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19-01-2020, 11:26 AM
The market for any single product (bread, ramen, ba ku teh, hotpot, etc) is limited in a developed market. To grow revenue in a developed market, they had to initiate new products/brands and compete with other incumbents in other markets.
Given their penchant for having very nice fitouts for their stores, I'm guessing that the capex for each store costs about $500k to $1m.
The low margins are probably due to insufficient sales volume. A bowl of hot savoury soup noodles with portions that are at least twice the average bowl of Singapore soup noodle costs only 5 to 10 yuan in China, depending on which city you are in. A fried egg costs an additional 2 yuan, and minced meat an additional 5 yuan. Or you can have rice with 4 vegetables for 10 yuan. If the Chinese wants to have bread, they can get it for 2-3 yuan for a whole lot of it (sold according to weight!). It is not as aesthetically pleasing as BT's bun, but it is tasty.
A bun from BT also cost about 10 yuan. And it is hardly a meal.
Of course, such pricing comparison is not different from Singapore. But while China is growing, it does not yet have the kind of disposable income Singaporeans enjoy.
I believe BT should have understood that the average Chinese consumer do not primarily eat (artisanal) bread. Perhaps they believed that they can create a market for it. If MCD can create a market for burgers, why not BT? You can get a burger (McChicken or double cheese) and sundae/pie from MCD for only 12 yuan, which is comparable in price to a Chinese meal. So I think MCD understood the level of disposable income which Chinese consumers are willing to spend on food, even if they may not be making much money from such sales.
Maybe BT needs to wait for the Chinese consumers to have more disposable income. Maybe BT needs to offer products with more competitive pricing to its Chinese customers.
Given their penchant for having very nice fitouts for their stores, I'm guessing that the capex for each store costs about $500k to $1m.
The low margins are probably due to insufficient sales volume. A bowl of hot savoury soup noodles with portions that are at least twice the average bowl of Singapore soup noodle costs only 5 to 10 yuan in China, depending on which city you are in. A fried egg costs an additional 2 yuan, and minced meat an additional 5 yuan. Or you can have rice with 4 vegetables for 10 yuan. If the Chinese wants to have bread, they can get it for 2-3 yuan for a whole lot of it (sold according to weight!). It is not as aesthetically pleasing as BT's bun, but it is tasty.
A bun from BT also cost about 10 yuan. And it is hardly a meal.
Of course, such pricing comparison is not different from Singapore. But while China is growing, it does not yet have the kind of disposable income Singaporeans enjoy.
I believe BT should have understood that the average Chinese consumer do not primarily eat (artisanal) bread. Perhaps they believed that they can create a market for it. If MCD can create a market for burgers, why not BT? You can get a burger (McChicken or double cheese) and sundae/pie from MCD for only 12 yuan, which is comparable in price to a Chinese meal. So I think MCD understood the level of disposable income which Chinese consumers are willing to spend on food, even if they may not be making much money from such sales.
Maybe BT needs to wait for the Chinese consumers to have more disposable income. Maybe BT needs to offer products with more competitive pricing to its Chinese customers.
