KUALA LUMPUR: Kumpulan Perangsang Selangor Bhd (KPS) has announced a new business strategy for its US-based subsidiary King Koil Licensing Company Inc.
KPS chief executive officer Ahmad Fariz Hassan said the change of business model in the US allows the company a larger revenue base as we move from royalties from licensing, to wholesale revenue from selling our own products.
“In the longer run, we will be seeing sustainable growth coming from having greater control of product quality and distribution in the market, translating into higher sales volume and profits,” he said in a statement today.
The company expects to see positive impact from the new strategy to the group’s financials, beginning in the financial year ending December 31, 2018 (FY18).
“It’s an exciting prospect for us, especially with the collective experience and capabilities of the new management team brought in since our investment,” Ahmad Fariz said.
KPS said it would maintain its licensing business model for its international markets, as it represents high growth potential with steady stream of revenue from royalty payments while requiring lower operating costs and minimal capital expenditure.
“However, changing dynamics in the US bedding industry in the past 24 months have created accessibility issues and triggered the need to re-assess the brand’s strategy in one of the largest mattress markets in the world,” he said.
The new US strategy entails King Koil gradually taking over its product distribution throughout the country upon expiry of its current license agreements over the next three years.
Ahmad Fariz said initially, the company will be launching its first manufacturing facility for direct distribution in the Western region of the US in the second quarter this year.
Another initiative under the new strategy involves a strategic partnership with one of KKLC’s top-performing licensees, Blue Bell Mattress.
In addition to their long-held licence in the Northeast region, the strategic partnership will see Blue Bell manufacturing and distributing King Koil products in the Midwest region of the US under a contract manufacturing arrangement.
KPS first acquired its 60 per cent stake in King Koil mattress brand licensing business from Malaysian businessman Yeoh Jin Hoe in May 2016.
Yeoh remains as 40 per cent shareholder of the venture.
King Koil currently has presence in over 80 countries including the US, via licensed manufacturing arrangement between King Koil and 27 mattress manufacturers worldwide.
King Koil’s new management team holds a wealth of industry-related experience, notably in manufacturing, sales and licensing.