdi acquired most of the shares. The takeover was long and contentious, and the exchange issued a warning. Tan and his partners ended up selling a 34% stake to Charoen, with Tan pocketing $20 million and agreeing to stay on as president. “I worked there for another five years, and during that period the share value tripled. I built up Oishi to be higher than it was before.” He dodges specifics, however, when asked what it was like to work for Charoen. When Tan and his wife, Eng, sold their final 10% stake in September 2010, it was worth $61 million. (She runs Melt Me, the chocolate-and-gelato shops. Their 27-year-old daughter started three Northeastern Thai cuisine restaurants called Zaab Eli. Their other two children are aged 11 and 6.)

Tan quickly started on his next gig. He launched his Apprentice style “Challengers” competition with an open Facebook invitation. Some 2,000 young people responded with two-minute videos explaining why they wanted to work as executives for his new company, at the time called Mai Tan. The nine winners were selected after a hothouse weekend that October at Tan’s Villa Maroc seaside hotel, where they created and defended promotional ideas for product launches. “I don’t think the new generation of workers wants to be employees all their lives,” he says. “Instead of looking for employees, with the Challengers I was looking for shareholders. Their sense of ownership is different. Maybe other companies can copy the Challenger idea, but most are not brave enough to give back to their employees.”

May the best brand win.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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