Safeguarding a Family Business
Group CEO of Eu Yan Sang International Ltd, Richard Eu, was clearly at ease when he addressed the crowd of over 80 CapitaLand staff including Vice Presidents and senior executives across eight Strategic Business Units at the Group’s eighth Innovation, Creativity and Entrepreneurship (I.C.E.) Talk. There to share his Midas touch turning around a centennial business in what was once considered a sunset industry; the former merchant banker’s training as a lawyer was evident. He began by inviting the participants to interrupt him whenever they liked.
“I’ll keep my presentation short so that you can ask questions. I prefer that you ask the questions,” said Mr Eu. “You can stop me any time. I think you can get much more out of it this way.”
Recognising a Business Potential
Although the Eu name is now synonymous with Traditional Chinese Medicine (TCM), the family business did not start out as a TCM one. Instead, great grandfather, Eu Kong, began in the mid 19th century with tin mining, a textile dying factory and even a bakery before opening a medicine shop in the town of Gopeng in Perak, Malaya in 1879. He named the shop “Yan Sang” which means “caring for mankind”.
“My great grandfather saw that people had no access to good medicine beyond opium. He wanted to bring in herbs and proper medical services to help these people,” said Mr Eu who, like his forefather, has a passion for helping others and is heavily involved in various charity efforts.
Under Mr Eu’s grandfather, Eu Tong Sen, the business expanded into rubber, banking and even property; while, the TCM business moved beyond Malaya into Singapore, Hong Kong and China.
But when his grandfather died, the other parts of the business were sold or liquidated, leaving just the TCM one. No one saw its potential, no one except Mr Eu.
“I’m a bit rebellious. I didn’t like to be told that the business wouldn’t work. The small company was in an interesting space. I could already see the interest in health and wellness in the West. I wanted to translate all that knowledge we had and make it into a bigger business,” said Mr Eu.
That foresight would turn a S$10-million dollar business into an over S$300-million one.
Revitalising a Sunset Industry
But when Mr Eu took over in 1989, Eu Yan Sang presented several challenges.
“The industry had a poor image and people who didn’t know TCM well had misconceptions about it. It was difficult to attract younger consumers. We had a shortage of funds for new products, innovation and marketing. It was difficult to have a standard formula for the medicine because regulations were different in each country and it was also hard to get new blood into the industry,” said Mr Eu, counting off all the things that stood in their way.
But the man who would become the "Best CEO of the Year Award" for companies with less than $300 million market capitalisation at the Singapore Corporate Awards 2010 and be named Ernst & Young’s Entrepreneur of the Year 2011 Singapore was undaunted. Instead, he steered the over 100-year-old company into new waters.
Mr Eu began by shaking the dust off the old business and giving it a whole new look. From the logo to the retail stores, the packaging, the way the business was run, the manufacturing process – everything went through a makeover.
“We had to change the attitudes and mindsets of everyone. Can you imagine going from the abacus to bar codes?” said Mr Eu.
New visions and missions were set. For Mr Eu, reviving the traditional family business required a willingness to buck the trend and refrain from being bound by convention.
“I believe that leadership cannot be taught but it can be learnt. As a leader, you cannot be too rigid about things. If you see things linearly, you can’t make the connections. You need to open up your mind. Nothing is irrelevant,” said Mr Eu.
That being said, the venture was not without its nerve-wrecking moments.
“The most difficult thing I had to do was to decide that Eu Yan Sang was going to be a chain of stores. We had not opened a new store since the one at Seremban opened in the 1930s. It was scary because no one knew anything about opening a new store,” confessed Mr Eu.
It was a risky move that reaped results. Today, the group has more than 300 retail outlets in Hong Kong, Macau, China, Malaysia, Singapore and Australia.
“It is interesting how Eu Yan Sang has expanded their business along their value chain, focused on their core competency in TCM. I learnt that you shouldn’t be afraid to try and to persevere when you set out to do something. Mr Eu started off with the belief that the TCM business could be expanded and he has taken it to new heights with perseverance and hard work,” said participant, Edwin Koh, Investment Manager, CapitaCommercial Trust Management Limited.
Revolutionalising a Traditional Business
Mr Eu also instituted changes in the processes and products of the company. He had all the herbs in the store studied and catalogued, creating a monograph library of more than 500 herbs. Until then, herbalists depended on their own knowledge to identify the herbs.
“As a result, over time, up to 25 per cent of the herbs in the market were mis-labelled. Now, we have the herbs right down to their DNA,” said Mr Eu.
The discipline has gone a long way to ensuring not only the safety and authenticity of Eu Yan Sang products, and has also brought a scientific approach into the picture, improving the image of TCM.
Mr Eu introduced innovation into an industry with thousands of years behind it, a revolution in itself. Eu Yan Sang partnered with tertiary institutes here and abroad to research into new products. It has even gone so far as to patent some of the products.
“We have a herbal tea called Infant’s Digestive Support Formula (Kai Nai Cha) which is mixed into infant formula milk to neutralise the “heatiness” of the milk. We use a patented method to ensure no unnecessary ingredients are added to the product,” said Mr Eu.
Innovation also extended to marketing traditional herbs in modern ways. For example, herbs for making different soups were pre-packed into handy packets so even novices can brew their own nourishing soups. Ginseng tea that once took hours to prepare were packed into easy sachets to make them more accessible to the busy, instant-cooking new generation.
“This is all part of product differentiation. We are now working on combining new ingredients with traditional herbs in an East-West fusion to see if we can achieve some synergy,” said Mr Eu.
Mr Eu has broadened the business as well, with 24 TCM clinics in Malaysia and Singapore, and two integrated medical centres in Hong Kong. Eu Yan Sang has expanded beyond curative care into the wellness and preventive care business, too.
“I was very impressed with his ability to harness technology to upgrade the company’s century-old processes and change his employees’ mindsets in order to get them to learn new skills. And in spite of all these challenges, he was able to grow the company and remain relevant to consumers by targeting new segments like the natural and preventive health industries,” said Tan Liang Jun, Management Executive, CapitaLand Limited.
In his over 20-year tenure, Mr Eu has transformed a traditional family business into a public-listed company on the Singapore Stock Exchange. Eu Yan Sang is now recognised as a foremost brand in the TCM world.
“In the next five years, we hope to hit S$500 million in sales. We are looking into new markets like Vietnam and Thailand. So we are creating products that are less Chinese. Another sector we hope to penetrate is the non-Chinese speaking customer. For example, if we have halal herbs, we can go into the Middle East,” said Mr Eu.
When Mr Eu took over, he had plans not only to save his family’s over-a-century-old business, he wanted put the business on the world map. He has not only done that, he has made TCM recognised and accepted, wooing a new generation without losing the old.