Marketing strategy and expansion of Sakae Foods Singapore

¶ … Excutive Summary

Popularizing Sakae Foods

Singapore is a multicultural society where many types of cuisines are available, such as Islamic-Halal, Indian, Chinese, Western, vegetarian and low-calorie meals. In order to attract and retain customers, Sakae will have to develop unique brands and menus that are available nowhere else. In order to be competitive, it will also have to provide a wide variety of foods at reasonable prices to appeal to various demographic groups. Each product has a life cycle of introduction, growth, maturity and decline, which is why the menu will have to be changed every two months, so that customers will not become bored with the same items. New foods will constantly be introduced during each decline phase.

RAW MATERIALS AND SUPPLIERS

Sakae uses only the best quality sushi from highly-rated suppliers and has had relationships with the same ones throughout its 20-year history. Its competent and experienced chefs perform their own tests to maintain quality, and they serve test meals with evaluations and recommendations from customers. To keep its preparation methods secret, the company has also acquired its own suppliers.

FRANCHISES

With franchising, a company can keep down its equity costs and debt risks by selling licenses to semi-independent operators, who commit to maintaining the same levels of quality and service when they sign their contracts. This permits a company to expand with minimal risks and liabilities, and Sakae now has outlets in Singapore, Vietnam, Thailand, the Philippines, Malaysia, China and Indonesia.

REVENUE AND EXPENSES

Sakae's revenue for the first half of 2011 was $43.1 million, down 2.8% from the first half of 2010. This decrease was caused by the fall in demand for Japanese food after the tsunami and nuclear accident in Japan, although it was offset by increased revenues from Malaysia. Operating income increased 81% to $1.4 million because of the lease of the Group's headquarters, while operating expenses increased 8.6% because of higher rent and personnel costs. Profits were $1.3 million, down 35.5% from the first half of 2010.

The Group's revenue in 2010 was $90.7 million, an increase of 2.1% over the $88.8 million in 2009. Gross revenue increased 1.9%, and expenses 3.3% or $1.2 million because of depreciation and increased staff costs. Other operating income reported in 2010 was $26.325 million, a decrease of 22.6%, and total profits for 2010 were $2.525 million, a decrease of 22.6% from 2009.

Sakae Group's bank balance on 30 June 2010 was $8.0 million, a decline of $4.5 million over the first half of the year because of decreased investment in property and plant, and higher costs for new construction in Singapore and Malaysia. Shareholder equity at the end of June 2010 was $20.8 million. Cash and bank balances at the end of 2010 stood at $12.5 million, nearly double the $5.8 million on hand at the beginning of the year. Total value of property, plant and equipment was $27.6 million, a decrease of $2.3 million from the beginning of the year. Shareholder equity on 31 December 2010 was $21.2 million, up about $956,000 from the end of 2009. Gross profits before taxes were $1.3 million on 30 June 2011, down $711,000 over six months.

Sakae's pretax profit at the end of 2011 was $3.2 million, a decline of $47,000 from 2010, while its cash flows increased $832,000 because of depreciation costs. Its cash and bank balances doubled to $.8 million.

FUTURE PLANS

The restaurant industry can expect increased operating costs in the future, more competition and higher expectations and demands from customers, which Sakae will have to meet in order to stay competitive. Rental and property costs will also continue to increase and Sakae plans to deal with this by expanding franchises, partnerships and corporate stores to other countries. It has set up a new touch-screen system or ordering through iPads on every table, which sends orders directly to the kitchen, saving time and increasing customer satisfaction. It will also reduce the demands on the staff. This touch-screen system has a relatively low life expectancy due to frequent use, and there are also sanitary and hygiene concerns because of frequent touching by many fingers. Sakae Sushi is the first Japanese restaurant chain to use a system like this, and it expects to reduce serving time 30-40%.

RECOMMENDATIONS

One of the Sakae's weaknesses is that it needs to increase its appeal to younger consumers by creating new products designed to appeal specifically to them. Older people prefer traditional sushi, but they represent a declining segment of the global market, and Sakae should develop a new line of Japanese food products for other demographics. These should not be mixed with the cuisines of Western countries, though, since the company has to retain its image as a producer of uniquely Japanese foods. As noted in "The Innovative Food People," Sakae should change its value meal to attract children and younger consumers, while retaining its other lines for the benefit of established customers.

Sakae should also expand its franchises overseas, including Western nations, where Japanese food has increasing appeal, and this become a true global brand. Over time, it could develop into the leading international chain of Japanese restaurants.

CONCLUSION

Sakae Sushi is a well-known Japanese food company that started in 1996 and has now evolved into a global brand, with more than 100 distributors and partners all over the world. Sakae has numerous competitors but it retains its advantages among its customer base of all ages, and its appeal for restaurants. Their product is not Western food, but traditional Japanese cuisine, and this is exactly what consumers want. In the future, the company is going to expand on the global level and give customers the opportunity to experience real Japanese food.