How BreadTalk's strategy earns $3.8mil in 6 months

Last week, we shared how bread mogul George Quek and BreadTalk strive to go against the grain to stay relevant in today's competitive society. But bread, while a staple part of many a Singaporean's diet, is not a sustainable and lucrative business by itself , especially in the face of hipster cafes and long-established competing brands emerging all around the island.

So despite the copious amount of eggs that go into Flosss buns, which is probably the greatest thing since sliced bread, it should have come as no surprise that BreadTalk does not have all its eggs in one basket.

How Does BreadTalk Knead Out Their Dough?

1. Their Brands Butter Up (Or Down) Rents

To start off the first point, I bring into point that case of Malaysia-based low cost carrier AirAsia, whose money-making strategies have long been a spotlight topic.

One of the main ways AirAsia keeps their costs low is because they have massive buying power with Airbus, being essentially their largest customer, which, in turn, translates to a powerful leverage in price negotiation.

Similarly, The BreadTalk Group manages a series of F&B brands ranging from Din Tai Fung and Toast Box, all of which are influential in their own right.

By leveraging on these brands, BreadTalk is able to haggle down rent prices, while still maintaining standardised costs for their food.

To prove this to you, a quick search of BreadTalk, Toast Box, Food Republic and Din Tai Fung outlets bring up an overlap of locations, with BreadTalk sharing locations with the 3 other brands in more than 10 locations each.

2. They Have Their Fingers In More Than One Pie

Imagines Properties Pte. Ltd. was incorporated as a holding company in 2009, and is a wholly-owned subsidiary of BreadTalk Group Limited. Every Singaporean knows that property is one of the best investments there is, especially considering our limited land space. And so far, Imagine Properties has been highly successful at bringing in the dough.

January 2016 saw Keppel Land spend $51.4million to buy stake in 112 Katong from Imagine Properties, among others. Within the same month, Imagine Properties also entered a sale with DC REIT Holdings Pte. Ltd. for bonds of the same property, 112 Katong, coming out with a gain of S$8.5 million.

BreadTalk's dabbling in property doesn't just stop there in terms of benefits, the company also leverages on its property assets to showcase their brands in prominent locations.

And when you own the mall, that's just the way the cookie crumbles. Or in the case of BreadTalk, their 2017 Wah! Piang CNY biscuits.

 

3. Quek Did Not Loaf Around Overseas

Some companies might shy away in the face of a widespread expansion strategy, especially if their product is something already found ubiquitously in the target country. For BreadTalk, their ambitious expansions with founder Quek at the helm have actually paid off extremely well.

With his 20 years of experience in working overseas, Quek is well-endowed with the skills and acumen essential to build brands overseas, and he rose to the occasion splendidly. Given his experience doing business with China, Quek was even ballsy enough to enter the market without first securing a partner.

Although Ramen Play Singapore has suffered from debilitating closures of multiple stalls, the company's overall losses were compensated for by higher profit margins in Hong Kong and lower losses in Thailand.

 

4. They Find Ways To Stay Fresh

Aside from creating new flavours for local celebrations and such, BreadTalk has always held to their commitment to innovation. The first way involves the evolution of their store concepts, which has seen a consistent development from Generation 1, as boutique bakeries, to the current Generation 4's rustic style.

On its talent forefront, the BreadTalk Group also seeks to stays relevant by encouraging young management associates to work towards innovating new ideas and projects to grow the brand's vibrancy.

In keeping with the convenience technology brings, brands under the Group have also incorporated digital payment methods such as Apple, Android, and Samsung Pay.

As an additional testament to how BreadTalk's innovation helps them to reduce costs, BreadTalk succeeded in piloting frozen dough in its recipes.

With the central kitchen in their International Headquarters baking out more than 85,000 pieces of dough per day using machines, it greatly enables the company to reduce labour and rental costs. This translates to better productivity, with instead of 5 people making 100 frozen dough portions, 2 people now produce 300.

Bread May Be The Staff Of Life

However, that does not mean that that businesses can go at it with half-baked strategies.

BreadTalk has not become one of the most beloved local brands of Singaporeans and investors simply by churning out golden loaves of fluffy goodness. It was only with a carefully curated portfolio of assets and expansion tactics that BreadTalk was able to sow its oats across multiple locations.

But similarly, their success also shows that when the company knows what its doing, it is possible to have their cake and eat it too.

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