YONG HUI YOW: What did that man have on his piece of paper?
PETER KOH: He had words of apology for not buying the packet of sugar he’d promised his wife, and to his kids, for not keeping his promise to take them to the zoo. He was flying to Hong Kong to close a multi-million dollar business deal which he had been working on the whole year. In doing so, he neglected his family, but that deal did not even cross his mind at that point when his life could be in danger.
We all come into the world and become automatons as part of this huge machinery. Slowly, we lose track of things which matter.
YONG HUI: How did that affect you?
PETER: That experience jolted me out of my routine, and made me take a step back—maybe I wasn’t any better than him. We all come into the world and become automatons as part of this huge machinery. Slowly, we lose track of things which matter. I decided to call it a day, and took a break from the business world for five years.
YONG HUI: What did you do during that period?
PETER: I started doing charity work and backpacked in Mongolia and North Korea. When I worked with terminally-ill children, it also got me thinking. One particular child, who was seven, was very sick and probably would not have lived for another year. He has passed away. But while he was alive, he was so happy. Once, he told the nurse he’d already almost died a few times, so he was very thankful to be alive every day, so long as he was able to see the sun shine and breathe the fresh air, that was enough reason to be happy. I felt very small when I heard that.
When I became CEO, I told the staff their priorities are first their health, family and well-being, then the company.
YONG HUI: How did that experience influence your management style now?
PETER: When I became CEO, I told the staff their priorities are first their health, family and well-being, then the company. No matter how busy they are, those things are more important. We work in a very open, family-oriented atmosphere. I joke and talk to the staff, and have my meals in the canteen with them. When I visit our farms, that’s where I sleep—I'm one of them.
YONG HUI: You were first on the board as an independent director. How did you end up being the CEO?
PETER: At that time, the company was having many issues so something had to be done. On our board, I was probably the only one who had run a business before, and so one thing led to another. I’d met some shareholders of the company, and listened to their concerns, but I felt quite helpless. As an independent director, there wasn’t much I could do, so I decided to take up the challenge. It was also an issue of timing. To be honest, I was becoming increasingly bored. Some days, I wished someone would ask me out for lunch. But they always had to rush back to the office and couldn’t stay for a long lunch with me.
YONG HUI: How difficult was it to get consensus from the board after taking over?
PETER: The Company needed to be taken in a whole new direction with a new vision. Moving forward, they have to be rotated.
YONG HUI: How much have costs reduced by?
PETER: We have cut our costs by more than 60 per cent. We even moved out of our old office in the CBD and saved on rental costs there. We have also reduced our headcount by quite a bit.
YONG HUI: What caused the company to reach that bad state?
PETER: Management and human factors such as poor planning and execution, and bouts of bad luck. It was a combination of many factors.
YONG HUI: You’ve embarked on a total change of your business model. How's the company doing now?
PETER: Oceanus is a lot more stable, and better-positioned than it was twelve months ago. Everyone at the company now knows what the vision is and where we are headed.
YONG HUI: What’s the rationale for this change in the business model?
PETER: We previously spawned the juveniles [youngling abalones] and grew them until they were ready to be harvested. We are by far the largest land-based farmers of abalone in the world. Nowadays, sea-based farmers are more cost efficient by about 30 to 40 per cent. However, they are not able to do the spawning process themselves. So why compete? Now, we supply juveniles to them, and when the abalones are ready to be harvested in two to three years, we’ll purchase it from them. They can sell abalones to other companies too, but we have the right of first refusal. In the past, we did not sell juveniles; instead, we grew the abalones ourselves, incurring a lot of costs.
YONG HUI: How does the spawning process work?
PETER: The sad part is the male and female abalones don’t ever meet each other.
YONG HUI: Even on Valentine’s Day.
