Cover Story: Full steam ahead for Loob

This article first appeared in Enterprise, The Edge Malaysia Weekly, on October 9, 2017 - October 15, 2017.
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Two months after losing his Chatime franchise, Loob Holding CEO Bryan Loo started his own brand, Tealive, which opened its first international outlet in Vietnam recently. Moving at lightning speed, the company plans to expand to 15 countries in the next three years.

 

Loob Holding Sdn Bhd endured a trial by fire when it lost the Chatime franchise early this year and came out with its own brand in less than three months.

Having placed the new brand, Tealive, on  a firm footing, CEO Bryan Loo is not letting the grass grow under his feet. Even before Tealive celebrates its first birthday, Loob has already opened its first overseas branch in Vietnam.

Loo says the company spent about six months establishing the business during the transition from Chatime (our ex-brand, as he calls it) to Tealive.

Firstly, it had to reassure its 1,000-plus staff that nobody would be laid off. Although the company rationalised its business and closed down eight non-performing outlets (he maintains that it was the malls they were situated in that were the real underperformers), it managed to redeploy the workers to the 10 other food and beverage (F&B) businesses in Loob’s stable. Then, it familiarised its two million customers with the new brand.

And after the pain of transition came the sweet realisation that for the first time, it actually owns the brand and there will be, literally, no holds barred. “Our new brand was born of very difficult circumstances, but it was born with a mission and purpose,” says Loo.

“After four months of stabilising the business, we started planning our regional expansion. Last week, we opened our first outlet in Vietnam.”

Why Vietnam? “We were looking for a market with a huge population in Southeast Asia. There are only three such markets — Indonesia, the Philippines and Vietnam. Indonesia has about 250 million people while Vietnam and the Philippines have about 100 million each,” he says.

With Indonesia, it would be difficult in terms of importing raw materials. “A lot of our ingredients are imported and there are too many restrictions there. Also, on a personal level, I don’t like it because the streets are so jammed. There is so much to do daily, but if you’re always stuck in traffic jams, it makes you unproductive.”

Loo says they did not pick the Philippines because of logistic issues. “The Philippines is made up of many islands. So when you want to open 100 outlets quickly, it can be difficult because of geographical constraints.”

Vietnam, on the other hand, seemed ideal. “Some 75% of its population are young, between 20 and 25 years old. So the entire market is up and emerging. And Tealive’s  main demographic is aged between 15 and 25.”

Also, Loo says, while the most of Southeast Asia is experiencing an economic downturn, Vietnam is already on the road to recovery. And another plus, in his view, is the country’s spending habits. “The tea is 25% more expensive than in Malaysia. And yet, we sell double the Malaysian volume.”

How is this possible? “Vietnam has a high disposable income. People can argue that the Vietnamese have lower salaries compared with Malaysians, but when you compare apple with apple, a Malaysian earning RM2,000 to RM2,500 has to pay for his house and car loans, leaving only RM300 to RM400 to spend every month.

“In Vietnam, they don’t buy houses because most can’t afford them. They are also comfortable riding a bike. So even if they are earning RM1,000 a month, RM800 of that is disposable income. That’s why they spend like crazy.”

Loo says the company plans to focus on Ho Chi Minh City because it accounts for 55% of the total retail business in Vietnam. “We would like to open five stores there this year and increase to 100 by 2020. If we focus only on Ho Chi Minh City, that is fine by me because there are still a lot of untapped opportunities there.”

Loob has a local partner in Vietnam — Kinh Do Corp, the largest fast-moving consumer goods company in the country. “Having Kinh Do on board allows us to view opening 100 outlets in the next three years as possible because it owns a lot of hotels and shopping malls and we will be opening many outlets in the malls owned by it.”

Tealive’s outlets in Vietnam will also be more upmarket than its Malaysian ones. “We are upgrading to inline stores as well and we have beautiful shoplots with Scandinavian designs, some measuring about 3,000 sq ft. We can go for bigger formats over there because the country itself is laid-back and its people look for places to chill out and interact.”

Loo says the company is going for this format because it is trying to impress the market and build a global brand. “We want to make sure that the stores are living up to the ambience and environment we are striving to create.”

Loob intends to prove that its business model is for the “East” in Vietnam. “I look at Southeast Asia as one family. They can be Vietnamese, Indonesian or Filipino, but basically, they have the same taste buds. So it’s whether you’re Eastern or Western.”

Looking at the business through only these two lenses simplifies matters considerably, which means getting things done faster. And for Loo, it is all about speed. “I would like to go deep into each and every market, but it would suck up a lot of our effort. As long as we understand what works in an Eastern market and have a sub-strategy for the Western market, we’re good. Retail is not that complicated.”

This is why Loob’s next target market is Australia (to try out its Western business model). It intends to open its maiden outlet there next January. It has teamed up with The Sphere Agency, which is the former global agency for Nandos. “Our partners really know how to create global branding, so we’ll have good synergy. They are also helping us shape our global brand.”

Loob is looking to open 10 stores in Australia next year and 40 by 2020. Only the first seven will be directly owned and operated; the rest will be franchised out.

It also plans to open outlets in Thailand by the second quarter of next year. “We are using different strategies for different markets. In Vietnam and Australia, we will own and operate the stores. In Thailand, we will have a full franchising model. That means we will pick the markets that we want to go through the learning curve ourselves,” says Loo.

He adds that most people do not know that Tealive is a technology-driven business. “We are adopting the latest technology such as the crowd-based automated dispenser. When we implement this next January, gradually over the next two quarters, we will save on manpower by 30%. This means that we can redeploy at least 300 workers to other areas.”

