Company Analysis of Old Chang Kee

Old Chang kee which is based in Singapore engaged in the manufacturing and distribution of food products in Singapore, Malaysia and Republic of China. It is famous for its Curry Puff and later diverse into as many as 30 products which could be found in its network of outlets distributed around Singapore, Malaysia and Republic of China.

Company History

The Beginning of Old Chang Kee dated back to 1956 which kick off in a small stall inside a coffee shop located outside the former Rex Cinema along McKenzie Road. Crowd of people were attracted to the delicious pastry stuffed full of curried potatoes, chicken, and a slice of egg and fried with several herbs and spices, which is called Curry Puff. Every individual Curry Puffs were meticulously handmade to ensure the aroma was locked within the Curry puff. In 1986, Han Keen Juan take over the small snack shop upon facing winding up and carry the vision to turn the snack shop into a successful enterprise.

SWOT Analysis

Strength

Strategic location

The company owns more than 80 outlets around Singapore, Malaysia and Republic of China, of which 70 outlets are based in Singapore. The company market its range of food products from kiosks along the road to supermarket outlets and shopping malls at every corner of Singapore, thus allowing consumers to gain easy access to its outlets.

Price and Variety of Food products

All products of Old Chang Kee were priced between $1 to $2. The affordable price range would even allow children as young as seven to be able to afford to purchase food products from the retail outlet. Keeping the price affordable would also welcome consumers who were still not full after their meal to purchase any food products from the outlets.

The Company offer a range of over 30 food products. It allows the consumers to have the luxury to choose over a range of food products, beside their famous Curry Puff such as Sotong Onstik, Pineapple Pie, and Yam Cake. Thus, it would be able to reach out to many other consumers besides Curry Puff lover and at the same time, the company would be able to increase its source of revenues and increase the group’s revenues.

Quality Control

The company is committed to maintain high standard and high level of quality control to deliver foods which are safe to consume for our consumers

In the company’s production facility, the company had obtained HACCP certification for the manufacturing of currying puffs, starting from handling of raw materials to processing, storing and delivery of the products. A series of quality control procedures were implemented which relate to hygiene control, maintenance of equipment, cleaning and sanitation, raw material control and product quality control.

In the retail outlets, the employees had to undergo training which will equip them with food-handling, cooking and hygiene control. To maintain the same standard of the food products, the employee had to adhere to the cooking procedures given to them in the form of operation manual.

Either A or B grade were obtain by all the company’s food outlets for food hygiene and safety standards.

Management of Retail Outlets

All of the retail outlets will be oversee and managed by Our General Manager, Chow Hui Shien who is assisted by a 10-man team consisting of one manager, executives and supervisor. The retail outlets are classified into five area groups based in their location. An area supervisor will manage one specific area group and a maintenance team which has four members will perform regular maintenance work and hygiene maintenance for all the retail outlets. A team leader is appointed in each retail outlets and their task is to manage the operation of the shop and the employee in the shop. Depending on the size and volume of each retail outlets, the employee counts for each shop will range from two to eight employees who work either both shifts or single shift.

Financial Performance

The company revenue shows a slight increase from $24.8 million in first half year 2009 to about $26.3 million in the first half of the year 2010. The retail segment is the main contributor with revenue increase from $24 million in first half year 2009 to $25.3 million in first half year 2010. The company’s cash and cash equivalents amount to $8.7 million as at 30 June 2010. The total assets of the company stand at $24.807 million as compared to the total liabilities of $ 6.616 million as at 30 June 2010. The total equity of the company is $ 18.199 million. The figures reflect that the company has a healthy balance sheet.

Accreditations and Achievement

In 2004, the company had received the Halal certification by Majlis Ugama Islam Singapura which allows its business to gain entry to the Muslim Community.

In 2004 and 2005, the Company was awarded “Singapore Promising Awards”, “SPBA- Heritage Brand Award “and the “SPBA- Distinctive Brand Award “by the Association of Small and Medium Enterprises Singapore and Lianhe Zaobao.

In 2007, the Company was Awarded “Lifelong Learner Award Corporate Category” by MediaCorp, Singapore Workforce Development Agency, National Trade and Unions Congress and Spring Singapore. May 2007-obtained Hazard Analysis Critical Control Point (HACCP) certification for the manufacturing of curry puffs and implement a quality assurance programme.

In 2009- Revenue of the group surpassed $50 million.

Weakness

People and Service

The employee stationed in the food outlets were usually middle-age, thus it leave an impression of old-timers.

The company’s employees could be found mingling and chatting heartily among themselves even when there are long queues around the shop. These behaviours leave down a bad impression to consumers in term of bad servicing.

Products

Most of the food products from our outlets undergo deep-frying before selling to consumers. As for now, more people are being health-conscious, so they will usually abstain from greasy food.

