E35 – The Impulso Podcast – Flash Coffee exits Singapore, Foodpanda appoints a new CEO, J&T’s upcoming IPO

[Transcript]

Dalia 0:00
Hello everyone and welcome back to the Impulso Podcast. Today with us we have Weihan and Jianggan

Now, many things happen this week: Flash Coffee closure, J&T IPO, a new Foodpanda CEO, but we’re gonna start first with Flash Coffee. But before we jump into this, let me give you some background information. v was founded in 2018 by former ex executives at foodpanda and Bain and Company respectively. It is headquartered in Singapore. It positions itself as a tech enabled company offering specialty coffee at affordable prices. Previously, Flash Coffee had approximately 200 locations in Singapore, Indonesia, Thailand, Hong Kong, South Korea, Taiwan and Japan. By now however, they closed several stores in Hong Kong, exited Japan and Taiwan last year, and now Singapore in pursuit to build a profitable and sustainable business. So what exactly happened?On Thursday 12th of October news appears during the Flash Coffee closes all 11 stores in Singapore. Some social media posts show that chain services had strike in the country, but the company later denied it. Meanwhile, most often the Singapore head office have been offered roles in other markets or with its regional team.

So my first question to you would be Have you ever tried Flash Coffee? No.

Weihan 1:23
I just know it’s the stores are actually very bright. Yes. very eye catching but didn’t appeal to me much. Oh, really? Okay.

Jianggan 1:34
Once that was awhile ago, and

no, just try it was so I know lots of people saying that. Okay, the test is not good. I think mine will be right. But the eulogy, so Flash Coffee, saying that. Okay, bye bye bad coffee. Yeah, and people making fun of it. So personally, I think when I started, I didn’t really like to test but but I’m also very conscious that that test is highly subjective. So when looking coffee, and the most successful, right, first came out the union the international comment from my friends in Beijing in Shanghai was was the same, the coffee doesn’t taste good. They asked them how they feel for Starbucks. And almost everyone said the same thing the coffee doesn’t test as a start a successful business so far. And maybe the test is not only Yeah, I agree, maybe it’s too early to blame and taste for the reason that there are deeper reasons but

coffee, this is like a heavy heavy subject, right? Because in a region that that lots of people drink coffee, and just like kind of culture brought by like Congress years of like colonial history. And and of course people are very, very sort of many people are very passionate about coffee and there’s also opinions about coffee. And I think when when flash came about right, I think the value proposition was similar to investing in interlocking and were different that okay, Starbucks is expensive, and, and mass market coffee is inconsistent in quality. So it could be something a little bit more premium, but my shipping is diverse.

Weihan 3:24
I recall back when fresh coffee first came out all of my friends were rushing to try because yeah, because there was so many social media posts about fresh coffee and back then apparently they were engaging a lot of influences to promote brands as well. They also had a lot of views. So as university students back then we are more concerned of just getting a quick dose of caffeine.

They will drink coffee first and then afterwards they will okay so as the night progresses and you still have to allegedly study Yes. So I think back then the impression that they gave us is just a normal coffees nothing spectacular. It’s just Oh, it’s dead something new. I want to try it out.

Jianggan 4:19
I think personally from the start, I didn’t really like this company for a mutual reason. So so the founders actually created lots of sort of PR materials saying that they have a plan to conquer Asia and of course as Asian I feel offended but affected by this too young Germans would value this region trying to say that okay, we want to conquer. But, but but again, similarly to coffee test is probably not important point. The important point is that okay, what’s the strategy? What’s the game plan, how to execute this and and how to slow the business

So so they’ve been to many countries. And

I think that we’ve been looking at the places that choose in red are in there, they’re quite innovative in, in our how to expand fast, I can work with some breakfast places, Susanna Hey, you guys have breakfast, but you don’t really offer extenders coffee opportunities, half the space to us so that we can offer good coffee to people. So. So I think they’re quite innovative in finding different places to expand, I guess 500 Plus stores? Yes, it was pretty interesting. I didn’t know that the found like, it’s kind of like a collaboration between like, whatever, with whatever food service there was previously, I would just always wonder why most of the stores are located in such why the store space is always so tiny. It was like a very random stuff that they selected. I think a Texas us Singapore, I mean, Singapore, there’s always an issue with that. There’s so many use cases, which are often limited. It’s unlike in Malaysia, or Indonesia, if you open store on the north side, and you pretty much have to go to the office theory have to go to a mall. I think the difference between here and when watching when popular in China, back in 2017 2018 was in China, there was lots of new malls, new office buildings being opened. And remember that that was a time when real estate development was still a key pillar of the

