Where Creativity Is a Bread and Butter Issue

BREADTALK GROUP

Breadtalk first made waves when they entered the bakeries market all over
Singapore in the year 2000, bring in a totally new concept of bakeries
business into Singapore.

1. From a classic rags to riches tale

Born in 1957, MR. George Quek was a son of a humble vegetable farmer
who later became a seaman and a housewife mother. Together with his 3
brothers, they stayed in a rented wooden attap hut in Hougang.

As a boy Mr. George slowed no inferred in studies whereby in his report card
you could see more red than blue marks. He rather prefers to dabble with a
pencil and drawing board. His creativity ignited into a passion for artistic
pursuits. Once completed his “o” levels he enroll himself to Singapore Art
Academy and worked as a cable technician to pay his fees. After graduation,
he was enlisted for National Service. He signed on as a regular in the Army at
the age of 20. The Army has taught him to be tough and strong with
endurance and determination and eventually emerged as a company
sergeant major, upon leaving the Army, he worked in a Hong Kong handicraft
shop in Parklane Shopping Mall. Where he did wood carving metal engraving
and also move dragon-bread candy. In 1982, Mr. Gorge Quek left for Taiwan
to further his art education. But destiny had no plans for him when he realized
he could not afford the 6000 dollars enrollment fee. With the remaining
money, he set up a single pushcart stall selling “Dragon Bread Candy” in
Taiper Department Store. The snack failed to “bite” at that p, feeling the sheer
horror that he might not have money for a return-ticket home desperate for
new invention and creativity. Slowly he began to “feel” the tasebud and
preference of the Taiwanese customers. Though trials and errors, he modified
his sales pitch, marketing, flavors and presentation accordingly business
flourished.

2 years later from one single cart outlet it expanded into 4 more push-cart with
the sales over $240,000 a month. Emboldened by his “initial success”, he
came back to Singapore and invested $100,000 in Singapore’s howker food “
bak chor mee and fishball noodle”, he lost a huge portion in the early stage.
Refusing to throw in the towel, eventually the venture paid off in 1992, and
had since grown into 21 outlets. He sold off his business and started an ice-
cream chain parlour in China, which was again successful. Mr. Quek and his
wife Katherine feeling homesick after too many years in China, decided to
pack up and head home.

Back in Singapore with his years of experience in F&B, he engaged a few

Taiwanese partners and set-up the first Singapore style modern food court in
Bishan function 8 in 1994. The venture was a sweet success and within a few
years, over 15 such food courts up all over Singapore and overseas.

2 Entrepreneurship

Mr. Quek’s achievement so far had been an Astounding success and he could
jolly well “retire” comfortably yet, he was never contended.

While in Taiwan and Japan, he noticed the “popularity” of “designer-bread

boutique” outlets among the people.

So in the year 2000, brought in the “designer bread boutique concept” ( an

“open kitchen concept”) whereby the breads are presented in elegant clear
glass boxes that resemble jewelry showcases creating a bright-looking
fluorescent lit-boutique which allows people from outside the shop to look in
and watch the chefs making the delectable bread and pastry concoctions from
start to finish. Customers also enjoy a breezy and trendy ambience in these
bakeries. The walls are splashed with a clinical white and the bread and
pastries are displayed on sleek white plastic and glass shelves, life clothes on
display in a department store, creating a wonderful potpourri of colours and
smells that attract long queues of people round the clock. Stylish plastic
carriers used for purchases are trendy looking and carries over the minimalist
concept.

Equipped with the new staple of the art bakery

Equipments specially imported from Germany, Spain and Japan, the fasts,
aroma, quality and texture consistency of our breads are further enhanced
new staff uniforms with French and Japanese influence and biodegradable
and Environmentally friendly packaging for all our products complete the
entire “ new look”.

Breadtalk has become a “distinctive Singapore brand” that has gained

International Appeal and renowned for the way it has revolutionized the
culture of bread consumption with its visually appealing, aromatic and unique-
fasting products.

From 2002 to 2004, the Breadtalk was recognized as one of the most
recognizable Local Brands in Singapore, was awarded the followings: 1)
Singapore Promising Brand Award; 2) Singapore Most Popular Brand Award
2002; 3) Super Brand (2002/2003); 4)Enterprise 20 start-up Awards (1st); 5)
Singapore Most Distinctive Brand Awards (2003-2004): 6) Design for Asia
Awards 2004; and 7) Most Transparent Company Awards 2004

Mr. Quek was conferred an Honorary Business Doctorate by the Wisconsin

International University in recognition of his entrepreneurial creativity and
successful career record in May 2002. On 10th July 2002 he was the joint
winner for the entrepreneur of the year 2002. Eventually he brought Breadtalk
to list on the SGX in 2003.

