Analyze Ya Kun Kaya Toast's current operation and propose a 3 year international strategic plan

1. Bay Wan Ting | Chan Li Feng Carissa |Eu Sin Yi|
He Jia Ling |Cyndy Lin Xin Yi | Hena Suhail
Operation Analysis and Strategic Plan
360°Consultancy Team

2. 2
OVERVIEW OF YA KUN
Current Operations
Overall align with Ya Kun’s strategic vision of being a household name in
Singapore and Asia
77 Stores in 7 Countries in 2012
Expansion into 4 New Countries in 2013 (in process)

3. 3
CONTEXT
✗Specific operation details
i.e. site selection and potential franchise partner
✗Relations with existing franchisees
✗Exporting/ trading to neighboring countries
✓Focus on Singapore
✓ Remains the core business
✓Analyze café industry trends and identify opportunities
✓Propose recommendations
Existing markets
New market(s)
✓ Focus on expanding its international presence in other Asian markets
beyond Singapore
✓Leverage on franchise success model
• Industry: Chained Cafes
• Timeline: 5 years (2014 to 2018)
• Objective: Expand in Asia
• Focus: Long-term strategic direction

4. 4
APPROACH
Strengthen
Expand
Explore

5. Existing Markets

6. 6
SINGAPORE

7. 7
CAFÉS INDUSTRY
Market Performance
7
0
50
100
150
200
250
300
0
0.05
0.1
0.15
0.2
0.25
0.3
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Units
GrowthRate(%)
Years
Units of Chained Cafes in Singapore
0
50
100
150
200
0
0.05
0.1
0.15
0.2
0.25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Sales(S$million)
GrowthRate(%)
Years
Sales of Chained Cafes in Singapore
Market Projection for 2014 to 2018

8. 8
COMPETITORS ANALYSIS
Key Competitors identification:
 Similar product offering
 Brand shares
 Overseas Operations

9. 9
PERFORMANCE EVALUATION
2008 2009 2010 2011
Ya Kun 3.8% 4.7% 4.4% 4.7%
Toast Box 5.2% 5.7% 5.9% 7.5%
Killiney Kopitiam 2.3% 2.5% 2.1% 2.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Brand Shares of Chained Cafes in Singapore
ToastBox
Ya Kun
Killiney Kopitiam

10. OPERATION EVALUATION
Factory
 Under-capacity
 Opportunity to
expand
No of Outlets
 ToastBox (50)
 Ya Kun (41)
 Killiney (20) 10

11. 11
PROPOSED STRATEGIC DIRECTION
Market
Penetration
Market
Deployment
Product
Development
Market
Diversification
New ProductsExisting Products
NewMarketsExistingMarkets
The Ansoff Growth Matrix
1
432
1
2
Convenience Grab-
N-Go concept @
Tertiary Institutions
Convenience Grab-
N-Go concept @ MRT
3
4
New stores at Tourist
Spots
New Beverage-Tea

12. 12
TREND: Convenience
 High percentage of takeaway for specialized coffee shops
 Increasing busy lifestyles in Singapore
PROPOSED STRATEGIES
Market Penetration (Existing Products, Existing Market)
Location: New Downtown MRT line
Objectives:
 Cater to Singapore consumers takeaway trend
 Faster expansion to gain greater market presence and brand
awareness
Convenience Grab-N-Go concept @ MRT1

13. 13
Reasons cited for eating out
Source: Ang, K.L., & Foo,S. (200a2)
PROPOSED STRATEGIES
TREND: Convenience
Location: Tertiary Institutions (Polytechnics and Universities)
Objectives:
Gain brand acceptance and capture the youth market
Market Deployment (New market, Existing products)
Convenience Grab-N-Go concept @ Tertiary Institutions2

14. PROPOSED STRATEGIES
Market Penetration (existing products, existing market)
Location: i.e. Integrated Resorts At Sentosa, Marina Bay Sands, Gardens
by the Bay and Botanic gardens
Objectives:
Reach out to the tourist to get Ya Kun’s brand known before venturing
to other countries.
New Stores at Tourist Spots
TREND: Increased Tourists Arrivals
 Tourists are growth driver for consumer foodservice
Tourist arrivals 48.4% from 2009 to 2012
Tourism expenditure on 81.8% from 2007 to 2012
 Consumers spend the highest in sales per outlet and are willing to
spend more on F& B in leisure retail outlets
3
14

15. 15
TREND: Wider food menu
 Serve all day product offerings
 Food expenditures increased to 31% of value shares
TREND: Healthy Menu
 Singapore consumers seek healthy quality meals
 Coffee and tea based beverages can easily be positioned as
healthy
TREND: Shift of focus from Coffee to Tea
 Singaporean consumers are becoming more sophisticated in their
choices of drinks
 Expansion of independent cafes specializing in tea e.g. Twinings
4. New Product Tea Drinks
Objectives:
 To target the health conscious consumers who seek a healthier
drink
 To introduce new varieties e.g. Flower Tea, Ginger Tea, Herbal Tea
4
PROPOSED STRATEGIES

