Eu Yan Sang pioneered the world's first certification standard for herbs with AVA.
A LINGZHI farm in China is the source of Eu Yan Sang’s popular Pure Lingzhi (100%) Cracked Spores Powder, which retails for $143 a bottle of 60 capsules.
The lingzhi is now the first herb that Eu Yan Sang has subjected to stringent audit to achieve Good Agronomic Practices for Herbs (GAP-H) certification.
The audit was conducted by Singapore’s Agri-Food and Veterinary Authority ‘s (AVA) commercial unit, Agrifood Technologies, over one complete crop plantation and harvest cycle.
EYSGAP-Herbs, short for the "Eu Yan Sang Good Agronomic Practices for Herbs" Scheme, is the world’s first accreditation standard for herbs.
”GAP-H certification plus being a foreign label differentiate us from suppliers in China," added Eu Yan Sang CEO, Mr Richard Eu.
The scheme ensures that world leading standards are adopted along an entire supply chain from crop cultivation, harvesting, processing, packaging, storage to distribution and retail.
On 9 Nov 2008, China’s State Council announced plans to boost domestic demand through a Rmb 4 trillion-stimulus package which includes measures to develop its healthcare system, among others.
Currently the leading Traditional Chinese Medicine retailer in Hong Kong, Singapore and Malaysia, Eu Yan Sang is already exporting wholesale herbs to China and also has four retail outlets in Guangzhou.
Equivalent retail value of its wholesale exports to China amounted to as much as Rmb 100 million in FY08.
Wholesale medicines contributed 13% to Eu Yan Sang’s 1Q09 revenues. Retail sales contributed another 80% while clinic services contributed 7%. Group revenues for 1Q09 (ended 30 Sep) were S$50.4 million.
Guangzhou was chosen as its base as the city is the capital of China’s richest and second most populous province, Guangdong.
With a population of 95 million residents, Guangdong’s GDP of Rmb 3 trillion in 2007 exceeded that of Eu Yan Sang’s existing core markets - i.e. Hong Kong, Singapore or Malaysia.
2007 GDP | ||
| Guangdong | US$455 billion | |
| Hong Kong | US$207 billion | |
| Malaysia | US$181 billion | |
| Singapore | US$161 billion |
Mr Eu is hopeful that the 129-year old TCM retail chain with 146 outlets in Asia will grow to 500 outlets 10 years from now, with half of the outlets in China.
The number of Eu Yan Sang retail outlets has doubled every 4.5 years. It had 64 outlets at the end of FY02, during Asia’s last recession.
However, obtaining licensing for medicinal products is tough in China, where food safety is a cause for concern for consumers and regulators alike.
China has been plagued by food scares, the most recent example being the melamine-in-milk powder scandal that rocked the world in Sept 2008.
Milk and infant formula produced by 22 Chinese companies were found adulterated with melamine, which leads to kidney stones and other renal failure, especially among young children.
More than 50,000 people were found to be ill as a result of taking the toxic milk, with more than 12,800 hospitalizations and four infant deaths.
Here’s where EYSGAP-Herbs becomes all the more relevant.
A standard that Eu Yan Sang pioneered in collaboration with the AVA, EYSGAP-Herbs rides on AVA’s pristine reputation worldwide in food licensing standards and will certainly help Eu Yan Sang’s foray to China.
Not all products will be EYSGAP-Herbs certified, though. The global certification is only for top selling precious herbs as these are most likely to be adulterated by profiteers.
EYSGAP-Herbs is a farm-to-fork certification says CEO Richard Eu.
Since precious herbs command much higher margins, certification is commercially viable as its cost as a percentage of goods sold would not be significant, said Mr Eu.
Lingzhi is one such example, and it has been one of Eu Yan Sang’s top 5 selling product groups and contributed 4.2% to FY08 revenues.
Lingzhi is known for its potency in enhancing the body’s immunity system.
The next Eu Yan Sang product to be certified will be Wisconsin Ginseng, for which Eu Yan Sang owns exclusive global distributorship rights.
About 95% of all ginseng farmed in the US is from Wisconsin. While American ginseng is also farmed in Canada and China, Wisconsin is acknowledged to produce the premium variety.
Recessions open opportunity for good retail location
”Our store penetration grew during the past recessions because choice retail sites not easily available during good times were vacated,” said Mr Eu, a fourth generation CEO.
Mr Eu was appointed group general manager in 1989 and saw the family business through the 1997 Asian financial crisis and 2002-2003’s slowdown in Asia.
During the previous slowdown, the TCM retail chain locked in reasonable rental rates for as long as 3 years at locations bustling with the busiest shopping traffic.
So while FY09 revenue growth may slow down, there are plans to open a few more retail outlets in China by Jun 2009.
A team in Guangzhou is already on the lookout for good retail locations.
Also coming up in 2009 is iGates, the world’s first online portal that integrates chemical and genomic fingerprinting of TCM herbs.
iGates is an acronym for “integrated Good Agronomic Practice for Traditional Chinese Medicine Electronic System”, which Eu Yan Sang will launch in collaboration with leading Asian life sciences IT company, KOOPrime.
The iGates portal can be licensed to national food and drugs safety regulatory agencies as well as industry players to enhance their existing food safety tracking system.
The system will allow users to streamline lab processes and create an open platform of communication between suppliers, distributors and other industry stakeholders.
Costing S$445,000, the iGates project has received a S$262,000 TEC grant from Singapore’s Prime Minister Office.
”We create brand prestige by adding to the legacy of health sciences rather than outright advertising or celebrity endorsement,” said Mr Eu.
Steady sales growth through the years.
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