JT 8.2016This article, written by Jennifer Tan (left, Director, Research & Products,  Equities & Fixed Income, at the Singapore Exchange), originally was published in SGX's kopi-C: the Company brew series series on 13 November 2015. The article is republished with permission.


DouglasFoo restaurantFounder and Chairman of Sakae Holdings, Douglas Foo
(Photo: Company)

The name Douglas Foo is virtually synonymous with conveyor-belt sushi.

But before the founder of the Sakae Sushi chain of restaurants in Singapore began dating his then girlfriend, now his wife of nearly two decades, he didn’t consume Japanese food often.

Foo met Yen Khoon in 1988 while working as a baker in a Delifrance café, and began eating sushi regularly during their courtship. But he winced every time he had to foot the bill after each date.

“As she enjoyed eating sushi so often, it was quite painful whenever the bill came. At that time, Japanese cuisine was healthy but very expensive,” he recalled, flashing his trademark broad grin.

“It got me thinking, ‘Why is this delicious and healthy fare not available to the masses?’”

LQM ad141eIf you look at all
the mass-market F&B brands out there – Starbucks for coffee, MacDonald’s for hamburgers, Pizza Hut for pizzas and KFC for fried chicken – what is absent is an Asian F&B brand that can play in the same league.

- Douglas Foo
Chairman

Sakae Holdings

This spurred the 46-year-old entrepreneur, now Chairman of Sakae Holdings Ltd, to consider ways of taking this premium cuisine to the mass-market by building a global brand.

“If you look at all the mass-market F&B brands out there – Starbucks for coffee, MacDonald’s for hamburgers, Pizza Hut for pizzas and KFC for fried chicken – what is absent is an Asian F&B brand that can play in the same league,” said Foo.

Sakae, which owns more than 200 restaurants in Singapore and nine other countries, opened its first outlet in Singapore’s central business district in September 1997, right smack in the middle of the Asian financial crisis.

“It was totally nerve-wracking. We were thinking whether we should hold back because of the downturn. But really, when is it ever a good time?” recalled Foo, who was 26 then.


Longevity and Prosperity

He wanted to build a brand that was easy and simple to remember – drink sake, eat sushi, so “Sakae Sushi” was born. The word “sakae” also means growth and development in Japanese.

In Mandarin, the brand is 荣寿司(rong shou si), which symbolises double blessings of longevity and prosperity.

Sakae HQThe Group's headquarters at Tai Seng --- Sakae Building, houses its central kitchen, culinary training facility, automated self-retrieval system for freezers storage of frozen food, sake and other amenities. (Photo: Company)
To give the brand a soul and clear symbolism, Foo chose a frog. “The frog is a creature that likes clean environments, and we want to epitomise hygiene and cleanliness in our food preparation. Besides that, this animal appeals to all cultures.”

The frog’s head and tummy form the lucky figure 8, a symbol of prosperity. The bottom half of the logo is shaped like a rice bowl, the fundamental ingredient in Japanese food, and also resembles a gold ingot. Together, they signify abundance and a thriving business, he explained.

The amphibian’s colour signifies healthy dining, and personifies Sakae’s green efforts – recycling, the use of renewable energy, and sustainable initiatives.

Different parts of the frog also portray the coming together of all facets of the business. “How does the team want to move? By leaps and bounds, of course,” he added.

DouglasFoo

“Do unto others as you would have them do unto you, and the brand must reflect that.”


- Douglas Foo
Chairman

Sakae Holdings

The company is not interested in just running a F&B business. “From day one, we have been on a global brand-building journey, and we want to ensure our brand has a soul – Sakae cares for the communities we serve,” Foo said.

With that in mind, Sakae Holdings decided not to remove Vitamin E from its cooked rice to cut costs during the economic downturn. It has been serving Vitamin E-infused rice since 1997.

“Some colleagues wanted to cut costs and suggested we stop adding Vitamin E to our rice. But I told them, ‘Let’s not lose our direction, because if we do, we can forget about building the brand’,” Foo said.

“I asked them, ‘If you were cooking this pot of rice for your family, would you add the Vitamin E?’ The answer was clear, so we kept the recipe, and senior management volunteered to take a pay cut instead.”

In recognition of his efforts, Foo was named Entrepreneur of the Year earlier this month at the 2015 Asia Corporate Excellence & Sustainability Awards (ACES). He was lauded for making high-end Japanese dining experiences accessible to middle-income consumers.

ACES is a two-year-old awards programme organised by the MORS Group, which champions revolutionary leadership and sustainability in companies operating in Asia.

♦ School of Hard Knocks

The company, which ventured beyond its home market in 2000, has faced its share of challenges. Over the last 18 years, it has survived the fallout from the Asian financial crisis, as well as virus outbreaks, including the Severe Acute Respiratory Syndrome (SARS) and bird flu.

Its experience in the US also offered invaluable lessons. Sakae set up shop in New York City in 2008 by securing a strategic location on the ground floor of the Chrysler Building.

Shortly after, the global financial crisis struck.

“When the crisis hit, the revenue slide was fast and furious,” Foo recalled.

“We closed down the outlet in 2009. That episode was painful, but not without its purpose. We’re wiser and stronger now. We have grown from that exposure, and continue to expand globally with more acquisitions.”

Sakae’s entry into Malaysia was also fairly recent.

Sakae Holdings

Stock Price

34c

Market Cap

S$47.4m

52-week High Low

25.5c-44c

Price/Book

1.26

PE

-

Source: SGX StockFacts
(data as of 22 Dec 2016)

“We had actually secured a place earlier, but we held back because the location and timing were not right,” Foo said.