16. 16
Singapore Strategies 2014 2015 2016 2017 2018
1. Convenience Grab-N-Go
concept @ MRT
Source & Selection
of Franchisee
Tender for
Locations
Accept: Launch
Outlet
Reject: Tender for
other Locations
Accept:
Launch Outlet
Reject: Tender
for other
Locations
2. Convenience Grab-N-Go
concept @ Tertiary Institutions
Source & Selection
of Franchisee
Tender for
Locations
Accept: Launch
Outlet
Reject: Tender for
other Locations
Accept:
Launch Outlet
Reject: Tender
for other
Locations
3. Open stores at Tourist Spots Source & Selection
of Franchisee
Tender for
Locations
Launch Outlet
Evaluate
performance
IMPLEMENTATION TIMELINE

17. RISKS & MITIGATIONS
Type of Risk Risk Solution
Unmanaged growth  Shortage of manpower due to
sudden increase in production
 Reduction in quality
 Transportation problem due to over
expansion
 Uncontrollable Franchise
management due to overwhelming
number of franchisees
 Brand Dilution
 Hire part-time staff
 Standard quality control
procedures
 Source for additional logistic
support
 Monthly meetings & updates
 Managing of Brand message
through Public Relations
Unanticipated
events
• Fire in Ya Kun’s Singapore Factory • Implement work safety rules
Operation Risk • Poor management by Franchisees • Updated Franchisee contract
with Documentation and
procedures for start-up & on-
going process
Relationship Risk • Miscommunication/lack of clear
communication channels with
Franchisee
• Conflicting objectives
• Have clear goals &
communicate the goals
• Embrace short term pain & long
term gain
17

18. SCREENING EXPANSION OPPORTUNITIES
Positive Chained Café
Unit Growth
OBJECTIVE
Positive Chained Café
Sales Growth
Existing Operations
KEY PARAMETERS
To identify the countries with most potential for further franchising expansion
CONSIDERATION SET
18

19. SCREENING INDICATORS
* A Country@Rating indicator was used to assess the country risks across different countries.
Measure the prospective business environment quality
Key Indicator Weight
Chained Cafes Growth 5
Country Growth 1.4
Country Risk* 1.6
Business Costs 2
Total 10
19

20. COUNTRY SCREENING GRID
Key Indicator Weight China Indonesia South Korea
Chained Cafes Growth 5 126.5 128.7 244.8
Country Growth 1.4 48.9 59.7 31.4
Country Risk* 1.6 53.3 26.7 80.0
Business Costs 2 73.5 90.2 36.3
Final Scoring 302.2 305.3 392.5
Rank 3 2 1
20

21. New Market

22. COUNTRY SELECTION
Distance Proximity
New Markets with
no existing
presence
Emerging Markets
Expertise in
franchising business
model
Singapore's Free-
trade partners
Countries That Passed The Key Parameters
Malaysia Thailand Brunei
KEY
PARAMETERS
22

23. COUNTRY SCREENING
* A Country@Rating indicator was used to assess the country risks across different countries.
Measure the prospective business environment quality
Key Indicator(s) Weight (Out of a total sum of 10)
Ease of doing business 0.5
Ability to operate efficiently in the
country
2.5
Attractiveness of the local market 3
Market Forecast of demand 2.5
Country Risk* 1.5
23

24. COUNTRY SCREENING GRID
Summary
Key Indicators Weights Malaysia Thailand Brunei
Ease of doing business 0.50
19.31 12.476 18.21
Ability to operate
efficiently in the country
2.50
110.65 111.72 70.55
Attractiveness of the
local market
3.00
119.30 132.16 42.74
Market Forecast 2.50 93.01 66.43 90.55
Country Risk 1.50 37.50 37.50 25.00
Final Scoring
10.00 932.96 904.36 577.58
24

25. 25
THAILAND

26. COUNTRY ANALYSIS
Strategic Location
 Linked with other SEA
Infrastructure
 Significant number of
interconnected highways and
a reliable internet broadband
connection
Government Initiatives for SMEs
 “One-start-one-stop”
centers cater to ease
setting up business
 Thai Insurance
Catastrophe fund
Import Duties
 Faster and cheaper import
comparison to other East
Asia regions
Demand for Franchises
 Continued growth at an
average of 15% 26

27. INDUSTRY TRENDS
 Coffee growth forecast of a total
volume CAGR of 4%
 30% of Thai consumers report that the
drink coffee regularly
 Increase consumption of fresh coffee
 Price-conscious seek lower price per
cup (E.g. mid-priced fresh coffee THB
40 to THB 60)
 Import tariffs for coffee beans were
held at under 5%
27

