Thursday, Oct 18, 2018
Industry & Trade | Asia-Pacific | Singapore

F&B, Singapore

How BreadTalk became the talk of the town


4 weeks ago

Mr Henry Chu, Group Chief Executive Officer of BreadTalk Group Limited
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Mr Henry Chu

Group Chief Executive Officer of BreadTalk Group Limited

Founded in 2000, BreadTalk is a food and beverages group which has a number of popular food brands runs chains of restaurants across Asia and the Middle East, such as Food Republic and Song Fa. In this interview, Henry Chu discusses how the company shifted its focus from franchisee to joint ventures, its expansion plans for the US and UK, and the innovation that has underpinned the Group’s success.

 

BreadTalk Group within the multinational food and beverages industry has internationalized in Asia. ASEAN is one of the fastest growing economic blocs. What does it represent for BreadTalk Group?

We have a total of 10 brands under our portfolio. For our business right now with close to 1,000 stores globally with more than 300 in Asia alone, we are learning with each new area we go into. Of course, for some of the countries, we take a longer time for growth because understanding the consumers’ lifestyle, infrastructure and culture takes time. Indeed, we see ASEAN as a growing bloc with many opportunities.

 

One of the big challenges of Singaporean companies is the ability to internationalize SMEs. Singapore is a limited market and companies have to go overseas. How do you see the efforts of the government to help SMEs to go to other ASEAN countries?

Our government is very supportive towards helping local SMEs expand overseas. We continue to benefit from many useful government contacts where we are able to link up with good potential joint venture partners or franchisees in other countries. With support in areas such as the movement of currencies, the search for partners and adoption of technologies, we are able to establish a win-win scenario for ourselves and our partners. Through our experience, we found that most of these developing countries are also looking for global brands. For example, Din Tai Fung is one global brand that we brought from Singapore as a master franchisee into Thailand.

In other ASEAN countries such as Cambodia, our partners have started off with BreadTalk and having witnessed the success, they are very eager to explore and bring in different brands into their country. Looking ahead: the government continues to support SMEs like us through Enterprise Singapore. Recently, they helped to arrange an exploratory trip to New York where we were able to meet and talk to potential business partners. With useful insights gathered from this trip, it will be helpful towards preparing our entry into the US market.

 

BreadTalk Group’s turnover last year was near 600 million SGD. Being well-known internationally, can you tell us about the inception of BreadTalk and what would you recognize as the main factors that have allowed you to grow so quickly?

When we started this company in 2000, we were the market leaders in terms of product creativity and introducing the open concept-full height glass design that enables our customers to witness the entire baking process. Coupled with the aroma of freshly baked buns that attracted customers, BreadTalk soon became the talk of the town.

In 2003, we adopted a similar creative flair for our first Din Tai Fung restaurant design in Paragon Shopping Mall where customers can witness the making of the iconic xiao long bao by our chefs and other delicacies offered on the menu through open concept kitchens. In the last 18 years, we recognized the importance of flexibility when we work with franchisees with strong knowledge of their local markets. For example, we adopted the 80-20 rule where we can co-create relevant products with franchisees for each market. In the same spirit that McDonalds kept their signature Big Mac on menus globally, this approach enabled us to keep a core selection of iconic products such as Floss while allowing our franchise partners to create exciting products infused with local flavors.

We continue to encourage our franchisee partners to create quality products through a regular cycle of food tasting, feedback, safety testing and finally approval before they sell the products in the stores.

 

Regarding innovation, the one that is challenging the status quo is the implementation of the 4orth Division. You also made some advancements incorporating digitalization for your customers. Can you tell us about those innovations that are coming out?

In our 4orth Division, we partnered with well-known local brands such as Song Fa Bak Kut Teh (Song Fa). They are a well-run family business and have been around for 50 years. Through this JV, we were able to combine our strengths in operation management with Song Fa’s steadfastness in Building Generations of Bak Kut Teh Lovers and brought this iconic Singaporean brand into four major cities in China namely Beijing, Shanghai, Shenzhen and Guangzhou. We observed that Chinese consumers are very tech savvy where every transaction is managed through the phone and people stop bringing their wallets out at all.

For our first Song Fa restaurant in Shanghai, we adopted IPAD technologies for customers to place order and through leveraging on technology, we are able to measure how long it takes to cook a soup or deliver a drink.  This adoption of technologies actually allows us to deliver efficient and high-quality service to our customers where we start off with a drink, followed by appetizer, main course and dessert. With digitalization, we can ensure that each customer is able to enjoy their meals coupled with high-quality service. With IPAD ordering system, time and motion are taken into consideration and dishes are delivered in sequence.