Luckin was lucky, you don’t have competitors use difficult space. I think in Singapore, you have to be creative in finding the space if you want to expand fast, especially because most of the time they have to bid for the spots at a popular Mall. You have to wait. And actually for some of the Chinese, like public businesses and come to Southeast Asia, they always complain for Singapore where they can’t expand as far as invasion of space. Yeah, the word for the space. But I think back to the fresh coffee per se, on a note that they have been immersed in tech, I know that they have been leveraging sort of political platforms extensively. But I think at the end of the day, what happens is that coffee essentially, is in focus. At the end of the day you make commitments to no matter how small the list that is. And if you don’t do it carefully, you make a commitment that you can easily get out of. So it’s still quite heavy business. And it’s something that we expect to ask. You probably make compromises in, in careful news in selection of location, etc, etc. So, so I think the I think they went very fast on this year. Are those news that a relatively comedian? Yeah. Lawless? And of course it also the people come in and say then how did they bring this $3 million so fast? But the truth is, this 50 million will raise last year, it just didn’t announce it until this year. So I think last year when they raised this money in summer, the funny environment was already changing, where we investors started to become more cautious. But I think the management

I don’t know, for whatever reason didn’t really notice that. So let’s do I mean, we in the loss of heaviness, mode expansion and stuff. And I think it was the end of the year they realize that okay, fundraising has become quite hard. And of course, the challenge is that we have already committed a loss of like grand real estate is a philosopher, so it has become a bit hard for them to turn around. I think the founders spent a lot of time fundraising this year. But it just the moment is so difficult.

Which are you looking on the reporting of?

Weihan 9:03
Yes, we’re currently working on a report. It’s gonna come out soon.

Yeah, this is market where we find that fascinating. Well also pick this up in view, there are still lots of opportunities or you think that you’re going to be cautious. I think businesses need to be a bit more cautious. Number one, because there’s a lot of elements when it comes to running a coffee business or in general, any f&b business, especially, let’s say in tiny spaces like Singapore, which is really a tiny space. They don’t really have much room for them to expand, or what then because I think for a lot of the Southeast Asian consumers were not particularly the most brand loyal. So even you have new businesses coming in there is a potential for them to, let’s say, catch a brand new market, but because they are so new, they don’t have the, let’s say, history that maybe bigger chains like Starbucks have that they don’t have that audience as much people and are less likely to continue to go to them if they don’t offer something that is unique and something that really appeals to what the what they really want, because there’s just simply too many players here. Yep. So I think that would be an issue for players entering as well as looking to expand in the space.

Jianggan 10:36
And also, I think differentiation says you fight hard, because a lot of people try to differentiate, but they differentiate in a way that only attracts people to come and take a photo and put this differentiation, the real core battle differentiation that I mean, what we talked about all the time, selection, speed, savings and quality. It I think, requires lots of careful strategic thinking. And at the end of the day, whether the market is big enough for you to actually differentiate that way for you all fall into a very, very small niche where you can have only have like one upscale neighborhood country, which is also uncomfortable business but is that something that you want to build and you want to scale so different? Different proceed.

Dalia 11:25
Next news Indonesian courier J&T Global is planning an IPO on the 27th of October on Hong Kong exchange, they’re aiming to raise half a billion US dollars, which will be the second largest IPO of HK x. Now, we did cover J&T extensively in our report, who is J&T, which will be linked in the show notes, as well as a complimentary report in the Express highlights of the draft of IPO perspectives. So we will not go too much into the company background. But Weihan, Could you maybe share with us some interesting thoughts from the highlights?