28. DEMAND
YEAR
VOLUME/Tonnes
2011 2012 2013 2014 2015 2016 2017 2018
Fresh Coffee 2989 3123 3252 3377 3500 3640 3764 3893
Jams and Preserves (Tonnes) 7718 7949 8148 8311 8461 8579 8795 8966
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
28

29. Hai Yai
CITY SELECTION
Availability of
infrastructure at the
ports
Presence of
international airports
KEY
PARAMETERS Northern
Central
Northeastern
Eastern
Southern
*Not covering
1. The exact location
in the city and/or
which mall to
locate
the outlets
2. Exact franchisee to
work with
3. Exporting/Trading to
neighboring
countries
29

30.  To capture 0.5% of the total chained
cafes’ industry market share
 To further expansion and gain constant
market penetration into other cities in
Bangkok and beyond Bangkok
OBJECTIVES FOR EXPANSION
30

31. Indicators Weightage Bangkok Phuket Hat Yai
Population
0.2 92 5 3
No. of coffee house
and shop 0.25 16.67 50 33.33
Consumer
Expenditure on
Food(USD, Million)
0.25 42.96 38.24 18.80
Cost of setting
business (Labour
and Rental)
0.2 17.00 50.00 33.00
Political stability
0.1 40.00 40.00 20.00
Total score
1 40.61 37.16 22.24
CITY SCREENING GRID
31

32.  890 coffee shops and
cafes(mostly not serving the
same food concept as Ya Kun)
 Top two indirect competitors
-Starbucks
-Black Canyon Coffee
 Westernized café concept
 Existance of a Singapore
homegrown Toast Café
competitor: Toastbox
 Ya Kun’s Point of differentiation
Traditional Café concept
Totally new concept from
existing competitors
46%
13%
41%
Brand Shares of Café
Starbucks
Black Canyon Coffee
Others
COMPETITIVE LANDSCAPE
32

33. Located in
high-human
mall in Bangkok
Operating
hours: 830am
to 0930pm
(Include
weekends and
exclude 20 PHs)
Number of
seats per
outlet: 45
maximum
One person
approximately
spend 45 mins
in the outlet
Targets at Mass
Market
Each outlet
only sell kaya
toast and
coffee
OPERATION DETAILS
33

34. Methodology
Step
1
•Determine the average of number of transactions per café
outlet in year 2011
Step
2
•Determine the average market share per café (%) in year
2011
Step
3
•Based on estimated market share (%) for Ya Kun, identify the
average number of transactions in year 2011 for Ya Kun
Step
4
•Calculate total revenue of transactions in year 2011
Step
5
•Used as a base point to project sales revenue from 2011 to
2018
MARKET & SALES REVENUE FORECASTING
34

35.  One transaction is consists of 1 coffee and 1 kaya toast
 100% market share is shared among the 890 cafes in Bangkok as
dated 2011
 All of the transaction comes from Bangkok, the capital of the city
 Close proximity between provinces of Bangkok
 There is equal density in different province of Bangkok
 Periodic fluctuations of the number of people patronising the shop is
presumed to be accounted
 Net inflation effect is going to be constant for years forecasted
 An incremental of 0.1% market share is used to buffered against the
effect of under-recording the number of transaction of café in
Euromonitor International 2012 data
 The franchisee’s upfront tenure fee of SGD 50,000 off and franchisee
fees of USD 200,000 (overseas) are paid from the franchisee’s own
capital
 Ya Kun’s market share remains constant in the 5 years
ASSUMPTIONS
35

36. Most Likely situation
*Context: 1) Election is going to happen in 2015
2) Big players such as Starbucks and McCafe are opening more outlets till 2017
3) There is a moderate ongoing competition among chained cafes in Thailand
GROWTH RATE
Year 2011 2012 2013 2014 2015 2016 2017f 2018f
Chained café 11.9 12.2 12.6 12.9 13.3 13.8 14.09 14.47
Growth Rate 2.52% 3.28% 2.38% 3.10% 3.76% 2.13% 2.66%
Reduction: Competition
by Starbucks and True
Coffee opening more
outlets 1.40% 1.40% 1.40% 1.40%
Reduction: Election
aftermath effect 7.00%
Addition: 1 1 1 1 1 1 1
Net growth rate(%): 1.03 1.03 1.01 1.03 1.03 1.01 1.03
36

