The SME Series by BDRC Asia
Case studies of successful small & medium enterprises and how they have or have not used market research – interview with Daniel Tay, Founder of Bakerzin
Singapore is one of the world’s leading destinations for cuisine with a fusion of Western and oriental tastes, and one of the most prolific eating out cultures globally. But how do you succeed in a market that sees competition from virtually every quarter such as from small hawker stalls, independent eating outlets, and major Western Chains?
Previously known as Baker’s Inn, Bakerzin started out in the middle of the Asian Financial Crisis in 1998 as a modest patisserie dealing with wholesale orders and supplying French bread and pastries to restaurants and hotels. During this time Daniel Tay, the founder of Bakerzin,began experimenting and conjuring new and indulgent creations. As word spread, Bakerzin steadily gained a reputation in the industry as not just an authentic French bakery but one with an excellent selection of scrumptious sweets on its order list.
In 2000, Daniel Tay launched his first boutique café serving up Bakerzin’s collection and now has ten outlets in Singapore and franchises in Jakarta, Indonesia.
The key success factors of Bakerzin
Daniel had learnt from earlier ventures not to go too big from the start. By starting small and with it a more modest investment, the risks could be managed. Hence Bakerzin started as a small retail mom-and-pop style of business, but with a great product it allowed them to grow progressively. An important part of their business model that still holds today is that Bakerzinmakes all their products, e.g. the bread, the croissants, and even their own yeast.
While many brands increasingly outsource their operations, Bakerzin insources their production to ensure quality. In addition they maintain in-house R&D and training. Daniel admits that this decision probably hits him financially, but as an award winning baker (Pastry Chef of the Year) this is an area he is not willing to compromise on and comments “From a chef’s point of view, I get a lot of satisfaction (from the quality)”.
Like many successful businesses, Bakerzin’s success was also about spotting a gap in the market – at the time there were very few places where you could go for simple food, desserts and nice coffee, and he also looked at a relatively untapped market in the tea time slot which many informal eating outlets ignore. Daniel comments “desserts and cakes are always a different category and the only place you could go is hotels. For some Asians, cakes were never a part of an after meal thing so we decided ‘let’s do it’ and be the first.”
The spin off benefit of keeping production in-house is that they can also generate a wholesale business, i.e. selling their products to other F&B outlets in Singapore. These include hotels and cafés and even competing brands like Starbucks – “I love Starbucks and they love us, but they hate us being in the café business!” jokes Daniel.
While the wholesale business actually provides more income to Bakerzin than the retail side, Daniel knew the importance of building brands. He recognised that the most effective route to do this was to further develop his retail business. Daniel comments “It’s a two edged sword, I need a brand to show people, to showcase my products”. And hence it was his ambition, and if not a necessity, to build a retail brand from what was at the start a ‘mom-and-pop’ type of operation, to a chain of recognisable, branded cafés that we now see today across Singapore.
Similar to other retail operations, Bakerzin then looked at new channels. Online ordering and home delivery opened up a new business stream – if customers order before 12 noon, then they can get their deliveries the same day. The online business also helped to reduce manpower costs and of course you don’t need to pay rental for this type of business. Today their online sales can exceed S$50,000 a month and they hope to grow this to S$200,000.
In addition, Bakerzintook their CRM system to a new level. “I realised that the way we do loyalty programs had to change, because everyone was doing it”, said Daniel. As a result Bakerzin developed a menu app for mobile devices and customers can flash their apps in stores to get discounts. This system can also be used to inform customers of promotions, and today they have 15,000 loyalty members in Singapore.
And the role of consultants?
Spotting the market for desserts and cakes, said Daniel, was a gut feel not supported by any research or evidence. But today he takes a far more considered view of the market and is far from complacent. “A lot of people look at us and say ‘I want to be in this business as well’. People might hire the staff that I train and create something new. I have become the ‘norm’, so now I need to ask where do I headnext?”
He has engaged consultants to assist him in brand management. Firstly, the emphasis was about standardising the brand in the classic sense, e.g. ensuring commonality across his outlets. But today such standardisation can work against you in a category like F&B where people are looking for fun and excitement. Hence through the help of a design agency they have “de-standardized” –while they keep the same brand identity, they have developed a unique architectural feel to each outlet according to the location, demographics, and “a few other things.”
Hence each store might have their own type of chairs, flooring, and lighting. Some might have a more ‘industrial feel’ while others can be more ‘chic’. Apart from the range of designs being able to attract a wider spectrum of customers, Daniel admits that the design work “makes my life more fun!”
Currently working with F&N, Daniel also realised the importance of market research – “I realize that yes, market research is actually a very important part of a business decision, because if not we will still be running as a mom-and-pop operation without any direction… a lot of the time I make my own decision based on my own taste bud and my own feel, and I realise this can be wrong”. But Bakerzin have to justify the cost of research – currently they are looking at product testing mooncakes which is a huge business for them at 100,000 boxes a year – “that’s a lot of money and we can put some of this in research”.
And the future
Looking forward, Daniel recognises that the same business model cannot be sustained in such a crowded F&B market like Singapore. Part of his plan is to try and separate the wholesale and retail business since wholesale customers “don’t want competing brands to be too strong”.
Secondly he faces the challenge of all other retailers about labour costs and the restricted supply of labour – while production automation and even manufacturing in Malaysia is one option, he feels that he needs a ‘no frills’ option and will look to introduce self-service in some restaurants while retaining the high end signature brand where the food and service is more refined.
The self-service option will help to reduce manpower costs, yet the signature brand will also help him to raise prices by communicating a higher end offering for which an increasingly affluent Singaporean population are willing to pay for. This involves a review of the external look of the store, the look and feel, the music, and the presentation of the food. This will help to offset rising costs including a common gripe among F&B operators – the rising costs of rents!
And with 14 years in the industry, he also recognises the importance of bringing new talent into his organisation and has recently hired a young Italian chef to bring in new ideas. “I think I can get a bit stagnant, so I sometimes let someone else do it” comments Daniel.