Using the current socio-political-economic outlook, I will examine Breadtalk

external general and industry environments, internal analysis of the company
as well as provide an assessment of the performance of the company in terms
of the company in terms of efficiency, effectiveness and returns to investors.

3.1 External general and industry environment

3.1 Political Factors

Increasing globalization and loosening trade barriers, presents a challenge as

well as an opportunity to Breadtalk. The challenge will be to compete against
unknown forces and to source the best quality/financially viable
products/ingredients from world over. Breadtalk can enter the markets of
emerging companies through joint ventures or partnerships to explore these
new markets especially those in the less developed Asian markets where
bread could be a luxury. However, understanding the other countries’ dietary
preferences would be needed to help Breadtalk

Moreover, Breadtalk may stand to lower its costs as governments begin to

lower taxes or provide subsidies to help businesses stay afloat in this
economic crisis and landlords reduce rents or provide rental rebates to keep
their tenants.

3.2 Economic factors

The fluctuating commodity and raw material prices all over the world result in
rising purchasing costs for Breadtalk. This will have an impact on the margins
of the organisation and might lead to passing over the cost to consumers by
increasing prices of most things in the supermarket. Furthermore, rising fuel
costs will have implications right throughout the supply chain of Breadtalk
leading to an overall situation of increasing prices, resulting in decreased
competitiveness. At the same time, the monsoon season may also have a
negative impact on prices as crops are destroyed and supply decreased.

The credit crunch can impact Breadtalk negatively as it might decrease the
purchasing power of consumers and though they will still buy the essentials
they may be more cautious. Furthermore, Breadtalk’s fast expansion needs to
be fueled with cash injections and given the latest Dubai crisis, investors and
bankers may hold their cash and be less willing to lend.

At the same time, Breadtalk may also face stiffer competition from local small
retailers who offer bread at more affordable prices albeit less delicious or
varied- something which will appeal to cost conscious consumers. At the
same time, traditional big bakeries like Sunshine and Gardenia may also pose
a threat as they also offer buns with fillings.

3.3 Social Factors

As Breadtalk forays into the lesser tap markets of China and India, social
factors may also come into play. Chinese and Indian customers for example,
have different staples depending on the region they hail from and also the
styles of food preparation maybe different from the current inventory offered.

3.4 Technological Factors

Modern processes and machinery can also be used to ensure that the cost of
labor and production is reduced. At the same time, PDAs and other
communication devices can also be utilized to ensure faster processing of
orders.

4 Analysis of Industry

Using the Porter’s five forces model, I will provide an analysis of the industry
in which Breadtalk operates in.

4.1 INTERNAL RIVALRY/COMPETITORS

The organization operates in a highly competitive industry, characterized by

other low priced confectionery producers which are mostly small family-run
businesses producing bread that are sold in the neighborhood, which
translates to small-scale production for the local market. On the other hand, a
few large retailers such as Sunshine, Gardenia also produce affordable
products and enjoy economies of scales to compete effectively. Thus, it would
seem that competition among rivals is intense with Breadtalk facing
competition from both ends of the spectrum. Internally, the organization,
according to some accounts, has seen differences of opinion regarding
product offerings and positioning. Due to the intense competition and to
diversify, Breadtalk has wisely attempted to compete by entering the markets
which typically pose the largest competition, such as China.

4.2 Buyers and Suppliers’ Bargaining Power

It is true to see that consumers pose a credible threat of backward integration

to retailers however in order to compete effectively against the backdrop
retailers as a result seek different ways of improving performance by adopting
strategic schemes of work based on relationship marketing which aim to build
greater customer loyalty and long-term relationships with suppliers. This
explains Breadtalk strategy in the integration process between suppliers,
retailers and customers. Breadtalk integrates backwards by producing and
designing its products in its own factories and this benefits customers as
products are priced potentially lower.

