Introduction
1 Good morning, key stakeholders of the NTUC Group of Social Enterprises (SEs):
on behalf of my fellow chairmen of the social enterprises, I would like to welcome all of you to this SE 2015 vision seminar.
2 In the past few months, the NTUC Social Enterprise Development Council (SEDC) which consists of the chairmen of the 12 social enterprises, the President, Secretary for Financial Affairs and Sec-Gen of the NTUC held intensive discussions to chart our collective SE2015 vision. The discussions involved the boards of directors, CEOs and senior management team across the group. We also sought inputs from the NTUC Central Committee and senior management team. Today, on behalf of the SEDC, I will share the core elements of our vision.
3 The SE2015 vision is built on the firm foundation of the social impact that the SEs already deliver today. It reaffirms our collective DNA to deliver social impact sustainably through profitable enterprises. The SE2015 vision articulates our collective commitment to expand our social impact in the next five years. We will do so in three key ways. First, we will expand our role to keep the prices of essentials stable to support families to stretch their every hard-earned dollar. Second, we will break new ground to develop new approaches to meet new, emergent needs. Third, we will expand services to support 3-generational families as we do our part to build an inclusive home for all who live in Singapore.
Social Impact Today
4 The SE2015 vision is built on the firm foundation we have in place today. Across the Group, 13,000 employees serve an estimated 2 million customers a year. A number of SEs have grown to become market leaders in their respective industries, for example,
5 The NTUC SEs meet customers’ needs for quality and accessibility at an affordable price, for a wide range of goods and services. We do so in three key ways.
6 Firstly, we set benchmark prices for key essential goods and services so that more families would find them affordable and good value for money. For example, the estimated 1.2 mil customers who bought about $780 mil of Income’s life, health and motor insurance policies in 2010 would have saved $37 mil, given Income’s attractive pricing vis-à-vis comparable products from the market. FairPrice sets competitive prices for its 500 popular Every Day Low Price items. NTUC First Campus sets fees for My First Skool affordably, at about 10% below national median.
7 Where we have sizeable market share, our pricing strategy will also have an impact on the general price level of the industry. For example, during the rice crisis in 2008, NTUC FairPrice was the first to drop rice prices. This sent a price signal to the industry. During the SARS crisis in 2003, FairPrice also held the prices of eggs and vegetables stable. This has helped to keep its competitors on their toes and reduce the opportunities for profiteering
8 Secondly, in addition to attractive pricing, the SEs offer direct price discounts, rebates and cash bonus. These amounted to $80 mil in 2010. The top contributors are
9 Thirdly, we find ways to create more value for our customers. For example, FairPrice has been rapidly expanding its house-brand products that give customers more value for money than national brands. These house-brand products are on average at least 10% cheaper than comparable national brand ones. FairPrice customers saved $27 mil in 2010 by buying its house-brands instead of equivalent national brands. For example, NTUC FairPrice’s house-brand of the popular Thai Hom Mali Rice A is cheaper than the national brand equivalent. FairPrice passes savings achieved through direct sourcing and bulk purchase to customers.
10 The over 2 million customers of the NTUC Group understand the value that we deliver and the price moderation role that we play. In fact, from time to time, I would read a reader’s letter to the newspapers suggesting to the NTUC to start a new social enterprise. The more recent suggestion was for NTUC to run petrol kiosks!
NTUC Social Enterprise DNA
11 As part of the SE2015 vision discussions, we have asked ourselves what has enabled the SEs to deliver the social impact? We concluded that the single most important factor is our unique DNA. This DNA has two mutually reinforcing dimensions.
12 One, the NTUC and Labour M ovement created social enterprises to deliver Do Good impact, that is, to meet under-served or un-served core needs of working families. The core needs include:
13 Two, we deliver the goods and services through financially sustainable and profitable business models. The social enterprises need to Do Well, that is, to be profitable in order to reinvest to improve quality and reach more customers. However, we do not seek to maximize profits or shareholders returns. This is the reason why we are able to deliver social impact through our affordable pricing strategy.
14 How do we live this DNA in practice? Before we start any new enterprises, we study the industry carefully. We ascertain how to make an impact: how to be cheaper for the same quality provided by existing market players; how to be better for the same price; or how to make accessible something not currently available. We have to be confident that our new enterprise would be able to operate within prevailing market conditions, and compete successfully.
15 Take insurance business. Income was started to meet the under-served needs of ordinary workers who were inadequately insured. Simple, lower-value insurance plans were less profitable, and hence was not the priority of commercial insurers. We reached out to workers through the union network. This helps to keep operating cost low, and hence premiums affordable. As Income grew, it also led in developing new products that were not previously available. Income pioneered annuities for retirees. Income was also the first to offer IncomeShield, supplementing Medishield. To further maximize value to customers, Income is also the first to introduce loyalty rebate to its motor policyholders – which will amount to $5 mil in 2011.