Weihan 11:54
Okay, so just some brief information from the highlights. So when we look at revenue, genties revenue actually grew about 4.7 times between 2020 and 2022. You can see that the revenue contribution from China’s site actually grew by 56% in the last year, and it has actually surpassed what Southeast Asia initially contributed to J&T revenue. And I think if we were to look at the number of parcels that g&g actually delivered, they delivered around 14 point 5 billion parcels last year. And the bulk of it actually is 14 point 4 billion Yes, billion. And you have the bulk of it, coming from China, which is I think about 12 billion. And this is quite interesting, considering the fact that

Jianggan 12:45
the Chinese markets are already dominated by a lot of other logistic giants, and yet, gently still managed to capture a bit of a share in such a competitive market. And the honor pub hassle basis. J&T is actually narrowing its losses. So it’s in China. So it’s slowly starting to become profitable in China, while they’re in Southeast Asia, the profit in Southeast Asia has actually declined. So this might be a sign of you having the existing maybe ecommerce players starting to expand to logistics. Yeah, they probably took quite a chunk of the parcels that the entry actually gets in services. So I was just hearing the numbers. You mentioned about the 2.5 billion parcels you saw this division last year. Yes, 2.5. So that has to about 6.8, or 7 million a day in Southeast Asia. So I know that they’ve been the primary partner of the coffee shop. And we noticed that this this year at coffee shops, bowling in Southeast Asia has grown a lot. So she’s that Chinese business this year, has also gone hot. Until Until what happened in an end in Indonesia, it wasn’t so so because I was banned, they stopped the business, that will probably cause them to lose a few million parcels a day. And these are probably more profitable parcels compared to what’s shocking to them. So so so I think there’s some challenges there. We do believe that people eventually will find a way to get back and this additional growth of E commerce will come back. The question is, is and with a Shopee and Lazada or other things we’ll capture part of this value and whether that was J&T’s margins.

I think it looked at logistics to say in Southeast Asia, GMP is still a formidable presence. And we know that in the beginning, we humans first came about and the new logistic sort of startups are trying to do something which is digital shaming.

And I think solving the nation players, and try to do that as well, you offer a good service. And an easy to go back to the billing history and see if there is a feature in the Middle East trying to do the same, you offer a good service, reliable compassion, compared to what the incumbents are doing. And in fact Arvixe.

But what what J&T did, which is decide is that they just came in and undercut everyone twice. So they go for the mass market. And of course, the service level in the beginning. You can complain about certain things but but actually deliver much more parcels compared to the compared to the competitors and still retain a good sort of profit margin. And this consultants, Asian, they also work a lot on franchises. I think the Open Network, initially, lots of people came in saying that hey, on for the extended network, we will invest in the infrastructure, we’re investing in the, in the in hardware, so that I mean, for our company point of view to cut the cost is not that heavy. So they took this business model to China as well. So So in short, they are growing phenomenally. And it just happened that this was this global issue directly in the pandemic, everyone invested in Muslim infrastructure. So hoping that the growth of E commerce will continue. But in most markets, I think the growth has kind of slowed up because of the the recession, rising cost, and people be cautious for standing. So everybody’s facing the squeezing of overinvested for the free immediate sort of hustle volume and getting. So I think Genki will probably suffer a bit from that just as everybody else is, is in industry. But still, I think it’s only to a company where the devaluation is justified.

Dalia 17:31
Okay, so the news of a potential deal between Foodpanda and grab made a lot of noise back in September. But personally, I did not really expect that this news would refer resurface again until recently. So Foodpanda has removed its chief executive officer after he allegedly leaked confidential information of the platform’s potential sale to Grab. J. Fang, who have the position of the chief international officer will succeed as the company’s new CEO and continue to lead and receive advanced business bank join the company six years ago, I co authored by the time, his latest role, he managed business operations across the company’s allowing markets.

Jianggan 18:11
What happened?

Weihan 18:14
I think what most people interested in is actually the entire village in case of the leaking, but it’s it I think it happened between the next CEO as in his partner, and there was a lot of accusations thrown by both sides regarding this issue, because obviously it has implicated them both in very negative ways and one more than the other. So I think

that beyond just him allegedly leaking the information, they will also employees coming up to give certain comments as well as their feedback about how he was like SSC, VO and I think this further ties in further support the case of why maybe the company decides to remove him from his position. Yeah, he was. Everyone around me is just like, oh, this a lot of gossips.