In relation to buyer power in the industry Breadtalk seeks to enhance

customer loyalty through a focus on enhancing existing relationships while
aiming at winning new customers also and tying them into long term
relationships with companies. This is done by providing customers with
positive shopping experience through good customer service. For example,
Loyalty card- Spend above $5, you will get a stamp on your card. With correct
no. of stamps, customers are able to redeem a free bun. Package meals are
also available where 5 buns are sold for $5 and Breakfast set comprising
coffee/tea+bun at $2.

4.4 Threat of Substitutes

The position of substitute products is a matter of searching for other products

that can perform the same function as the product of the industry or player in
the industry. Breadtalk selling confectionery faces several substitutes
depending on the purpose the consumer is buying the bread for. Singapore
has many hawker centres and restaurants selling food and all these are
substitutes for bread. For breakfast, outlets like Delifrance, Mcdonalds KFC
etc provide competition while restaurants like hawker centres and Saki Sushi
are close substitutes for lunch and dinner in terms of pricing.

4.5 Potential Entrants

There are several furniture retailers in terms of stores such as Delifrance,

Mcdonalds KFC and other high end retailers like Jack’s place. It is obvious
that the decreasing level of customer loyalty has resulted in higher degrees of
competition while threats have also come from new entrants to this industry.
Capital investment required in the bread shop can be rather high as shop
space needs to be rented, factories need to be built and designs need to be
sourced before the entrant could begin selling the products. Furthermore, the
new entrant would need to capture a certain market share before it could reap
the necessary economies of scales to allow it to compete with rival firms. The
difficulty of securing suitable distribution channels for potential new entrants
may also create barriers to entry since bread is a common product and
supermarket chains may be unwilling to distribute such products, especially if
they have their in-house bakery. The confectionery industry enjoys fairly high
product differentiation since established retailers enjoy a degree of brand
name recognition and customer loyalty, making it tougher for new entrants to
enter. In general there are various forms of new entrants for established
confectionery retailers and some companies, notably the small family owned
businesses, have exited the industry due to decreasing profit margins and
increased competition. This is evident in the neighbourhood bakeries many f
which has ceased operations. It is fair to say that branding strategy plays a
critical role in maintaining long term customer bases which itself reflects the
increasing power of customers.

5 SWOT Analysis

Having looked at how the external environment can affect Breadtalk in its
strategy, let us look at the internal analysis of the company.

5.1 Strengths

Breadtalk’s main strengths are a strong international brand recognition

attracting key demographic customer groups, built upon a unique philosophy.
This Breadtalk business model is unique in its construction and execution with
little direct competition on a like for like basis. Perhaps a key asset Breadtalk
possesses is the Breadtalk menu. Breadtalk ‘s success has been driven from
the price architecture offering value to the customer in innovative and tasty
products which are low priced vis-à-vis similar products. Since 1997, the
company has enjoyed high sales performance which boosted profit margin
and created a healthy reserve which could be used to fund company
expansion. Another strength is that the company also a wide menu of
confectionery products which allows it to change the menu on daily basis. Its
financial strength is also strong as it has the capacity to draw funds from
investors as a listed company.

5.2 Weaknesses

The firm’s main weakness is the fact that it is very much reliant on Singapore,
with a small domestic market of five million and is underserved in the
emerging economies of Asia. This could be a potential drag on company
performance in the long term as the local market is fairly saturated with little
growth. Another potential snag is that though Breadtalk offers a wide variety
of products, it does not have halal certification, which is necessary for them to
penetrate the Muslim market and even more critical if it wishes to penetrate
the Malaysian and Indonesian markets.

5.3 Opportunities

Breadtalk is countering its main weakness with its key opportunity, which is
expansion into emerging markets in China, Vietnam and other Asian
countries. Traditional product for Breadtalk has been affordable, low-priced
high volume bread. However the movement into mid and higher price points
will see an opportunity to move the demographic base and increase the
average basket value with less reliance on a limited demographic group.
Another opportunity available to Breadtalk is the increasing popularity of
online shopping. Its expansion into the realm of the virtual marketplace, the
possibility of greater reach coupled with lowered expenses is now a real one
for Breadtalk. Although there are negative associations within the
development of the Breadtalk Ecommerce site there is an associated
opportunity to achieve growth and increase levels of customer service as the
additional transactional capability will reduce pressure from stores to a certain
degree. This will also create a push for consumers to purchase bread through
websites, ensuring that the consumer could have a Breadtalk bun without
travelling to town.

