Entrepreneurship: BMS Organics plans major expansion amid doom and gloom

This article first appeared in Enterprise, The Edge Malaysia Weekly, on July 13, 2020 - July 19, 2020.
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Amid the doom and gloom brought on by the Covid-19 pandemic and the stringent measures taken to contain it which brought most businesses to a halt for almost three months, one company intends to go all out with its expansion plans and culminate in a listing on Bursa Malaysia’s Main Market.

FMC Greenland Sdn Bhd — the owner of one of the largest organic retail chains in the country, which owns the BMS Organics brand — plans to open 100 outlets in the Klang Valley over the next three to five years, says CEO Terry Lee.

He adds that the company has identified 500 office buildings with at least 20 floors in the Klang Valley. Of these, it will pick 100 to open new outlets. “We should have opened two of them, including one at Menara Haw Par in Jalan Sultan Ismail, had it not been for the Covid-19 outbreak.”

These new outlets will be smaller than the current ones, being only 500 sq ft each and manned by three employees. They will serve 10 to 20 types of organic and vegetarian food and drinks. They will also sell products that have been developed in-house. These products will also be available via the company’s online sales channel.

Lee says these smaller outlets will target office workers looking for healthier meal alternatives at affordable prices. “For instance, if you buy our promotional package, you can have a set meal that comes with a drink for as low as RM12.60 per person.”

He says these outlets will have limited space for office workers who want to dine in. The main function of these outlets is to allow the workers to enjoy healthy meals on the go during rush hour. “They can always drop by and order a takeaway.”

Lee describes this as a “light concept”, which allows customers to enjoy light and healthy meals while the company gets to expand quickly by opening more of these outlets that are “lighter” in terms of cost. “The cost to launch such an outlet is about RM100,000, whereas our existing outlets cost between RM500,000 and RM1 million. This model allows us to expand our business quickly,” he says, adding that based on his projections, an outlet can break even after 10 months.

Lee points out that the healthy living trend, which includes eating organic and vegetarian food, has been gaining traction over the past few years in tandem with rapid urbanisation and income growth of those living in the Klang Valley. This trend is also reflected in the company’s growth. FMC Greenland started BMS Organics in 1997 and now has 56 outlets (33 of which come with a kitchen that serves organic food and drinks) across seven states in Malaysia. It expanded to China in 2017.

Lee remains mum about the company’s earnings but says that as it stands, it already qualifies for an ACE Market listing. This indicates that the company has had an aggregate after-tax profit of at least RM20 million for three to five continuous financial years.

FMC Greenland raised funds on licensed equity crowdfunding platform Mystartr in March to accelerate its expansion plans. The company managed to raise RM1.525 million in just three days from 288 investors, who would receive preference shares in a subsidiary of FMC Greenland that operates the BMS Organics Puchong Jaya branch.

“We are also tapping into banking facilities. We are talking to several banks and they are very interested in our concept,” says Lee.

About 95% of BMS Organics’ customers are Chinese as the awareness of organic and vegetarian food has been higher among the Chinese community, he says. The number of Malay customers, however, has been growing slowly in recent years.

“We are trying harder to reach out to the Malay community to let them know that we serve organic and vegetarian food. All our ingredients are plant-based even though we have not applied for a halal certificate. We have also been organising cooking shows in Bahasa Malaysia to attract more Malay customers,” says Lee.

Sharp rise in online sales

However, the Covid-19 outbreak, which led to the implementation of the Movement Control Order (MCO) in March, has somewhat affected Lee’s plans. The company’s revenue initially tanked a whopping 70% as a result of the measures.

“The impact of the coronavirus outbreak has been huge. We could not operate our business, but we still had to pay salaries and rent,” he says.

Fortunately, the company quickly ramped up its online capabilities and was able to keep all of its 400 employees, without cutting their salaries. In fact, its online business increased 10 times during the MCO period, says Lee.

“The online business used to generate about 5% of our offline business revenue. Now, it is about 50%. The massive pick-up in our online business has enabled us to recover to about 60% of our pre-MCO revenue levels. This is what’s keeping us afloat,” he adds.

Lee is also paying the company’s delivery partner a higher premium, sometimes up to 40% more than others, to ensure that its food and ingredients reach its customers on time. He has also lowered the minimum purchase amount eligible for free delivery to RM100 from RM150 previously.

Why do this at such a challenging time? “We are hardly making a profit. But our aim is to enlarge our customer base by providing good quality products and services,” says Lee.

“After all, we are facing hard times together. We do not mind earning less to make our customers’ lives easier.”

At the moment survival, rather than profitability, is key. “In times like these, you are already a winner if you can survive,” he says.

Lee is proud that the company has been able to ramp up its online capability during the MCO under his leadership. He attributes this partly to his experience of doing business in China.

In 2017, Lee flew to Shanghai to set up BMS Organics outlets, spurred on by the company’s investors. “That experience allowed me to grow up very quickly. The Chinese are very fast and smart. They use technology very well. Their marketing techniques are very advanced,” he says.

“Working in China allowed me to better prepare myself for the future. It helped me to make the right decisions to quickly improve our company’s online capability during the MCO period.”

Lee vows to bounce back

Despite all this, Lee’s journey in China has been a bumpy one. The Covid-19 outbreak, which erupted there first earlier this year, forced him to close three BMS Organics outlets in Shanghai.