PETER: Yes, even on Valentine’s Day! Spawning is done in our land farms, under very strict conditions. The male and female abalones are put in separate tanks, and the former is placed under UV light to excite them. This is usually done close to winter in October and November. Once excited, they’ll release their sperm into the water, which gets milky. The sperm-filled water is then poured into the tank with the females. Then we’ll let it fertilise for awhile. After that, we analyse samples from the tank to ascertain if spawning has taken place. We also inspect for defects and closely monitor their development, water temperature, ammonia levels and other indicators. It’s quite a scientific process.
YONG HUI: What is the average morality rate for each batch?
PETER: Usually between 20 and 30 per cent. If you’re really good, maybe 10 per cent. Just like human babies are a lot more delicate and require more care until it gets older, mortality rates are likewise higher for juveniles. Now that we are focusing on the juvenile business, we need to be extra careful about the way we operate.
YONG HUI: How do you help improve the mortality of juveniles?
PETER: For example, Temasek Polytechnic is doing research on lagged juveniles, which are spawns that cannot grow. This could be due to temperature. If they are too cold, they simply go into hibernation and stop growing. In the summer, many also die, and you need to bring down the temperature. If ammonia levels are too high, they also die. We are working with TP to see if there are ways to revive such spawns.
YONG HUI: What makes a high-quality abalone?
PETER: Usually, people consider its size to determine price. It can take up to two years longer to grow a larger abalone naturally. If you are talking about the crunchiness of the abalone, that has to do with personal tastes. Personally, I prefer wild abalones. But by and large, the cost of specific species of abalone depends on demand and supply.
YONG HUI: As part of the change in business model, you are moving into other types of seafood.
PETER: Yes, no company can be a one-product company. Now that we don’t need so much farm space because we don’t grow the abalones ourselves, this has freed up a lot of resources for us to get into other seafood. From a risk mitigation perspective, just imagine if abalone gets a bad general public image due to some unfortunate incident, the abalone may not even have come from our farm, but being a listed company, such things will affect us. For Oceanus to move forward, and to grow and scale, we need to expand our product mix. So we will go into farming sea cucumber, and possibly also fish.
YONG HUI: How about oysters?
PETER: Not oysters because that is more on the sea-farming side, whilst our main business is still land farming. We will focus on leveraging on what we already have.
I think people will eat more abalone in the future.
YONG HUI: Is abalone consumption growing?
PETER: Yes, I think people will eat more abalone in the future. A lot of restaurants and weddings are now shying away from shark's fins due to environmental reasons. This helps increase the demand for abalone. Recently, many are also using abalone in yusheng instead of raw fish. Petrol kiosks also ran out of abalone during the Chinese New Year period.
YONG HUI: How about Kan Pao?
PETER: Kan Pao is a different thing altogether. Those are dried abalone, which are something like dry scallops. The end product is three or four times the price of a normal abalone. It is a niche market because most people don’t know how to cook it. Most of the times, it is prepared in restaurants. I personally think they are overrated.
YONG HUI: Other than expanding your product mix, you also plan to go into retail.
PETER: Yes, with our own brand of canned abalone, which we will likely launch in the middle of the year. We want to be strong upstream as well as downstream, so we have decided to come up with our own canned abalone to retail ourselves. What the company did previously was just very focused on selling the abalone into the wholesale market while incurring the costs of growing the abalone ourselves.
We will price it in a way which is value for money, with the focus on quality, rather than being cheap or expensive.
YONG HUI: What is your retail strategy? Are you competing on price?
PETER: I don’t want to fight on price, because if we fight a price war, the company will not survive. We will price it in a way which is value for money, with the focus on quality, rather than being cheap or expensive. Generally, abalone isn’t cheap as people know. Anyone who buys abalone does not mind paying a few more dollars. They go for the quality and taste. We also want our abalones to be halal-certified.
YONG HUI: Are non-Chinese eating abalone?
PETER: It is still a small number now, but it will grow with education. Some try out of curiosity. Why do the Chinese like it so much? It is slowly opening up, and this will give us a larger market.
My moral obligation is to do well for our shareholders and employees.
YONG HUI: Is Indonesia one of the markets you want to educate?