5.4 Threats

Unfortunately, these extra developments are driving the threat of a possible

over saturation of the market, as mainstream retailers are beginning o offer
more variety of bread and other firms like Sweettalk join the fray. Existing
bread related firms like Ya Kun could also decide to compete with Breadtalk
directly by offering bread with fillings. Such move will have an adverse effect
on Breadtalk which draws a significant portion of its revenue from the sale of
bread. This is compounded by the existence of alternatives like SubWay
which appeal to the health conscious and if it decides to sell low priced bread,
would provide Breadtalk with a challenge.

In my opinion, Breadtalk has a two-pronged strategy for growth, branding and

expansion. I will attempt to talk about the company’s branding and expansion
strategies and show how these are interlinked and also the problems the firm
may face in the near to medium term.

6. Branding strategy

The development of a successful brand requires a well-managed, strategic

approach that includes three key elements, which Breadtalk has done well. It
has successfully came up with a brand idea, created a core identity and made
itself authentic. At the same time, the nine-year-old BreadTalk opts for
franchising when venturing abroad. This allows optimization of resources. The
company focuses on branding while the local partners focus on the network
and operations.

In more familiar markets like China and Singapore, BreadTalk prefers to own-
and-operate. In total, the company has 42 wholly owned outlets and 26
franchised outlets in the region.

6.1. The brand idea

Every brand must stand for something that is unique, remarkable and relevant
to the target markets' worldview and aligned with the company's goals. In
Breadtalk’s case, it aims to ‘Establish BreadTalk as the foremost international,
trend-setting lifestyle bakery brand’. The branding is a simple but good
strategy as it establishes itself as such and at the same time, connects with its
core target market which are the heartlanders.

From its foundation, Breadtalk has been successful as it revolutionized the

bread market. Many customers were satisfied with the products and they
became the firm’s greatest asset as they promoted the brand by word of
mouth, allowing it to connect with an increasingly wider audience.

6.2. The core identity

Having established a suitable brand idea, the next stage is to develop a core
identity for this idea. This serves a number of functions.

Breadtalk gained the attention of the target market, helped consumers to

identify you, and ensured that its remarkable brand idea is attributed to the
firm.

The core identity consists of the brand name, logo and visual style as is
evident from its website.

However, the brand is not yet complete. Without the third and final element,
the brand is unlikely to achieve any significant lasting value.

6.3. Authenticity

This last stage of the brand's development is its creating an authentic brand. It
tells the world who Breadtalk is and what it stands for.

This allows it to earn the trust and respect of not just its customers, but also
your staff, investors and other business stakeholders.

To achieve the required level of authenticity, its Mission statement guides

everything that it does, and below are some of the strategies it used.

Famous for its pork-floss buns that made waves in 2000, home-grown bakery
BreadTalk now has over 200 products and can be found in 8 countries.

Making The Dough

Head of Brand Development, Joyce Koh, says: “We opened shop in 2000. In
our first year, we had a lot of enquires, especially from Indonesia. But we felt
we were not ready operationally.”

BreadTalk waited until it had built up its business development and resources
to support a partner before setting up its first outlet in Indonesia in 2003.
“It was a brand new game for us so we decided to engage professional
expertise to help us develop the franchise,” Joyce recalls. BreadTalk also
works closely with Government agencies such as IE Singapore which
provides networking opportunities, intelligence, research and groundwork.
This is a good strategy in my view as it allows the company to built up the
financial capital needed and at the same time, also allows the firm to build its
organizational capacity without stretching its limits.

Once in place, branding efforts will take the company to new heights. “The
brand is always progressive and grows through different facets. As the brand
evolves, it is important that the vision remains clear to ensure consistency and
adherence to the core brand concept,” emphasized Ms Koh. Consistency in a
brand name goes beyond just the aesthetics of a logo or punchline.

Choosing Partners

“We have been blessed with partners who are proactive. They approach us so
we do not need to source for them. We look for partners who are dedicated
and have the drive and passion to build the business,” says Joyce, adding
that BreadTalk has rejected big conglomerates, as they did not fulfil
BreadTalk’s requirements. This is also a good move as big companies are
usually in a diverse field of businesses and may not have the time and
resources to work with a fledging company. As such, by choosing to work with
partners who are willing and able, the firm is in a good position to enter into
win-win partnerships.

