SINGAPORE (Dec 20): It perhaps comes as no surprise that companies are constantly racing for consumer dollars as they jostle each other in the highly competitive F&B industry. But it is not just about bringing in new trends or opening more outlets to cater for an ever-hungry clientele. Many companies are also moving outwards in their quest to expand their businesses. This year was filled with many such moves and we recap the highlights.
Branching out
Australian-based, Singapore-listed ST Group Food Industries Holdings is riding high on the bubble tea craze in Asia. Now, it is bringing the Gong Cha brand to the UK and New Zealand. When The Edge Singapore spoke to ST Group CEO Saw Tatt Ghee in September, he said Gong Cha became popular in the UK very quickly. Each of the two outlets in the UK now rakes in revenue of about £20,000 ($34,083) a week, or about £1 million a year. The company plans to open at least three more Gong Cha outlets there.
In July, the group also secured the rights to bring South Korean franchise NeNe Chicken to New Zealand, to add to the 26 outlets it operates in Australia and Malaysia.
The deal will also expand ST Group’s presence in New Zealand, where it now operates 15 outlets under the Gong Cha, PappaRich and Hokkaido Baked Cheese Tart brands.
Its FY2019 results showed, however, that earnings fell 28.4% y-o-y to A$2 million ($1.9 million) from A$2.7 million, owing mainly to IPO expenses of A$2.9 million. Revenue was up 42.9% y-o-y for the full year ended June at A$52.1 million.
Also eyeing expansion is Singapore-listed Japan Foods Holding. In August, the group — which specialises in Japanese food brands — acquired a 30% stake in Wakayama International for US$15,000 ($20,400). At the same time, Japan Foods also inked a joint-venture agreement to launch ramen chain Konjiki Hototogisu in Hong Kong.
The Tokyo brand — famous for its pork and Hamaguri clam broth — was awarded one Michelin star in the Michelin Guide Tokyo 2019. The new outlet will open in Hong Kong’s Central district by year-end.
In January, Japan Foods also entered into a 50:50 joint venture with Minor Food Group to franchise and operate brands owned by both parties in Japan, Thailand and China.
Takahashi Kenichi, executive chairman and CEO of Japan Foods, says: “Subject to business considerations and developments… we remain on track to setting up our first Konjiki Hototogisu brand restaurant in Hong Kong. Meanwhile, the joint-venture company that we had established with Minor Food Group is actively looking for a suitable location in Japan.”
For 2QFY2020 ended September, the group recorded earnings of $810,000, up 7.4% y-o-y from $754,000. Revenue for the second quarter was up 8.3% y-o-y at $18 million, in line with a higher number of restaurants in operation. Japan Foods’ other flagship brands include noodle restaurants Ajisen Ramen and Menya Musashi.
Staying local
Instead of taking their business overseas, some home-grown F&B groups are staying focused on expanding their brands at home.
In June, BreadTalk Group opened the first Wu Pao Chun Bakery at Capitol Piazza, bringing a taste of the famous Taiwanese brand to Singapore.
Meanwhile, the company also offered $80 million to buy food court operator Food Junction from Auric Pacific. The acquisition will make BreadTalk the third-largest food court operator in Singapore behind NTUC Enterprise and Koufu.
Analysts felt, however, that the price tag was too high for a company whose net tangible assets were valued at only $12.3 million. Food Junction also reported a net loss of $1.7 million in FY2018. For 1HFY2019, the food court operator recorded earnings of just $3,183.
Despite a 10.1% y-o-y increase in revenue to $173.6 million in 3QFY2019, BreadTalk saw earnings plunge 81% y-o-y to $0.5 million, from $2.7 million.
In FY2019, seafood restaurant operator Jumbo Group opened its second Tsui Wah outlet on Orchard Road in September, after its first outlet in Clarke Quay won praise from consumers. During this period, the group also opened Jumbo Seafood outlets at ION Orchard and Jewel Changi Airport.