Jianggan 19:22
what’s true, what’s not that? Yeah, yeah. So last two days, because so many people like WhatsApp and wechat messages and saying that wow, wow. What is that true? Wild asked me.

Actually worked into the vendor many years ago. 15 years ago, I was running the supermarket. So I worked with with the CEO who just left. personally so one of the things I think he was he was He has lots of attention to detail and he micromanages each part of operations. And that’s probably good. I mean, You know, the stages of the market development, but I’m not sure of how things have evolved since then. But, but looking at the allegations, I think the whole thing is just unnecessary, right? I mean, it gives so, so many personal details out in open on Instagram in such a public way. Um, so, so the way and somebody also asked him that, okay, from the report, or from the Instagram post I’ve read, and not sure whether the lady who posted this is his current girlfriend, ex girlfriend, and invite applications that is actually Muscat, sometimes cars as x so, but it doesn’t matter whether you should integrate this too much. At the end of the day, somebody who has been working there for nine years, it’s not even a company. Somebody else is taking over. . I don’t know him personally, but few friends of mine known for some firewall, and they speak very highly of him. And why is also important market that Ben has been very successful. So personally, I think I’ve said that about what the markets in Southeast Asia, including Southeast Asia, Pakistan, and Hong Kong, Taiwan. So we have done some research for Southeast Asia market.

Weihan 21:22
Last year’s numbers. Yes. So the numbers that we have here, it’s GMV for last year is about 3.1 billion. And I think its market share overall for most of the Southeast Asian countries that it’s operating in. It’s it’s usually around the second or third position, often trading behind grep. So I think a lot of us have been wonder, making people wonder whether grant would actually acquire food panda as a result of this.

Jianggan 21:55
Yeah, so relief came out with support in German media and to discuss the prices on billing.

I think for Grab, it probably makes sense for them to eliminate a key competitor, even though that competitor is losing, losing market share. And if you look at the the market share statistics that we have been publishing, in the last three years, I think put the pen has been steadily losing market share. Different reasons are personally, I think, strategically, the two big mistakes they’re making is first, they’re going to be into quick commerce, which is the black hole. And the second, they went to Apple and say they went to some of the smaller markets in every province in Thailand, during every compilation, they were in countries like Laos and Cambodia and last countries, but at the end of the day, for deliveries is a business with one and destiny, you’re not going to build density in those markets where you don’t have enough middle class and consumers. So, so. So even if you look at even with PEST analysis that I mean, for delivery hero, the parent group of 70% of patient volume comes from gaming in Korea, a company that acquired so which means that the whole of the 11 countries advocators less than half of Korea, which is comfortable for community. So if I were there, what how to properly do is to sell all these countries, so sell the operation, and concentrate on Taiwan and make it 30% As big as Korea, then that’s already like the same size of all other markets. And the good thing about Taiwan is that you will never have a Chinese competitor. Yeah, so you Hong Kong, they will be faced the competition from the plan

for grab is interesting, I think $1 billion, 4 billion euros, whatever, it’s probably too high a price, in my opinion, because they’re losing market share. And if what would be longer, and the price will probably go down. But they probably need to be pre emptive to somebody else from outside markets. They need one from China buys the panda and becomes instantly a competitor in for our six mega markets in Southeast Asia. So so. So that’s a calculation they need to do, right.

Especially just when we’re not going to talk about details in this and you can go and read through the linkedin, in the Instagram.

But did I mention anything? Oh, yeah. Because content is supposed to a half naked photo.

Jianggan 24:31
A. It’s been a very interesting week, for sure. Yeah. And it’s not even double 11.

Yeah, so this stuff happened at Momentum Works. Our team’s working hard. We have been preparing the coffee report, which will give you lots and lots of interesting insights and in subsequent days, we learn for the first time to look forward to that and then there are a few other pieces that are coming out. So yes, thank you

Dalia 25:00
Thank you very much Jianggan and Weihan for your insights. As promised, we’re gonna link all the mentioned the featured reports in our show notes. Stay tuned for our coffee report for you more coverage from f&b industry. And see you next week.

Weihan 25:15
Bye

Transcribed by https://otter.ai