Fees And Royalties

For BreadTalk, leaving their mark through franchising in 12 territories around

the world including Indonesia, Taiwan, Hong Kong, Philippines, Kuwait, UAE,
India, Malaysia and China – it is essential for the brand’s values such as the
quality behind the product to be transmitted throughout the different markets
at home and abroad.
Market experts have urged SMEs to take on a serious approach to
establishing brand stability and developing a clear identity before venturing
into new waters, something that BreadTalk has adequately achieved before
developing the brand further.
BreadTalk’s Master Franchise fee is USD$600,000 to USD$800,000.
Franchisees will also have to pay royalties each month. Bi-annual trips are
made to the franchise outlets to ensure that franchisees are following the
guidelines and doing well. In my opinion, such strategy has several benefits,
chiefly, Breadtalk does not need to shell out huge fees to penetrate foreign
markets overseas and at the same time, stands to gain more than a million
dollars from each market. It also allows the company to grow its brand as
franchisees would have to use the Breadtalk brand. In effect, it would be like
getting other willing partners to help grow the firm.

Intellectual Creations

At the top of BreadTalk’s agenda is creative innovation. They maintain this

through training and constant performance reviews. To ensure that ideas are
fresh and innovative, the team regularly travels to countries such Japan and
Europe to scout out international trends to bring back to the local team. Brand
experts have always advocated that branding efforts should indeed
complement the vision of the company.

Being innovative and adaptable helps BreadTalk succeed in overseas

markets. It maintains 80% of its product range and adapts 20% to the local
palate. For example, BreadTalk used halal mixes and created new recipes at
its Kuwait outlet. “Kuwaitis have a sweet tooth. So, we created a range of mini
pastries and packed them in a specially designed gift box. It has proven to be
very successful,” Joyce says.

The company is diligent in protecting intellectual creations. For instance, the

BreadTalk brand is a trademark in 30 countries and is a pending trademark in
about 60.

This is also a good move as it helps Breadtalk stay relevant in the market and
meet the consumers’ needs rather than trying to get consumers to like the
products of the company. Such customizing of products to meet target market
needs is also useful in building a brand name that gives consumer the feeling
that the firm is sincere about doing business and also wanting to meet
consumers’ needs.

Brand Recognition

BreadTalk presently also holds several accolades to its name. It was awarded the
Most Promising Brand and voted Most Popular Brand in the Singapore Promising
Brand Awards 2002, co-organized by ASME and Lianhe Zaobao.

The repeated wins in 2003, 2004 and 2005 gave further recognition to this well-loved
brand. BreadTalk is the Award’s first ever SPBA Gold Award Winner.

It has also won other overseas branding accolades such at the Design for Asia
Award 2004 organized by the Hong Kong Design Centre and the Five Star Diamond
Brand of the Year 2006 accredited by World Brand Lab in Shanghai.

In a recent Singapore Promising Brand Awards (2005), BreadTalk clinched

the overall Most Popular Brand Award. There were more than 150 brands
who were vying for the accolade.
Winning such awards helps to strengthen BreadTalk's brand both locally and
internationally. And will, undoubtedly, help the company to continue to
franchise its way into global markets.

The Breadtalk branding strategy focus and maintain the following tactics :

1) Breadtalk outlets are Designer Bread boutiques to project the image of

a friendly kitchen;
2) The bakery uses a concept of Space Age Bakery to inject fun and
humour;
3) It utilizes an Open-See Though Kitchen Concept which allows
customers to appreciate the hygienic conditions and food standard
under which the bread is made;
4) The stalls take the form of Brightly Lit Fluorescent boutiques to exude
warmth and close friendship
5) Its products are unique and innovative in terms of taste and freshness
6) Besides delicious buns, it also attempts to make the products visually
attractive in the form of creative recipes with funk and exotic names like
Spice Girl, Crouching Tiger, Hidden Bacon, Moshi Mushroom,
Earthquake Cheese Loaf, Down to Earth and Floss Buns, etc.
7) It offers a Mix of Western-style Buns with Asian ingredient which is an
example of creativity and fusion of cultures and tastes
8) A wide variety of products is offer with over 150 varieties of bread,
buns, pastries and cakes and offers 40 to 60 different items daily.
9) Last but not least, the company sets itself as a company where strive
and creativity are valued and esteemed.