It was a tough call, but one Lee had to make as the cost of doing business in China’s biggest city is very high. “We opened our outlets at a luxury mall, where the overheads are high. We needed to pay RMB300,000 in rent per month for the three outlets. And we had to pay about RMB200,000 in salaries for the staff at these outlets every month,” he says.

The company did not have enough cash to cover the expenses of the three outlets for the next three to six months, which is when retail businesses are expected to recover, says Lee.

But he is not giving up on the China market yet. “I will reopen our outlets after three to six months. I am not giving up. Our team in China is focusing on driving our online business now. The overheads are much lower and we can focus on selling our products,” he says.

After all, Lee is used to facing unexpected chal­lenges when doing business in China. Once, he even bought a flight ticket back to Malaysia and vowed not to return. “I was facing a lot of challenges internally and externally back then. I could not sleep every night during that period,” he says.

Internally, some employees were stealing money from the company while others were threatening to quit if he did not increase their salaries. “They took advantage of the company whenever we opened a new outlet. They knew we needed manpower and refused to work unless we gave them a pay rise,” says Lee.

There was also a chef who worked for the company briefly and then quit to start his own restaurant nearby serving similar food.

Externally, suppliers marked up prices and tried to take advantage of Lee in various ways. One of these barged into his office brandishing a stick, threatening to beat him up.

“They did not do what they promised and put the blame on us. The person took advantage of the fact that I was a foreigner and running a foreign entity [which is less protected than a local business]. Some of them would straight out bully you,” says Lee.

He had never gone through anything like this doing business in Malaysia. He even thought it was time to give up on the China market. However, he had a change of heart on his flight back. He took out a piece of paper and started writing the reasons for setting foot in China. “I asked myself if I was there only for the money?”

Lee realised that he was not. In fact, his main aim was to have a bigger impact on the world. “I believe that our business — a green and sustainable one — is beneficial to people and the earth. I needed to expand the business to achieve such a goal,” he says.

Lee compared the impact of having a company with five shops to one with 1,000 shops. Naturally, it was vastly different.

“I also asked myself if I wanted to do something different in China or enjoy a more comfortable life in Malaysia? The answer was clear. After that, I bought another ticket and went back to China and started over,” he says.

Having learnt his lesson, Lee did not hesitate to sack every member of his previous team and build a new team from scratch. His current team, which comprises a mix of Malaysian, Taiwanese and Chinese employees, work well together.

People problems a key challenge

Managing people, rather than making a profit, is the most important thing in doing business in China, says Lee. “The key issue is really not the market size or opportunities. It is always people problems. And there are many of them.”

Business owners who want to expand to China need to identify the right partner and hire good people, he says. “If you hire the wrong one, you could end up hiring more of them. It could snowball. There are good people, like those I hired for my new team. But you need to identify them.”

They also need to understand China’s culture and be able to mingle, says Lee. “It depends on the industry you are in. For the food and beverage industry, we hire people who come from small villages. You have to bring them out for dinner every month to form a close relationship with them. It is not easy.

“Yes, having dinner with your team is similar to a team-building event in Malaysia. But in Malaysia, you do not need to do it every month. In China, you had better do it.”

The best way for a business owner to expand to China is to find a local partner there, he says. “You let him run the business and manage the people. And you share your profit with your partner. It can take a lot of stress off your shoulders.”

No longer a family business

Going forward, Lee hopes that FMC Greenland’s business and BMS Organics brand will gain momentum in China. He wants to explore business opportunities in other countries as well and sustain the business for as long as he can.

“Jack Ma often says that he wants Alibaba Group to last 102 years. I want our company to last 1,000 years. Yes, it sounds grand. But that is my vision and I am steering the company in that direction,” says Lee.

That is why he decided to corporatise FMC Greenland, which started out as a family business founded by his three older brothers. To do so, Lee hired professional managers and invited an external party to invest in the company.

He also set up a proper corporate governance structure to prepare the company for a future listing. Its equity crowdfunding initiative in March was like a warm-up event for the listing.  

“I believe that we need a proper and transparent system to make the company sustainable. To grow quickly, we need to involve the public. The public has to scrutinise the company so that the business can stay on track,” says Lee.

He also wants to ensure that the company is doing right by the community as well as the planet. “We are slowly building our own ecosystem to make sure that we have control over the value chain. We own two organic farms and retail chains now. We also have our own R&D department and bakery,” he says.

“In each of these segments, we have people in charge to make sure that we are doing the right thing and doing no harm to the earth and the community.”

Lee says people who know him know that he will not get involved in businesses that require the taking of lives or that contaminate the earth. He plans to continue educating the public on the benefits of organic and vegetarian food for the community as well as the earth.

Lee believes in the power of education as it has changed the destiny of his own family. “I have three older brothers and an older sister. We grew up without much money living in an illegal house in Sungai Way [in Petaling Jaya], and we were constantly worried that we would be evicted. My father was a technician and my mother was an office cleaner,” he says.

“We were so poor that we had to count how many slices of bread each of us would get to eat each day. Let’s say we bought 20 slices,  each of us would get four slices. If the bread had to last four days, that meant only one slice a day.

“It was during this time that one of my brothers told us the importance of education. He said it was the only way to change our lives. We did not have capital and we did not have a network. We could only rely on education, so we had to study hard.”

And they did. One became a doctor, another, an engineer and the third sibling, an accountant. This was in addition to being consultants and shareholders in FMC Greenland. His sister, who found a job after leaving secondary school to help support the family, would later study accountancy and be involved in the operations of the company.

“Today, we have successfully changed our destinies and it was all through education,” says Lee.