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Adapting for expansion into the regional market
FOOD and beverage operator Select Group expects to be making more than one-tenth of sales in neighbouring markets next year - just four years after it moved into the region.
"Due to the market potential of South-east Asia, we foresee that the long-term contribution of the South-east Asian market may surpass our local market," Select's managing director Vincent Tan told The Business Times.
The group - which counts catering brands, restaurant chains and ready-to-eat meals among its business units here - clocked turnover of S$187.7 million in its most recent financial year, with a net profit of S$3.24 million.
Outside of Singapore, Select now has a footprint in three other South-east Asian hubs: Kuala Lumpur, where it has opened 13 stores; Jakarta, where it has seven; and Ho Chi Minh City, where it has six. It also has one franchised outlet in Sibu, in Sarawak.
Brands that are now active in these markets include Hong Kong Sheng Kee Dessert, Pho Street, Peach Garden and Landmark 81 Food Hall.
After setting up shop in major hubs, the group plans to move into Penang and Melaka, Medan and Surabaya, and Hanoi.
It is also looking to enter Thailand and the Philippines "in the near future", according to Mr Tan, who founded Select in 1991.
"We see the growth potential for our business in the region," Mr Tan added, citing South-east Asia's population of some 650 million people as a driver.
But Select will still have to work hard to capture the hearts, wallets and stomachs of the region's diners.
"Due to the cultural differences in the different countries, we will need to understand the various consumer behaviours in each country," Mr Tan said. "It is important for us to build a strong local team, as they will have in-depth knowledge of the consumer market in each country."
For instance, Select's Hill Street Coffee Shop brand typically serves its menu items in individual portions.
But after expanding, "we realised that the dining habits in Vietnam are very different from Singapore, as many consumers dine as a family and prefer to share", Mr Tan told BT.
"Thereafter, we introduced additional items that can be shared in a group, such as whole Hainanese chicken, as well as side dishes such as stir-fried vegetables and meat."
He added: "With each entry to a new market, we will send a Singapore team to set up the processes and to stabilise the operations as we build up a local team. Both the Singapore and local team will learn and transfer knowledge to strengthen the business operations in each country."
The need for market research is a lesson that was learnt at bitter cost. Select decided in 2005 to expand into staff canteens in China, on the back of its success in Singapore institutional catering operations.
Then, finding out the hard way that such a business model did not translate well across cultures, it beat a painful retreat just four years into its maiden venture overseas.
But Mr Tan told BT that Select's prospects are brighter this time.
"Due to the difference in business concept being brought into the South-east Asia market - that is, casual dining versus institutional catering in China - we see better potential in South-east Asia as the population is more receptive of the introduction of a new lifestyle and culinary concept.
"Learning from our China experience, we also ensured our readiness to enter each market by sending our team to conduct in-depth research of the market with the help of our consultant months before our entry," he said.
With the help of government agency IE Singapore, Select carried out a detailed market study before moving into Malaysia in 2015.
Its foray into Indonesia came with the help of IE's successor, Enterprise Singapore (ESG), which shared information on regulatory issues such as foreign ownership controls.
ESG offered similar advice, as well as information on raw material import rules, when Select entered Vietnam. It also introduced the group to potential joint-venture partners.
Asked why Select took another stab at overseas growth after the setback in China, Mr Tan said: "As we continue to expand our business in Singapore, we also understand that the market is saturated in Singapore, and that led us to the decision of expanding overseas.
"Malaysia, Indonesia and Vietnam were identified as ideal countries for our expansion as they are developing countries with a large population of middle-class consumers.
"Hence, there is a potential for our business to grow. The proximity of these countries also fuelled the decision to expand to these countries."
He added that Select has a three-pronged approach to growth abroad.
"Introducing more brands into these markets is one of our strategies for growth, as we see a potential in these market for new culinary concepts," said Mr Tan.
"Increasing the number of restaurants of brands currently already in these markets is another approach to our intended expansion plans. We are also exploring the franchise model for further expansion."