Entrepreneur

BreadTalk Is On A Roll With 337% Profit Growth - Here's What They're Doing Right

Retail may be on the decline, but global interest in BreadTalk is still rising.

Just a few days ago, Straits Times published a report on a spectacular first quarter with soaring revenue. The company’s profit swelled by 337.2% from Jan to March, compared to the same quarter in 2016.

Not all profits came from bread, with $9.3 mil stemming from BreadTalk selling its stake in property. In addition, BreadTalk’s profit before tax etc (Ebitda) leaped 417% to $4.9mil, a success that the company attributes to strong economies in Singapore and China.

Clearly, BreadTalk may be a company on the wrong side of retail, but that isn’t stopping it from taking the cake. Previously, we shared about how bread mogul George Quek goes against the grain to stay relevant in today’s competitive society, but that’s not all to the winning recipe.

How Does BreadTalk Knead Out Dough?

1. Their Brands Butter Up (Or Down) Rents

To start off, I bring to your attention Malaysia’s 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 through their massive buying power with Airbus. Being Airbus’ largest customer translates to a powerful leverage in price negotiation for aircrafts.

Similarly, The BreadTalk Group manages a series of F&B brands ranging from Din Tai Fung to 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, thus proving that not having all your eggs in one basket is still a winning strategy.

BreadTalk Brands at Nex Mall, Serangoon alone. / Image Credits: chingyicy, jieshun, midas400.blogspot, allgoeasy

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

2. They Have Their Fingers In More Than One Pie

Image Credit: singaporenewlaunch

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, especially considering the limited land space. 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 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.

3. Quek Did Not Loaf Around Overseas

BreadTalk in Shanghai / Image Credit: nytimes

Some companies might shy away from a widespread expansion strategy, especially if their product is already ubiquitous. For BreadTalk, their ambitious expansions with founder Quek at the helm have instead paid off extremely well.

With 20 years of experience in working overseas, Quek is well-endowed with the skills and acumen to build brands overseas, and he rose to the occasion splendidly. Given his experience in 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 NEX outlet has rebranded to So Ramen), 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 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.

Generation 4 BreadTalk / Image Credit: thesmartlocal

On its talent forefront, the BreadTalk Group also 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.

Image Credit: Miss Tam Chiak

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

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

Bread May Be The Staff Of Life

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

BreadTalk has not become one of the most beloved brands for 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 their success also shows that when the team knows what it’s doing, it is possible to have their cake and eat it too.

Featured Image Credit: r0ckstarmomma

 

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