Breadtalk Economic Analysis

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BreadTalk Group Ltd.

1.0Introduction
1.1Background information on the industry

The F&B industries play an important role in Singapore’s economy. Being a multinational country, the F&B industries have been influenced by culture from different nationalities and countries. Singapore has been ranked as one of the three major eating capitals in the Asia Pacific region and the other two countries are Hong Kong and Australia. Singaporeans’ extremely large appetite for eating out has rose the incredible rang and numbers of F&B outlets, from upmarket restaurants and eateries to inexpensive cafes (Springs Singapore, 2008).

There is a great opportunity to be an entrepreneur in this industry because of its low entry barriers. Having this opportunity, enterprising individuals are attracted to give up professional careers and go into business. Today, many F&B entrepreneurs have expanded overseas by setting up franchises, joint ventures or corporate-owned outlets (Springs Singapore, 2008).

1.2Background information on the company

BreadTalk Group was founded in 2000, operates its chain of retail outlets selling breads, buns, cakes and pastries through its principal subsidiary, BreadTalk Pte Ltd. BreadTalk has become a unique Singapore brand that has gained international appeal. The Group owns and operates 34 bakery outlets in Singapore as of 31 Dec 2007, as well as several outlets in various countries regionally, including Shanghai and Beijing. It is most famous for its cream-filled buns topped with pork floss, named Flosss (BreadTalk, 2008).

In 2003, the Group opened the world-renowned Din Tai Fing restaurants, famous for its its “xiao long bao” meat dumplings, in Singapore (BreadTalk, 2008).

In 2005, BreadTalk enters further into the China market by acquiring Topwin Investment Holding Pte Ltd, which owns and operates 13 food courts under the award-winning brand-name "Megabite" in the PRC (BreadTalk, 2008).

In October 2005, the Group opened Toast Box coffee shop which inherits the style and atmosphere of coffee shops in 60s and 70s (BreadTalk, 2008).

1.3How the firm creates value

As part of Breadtalk’s unique concept, the layout of retail outlets are designed in a way that customers have a clear view of bakery items on display. The outlets’ “see thru kitchens” allow the chefs to share the preparation of the freshly browned breads with customers and shoppers. The design of retail outlets also gives customers a warm and friendly atmosphere. To provide customers with high quality and freshly baked breads, breads are kept only one day on the shelves, and disposed at the end of business hours. Breads are created to reflect the local taste so that customers can enjoy the combination of western concept with eastern design. To accommodate the customers’ changing taste and individual differences, it constantly introduces new varieties of products. With so many varieties of selection, the promise is that “Each person will find something in the shop” and this makes the trip to the BreadTalk worthwhile (BreadTalk, 2008).

2.0 Factors
2.1 Factors influencing demand

The four factors that determine demand for the bread supplied by BreadTalk are population, price of substitute goods, income and taste and preferences.

2.1.1 Population

Figure 1: Singapore population
Source: Data adapted from Statistics Singapore, www.singstat.gov.sg

Figure 1.1: Total revenue from owned and operated bakery outlets around the world
Figure 2.2: Singapore bakery sales

Source: Data adapted from ListedCompany, www.ListedCompany.com

Population is one of the factors that determine the demand for bread supplied by BreadTalk. As shown in Figure 1, Singapore population has been increasing year on year. With the growing population, there are more people to consume the products and hence, the sales of BreadTalk also increased from 31.4 millions in 2006 to 39.1 millions in 2007,...
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