Although branding strategies need to be valued as a core component of

business growth, BreadTalk’s Research and Development (R&D) has also
played a vital role in leading the market with innovative and delicious recipes
that bring much revenue and brand awareness. It creates new varieties of
cakes, buns and bread on a daily basis, drawing inspiration from foreign
markets.

One aspect of branding that is often overlooked is the practice of corporate

social responsibility (CSR). The earthquake in Sichuan has been a heart-
wrecking disaster. Both individuals and corporations have stood forward
leading the humanitarian efforts in collection of aids in both kind and
monetary.

Breadtalk who owns business in China has initiated the efforts by contributing
100% of the proceeds from sale of a specially created bun called the “Peace
Panda” as a support to help the disaster. This effort is in collaboration with the
Red Cross, and has since put together SGD40,000 in barely a week.
Breadtalk has performed a good example of Corporate Social Responsibility
(CSR) and as a CRM strategy, it has indeed worked very well for its brand. A
benefit is received is free media coverage. The earthquake is top of the mind
concern for every single person on the street and everyone is interested in
reading the latest about it. The fact that Breadtalk has led such an effort has
built a top of the mind brand recall for their business, further strengthening
their market position as the big brother in the bread lines. Secondly, the
interest it has created caused a word-of-mouth marketing effect. People will
asked each other about the buns and another person will be off to buy it as a
gesture of support. So it thus created both the “attention and intention” to
purchase. Furthermore, for better or worse, people started talking about it on
blogs and forums, tapping the power of Social Media Marketing. Taking into
account that no publicity is bad publicity, the internet has a long memory and
reaches beyond just the localised demographics. This further created a
stronger branding for Breadtalk in the region.

As Breadtalk has a lot of businesses in China, regardless of how insignificant

their efforts may seem like, they have already created a top of the mind brand
recall for the 1 billion chinese population, especially in a China where people
are patriotic and gestures for or against the Chinese people go a long way. So
the next time a local Chinese wants to buy bread, they will remember how
Breadtalk have supported the disaster and that will translate into a long term
ROI.

George Quek’s motto for Breadtalk is:

Seek change

Seek ideas

Seek to differentiate

7. Expanding

THE economic downturn has barely slowed down BreadTalk's expansion

plans. The group is still charging ahead with its target of opening the 1000th
bakery in the region albeit shifting the deadline for this from 2011 to 2012.
Of these new stores, 550 will be in China - up from a total of 99 currently.
Chairman George Quek is optimistic about the bakery business and is
convinced the vast size of China's market will provide great returns.
Indeed, key drivers behind BreadTalk's first-quarter growth were the China
and Hong Kong markets. Revenue growth in China was 34 per cent and
104.3 per cent in Hong Kong - a success Mr Quek attributed to the
management's keen understanding of the culture and business environment
in China.
The group will be leveraging this expertise to franchise Carl's Junior in China.
There are plans to open 100 outlets of the popular American burger brand
with the first outlet slated to open in Raffles City Shanghai this July.
Developing the franchise network will cost several million dollars.
The group is also exploring plans to break into the Middle East markets,
where it will also experiment with the sub-franchise system.
Breadtalk was incorporated in Singapore in April 2000. It was founded by
current Managing Director, George Quek and wife, Executive Director,
Katherine Lee.

The 1st Breadtalk retail outlet was open in July 2000 at Parco Bugis Junction.

A 2nd outlet opened within 5 months, in December 2000 at Novena Square.

The 1st HDB heartlands outlet opened at Junction 8 Shopping Center in

December 2000 also.

During 2001 another 5 retail outlet was opened. As of April 2003, 22 retail
outlet exist in Singapore along with a central kitchen at Kampong Ampat that
prepares and distributes “fillings” for breads and buns, bakes cakes and
pastries for distribution to various outlets island-wide. Breadtalk opened its
first “franchise” outlet in Jakarta in April 2003. They have also received
inquiries from interested franchisees in other countries, including Malaysia,
Hong Kong, Australia and USA.

Over the last 9 months, Breadtalk has grown from a “humble beginning” to a
“household name”. It has put Singapore on the “International Retail Map” at
the “World Retail Awards”, the Oscars of the retail industry.

These one of a kind creation are “unique” to Breadtalk and the constant
creation of “new” and more “flavourful” products is Breadtalk’s way of staying
“Ahead” and “Dealing” with the “counterfeit” market in China.

