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

OVERVIEW OF YA KUNCurrent 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

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

APPROACH

Strengthen

Expand

Explore

Existing Markets

6

SINGAPORE

7

CAFÉS INDUSTRYMarket Performance

7

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20180.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

50

100

150

200

250

300

Units of Chained Cafes in Singapore

Years

Gro

wth

Rate

(%

)

Unit

s

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20180.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

50

100

150

200

Sales of Chained Cafes in Singapore

Years

Gro

wth

Rate

(%

)

Sale

s (

S$ m

illion)

Market Projection for 2014 to 2018

8

COMPETITORS ANALYSIS

Key Competitors identification: Similar product offering Brand shares Overseas Operations

9

PERFORMANCE EVALUATION

2008 2009 2010 2011

Ya Kun 0.038 0.047 0.044 0.047

Toast Box 0.052 0.057 0.059 0.075

Killiney Kopitiam 0.023 0.025 0.021 0.027

0.5%2.5%4.5%6.5%

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)

11

PROPOSED STRATEGIC DIRECTION

Market Penetration

Market Deployment

Product Development

Market Diversification

New Products Existing Products

New

Mark

ets

Exis

ting M

ark

ets

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

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

\\

Reasons cited for eating out Source: Ang, K.L., & Foo,S. (200a2)

PROPOSED STRATEGIESTREND: 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 Institutions 2

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

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

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 & MITIGATIONSType 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

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

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

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

New Market

22

COUNTRY SELECTION

Distance ProximityNew Markets with

no existing presence

Emerging MarketsExpertise in franchising

business model

Singapore's Free-trade partners

Countries That Passed The Key Parameters

Malaysia Thailand Brunei

KEY PARAMETERS

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

24

COUNTRY SCREENING GRID

Summary

Key Indicators Weights Malaysia Thailand Brunei

Ease of doing business

0.50

19.31 12.476 18.21Ability to operate efficiently in the country

2.50

110.65 111.72 70.55Attractiveness of the local market

3.00119.30 132.16 42.74

Market Forecast 2.50 93.01 66.43 90.55Country Risk 1.50 37.50 37.50 25.00Final Scoring

10.00 932.96 904.36 577.58

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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%

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%

28

DEMAND

YEAR

VOLUME/Tonnes

2011 2012 2013 2014 2015 2016 2017 2018

Fresh Coffee 2989.4 3122.5 3251.8 3376.7 3499.7 3639.8 3764.16666666666

3892.98095238095

Jams and Preserves (Tonnes)

7717.7 7949.2 8148 8310.9 8460.5 8579 8794.54666666665

8966.06952380951

500

1500

2500

3500

4500

5500

6500

7500

8500

9500

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

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

31

Indicators Weightage

Bangkok

Phuket Hat Yai

Population0.2 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 score1 40.61 37.16 22.24

CITY SCREENING GRID

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

47%

13%

41%

Brand Shares of Café

Starbucks

Black Canyon Coffee

Others

COMPETITIVE LANDSCAPE

33

Located in

high-human mall in Bangk

ok

Operating hours:

830am to 0930pm (Include weekend

s 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

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

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

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

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 SituationYear 2011 2012 2013 2014 2015 2016 2017f 2018fChained café 11.90 12.20 12.60 12.90 13.30 13.80 14.09 14.47Growth 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

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 Situation2011 2012 2013 2014 2015 2016 2017f 2018f

Chained café 11.90 12.20 12.60 12.90 13.30 13.80 14.09 14.47Growth 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

39

Sales Revenue Forecasting

Sales Revenue Forecast

2014 2015 2016 2017 2018

Most Likely Case (THB)

117883.957266591

121538.359941855

126108.202275669

127028.792152281

130407.758023532

Best Case (THB)

237402.273163926

226481.768598385

233412.110717496

236749.903900756

243047.451344516

Worst Case (THB)

48600.28998 45368.3707 45826.59124 45542.46638 46139.07268

65,000

115,000

165,000

215,000

265,000

Most Likely Case (THB)

Best Case (THB)

Worst Case (THB)

Am

ount

in T

HB

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

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

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

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

44

StrengthenSingapore

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

45

Q & A

Thank You

46

Back up slides

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