Opportunities

Changing Lifestyle of Consumers

In a modernised and fast-paced Singapore, the lifestyle of working adults and stress-stricken students were so busy and hectic that they can only turn to convenience food or takeaway to reduce the time loss in eating as time is never enough. Old Chang Kee is well-positioned to ride on the upwards trend of convenience food and takeaways with its Old Chang Kee Take 5 outlets and over 70 outlets well-positioned retail outlets in heartland, shopping malls, kiosks and supermarket.

Business development

In Singapore, the company had also moved into the food delivery services called the “Old Chang Kee Delivers”. The delivery services cater to the consumers in the central business district area and other selected area in Singapore. The aim of the delivery service is to provide an added convenience to consumers and to offer an easy route to provide finger food for event, meeting and parties.

Regional Expansion

Upon reaching saturation point in Singapore, the company had ventured into overseas market and set up retail outlets through joint ventures, direct investment or franchise arrangement. The company currently have three retail outlets in People Republic of China(direct investment), Indonesia franchisee in Jakarta had four outlets, Philippines franchisee in Manila had two retail outlets and in Associated Company (Old Chang Kee Malaysia) had two retail outlets in Kuala Lumpur.

Threats

Risk Factor

The Company will be affected by any outbreak of food-related diseases. In 2004, during the outbreak of avian influenza, supplies of chicken meat and egg which are the ingredient in making our curry puffs had dropped drastically. Due to the shortage of supply to meet the demand, the prices of chicken meat and eggs were elevated, which increase the cost of raw materials of our company. The company had to bear with the additional expenses as the company could not transfer the increase of cost in raw materials to the customers which greatly affected the financial performance of the company in 2004.

Due to the worsening of the avian influenza, the government of Singapore totally banned the import of chicken meat and egg from Malaysia. The Company have to replace fresh chicken meat with frozen chicken meat and the company’s food products were being served without egg. Thus, it has greatly affected the sales and revenue of the financial year of 2004.

Labour forces and salary

The food and beverage (F&B) industry in Singapore is very competitive and labour intensive. In Singapore, since there is a shortage of Manpower in the F&B sector; many companies will increase salaries term to attract workers. The food industry will engage in a price-bidding war, and hurt the profits of the F&B sector in the end.

Competition

The company had a string of competitors who are Bengawan Solo, Breadtalk, Polar Puffs and Cake, Prima Deli and bakeries and food retails outlets close to our retail outlets. Those competitors have many retail outlets located island-wide. Thus the level of competitiveness will depend on factors such as food pricing, taste, branding, hygiene standards and widespread of food products.

Future of the Company

Expansion of existing overseas operation

Currently the company has established brand presence in Indonesia and Philippines through franchisee in both of these two countries as stated. The group had subsidiaries located in People republic of China, three retail outlets in Chengdu and a dormant one in Australia. The company plan to open at least three more retail outlets in other parts of China such as Chongqing within the next one year. Currently the company is sourcing for appropriate production facility in Australia and plan to open at least two retail outlets in Australia. The company had put aside $1 million raised from net proceeds for the expansion plan..

Increase and Refurnish Singapore retail outlet

Since the main operation of Old Chang Kee is in Singapore and the fact that the main sources of revenue were also generated from Singapore. The Company have to pay emphasis on the Singapore’s operation too. The company plan to set up new retail outlets in strategic location which include Take 5 retail outlets and drive-through facilities. The company hope to increase the number of retail outlets by five in the next two years. The company plan to relocated some of it poor performance retail outlets to a better location to spur growth and at the same time to refurnish some of its existing retail outlets to light up the look of Old Chang Kee. The company had put aside $1 million raised from net proceeds for the proposed plan.

Expansion through strategic alliances, acquisitions, joint venture and franchises

Besides gaining popularity from Local, many foreigners had give encouraging feedback on the product of Old Chang Kee would love to see our company’s retail outlets in their home country too. Some people even have plans to discuss joint ventures with our company. The company will consider the entire above scenarios and had planned to take Old Chang Kee aboard through acquisitions, direct investment, joint venture and franchises. Net proceeds of $500,000 have been set aside for the plan.

Reflection

After completing the analysis on Old Chang Kee, I felt that the steps taken by Old Chang Kee in growing the company was planned very meticulously. The company focus on its core market and build up its strong presence and branding in Singapore. When the business was on track and the profit generated was stable in Singapore, then it begins looking to overseas for expansion. Even though the operation in Singapore have been stabilised, the company has been slow in entering emerging markets unlike competitor like Bread Talk which has a fast growing presence in niche market in China and Middle East. Thus the company has been losing its competitive edge in term of revenue from overseas business. In the long term, the company should focus on overseas business and obtain most of its revenue from overseas as Singapore Market has reached its saturation point.

Although the food products of Old Chang Kee were appealing for Singapore, proper market survey and research into the new market has to be done before entering the market. The new market might not suit to the taste of the food products offer by the company after all. With proper market survey and research, the company can experiment and come out with the new taste to cater to the taste of the new markets and thus reduce the risk of failing in the venture.