#Entrepreneur* David Ho, managing director, Hovid Bhd and Carotech Bhd

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Hovid Bhd Revenue (FY 2008 ended June 30): RM215 million Nature of business: Manufacturing of pharmaceutical and herbal productsMajor export markets: Nigeria, Ghana, the Philippines, Singapore and Hong KongYou had a short stint with Wyeth before joining the family business. Why?The family business then was a one-product company focused on herbal tea. My father was already 75 years old and if I hadn’t come back, he would have sold off the business; he couldn’t manage it anymore. Why start a new company (Hovid) instead of the more established Ho Yan Hor name?Initially we used Ho Yan Hor but it was difficult [for consumers] to accept pharmaceutical goods produced by a Chinese brand. So we created the Hovid brand, which was neutral and not racially based. It was so well accepted, we eventually adopted it as our company name.What was the first thing you did when you joined the family business?Revamp the packaging of the tea, which was done manually using paper bags that were glued and sealed. We used an automatic packing line to pack tea into the present teabag with the string attached. Drying tea leaves in the sun was not hygienic by GMP [Good Manufacturing Practice] standards so we dried them indoors using a special dryer. Carotech is the first company in the world to extract and market tocotrienols (Vitamin E) from palm oil. Where did you get such an idea? As a pharmaceutical company, we used carotene, a natural colouring agent, in our orange syrup for children. It was very expensive — RM800 to RM900 for 1kg. Upon discovering that palm oil has the highest natural source of carotene in the world, we tried to source for local carotene but found that nobody was extracting carotene from palm oil, when 1kg of 30% carotene actually costs more than a tonne of CPO [crude palm oil]! If we could extract RM800 worth of carotene from a tonne of CPO and sell back the unused oil to pay for the CPO, we’d still have tocotrienol in there that is unaccounted for, which we estimated to be around RM40 to RM50 per kg. Once we worked out the numbers, it made sense to extract tocotrienol. So it was actually by chance that you stumbled upon tocotrienol?Yes. If we were not using or researching carotene, we wouldn’t have discovered it. Even today, many people bleach out carotene in the palm oil refining process. Roche and BASF were the largest producers of synthetically manufactured carotene, and the market was huge — they were manufacturing a tonne a day at RM800 per kg [1 tonne = 1,000kg]. Nobody was pursuing this so that’s how we got started. How long did the R&D take to extract and market tocotrienol?The idea started in 1990. Laboratory research took us one to two years and then it took us another year to sort out the process and get it to work in a big-scale plant. That never stops — we’re still working on the process daily to improve the yield and cost. How did you fund Carotech initially?It was difficult because there was no VC [venture capital] fund then; you either approached a bank, private investors or big companies. I went to plantation companies, asking for RM1 million in working capital but they were more interested in commodity-type businesses, not carotene. After three years of not getting anywhere, one small Penang-based bank, Ban Hin Lee, decided to loan us the money. Besides Carotech, how many other players are there in the local carotene market?As far as I know, in Malaysia, we’re the only one and there are one or two coming up, such as Keck Seng (Malaysia) Bhd, which started six to seven years ago. As for tocotrienol, recently there is KLK-Davos [Kuala Lumpur Kepong Bhd and its subsidiary Davos Life Science]. But I think we are the only company able to extract both tocotrienol and carotene. It is said that Carotech produces about 80% of the world’s tocotrienol supply. We produce 40% to 50% of the world’s natural carotene supply and probably 70% to 80% of the world’s tocotrienol supply. How do Hovid products stand out among other supplements that seem to offer similar benefits? Our quality is up to GMP standards so we’re able to compete with countries like India whose products may be more advanced and cheaper, but people trust us for quality. We do very well in Africa, where price is the number one factor.Currently your main business is in pharmaceutical and phytonutrient (plant-derived nutrient) products. With Europe already implementing B5 (the blending of 5% palm oil with diesel) usage in vehicles and Malaysia to follow suit by 2010, would Hovid be focusing more on biodiesel, moving forward? Biodiesel would be a significant part of growth by virtue of the fact that with every tonne of CPO processed, you get a tonne of biodiesel and only 200g of phytonutrients. We have just expanded our manufacturing capacity; we can produce a total capacity of 120,000 tonnes of biodiesel a year.You’re seen as an innovator. What would you attribute this innovativeness to?To build the pharmaceutical capital-intensive industry, we were forced to do things in non-conventional ways because we could not afford the conventional route. Innovation is almost forced upon you during tough times. This article appeared in the Feb 23, 2009 issue of [email protected], the monthly management pullout of The Edge.