Oldtown plans expansion, aims to open 27 cafes in four countries

PETALING JAYA - Oldtown Bhd is planning to open 21 to 27 new cafes in Malaysia, Singapore, Indonesia and Australia in the financial year ending March 31, 2015 (FY15).

In its annual report, group managing director Lee Siew Heng said its cafe chain business remained the key revenue contributor, recording RM207.059mil in sales in financial year 2014 (FY14), up 1.2 per cent versus RM204.6mil in FY13.

It plans to open 12 to 15 new outlets in Malaysia, two to three in Singapore, six to eight in Indonesia and one in Melbourne or Sydney, Australia.

On top of that, it has a medium-term plan to set up a new food-processing centre in Guangdong Province, China to support the growing number of new cafes.

"The establishment of the centre has taken longer than expected, owing to a protracted delay in the conceptualisation and discussions with various parties to deliver an ideal outcome," he said.

Despite that, the operations were well supported by a licensed food-processing centre that supplies main ingredients to its cafes in Guangdong province.

"The group remains steadfast with the plan to open more licensed outlets in strategic locations within Southern China to tap into this massive market," Lee added.

The cafe chain segment was the main income driver, contributing 54 per cent to its consolidated revenue for FY14.

Of its 238 outlets in Malaysia, Singapore, Indonesia and China, 89 are fully-owned, 20 partially-owned, 108 franchised and 21 licensed.

There were a total of 30 cafes in FY14 internationally compared with 23 a year earlier.

It is exploring new licensing opportunities in Singapore and shifting away from the company-owned and operated outlets in Indonesia to the sub-licensing model to expand in the archipelago.

Its Indonesian outfit, PT Oldtown Indonesia, was licensed to establish and operate cafes in Jawa and Bali but the execution of its second master licence agreement enabled it to set up cafes throughout Indonesia.

Its foray into Australia this May was expected to contribute positively to the group in the medium to long-term underpinned by the overwhelming demand and acceptance of Asian cuisine.

"Pursuant to the agreement with the master licensee, our group is granted an option to participate directly in the Australia operations as a shareholder with up to 51 per cent of equity stake after the fourth year of operations.

"Through this strategic option, the group is poised to ride on the better business performance of the cafe operations in Australia," Lee said.

As for its beverages manufacturing division, it had appointed new distributors in Indonesia and the Philippines.

It strives to strengthen its position in the market via various marketing campaigns, advertising and promotional activities to fortify the Oldtown White Coffee brand equity.

It noted the highly competitive domestic market and had to match the competition with more aggressive marketing campaigns as well as frequent promotional activities.

"In essence, our domestic market will be a potentially large coffee market, and we believe our strategy to develop our coffee brands as premium labels will enable sustainable long-term growth in this growing coffee segment in the future," Lee said.

Nonetheless, he noted the challenges in the operating environment going forward.