Every now and then people ask us if it’s really worthwhile to go into the Food and Beverage business. We examine the factors that will help you decide the answers for yourself.
The Nature of the Industry
I caught up with a friend for dinner recently and he casually mentioned to me how fortunate I am to be in the food industry. “Why’s that?” I probed. My friend replied, “Well, a certain publicly listed oil and gas company recently collapsed. The spillover has costed plenty of people in this sector their jobs. Whereas in your industry, it’s never that badly affected by the economy.”
My friend is right. People always have to eat. Economy downturns doesn’t mean people eat any less. We just change our consumption patterns. Smart business owners anticipate change and strive on. Slower ones roll with the punches.
Risk versus Rewards Analysis
When comparing investment options, our own case studies of our clients places most F&B projects as worthwhile picks. Lower intrinsic risk relative to other investment options means adding these projects to the overall investment portfolio will balance out the overall risk profile.
We don’t, however, recommend entering the food industry with the mentality of making quick and high profits. It’s an arena where brands which provide genuine value stand the test of time. That’s why as far as possible, we advocate joint ventures and partnerships where at least one partner has a strong background in the food and beverage industry. For the same reasons, we offer expansion support services to help our corporate clients kickstart the entire process and matchmake them to the correct partners if required.
Which brings us to our next point.
There are Unicorns to be Groomed.
Unicorns. It’s what every angel investor dreams of discovering, and every entrepreneur fantasises about taming. The way we see it, unicorn startups in the food industry are a different breed, requiring very hands-on nurturing.
The local Singaporean market is much more competitive relative to other markets. For this reason, brands disciplined in this competitive local market acquire strong finesse to innovate and succeed internationally. BreadTalk has been the poster child of glowing international success for Singaporean brands for at least a decade, and has in fact been toted as one of Asian Gen Y’s favourite brands. Established around the same time as BreadTalk, but lesser in public light, Suki Group’s mastery of the local market has placed quite a few successful joint ventures under its belt too.
Consider also slightly smaller establishments like Joe & Dough and Awfully Chocolate which have also grasped the formula to their own success and scaled up consistently.
Now let’s shed some light on our recently Michelin-crowned Singaporean hawkers, Tai Hwa Pork Noodle and Hawker Chan. Local brands that have toiled hard now have an equal chance to make a splash overseas as Hong Kong brands Mak’s Noodle or Kam’s Roast. With recognition comes room for growth. We find it’s a smart move for Mr Chan to partner with Hersing Culinary. As equal share partners, Hersing Culinary complements Mr Chan’s culinary expertise with their own experience and expertise in running Tim Ho Wan’s brand in the Asia-Pacific region.
More Hands-on Approach
From hoteliers to restaurant entrepreneurs, some of our clients and investors choose to take the reins themselves, while others hire trustworthy and skilled project managers.
“I micromanage you until I trust you.” – Mark Cuban.
This means investment success is hinged on the business acumen of the management. It is much less resigned to destiny and market forces.
The journey of a food business is pretty straightforward, with its own challenges. Due diligence consists of setting business prospectus, proper financial modelling, and human resource planning. What we find as the key piece of this puzzle is the Operational Frameworks, which determines the entire layout of the business in concrete terms. When done right, it provides investors and partners the clarity and vision of how the business functions.
Our scope of work has led us from doing up standalone kiosks to retrofitting entire central kitchens. Journeying with fellow business owners, we often find that the real challenge lies in being excellent and consistent down the years, as the company grow and adapt.
Thankfully, we’ve always managed to stay ahead of market trends through the years.
Likewise, we ensure our clients and investors do so too.