Breadtalk outlets were initially concentrated in major shopping malls in town

area and slowly moved out into neighborhood shopping centers, with the
“aim” o attract a larger customer base of those aged 18 to 40 years, targeting
mainly students and young working adults.

Today Breadtalk owns 24 retail outlet in Singapore and Breadtalk Group Ltd
was listed on SGX in 2003. Breadtalk has 212 retail outlets worldwide and has
spread their wings by opening “Branches” in Indonesia, Hong Kong, and
People’s Republic of China, Philippines, Malaysia, India, Korea, Kuwait,
Oman and Bahrain.

It has also upgraded its listing to the SGX main board trading alongside “ blue
chips” companies.

Breadtalk expect to expand to open up to 550 retails outlets by the year 2012
in over 30 provinces and cities.

In venturing overseas, Breadtalk adopted these strategies:

- Built a winning concept in Singapore before venturing abroad. It does so by
ensuring that recipes were rolled out, finances and processes are built and
strengthened before it ventured. This allows it to build the necessary know
how and resources before venturing abroad. This also provides some buffer in
the event that the foreign venture fails to take off. Breadtalk also ensured that
the company was operationally ready before taking on overseas markets.

- Chose own-and-operate and franchising as complementary strategies. As

mentioned earlier, this allows the company to tap on external resources to
grow and at the same time, receive payments. Of course, the downside is the
reduced potential profits that the firm could reaped.

- Another important step to take in the process of internationalization is to

seek professional advice from the relevant bodies such SME associations or
government agencies. The latter avail the options and resources available
and smoothens the expansion process. In particular, ASME has placed much
effort in creating a platform to increase the importance for branding through
the Singapore Promising Brand Award (SPBA). Breadtalk moved into new
markets only after getting professional advice and help from Government
agencies. This removes the need to reinvent the wheel and saves resources
from researching the new target market. At the same time, Government
agencies could also help the firm in understanding the way business is done
in other countries.

Thus, in the words of Mr Quek, the key to flourishing in the competitive food
and beverage industry is to have a clear and focused brand strategy, and to
move ahead of the competition. Hence the need to push ahead with
expansion in spite of the downturn.

However, in its rapid expansion, one wonders where will the funding come
from.

According to Catherine Lee, group chief financial officer, cash flows generated
from existing operations will be sufficient for growing existing brands, while
bank loans and retained earnings will be used to fund new brands like Ramen
Play and Carl's Junior.

Currently the group's low gearing ratio of 0.26 leaves much room for increase
and Ms Lee said the figure could be comfortably increased to 0.5. Thus, in
terms of debt funding, there is indeed a buffer for the firm to expand.

Operating cash flow rose to $0.959 million, up from $0.645 million as Q1 net
profits increased to $2.08 million from a loss of $0.302 million a year ago. The
turnaround was a result of divesting loss-making J Co Donut. In effect, this will
allow the firm to experience increased profits now the loss making firms are
divested.
Revenue rose 26.9 per cent from $45.09 million to $57.20 million due to
improvements across all business segments. In particular, the bakery and
foodcourt segments contributed to an increase of 29.2 per cent and 29.4 per
cent respectively. We can probably see this value increase over time as the
firm opens more foodcourts in view of the new shopping malls that are
springing up and also the new bakeries the firm opens.

However, the group ended the quarter with a lower cash reserve - down $3.79
million to about $44.09 million - due to lower proceeds from short-term loans
and repayment of short-term loans. With low interest rate, it is unlikely for the
firm to want to increase this ratio except to keep sufficient reserves to expand
and for day to day operations. Nevertheless, the group's operating cash flow
can be expected to increase in the near future with increased franchise
businesses, Mr Quek added.

Another potential pitfall could be the problem of staffing in a fast expanding

business. When a company expands regionally, one of the major challenges
is hiring the most suitable people to run the new offices or branches
efficiently.

BreadTalk's group senior vice president (HR), Goh Khon Chong, says the
company's target in the next five years is to expand to a total of 1,000 outlets,
including its own outlets and franchisees.

Their strategy is to train the staff, who will activate such an ambitious
expansion plan, by bringing key employees to Singapore for training which
they can then spread in their home markets.

"Though the employees of our franchisees are not our direct employees, it is
essential that we provide training to ensure effective and efficient operations,"
Goh says.