He says the company is also building a business optimisation dashboard, which will be ready in December. “This is a system that measures the heartbeat of our business at the store level.”

In addition, it is coming up with a “digitally smart menu”. “We’re going to re-engineer the whole customer experience and call it Tealive Customer Experience 2.0. We are building a global integrated loyalty and reward programme so that anyone with a Tealive Unity Card can go to any of our stores around the world and find great deals. It will be like airmiles, where one is rewarded for travelling overseas and visiting certain stores,” he says.

On top of all that, Loo says, Tealive is building a global research and development centre. “We will spend a lot of time to ensure that the products we create are relevant to each market. The centre’s main role is to understand the taste profiles of each country.”

The centre will also be developing new products to capitalise on the shift in health trends. “We will introduce things like a nutrient booster, which you can add to your drinks. We will have a collagen booster, probiotic booster, antioxidant booster ... we are taking a lot of initiatives to change people’s perception that bubble tea is an unhealthy drink,” says Loo.

Over the next two years, he says, Tealive will be going all out to create a successful Eastern brand that also appeals to the Western market. “We want to make sure that our business model is translated into products.”

He says one of Loob’s biggest “motivations” to venture abroad is the dismal state of the domestic market. “Rents are rising, the currency is going down and the cost of raw materials is going up ... we want to grow the local market, but the situation is not encouraging at all. It becomes a motivation for us to go abroad.  We will continue to strengthen our local market, but half our effort will be on getting into other markets.

“We are acting local at the moment but scaling up very fast. By the end of this year, we will have 25 more new stores in Malaysia and five more in Vietnam.”

What about China? Loo says he is looking at it, but it will be a long-term plan. He wants to build up his brand first, and when it is popular globally, he will go to China. “Our strategy is to have a footprint everywhere in the world and then we go to China to strengthen the brand further.”

Basically, Loob is looking to bring Tealive to 15 markets over the next three years. “We had to come up with a goal that scares us. Otherwise, we might as well not do it. We have to be realistic but at the same time, ambitious. And we want to make sure that for each country, we have the right partner,” Loo says.

If Loob were to use the full franchise model, it could probably open stores everywhere at once, but Loo does not want this. “It has to be strategically and geographically feasible. We would rather go to Vietnam, whose time zone is near ours, and Australia, which has a two to three-hour difference, to strengthen the markets there and then get the Australian operations to manage London. So it’s a natural expansion and it follows a sequence. If we expand everywhere at once, we would have to work around the clock. Because, when you’re supposed to be sleeping, other markets are just waking up.”

How will it be funding this expansion? “It’s not that difficult. It’s just how we manage our cash flow. We will save on what we intended to spend on with regard to extreme expansion in Malaysia by 50% and deploy that globally.”

Retail is a cash business, so the company can grow with internally generated funds. “We do cash calls in a very controlled manner. We like to keep our debt small, so our gearing is very low,” says Loo, adding that at the same time, the company wants to grow as quickly as possible.

The ultimate goal of its 1,000-day expansion plan, presented at its headquarters in Kota Damansara earlier this year,  is to list the business by 2020. “With 1,000 locations worldwide or a total group revenue of over RM1 billion. That’s the goal,” he says.

Where? “We cannot give a definite answer right now. But we are looking at a listing board that allows us to realise our internationalisation plans. We want to attract foreign investors. We are not discounting Malaysia but we want to broaden our options,” says Loo.

One thing all this rapid growth will do is give the company leverage when dealing with its suppliers. “We want to develop a network of stores worldwide so that we can put our supply chain in the picture. We can literally give the company  huge bargaining power when it comes to the supply chain. So the economies of scale will only grow over time with our local and international expansion,” Loo says.

This is also a very testing time for the company’s talent. Loo demands that they be willing to undergo the baptism by fire, that is the rapid expansion. “The company has a strong mandate to shift the leaders to have a global mindset. I don’t want to be the only one with an international exposure. I want to ensure that every one within the company has the opportunity to transform. 

“So everyone learns together. We go to different countries and learn the cultures, overcome the challenges and tackle the issues. I enjoy that. I want to ensure that the rest enjoy it as well.”

Almost half of Loob’s senior team has been assigned overseas to support the company’s growth journey. “We want them to be the CEOs of different markets. We want them to grow to be even more capable than us.”

At the end of the day, for all his daring endeavours, Loo remains a little conservative. This is a cash business after all, and he wants to put people he knows and trusts in positions of power. “We still prefer to have a country head from Malaysia, supported by all the function groups from the local markets.”

Empowerment in different markets will have to be approached differently. “There’s no one-size-fits-all strategy. So for each market we are going into, we want to learn how to deal with the issues better and more efficiently. Then, we put the right person in the right position to do it.”

One strength he is keen to expound on is the close management links in the company. “We have an unbreakable management link. I established the company in 2010 and there were a lot of family and friends involved. My sister is the current chief operating officer and a lot of my childhood friends are in key positions. That makes the company unbreakable because of the relationships between the key management people. That is something unique to us and it is something that can ensure our continued success for a very long time,” says Loo.

The rapid expansion will also increase the barriers to entry in the industry.  “I always say that F&B is the easiest market to enter because it has the lowest barriers. Everyone who has a little money will want to go into F&B. But it’s also the easiest market to get liquidated.

“The ultimate message we want to get out there is that Loob is in the process of transformation to become a global player. We hope to position ourselves in such a way that we will be able to attract a lot more foreign investors. We want to list our company because we want to realise our global dream. And I want to pass on a publicly listed global brand to my daughter so that she can pass it on to my grandchildren.”