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Hup Seng, a timeless favourite

Hup Seng Industries Bhd is one of the leading cream cracker manufacturers regionally. It is a timeless favourite among Malaysians, having fed countless households as it is considered a staple food.

During times of great uncertainty such as last year’s Covid-19 pandemic, apart from tissue paper hoarding, Hup Seng crackers would be one of those at the top of the list.

So when I saw the recent news reported by the South China Morning Post that the Hong Kong Consumer Council (HKCC) had announced that it was on the list of 60 samples of pre-packed biscuits and crackers tested which contained potential cancer-inducing elements such as glycidol or acrylamide, imagine the shock I got.

Hup Seng was founded in a shop lot by four brothers from Batu Pahat, Johor in 1958 with a paltry sum of RM1,500. The Kerk family through bootstrapping started a traditional biscuit and cracker manufacturing outfit to produce biscuits suitable for daily consumption. To say they had envisioned the business would eventually be a regional player as it is today would be far too optimistic.

Starting out from the Malay village of Parit Linau Kecil, which had only about 100 families and seven Chinese families, they understood the importance of observing “halal” requirements from the get go.

Their winning product is the familiar “Cap Ping Pong” cream crackers. By 1977, it was Malaysia’s best cream crackers and was exported throughout South-East Asia.

Hup Seng has grown over the years through gradual expansion and stable inroads into grocers, malls and marts while making its way to the table of most households. It was then listed on Bursa Malaysia in 2000.

The company has now moved on to the second generation with even the third generation coming onboard. It contributes to the livelihood of possibly half the Batu Pahat townsfolk with an estimated 2,000 employees.

From a humble biscuit maker to almost a billion-ringgit company with exports to over 40 countries, it is not a small feat by any measure. With such news traversing mainstream news and social media, it is hard not to fear the impact toward the company’s long-standing reputation over the course of the past 63 years. CLICK TO ENLARGE

HKCC’s CEO, Gilly Wong, said: “We believe that these kinds of contaminants are possible to avoid because according to our findings, some of the ingredients in these biscuits are palm oil,” To substantiate the claim, she further said this “palm oil refined at high temperatures carries potential carcinogenic risks, according to the European Food Safety Authority (EFSA).”

This statement is problematic in itself. I am no scientist or nutritionist but I would like to know which edible oil refined at high temperatures do not carry potential carcinogenic risk? Soy, corn, sunflower seed or olive oil? Any edible oil processed at above 200 °C would face the similar risk, so why isolate palm oil alone? Is this a part of a larger agenda towards palm oil as crop and trusted edible oil?

For a long time, Hup Seng have taken pride on its product quality and taste with 90% of them within the healthy food segment which is low in sugar, high in fiber and minimal artificial ingredients or preservatives. Its product is also convenient and fitting for our nation’s eating habits regardless of race and creed. Executive Director Ms. Kerk Chian Tung during a 2019 radio interview said she believed that Hup Seng products speaks for itself with its quality and taste.

The late Dato Seri’ Kerk Choo Ting is one of the more high profile of the four brothers who co-founded Hup Seng. He was the former Deputy Agriculture and Agro-based Industry Minister and Member of Parliament for Taiping. Dato Seri’ Kerk highlighted that the company has a strong history of overcoming business challenges and financial turbulence. Their grandfather who purchased lands and invested in a plantation in Batu Pahat was not able to service the debts during the 1930s Great Depression, resulted in most of the lands being eventually auctioned off. Then again during the plunge of commodity prices between 1985 and 1987, Hup Seng almost collapsed due to its debt burden. Financial difficulties arose as the company was not able to generate enough cash to repay the loans taken to set up a 2.02ha factory in Tongkang Pecah, Johor. The family came together and sold off personal assets to recapitalise the company. By 1997 Asian Financial Crisis, Hup Seng was sitting on a RM 20 million cash pile. This made the company realise the importance of cash reserves and strong balance sheet. Today, Hup Seng remains net cash of RM 57 million as at 30th June 2021 and have continuously paid out dividend at 100% or more of profits every year for the past five financial years. The dividend yield average at 6% per annum for Hup Seng as per the table.

I would like to state that I do not know the management of Hup Seng personally. I do believe though on the importance of being objective in relying on findings rather than making wild allegations. While we have seen the other biscuit makers like Jacob’s, Mondelēz (Oreo) and Julie issuing stern statements to refute the matter, Hup Seng was slower to react. This may have to do with the recent passing of their founder Kuo Choo Song at 90 years of age. Hence, I have taken the liberty to pen this piece due to my own fond memories of Hup Seng crackers, which reminded me of the simpler days where my grandmother would dip hers in the coffee and urging me to have a piece with her before seeing me head off to school.

Additionally, my intent is to provide an alternative view towards the questionable findings of HKCC which relied on EFSA claims, seem to be biased towards palm oil as an edible oil. If anything, the news report showed me the main similarity shared by the biscuits and cracker makers flagged by HKCC as using palm oil in the process of making. In addition, quite a number are based in Malaysia. I urge the authorities in Malaysia to possibly conduct a G2G dialogue with their counterparts in Hong Kong to protect the reputation of locally homegrown brands as well as our country’s palm oil industry.

The name Hup Seng, which means “unity is success”, mirrors how the company continued to thrive during challenging moments of its long history, said Dato’ Seri Kerk in 2015. Whenever there is a challenge, the management learns from it. While this time it is not financial hardship, it is still a rising concern especially in the push towards ESG by advocates around the world. This may well be another chapter of learning faced by manufacturers not only in the FMCG sector but beyond. If Hup Seng can overcome this, it will be instrumental in their path towards becoming a world class biscuits manufacturer.

Ng Zhu Hann is the author of “Once Upon A Time In Bursa”. He is a lawyer and former chief strategist of a Fortune 500 Corp. The views expressed here are his own.

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