37. *Context: 1) Election is going to happen in 2015
2)
There will not be new competitors offering the same products as us in the first year of
operations
3)
Competitors will employ slower rate of expanding
more units
GROWTH RATE
Best Situation
Year 2011 2012 2013 2014 2015 2016 2017f 2018f
Chained café 11.90 12.20 12.60 12.90 13.30 13.80 14.09 14.47
Growth Rate 2.52% 3.28% 2.38% 3.10% 3.76% 2.13% 2.66%
Reduction: Slower rate
of competitors (Taking
50% of the competition
intensity that exist in the
most likely case) 0.70% 0.70% 0.70% 0.70%
Addition: 1 1 1 1 1 1 1
Reduction: Election aftermath
effect 7.00%
Net growth
rate(%): 1.03 1.03 1.02 0.95 1.03 1.01 1.03
37

38. * Context: 1) Intensive promotions from competitors such as starbucks and true coffee
2)
Election happens earlier, the year we enter in, and aftermath prolong for another
year(2016)
3) Rapid cafe outlets expansion by competitors
GROWTH RATE
Worse Situation
2011 2012 2013 2014 2015 2016 2017f 2018f
Chained
café 11.90 12.20 12.60 12.90 13.30 13.80 14.09 14.47
Growth Rate 2.52% 3.28% 2.38% 3.10% 3.76% 2.13% 2.66%
Reduction:
Competition by
Starbucks and 94 c
café opening more
outlets 1.40% 1.40% 1.40% 1.40% 0.00%
Reduction: Intensive
promotion set by
competitors 1.35% 1.35% 1.35% 1.35% 1.35%
Reduction: Election aftermath
effect 7.00% 7.00%
Net growth
rate: 1.03 1.03 0.93 0.93 1.01 0.99 1.01
38

39. Sales Revenue Forecasting
Sales Revenue Forecast
2014 2015 2016 2017 2018
Most Likely Case (THB) 117,883.96 121,538.36 126,108.20 127,028.79 130,407.76
Best Case (THB) 237,402.27 226,481.77 233,412.11 236,749.90 243,047.45
Worst Case (THB) 48600.29 45368.37 45826.59 45542.47 46139.07
Most Likely Case (THB)
Best Case (THB)
Worst Case (THB)
40,000
90,000
140,000
190,000
240,000
290,000
AmountinTHB
39

40. Type of Risk Risk Solution
Unexpected
emergency
Natural disaster (e.g
Flood, earthquake)
Political Risk (e.g.
riots, bombs, protest, labour
strike)
“Catastrophe Insurance
Policy “
Draft formal procedures
Relationship Miscommunication/lack of
clear communication channels
with Franchisee
Documentation and
procedures for start-up
Value-proposition
Foreign
exchange
risk
Fluctuations in the value of the
trading and buying currencies
Foreign currency deposit
account
RISKS & MITIGATIONS
40

41. CONTINGENCY PLAN
Unanticipated event Course of Action Future Alternatives
Singapore Factory
unable to send
shipment due to
unforeseen
circumstances (e.g
factory on fire etc)
1. Approach existing
network of suppliers to
source for supplies
2. Form a database of
suppliers for future
reference
1. Explore into
building new
more factories
in Singapore
and Malaysia
41

42. Justification for when it is time to exit:
Changes in market trends, the indicators that illustrate these could
be:
 Characteristic 1: Inability to breakeven in 3 years
 Characteristic 2: The degree of loss is inflating each year
 Characteristic 3: Even after intense promotion and pricing
strategies does not appeal to the consumers
 Characteristic 4: Human-traffic at Ya Kun Outlets in Bangkok fare
poorly as compared to other F&B outlets within close proximity
In any of the above scenarios, Ya Kun should try to intervene into
understanding the forces and reasons behind such failures. Guidance,
in the form of financial, training and skilled expertise should be
translated. A buffer time of 1.5years will be given since the time of
guidance.
EXIT STRATEGY
42

43. Step 1
•During these 1.5 years, Ya Kun will monitor their
progress and have constant feedback and reviewing
sessions
Step 2
•If there is no progressive changes seen from failed
franchisee, Ya Kun will access whether they should
change franchisee and exiting from the market
Step 3
•Exit from the market only if:
•1) Weak market forecast of demand
•2) Uprising of direct competition
•3) No availability of suitable franchisees
EXIT STRATEGY
43

44. Strengthen
Singapore
 Increased Tourists Arrivals
 Consumers seeking
convenience
 Shifting coffee to Tea
Recommendations:
 New stores at Tourist Spots
 Convenience Grab-N-Go
concept @ MRT/ Tertiary
 New Beverage-Tea
Explore
 Growing café culture and
coffee consumption
 Local’s strong preferences
for sweet food
Recommendations:
 High potential new market:
Bangkok (Thailand)
 Future expansion: Phuket
and Hat Yai
CONCLUSION
Expand
44

45. Q & A
Thank You
45

46. Back up slides
46

47. 47

48. 48

49. 49