Enterprise
Tealive moves into Asean market
Behonce Beh 
Though a predominant coffee market, Vietnam's young consumers are opening up to global tea offerings
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IT has been over 10 months since Loob Holding Sdn Bhd transitioned from a franchise to a principal brand when Taiwanese firm La Kaffa terminated it as the master franchisee of Chatime in Malaysia.

Having launched its own tea brand Tealive just weeks after the termination, the group managed to weather volatile market conditions domestically and abroad.

Its CEO Bryan Loo says the change in its business model was an important lesson and undergirds Tealive’s overseas expansion.

“What we have learnt from our experience is that when operating within a franchise model, one has no say in matters.

“Today, as a principal brand owner, we make sure we know those we approach as we need genuine partners,” he says.

Tealive made its first foray abroad in September when it opened its first store in Ho Chi Minh City, Vietnam.

That expansion was done through a joint venture with Kinh Do Corporation, a food and beverage conglomerate. Loob Holding owns 51% of Tealive’s business in that country.

“Not only is it an equity partner, it has a lot to bring to the table, namely access to retail locations,” says Loo.

Out of the five proposed Tealive outlets to be opened in Ho Chi Minh City by year-end, Kinh Do Corporation owns three of the properties.

The Tealive concept in Vietnam differs from that in Malaysia, as the country follows a cafe format that spans over 1,200 sq ft with its largest store at 2,500 sq ft.

“The Vietnamese are laid back and seek a space to have discussions or talks over drinks and small bites,” he says.

Though the country is known as a predominantly coffee-drinking market, modern tea brands have flourished over the past two years, owing to the dynamic and young consumer demographic which demands quality products and exceptional customer experience.

 

Evolution

Domestically, things have been fairly rosy for Loob Holding. It owns nine brands – from Tealive, Define Food, Soda Express, Ikki, Hacha Mecha and Tino’s Pizza Cafe – to foreign franchises such as llao llao, Gindaco and Croissant Taiyaki.

Tealive remains the largest portfolio for the company as it contributes over 65% of group turnover.

“We have been through an evolution where, following our transition in February, we saw a spike of 25-35% in monthly sales owing to market conversation and interest.

“That normalised two months later in May as we saw same-store sales growing 5% compared to the same month the previous year.”

To date, there are 176 Tealive outlets in Malaysia. Tealive currently serves two million cups a month and plans to double this by 2020. Its offerings start from RM6.50 per cup.

Loo says though there are many shopping malls in town capturing the same target market, they are not in a position to stop expanding into new malls.

“Our presence as a chain store business is not just about creating profits but making the brand a household name.

“If we are conservative and not expanding, then we cannot be a household brand,” he says.

The group plans to set up new stores for its brands next or close to each other so they are able to share rental and operating costs.

“We are able to capitalise on the small footprint format for each brand as our offerings complement one another.

“That way, we can source for a bigger location in shopping malls that can fit two to three brands,” he stresses.

Tealive’s smallest footprint is a kiosk of 100 sq ft. Outlets for brands such as Gindaco and Croissant Taiyaki are often opened side by side, for example at 1 Utama shopping mall in Petaling Jaya.

 

Casual dining

“When we look for brands in the future, we want to bring in those that can be added to our multi-portfolio position and share the operating cost.”

Its second most significant portfolio of Loob Holding is Spanish frozen yoghurt brand llao llao that contributes about 25% to its turnover, with 30 outlets across Malaysia.

Though no details have been revealed on which foreign brand they will introduce in the near future, Loo says it will spend resources on its casual dining fares.

“For the past one-and-a-half years, we have invested in casual dining through Define Food.

“We feel that we want to learn and explore the whole scope of the food and beverage business, from fast moving (Tealive, llao llao), casual dining (Define Food) to a restaurant (Hacha Mecha),” he says.

Although interest in the business is strong, Loo remains practical as he foresees the kiosk model growing at a faster pace compared to casual dining.

Define Food, an extension to the brand called Define Burgers was launched in Kuala Lumpur to capture the grey area between quality food and the kiosk model.

The kiosk is expected to serve gourmet burgers based on a takeaway concept.

The long-term goal of the group is to be listed by 2020. Funding obtained from that exercise will be used to open new markets in Europe on a directly owned model.

Opportunities at transportation hubs

NOT all of Tealive’s future stores will be in shopping malls. Loob Holding Sdn Bhd CEO Bryan Loo says transportation hubs such as Mass Rapid Transit stations and petrol stations will help bring its brands closer to becoming household names.

A listing is on the cards for Loob Holding, says Loo

“There are about 3,000 petrol stations in the country, and our vision is to tap into at least 10% of them, which gives us about 300 stores on top of what we now have,” he says.

Tealive is working with Shell, Caltex, Petron and Petronas to sustain Tealive’s growth in the segment in the next three to five years.

On the flipside, Loo is also targeting MRT stations and has been in talks with the respective parties to secure the space.

“We are able to perfect our business model to operate in a small space with a narrow product offering and still deliver in terms of revenue,” he says.

Tealive kiosks at petrol stations can achieve sales of 200 to 300 cups a day, compared to A-class shopping malls in the city that are able to churn out an average of 1,000 cups a day.



This article first appeared in Focus Malaysia Issue 261.