Zouk Group to recoup pandemic losses by end-2022; makes new F&B and nightlife plans

ZOUK Group expects to recoup its pandemic losses by end-2022 on the back of a nightlife rebound, with further plans to expand both its food and beverage (F&B) and overseas nightlife portfolio.

Chief executive Andrew Li is “a hundred per cent” certain that the lifestyle and entertainment operator’s Singapore nightclub takings alone will cover 2 years’ worth of losses by year-end, he told The Business Times.

Since the group’s flagship establishment Zouk reopened as a nightclub at Clarke Quay in end-April, it has been generating “triple” of what it used to make in 2019, Li said. All nightlife businesses in Singapore were permitted to fully reopen from Apr 19, following 2-year-long curbs due to the Covid-19 pandemic.

Dance festival ZoukOut will also make a comeback at Siloso Beach this December, after being on hiatus since 2019.

Said Li: “This year, I believe we will make revenues that I don’t think Zouk has ever made in its 31-year history.”

Pivoting amid the pandemic

Singapore’s nightlife sector was hit hard when the pandemic struck in 2020, with bars, pubs, karaoke establishments, discos and nightclubs forced to shut on Mar 26.

Li pivoted Zouk’s operations swiftly once he realised that curbs were for the long term: “I think a lot of other clubs and bars thought that they were going to reopen quite soon. When I realised that wasn’t going to happen, we were able to change that state of mind and see what else we could do to make it through this period.”

One initial idea was to turn Zouk’s Clarke Quay premises into a grocery store, with Li even reaching out to Amazon and RedMart as potential partners. While that fell through, Zouk transformed its Capital lounge into pop-up restaurant Capital Kitchen and launched an evening cinema club in its main room.

The nightclub also doubled as a livestreaming venue for e-commerce platform Lazada and hosted spin classes from rhythm cycling studio chain Absolute Cycle during the day. It ventured into retail too, selling canned cocktails on its online platform Zouk Shop as well as on Lazada and Shopee, and in Cold Storage.

But the biggest saviour was a pre-Covid foray: bringing in American burger chain Five Guys in 2019. From the third quarter of 2020, Zouk Group was breaking even on an EBITDA (earnings before interest, taxes, depreciation, and amortisation) basis, mainly due to the profitability of its Five Guys operations, Li said.

The Singapore nightclub operations, registered as Zouk Clarke Quay, recorded a net operating loss of S$6.8 million for the financial year ended Dec 31, 2020, with revenue down 78 per cent year on year.

Though dine-ins were not permitted at various stages of the pandemic, Five Guys benefited from its “strong” takeaway and delivery model, Li noted. About 70 per cent of the group’s revenue came from Five Guys and government support, while its business pivots contributed to the rest.

But revenue soon fell once subsidies tapered off, and as other bars caught up in pivoting to F&B. To cut costs, Zouk Group went through 3 rounds of restructuring, cutting its total Singapore headcount by about 40 per cent by November 2021.

In September 2020, cash-strapped Genting Hong Kong sold Zouk Group to Malaysian firm Tulipa for S$14 million as part of efforts to offload non-core assets and generate liquidity.

Strengthening its F&B portfolio

The pandemic has affirmed the need for Zouk Group to continue diversifying its portfolio and revenue streams, said Li. “If we didn’t have Five Guys, we would have been in a much worse situation. That was a very big learning in terms of how we wanted to do our business moving forward.”

Building on this, the group’s focus for the rest of the year is expanding its F&B portfolio via 3 strategies: developing its own concepts; bringing more brands from the West to Asia; and bringing Asian brands to the West.

In line with the first strategy, it opened cocktail bar Here Kitty Kitty and fine dining omakase restaurant Sushi Ichizuke in Singapore in the second half of 2021. Its newest F&B concept Maison Shūko, a Japanese-French omakase restaurant, opened last month.

The end goal is for Zouk Group to have an “even” split between its F&B and nightlife portfolio, Li said. His targets include going from 2 to 4 Five Guys outlets in Malaysia within the next year.

“In the past, you'd never think of Zouk being associated with a burger brand. But it was a very logical step for us, because the same demographic of people who eat burgers will also go to Zouk. And we realised that F&B was always going to be a market which was going to come back before nightlife.”

Global nightlife expansion

Outside Singapore, Zouk Group’s expansion into Las Vegas last year has made a big contribution to its revenue, Li said.

From June 2021, the group has progressively opened several lifestyle concepts at the US$4.3 billion Resorts World Las Vegas: a Zouk nightclub, Ayu Dayclub, restaurant Fuhu, and social gaming bar RedTail.

“We opened at an opportune time, because the US was just coming out of Covid-19, and they decided that they were going to live with it,” Li noted. The group also benefited from ‘revenge spending’ by US consumers and securing favourable deals with DJs, he added.

“Because of how profitable Zouk Group will be this year, we'll definitely have a lot of capital expenditure to work on new projects.”

The group currently has a confirmed project in Asia, though Li declined to reveal more. There are also plans to expand its US footprint to Miami and New York, as well as venture into Dubai.

“Our vision is still the same, which is to be a global lifestyle entertainment empire. We’re definitely on the right track, and the next 2 to 3 years are going to be very important in terms of how that growth goes. I believe it's going to be exponential.”