BreadTalk staying fresh to maintain edge

A hot pink ceiling is not what usually greets the eye when looking up in the boardroom.

But the BreadTalk group isn't your typical company either.

Its audacity in defying convention has propelled the firm to prominence - the guest-list to the grand opening of its international headquarters last Friday read like a who's who of Singapore society, from guest of honour Deputy Prime Minister Tharman Shanmugaratnam to chief executives of banks and corporations.

The 13-year-old firm also laid for itself a milestone target on Friday: $1 billion in revenue by 2016, and more than 2,000 bakeries, food courts and restaurants by 2018. It made $447.3 million in revenue last year, and currently has about 850 outlets in 15 countries, The bold ambition puts to shade the earlier goal of having 1,000 BreadTalk bakery outlets by 2014, a plan announced just in September last year.

Of the 2,000 proposed outlets, 1,800 will be accounted for by the BreadTalk brand alone, said its chairman George Quek in an interview with BT. And China will be a key part of the expansion strategy. "China will be the most important place for us to deepen our presence. To reach 2,000 outlets, China alone will have 1,000," Mr Quek said in Mandarin.

The group is now present in 49 cities in the country, with only one to five outlets in some cities. "So we have a lot of room to grow in terms of expansion," he added.

The firm runs Din Tai Fung restaurants, Carl's Jr burger outlets and Food Republic food courts in China, where it first set up shop in 2003.

Even so, not all has been smooth sailing there. In its most recent second-quarter results, BreadTalk recorded an impairment loss of $1 million from the closure of three Carl's Jr stores in Shanghai.

Mr Quek explained: "While managing Carl's Junior in China, we discovered that over there, you have to offer a smaller, lower value type of breakfast. But Carl's Junior is about juicy and big burgers."

The slow process of applying to Carl's Jr in the US to make the necessary changes proved a hassle for the group as it was managing so many other brands at the same time.

After discussing with Carl's Jr, it was agreed that BreadTalk would trim its stake in the franchise from 60 per cent to 40 per cent, and hand over the management and operations of the outlets.

"They have put a lot of resources in China. BreadTalk is unable to focus on Carl's Jr, hence we gave the control back to them to develop the brand," said Mr Quek. "Our role (now) is to open the way for them with the relationships we have established in China."

But even as it looks to entrench itself in China, the group is not forgetting its roots.

In Singapore itself, another core market for the group, it plans to double its current count of 100 BreadTalk outlets - in sharp contrast to many food and beverage firms which have cited the current manpower crunch to put their expansion plans on hold.

To this, Mr Quek said: "I think people have a very strong ability to adapt ... I can't say that the manpower crunch hasn't been a problem for us.

"It has indeed caused some concern for BreadTalk, but I tell my staff that I don't want to listen to the problem, I want to solve the problem. The government's policy on foreign labour is very clear ... This policy won't change, so we'll have to adjust to it."

The group has therefore spent $8 million on machines that can make dough and fold croissant rolls in its central kitchen in the new headquarters. Productivity has increased: while five people could make 100 frozen portions of dough in the past, two could make 300 now.

Mr Quek reckons that there are also other benefits: "With fewer staff, you have more resources to improve their salary."

Investors seem to like what Mr Quek is doing, as shares have climbed 33.8 per cent so far this year to 91 cents on Friday. The stock hit $1.16 on April 3 amid speculation of a possible privatisation. Thai hospitality and F&B player Minor International - which owns the ThaiExpress chain in Singapore - had been raising its stake in the firm progressively since January. It now holds 11 per cent of the stock, making it the third largest shareholder after Mr Quek and his wife.

BreadTalk chief financial officer Lawrence Yeo then told BT that both companies had not been in contact. Both have since started discussions, Mr Quek revealed.

"Minor group has vast resources in Thailand - restaurants, property, F&B brands. So of course they hope for a brand to cooperate with them. We are still exploring that possibility with them," he said. "If Minor group can add value, I don't rule out the possibility of a joint venture to expand even faster there."

Mr Quek was, however, quick to dispel speculation of a possible takeover. "We frequently get a lot of people knocking on the door to ask if we want to sell the company or give up part of our stake. As the majority shareholder and founder, I've never thought of selling my stake," he said unequivocally.

For the next three to five years, the firm will focus on deepening and improving its current brands and to increase efficiency and profit.

This, of course, will be underpinned by its philosophy of staying different.

"If you go to China you'll see a lot of first generation 'BreadTalks'. What we do, people follow. But we can push ourselves to keep learning and moving forward," said Mr Quek. "They can copy your first or second generation outlets, but not the newest generation.

Every three to four years, we come up with a new concept. So BreadTalk keeps innovating, learning, trying, creating."

sandrea@sph.com.sg

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