Trained up employees would then be responsible for giving the workers both
on the job and theoretical training. "Based on estimates, even if it's just 10 to
20% sent to Singapore for training, it'll mean more than 300 to 400 a year (are
actually trained), including our own employees. It's a real challenge". Thus
even when training has been identified as a key, implementing it would not be
easy given the number of staff that needs to be trained to gain a critical mass
to impact operations back home. Breadtalk has outlets in other cities,
particularly throughout China where it has more than 1,500 employees of its
own.

If HR leaders are not familiar with the talent pools on the ground in new
countries, it can lead to difficulties in hiring enough staff.
Chong says, "The main challenges for HR teams are alignment of HR
practices and local knowledge, and spotting reliable sources to understand
the labour market or getting information on HR rules in the particular country."
Talent mobility, for instance, can be a serious issue, Chong says. HR teams
must efficiently utilise the channels available to them in finding good workers.

8. Conclusion

From the stories of Mr. Georage Quek from rags to riches. It tells us that
being “hard working” is not enough. We must be able to foresee the taste,
culture, demands, presentations, sales pitch marketing, design, flavours etc.
then taking a step forward by making the first outlet stable before expanding
and taking the bigger challenges. The most important is “branding” and
offering different varieties and an outstanding design bread boutique with a
open kitchen concept. I have learnt that “team spirit” and organization is very
important and experiences.

9. Recommendations

I believe that there are some ways Breadtalk can take to increase sales.

One way is to use the strategy of Market Penetration

The use of EZ link cards: This will provide the consumer with an alternative to
make payment and is less costly than using NETS or credit cards as it does
not come with a merchant cost. Furthermore, many students carry EZ cards
but may not have sufficient cash and this would help them to pay for their
purchase, increasing sales.

Having a delivery service would also help as families who are too busy to buy
breakfast can always order delivery. With 25 outlets across the island, it would
be easy for Breadtalk to provide delivery.

Lucky draws and contests can also be held to increase sales as most
Singaporeans do appreciate and take part in them, especially if the draws are
of the instant win variety. Of course, this means that the company would need
to ensure that the increased sales can offset the cost of holding such draws.

Samples of upcoming buns can also be given. This will not only increase
awareness but also allow customers a chance to sample what’s new from the
company.

At the same time, Breadtalk could also attempt to develop the Halal market by
getting itself certified with a Halal certificate. This is useful as Muslims form
more than 12% of the population and thus, a sizeable market to tap. However,
due to the nature of the company’s products, it may wish to set up a
subsidiary that sells Halal products exclusively as the current inventory
includes pork. By having such certification, it would be easier for the company
to target the South East Asia market which has more than 250 million
Muslims.

It can also offer new products, coupled with a place to sit. i.e a café. This can
attract those people who want to sit and eat, not pick and go and would
appeal to the younger crowd who prefer to relax and enjoy in cafes instead of
munching on a bun while on the goal.

Instead of situating in city areas, close down certain shops that has high rental
costs and situate shops around residential areas since brand is already
established. This also allows a wider reach as the residential areas would
contain a lot more people rather than in the city where many people would just
rush to work and off work.

It can also diversify its products by customizing products to ones’ liking. For
example, it can allow customers to fill the bread with different type of toppings
with the price of toppings varying correspondingly to the value of topping and
charging a premium for such a service. This would cater to people who may
be bored of Breadtalk’s standard fares.

I personally think it will lower down the cost of each bread if they would have a
“factory” to produce a large quantity of breads per day, and also you could
allocated all the bakers in the “factory” rather than at the retail outlet. Cause in
this way they could monitor the work flow and control the productions and also
could bring down the overhead for staff employed at each retail outlet. Some
more, can cut down the overhead for space require for the kitchen area with
this idea it will save on the retail in the outlets and also centralizing production
in one “factory” place.

It may set up individual departments to focus on the products.

1) Design of different varieties

2) Marketing research and development
3) Expansion of business
4) Complains

With the above mention department whereby is strictly focusing on the

issue and to improve and make necessary changes.

References:

http://www.business.gov.sg/EN/CaseStories/case_overseas_breadtalk.htm

http://www.timesdirectories.com/Singlenews.aspx?DirID=101&rec_code=385110

http://noahfinancial.com/Corporate%20New1.htm
Strategic Management: Concepts and Cases (10th Edition)
by Fred David

Marketing Management by Kotler Prenticehall

Consumer Behavior (7th Edition) Prentice Hall

By Leon Schiffman and Leslie Kanuk