This ultimately increased the number of customers we can serve daily and we brought in RMB 1 million dollars in sales for the first month. Traditionally as an F&B group, we are labor intensive. However through adopting technology, it serves as an enabler as it helps to overcome traditional barriers and pertinent issues such as high labor and rental costs in Singapore. Technology also serves to enhance the overall customer experience. In the last 15 years, customers are familiar with the Din Tai Fung menu and hence, we are exploring how every customer can participate in the interactive experience with ease and submit their order through an IPAD. This is an example on how we use technology to improve and we plan to roll it out for our brands in Singapore.

 

Before those technological disruptions and all the political movements ongoing within the ASEAN, how do you see the evolution of BreadTalk Group not only within Singapore but within the Asia region in the future?

As BreadTalk Group continues to grow, we are constantly sharing key insights, knowledge and technological ideas with our franchisees in ASEAN. Through sharing, we see it as a ‘win-win’ for all parties as it is an excellent opportunity to shape our brands as exciting and innovative in these newer markets that we enter into. In addition, we find that emerging markets within the ASEAN bloc are more welcoming of new technologies and innovative practices as their domestic market continues to mature.

 

In terms of increasing your regional footprint, will most of your growth be coming now from outside of Asia or are you still planning to grow your operations inside Asia as your core market?

In the last 18 years, we grew our presence in most parts of Asia. This is why the United States of America is a market of strategic importance that we are currently studying. Located within a different time zone with a melting pot of diverse cultures, these are exciting times for the Group.

On the other hand, Asia continues to be important to us. For example, we may have one or two brands in emerging markets such as Cambodia and Vietnam but we can definitely do more to increase our presence in these markets. At the end of this year, we will open our first Food Republic food court in Cambodia. We continue to identify the clientele in each market, study their consumption habits and lifestyle to accurately identify which brand(s) are more suitable for specific markets. We are eager to bring our brands into existing markets, aside from BreadTalk.

 

Are you planning to keep the brands that you currently have or are you also working on incorporating new brands as you move forward?

F&B is a very competitive industry and we are constantly looking to expand our brand portfolio. As we continue to develop new exciting brands internally, we are on the lookout for quality iconic brands like Song Fa that we can bring into China or partner with famous Chinese brands such TaiGai and Nayuki to bring them into Singapore.

 

In December, you are launching your first Din Tai Fung in London and you are traveling to the US to look at opportunities for the Group. Can you tell us your vision for the western market?

As we venture out of Asia, we selected London as our first stop in Europe. Looking at the
United Kingdom and the United States, we recognize both markets’ strategic importance to the Group. We hope that they can contribute at least 10% of the group revenue in the medium term.

In addition, we are confident that if we are able to deliver exciting and high-quality Asian cuisine to consumers in the UK and the US, both markets can potentially be big needle movers for us.

Currently, our entry into the US remains a mid-long term vision for the Group. We will continue to research, tweak our strategies and improve our product mix to ensure that consumers in the US will be receptive when we open our first store there. Over the last 18 years, our experience tells us that taking time to find the best business model and partner are important considerations to lay the foundation for a sustainable and profitable presence in Europe and the US.

In December, we will open our first Din Tai Fung restaurant in London. This provides us with a unique window of opportunity to introduce other Asian cuisines such as Song Fa to consumers in London. In the long term, the western market can potentially contribute up to 10% of our total group revenue.

 

You have a big experience in leading the youth and in creating joint ventures and partnerships. What kind of models are you looking at for your expansion overseas? Is it going to be through joint ventures or through BreadTalk Group on its own?

Our approach towards overseas expansion is dynamic. It depends on a variety of factors such as overall familiarity with the proposed locale. For example, our partnership with Song Fa is a joint venture and we brought them out of Singapore and into China and Thailand. If we enter the United States market, our primary approach is to operate BreadTalk and other brands on our own. This is to allow the team to have the time, the bandwidth to fully understand and immerse themselves into the culture and ways of working in the US before we can decide the required investment.

Partnership to us is more than just operational experience or financial health. It is about the overall alignment of our values and their values; to ensure that we share a common understanding in store design, product innovation and managing business decisions collectively as a team. For example, if they are busy with their own business, they might dilute ours. Finding the right partner is important but opening a franchise is also a possibility. Our past experiences led us to move away from a pure franchise model to a hybrid joint venture franchise model so that we will be able to participate and exercise our rights in managing the business.

 

Do you have any last comments that you would like to make to the American audience?

Initially, it will be challenging for BreadTalk Group to set up operations in the US, but at the same time, we believe in looking at the other side of the coin; the immense potential for BreadTalk Group to excite and attract the massive domestic market in the US to enjoy our high quality products and cuisines. With this coming ASEAN Summit, we are eager to see how this can carry us forward. We are always in constant communication with the Government and would like to explore future collaboration opportunities with their contacts and support for us to go beyond. We will definitely talk to them about US and see how they can help us.

 

 

 


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