16 The SE2015 vision reaffirms our DNA to deliver social impact through profitable enterprises. Our DNA is robust for the future. We will continue to act consistently with our DNA.
17 We will develop new enterprises only where there is substantial scope to deliver sustainable social impact. We will also consider exiting existing businesses where our impact is limited. For example, Unity Healthcare used to run a network of outpatient clinics. We could only find a small pool of part-time doctors who were prepared to work with us, charge lower fees, and accept lower earnings. We were able to serve only a small pool of customers. We have since exited this business.
Future Social Impact
18 So what is the essence of the SE2015 Vision? It is a collective commitment to expand our social impact, in response to both enduring needs and also emergent ones of the diverse population made of all collars, ages and nationalities. The NTUC Group of SEs aims to enable access to affordable quality products and services that stretch dollar, time and employability of working people.
19 We are adopting three strategic thrusts to expand our social impact.
20 Firstly, we will rapidly scale up existing social enterprises so that we would be able to keep prices stable for even more customers. More scale will enable us to enjoy greater cost advantages. We can then pass back the savings to customers, either in the form of lower prices or better quality, and maximize our social impact.
21 The flagship social enterprises, like FairPrice and Income, will continue to step up in core areas where they make the most difference. FairPrice targets to expand its range of house-brands products and double its sales in the next 5 years. It would also expand the more basic yellow-dot range of products and increase its sales by 30-35%.
22 Income pledges to continue to maximize value for its customers across all lines of business. Also, Income plans to take the lead to educate more Singaporeans to get adequate insurance coverage through affordable pure protection term insurance plans. Income aims to double the term insurance coverage it provides to working families in the next 5 years. Income will reach out especially to the lower income, given that they have limited savings and their families would be the worst hit by unforeseen events.
23 The smaller social enterprises, for example, Foodfare, First Campus, and Unity Healthcare have also mapped out bold plans to multiply their social impact by two to four times in the next 5 years. They will expand the number of their locations to become even more accessible to working families.
24 Secondly, it is not enough to just do more of the same. We need to be responsive to changing aspirations, and break new ground to meet enduring and also emergent needs.
25 Some SEs have already developed new strategies:
26 Thirdly, the SEs will expand services to support 3-generational families care for their young and old. We live a world made up increasing of informal, loose ties. We make friends through the social media with people whose identities cannot be ascertained and whom we would never see in person. More needs to be done to reinforce a sense of connectedness to family, community and country.
27 NTUC Club is leading the Group’s effort to grow the nEbO community of teenagers and U Live community of active agers. Some of them are here with us today. The nEbO community support teenagers to develop their identities to be work-ready, life-ready, world-ready. This community expects to grow 2.5 times to 100,000 members by 2015.
28 The NTUC Group expects to do more to support the rapidly aging population in the future. Working couples are concerned about the cost of care for their parents and grandparents. They are also concerned about how to find the time to take care of their elderly given their work commitments. The U Live community now supports active agers to stay Happy, Healthy, Productive and Purposeful (H2P2), through a network of interest groups, including brisk walking and gardening. NTUC Eldercare provides day care and home care services to frail elderly. Income, Choice Homes, Healthcare and Eldercare are studying how they can individually and also collectively play a greater role in the financing and delivery of step down care in the community.
Concluding remarks
29 In conclusion, I think you will agree with me that our sense of security and community in any society is marked by the quality of mutual help. Human beings live in a society to support one another to manage the pressures and risks we face, whether due to the invisible hand of the market or the unpredictable hand of nature. NTUC and the Labour Movement formed social enterprises as our modest contribution to strengthen mutual help in Singapore.
30 The Labour Movement has been fortunate to be able to count on all of you for your unwavering support all these years. Unions pooled limited funds as modest start-up capital for the SEs. Experienced independent directors contributed their time and networks. Capable senior management staff dedicated prime years of their lives advocating social impact goals and delivering them in the face of tough market competition. Business partners, like associate trainers of Learning Hub and SEED Institute, hawkers in Foodfare outlets, suppliers of FairPrice, contributed to our cost efficient value chain. Many Government agencies supported our cause. Our loyal customers grew steadily to be over 2 million today.
31 I am confident that we can count on your continued commitment as we work together to realize the SE2015 vision to expand our social impact and make a difference to even more working families. I will also continue to support the SEs as we implement the SE2015 vision, in the SEDC and also in Learning Hub and Eldercare that I chair. Much has been done, and there is still much to be done. So although I am stepping down from politics, I still have a lot on my plate even as I take gardening leave! I look forward to your support!
32 Thank you.