PETER: We are looking to enter the whole of Asia-Pacific.
YONG HUI: Where can people expect to find your abalone?
PETER: We will start with e-commerce because we are not large-scale enough for the traditional channels—neither do we have the retail operations or the SKUs for that, so we will tie up with ecommerce partners, as well as through our own ecommerce channel.
YONG HUI: Channels like RedMart?
YONG HUI: Yes, we will explore that as one of the options, but we have not decided as of now. We are also in the process of talking to an Australian-listed company that specialises in ecommerce to roll out our products.
YONG HUI: How do you ensure the quality of your abalone?
PETER: For example, even though we have to pay two or three times more to ship our abalones to Australia to process it there, we do it. We have been approached by very questionable vendors in China who promised us many things. They say they can “value-add” at no extra cost, to make the abalones look bigger and whiter. The only condition is not to ask how they do it! We are not comfortable with such things.
YONG HUI: Should people be suspicious if their abalones are ‘too large’?
PETER: If it is wild abalone, that is perfectly fine! You can get large farmed abalone too of course, but that can take up to five years to grow. Can you imagine what kind of investment you have to put in for the additional two years? So something has to give.
YONG HUI: What brands do such augmentation?
PETER: I have no idea! Even if I know, I’m not saying. [laughs]
YONG HUI: Will your canned abalones be branded Oceanus?
PETER: Yes, and that explains why we are so careful about this, because we are literally putting the company's name on the product.
YONG HUI: What has been the response so far?
PETER: There was this Indonesia couple whom I know through a friend—they wanted to throw a feast and wanted to buy some abalone, so we sent them a few cans. They got back, with an order for ten cartons. We are not the cheapest, but yet they chose our abalones. She brought me into their kitchen and showed me a whole row of other brands they had tried. She asked why our abalones aren’t bigger. . . so I explained to her.
YONG HUI: Abalone consumption is very seasonal. How do you mitigate this?
PETER: We want to do it through education. After Chinese New Year, it can be difficult to find and buy abalone, but you don’t have to wait until CNY to eat abalone. This won’t be achieved overnight, but we plan to do something about it, and to invest the time and effort required.
YONG HUI: How are you going to go about doing this?
PETER: One is making it easier for people to purchase ready-to-serve abalone products, such as ready-to-serve meals with abalone in it. You just microwave and eat immediately. Second, are the health benefits of eating abalone, and that is an angle we will go for.
YONG HUI: What kinds of health benefits?
PETER: I don’t know the details now, but it is very good for ladies. We are doing research, and will release more findings.
YONG HUI: What about cosmetics? Is abalone essence really in some cosmetic products?
PETER: In cosmetics, they use abalone shells, which get grinded into powder.
YONG HUI: Is that something you are looking at?
PETER: Not at the moment. We are in the juvenile business, and juvenile shells are really small, but I won’t discount the possibility in the future.
YONG HUI: Why should shareholders believe in the future of the company?
PETER: What shareholders should do is believe in themselves. After seeing what we as a company is doing to change, they have to decide. In the past, there was a lot of talk, but nothing happened. Right now, they have to see for themselves whether we have changed, and did we see things through and deliver our plans. During our last AGM, there were a lot of questions from disgruntled shareholders, but what started off as a rowdy crowd, at the end, they understood better where Oceanus is heading. What took me by surprise was this middle-aged lady who shouted: Mister CEO, now that you have said all these, should I buy more shares? [laughs] That was a very difficult question. Look, I cannot control the market. I can tell you what the direction of the company is, but I cannot tell you how to invest your money. Interestingly enough, this other gentleman who was quite vocal shouted back—what are you waiting for? Go and buy!
YONG HUI: Will you consider taking the company private?
PETER: We don't have that in mind.
YONG HUI: Might that be beneficial for the company?
PETER: It won’t be beneficial to the shareholders. When you do that, it is over for the shareholders who bought earlier. It isn’t doing them a service. My moral obligation is to do well for our shareholders and employees. I have to be accountable to shareholders.