In addition, Jumbo introduced two new dining concepts in Singapore — Zui Yu Xuan Teochew Cuisine and Chao Ting Teo chew Pao Fan — at Far East Square. Jumbo also reported that its FY2019 total revenue was supported by a $4 million increase in its local operations, which saw revenue contribution from its two new dining concepts.
The increase was negated, however, by a $4.1 million decline in revenue from its restaurants in China, as well as a loss of revenue of $1.2 million as a result of a four-week renovation at the Jumbo Seafood Gallery at The Riverwalk outlet in Singapore. This caused overall FY2019 revenue to come in flat at $153.6 million, from $153.7 million in FY2018.
Despite the lack of revenue growth, the group managed to record a 5.9% increase in FY2019 earnings to $11.7 million, from $11 million a year ago. It also proposed a final dividend of 0.7 cent a share, bringing the total dividend payout for FY2019 to 1.2 cents a share. This amounts to 66% of the group’s FY2019 earnings.
Analysts are positive on Jumbo’s results; both CGS-CIMB Research and DBS Group Research are keeping their “buy” calls on the stock, with a price target of 47 cents.
Elsewhere, food court operator Koufu Group is also riding the booming bubble tea trend in Asia and has secured 10 new locations in Singapore for more R&B Tea outlets, targeted to open progressively from 4QFY2019 to FY2020.
R&B Tea is a concept brand by Koufu’s subsidiary Super Tea, which also manages the Supertea concept brand. For 3QFY2019, the group saw a 52.3% y-o-y increase in earnings to $7.1 million, from $4.6 million, on the back of a 6.6% y-o-y increase in revenue to $61.4 million.
Revenue from the group’s outlet and mall management rose $1.8 million, owing mainly to the opening of two new food courts at 164 Kallang Way and Millenia Walk. Most of the group’s food courts and coffee shops also reported overall revenue growth.
Revenue from its F&B retail business rose $2.1 million, attributable to two new F&B stalls in the newly opened food courts and coffee shop and five new F&B kiosks.
On Nov 12, Koufu announced the termination of its joint-venture agreement between Super Tea, A&O Assets and Chan Bee Kiew, owing to the lack of an Indonesian party in the joint venture. The collaboration was intended to bring Koufu’s Supertea and R&B Tea brands to Indonesia. On Dec 18, Koufu entered into another joint venture with PT Berkah Cipta Adirasa in its second attempt to bring the Super Tea brands to Indonesia.
Catering for consumers
The past year also saw a new trend in the F&B space — catering. Although Tung Lok Restaurants reported that 1HFY2019 losses had widened 21.9% to $1.3 million from $1.1 million, its catering business saw higher revenue for the six-month period ended September.
Still, the higher contribution from the catering business, along with contributions from four new outlets, was not enough to offset the loss of revenue from two closed outlets and lower revenue contribution from the existing ones. Revenue for 1HFY2019 came in flat compared with the year-earlier period, at $38.2 million.
Meanwhile, snack chain Old Chang Kee also saw an uptick in revenue contribution from its catering business. The group’s revenue from other services for 2QFY2020, such as delivery and catering services, rose about $581,000, or 117.1% y-o-y, to $1.1 million. The strong growth from this business segment was not enough to support overall revenue growth, which fell 2.1% y-o-y to $22.9 million, from $23.4 million. Earnings in 2QFY2020 fell 5.8% y-o-y at $961,000, from $1 million. As at Sept 30, Old Chang Kee operated a total of 90 outlets in Singapore versus 89 outlets a year ago.
On the other hand, buffet caterer Neo Group’s 2QFY2020 earnings saw a significant surge of 583% to $2.7 million, from $0.4 million a year ago. Revenue for the period rose 16% y-o-y to $48.7 million.
The overall increase in revenue was boosted by revenue from the group’s food catering business, which rose 34.4% y-o-y to $24.4 million, owing to stronger recurring income from the childcare and eldercare market segments, its fast-growing tingkat, or tiffin carrier, meal business as well as revenues contributed by acquired subsidiaries.