“On hindsight, that was a good decision. Today, we are much smarter in how we build our models to enter markets, having learnt from all these experiences.”

Foo is equally passionate and meticulous in his parenting efforts. He swims and cycles with his family, including his four sons, Donovan, Dominic, Donahue and Donaghan, aged 15 to seven.

“My role as a parent is to bring them up to have a system of good values. This is crucial in this day and age,” he said.

This is why his sons’ names begin with “Do”, hopefully reflecting their “can-do” attitude towards life.

“I teach them to have an open mind, to follow their hearts, and live their dreams. I hope they will do something with their lives, because life is finite,” Foo said.

“Whatever you want to do, you must plan. The earlier you start planning, the better.”

This principle of investing for the future underpins the company’s policies on staff welfare. Apart from training and education, Sakae also believes in taking care of its staff and families. It started offering baby bonuses to pregnant employees before it became a national initiative.

“The rationale is that we need people to build Sakae into a global brand. Innovation can only do so much – the rest depends on our staff, and for that to happen, we need the support of their families.”

“Besides, with every baby born by an employee, there will be one more person eating sushi in the future, right?” Foo beamed.

Kaisen NabeThe Group has over 200 outlets worldwide with a portfolio of brands that include Sakae Sushi, Sakae Teppanyaki, Sakae Delivery, Hei Sushi, Senjyu, Crepes & Cream, Sakae Express, Sachi , Kyo by Sakae and Nouvelle Events. (Photo: Company)
His vision for Sakae is a bold one – 30,000 outlets across five continents. “It’s a journey, and it will take quite a while, but we are not in any hurry, and we need to do things right,” he said.

Apart from Sakae Sushi, the group’s stable of brands also includes Hei Sushi, Kyo by Sakae, Senjyu and Nouvelle Events & Catering.

Sakae has averaged annual revenues of over S$80 million in the last decade, and has been profitable in eight of the 10 years, averaging earnings of about S$3.5 million per year.


Four Pivots


The company’s blueprint revolves around four pillars of growth. It will use mergers and acquisitions to step up its pace of expansion where appropriate.

Sakae’s first pillar centres on human capital. It has set up in-house training programs to allow staff to upgrade themselves, and scholarships with various educational institutions and statutory boards to harness talent, Foo said.

The second involves managing its global resources and choosing strategic partners to ensure quality and reliable supply of ingredients, including fish.

Its network currently spans suppliers in South America, New Zealand, South Africa, Europe and Asia Pacific. It is also working with various research groups and universities on sustainable fish farming practices and methods to naturally boost yields.

“As we are a small enterprise, we need to be very creative. We have an open-door policy – customers and suppliers can come and audit our facilities,” he added. “There may also be an option to build the aquaculture unit into a separate business later on.”

Sakae OnlinejpgSakae's mobile delivery platform. (Picture: Company website)
The company’s third pivot is real estate investment and management.

“Property costs in Singapore and other markets are constantly rising, and this will eat into our margins. So we need to have a hedge – we buy and invest in those properties, and where relevant, rent them out,” Foo said.

The final prong is Sakae Corporate Advisory, which was established in January to help local businesses grow, brand and add value.

Foo was inspired by General Electric’s business model, which has a capital-raising arm that generates cash flow for other units in the organisation and enables them to achieve their goals.

This unit will provide an income stream that could help fund Sakae’s expansion in F&B, as businesses in this sector tend to have long gestation periods, he noted.

“When our dream of 30,000 outlets materialises, it would mean that for every piece of sushi eaten in the world, equity would flow back to the Singapore economy,” Foo said.

“That allows me to do my small part for Singapore, which has given me the resources to be who I am today.”

 

 

Financial results

Year ended 31 Dec
(S$ 000)
FY2015 FY2014 FY2013
Revenue 96,165 97,693 98,962
Operating profit before tax -2,180 5,080 8,352
Profit/loss before tax -4,854 4,046 6,763
Loss/profit attributable to shareholders -4,631 2,091 5,365

 

9 months ended 30 Sep (S$ 000) 9M2016 9M2015 % Change
Revenue 63,810 72,526 -12.0
Gross profit 40,957 48,769 -16.0
Profit / loss before tax -7,327 -26 N.M.
Loss / profit attributable to shareholders -7,323 71 N.M.

 


Outlook & Risks
    • The Group continues to work hard to manage challenging operating conditions in the F&B industry, which include rising rental costs, food costs and staff costs, as well as the ongoing labour crunch, after the government tightened foreign-worker quotas. It will also continue to explore various revenue streams to improve its performance.
    • Another business extension, the Corporate Advisory arm, has commenced business. The Group is confident of seeing a healthy contribution from this new business, which will also help its global strategic expansion plan to mould Sakae beyond the region.


Sakae Holdings

Sakae Holdings is a food and beverage company that operates restaurants, kiosks, and cafes in Singapore, China, India, Indonesia, Malaysia, the Philippines, Thailand, Vietnam, the United States, and Japan. The company has over 200 outlets worldwide, under brands including Sakae Sushi, Sakae Teppanyaki, Sakae Delivery, Sakae Junior Club, Hei Sushi, Hei Delivery, Senjyu, Kyo by Sakae, Crepes & Cream, Sakae Express, Sachi, Sakae Shoppe, and Nouvelle Events. It is also involved in trading and sushi processing activities, catering and franchising, as well as food and beverage consultancy and management services.

The company website is: www.sakaeholdings.com

Click here for the company's StockFacts page.


For its results for the 9 months ended 30 Sep 2016, click here.

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