We think there are some excellent opportunities for us to expand, it’s a challenge when your sales are down 20-30 per cent and you’re taking on costs and you’re investing.
My takeaway from last year is that Australian retailers are smart and nimble, and we’re excited to be part of that group of people who are going to evolve and are committed to thriving in something that’s going to be a complicated and challenging couple of years.
IR: What are your plans for the Mad Mex store network?
CY: To get new sites, there’s a long lead time. It’s short-term expensive, but the opportunity in shopping centres is really good. We’re looking at some of the convenience-based neighbourhood centres, where we’ll hopefully get a lot of frequency of visitation and they’ve got ease of access for delivery, too. The CBDs are rough right now and we expect them to be tough for 12 or more months.
Airport locations will bounce back as soon as they start flying planes consistently with open borders. We’ve seen sales rebound and then crash back to near zero as soon as borders close, which is frustrating. We’re at the whims of the political system but with vaccinations, this should end.
IR:A lot of retailers are a bit cautious about the future of shopping centres and the CBD. What are your thoughts on that?
CY: We’ve traditionally gone for grade A shopping centres with entertainment and leisure or high-profile food court locations, and we don’t believe the fear mongering around the demise of the shopping centre. We fundamentally believe the shopping centre is an integral part of the Australian retail landscape and it’s not going anywhere. You can’t compare Australia to the US — that would be to totally misunderstand the nature of Australian shopping behaviour. That said, you could see a 10 per cent decrease in footfall over the long term, which would have big material impact on our revenue and profitability.
We’re avoiding South Australia and the Northern Territory, simply because it’s too hard to manage. It’s expensive, travel’s expensive and the size of the prize isn’t adequate. Western Australia, Victoria, New South Wales and Queensland are really our focus.
IR: Is international expansion on the cards for Mad Mex?
CY: We opened up a store in Singapore in 2019 and in Malaysia in February 2020, but you can’t predict the weather. Both have temporarily closed and we’re in conversations around the right time to re-engage them. In the absence of air travel, we’re focused exclusively on Australia and, when they get the bubble sorted out, New Zealand.
IR: Mad Mex has undergone quite a transformation lately. Tell me about that.
CY: We’ve had a complete rebrand. It started with our signage and visual identity and now it is rolling into restaurants. Our Sydney Central Plaza location was renovated to the new store design in June 2020 and we are in the process of renovating 25 per cent of our restaurants this year. Our restaurant interior design has been a weak point of our brand presentation and we’ll have a lot of new stores and renovations, so we expect to have the new look and feel in the majority of stores by the end of 2022. It’s a massive change and very exciting.
Our brand positioning is around [our slogan] Fresh Fuel For Life and how we bring a laid-back, Californian beach kind of feel to the restaurant. It’s a lot less cluttered, it’s very clean with whitewashed timber, and less eclectic and more confidence-inspiring. We are upgrading to digital menu boards and layering a 60-inch TV into the dining environment, which will play our Fresh Food for Life sports and lifestyle entertainment, featuring everything from surfing and the junior athletes we sponsor to communicating our brand and food values. This digital in-store experience is about sharing our passion and excitement for living a big life. It draws a connection to how healthy our food is and if you want to go out and do awesome things, you need fuel, which will then give you energy to accomplish them. Instead of telling people about products X, Y and Z, it’s about showing them that our food and a healthy lifestyle go hand-in-hand.
IR: Can you tell me more about the Fresh Fuel for Life “FFFL” TV program?
CY: Our Fresh Food for Life youth sponsorship program supports kids aged between 12 and 17 in action sports like skateboarding, BMX bike riding, snow sports, surfing and motocross. They’re fun, energetic and interesting sports to watch and we are building a team of young talent. It’s our first full year and we’ll see it grow over the next couple of years. We’re also sponsoring Surfing NSW and many of the World Surfing League “WFL” competitions — it gives us some visual content. It’s not just about showing people our chicken on the grill, how fresh our avocados are or our real and simple our food is. There might be a little bit of that, to show the authenticity around our sauces being made in Mexico City, but it’s mostly about sharing fun, cool stuff for people to watch while they’re waiting in line and eating their meals and hopefully they’ll see the natural connection between good, healthy food and living a big life.
IR: The digital in-store retail experience isn’t usually brought up when we discuss physical retail.
CY: A lot of people talk about it, but what we’re doing is fairly innovative in terms of communicating our brand value through digital entertainment. More often than not, when we people talk about digital, it is just a really big ad campaign. They are just saying, “We’ve got a five-foot TV screen showing commercials.” That’s great, but it’s not really a digital experience — it’s just traditional marketing with a digital tool, whereas we’re trying to deliver a brand experience. Pragmatically, we’ve got 60 restaurants — we’re not the biggest quick-service restaurant (QSR) in Australia, so how do we tell our story? We tell it to the four million customers who come into our stores every year — it’s an effective way of telling a story, and we believe it’s more compelling than trying to send 400,000 emails a year.
IR: What are your thoughts on how consumers currently view Mexican food as a takeaway food option?
CY: Is Mexican a new category for the QSR market that will have widespread adoption? I believe the answer to that is yes. Our service model is more interactive and we customise meals to our customers preferences, so we’ll have less drive-through locations. Guzman Y Gomez and Taco Bell are focused on the drive-through market, but that experience is less personal.
Our growth plans focus on providing customers a more face-to-face experience, with a higher level of customisation of a product. It’s easier for people with dietary restrictions to get what they need. We’ll be a premium leader on the Mexican side of things, and drive-through will become more a mass market part of the experience. If Guzman Y Gomez can get a billion-dollar valuation, that’s very good news for everyone at the Mad Mex office!
Even though Mexican has been actively growing in Australia for the past 10 years, it’s still a small percentage — maybe three per cent of the QSR market — so there’s massive potential.
Between us, Guzman Y Gomez, Zambreros and Salsa’s, Australia has the most Mexican offers for its population in the world [outside Mexico]. In combination, there might be 400 locations or more that sell Mexican food for a population of 25 million people. No other country other than the US has that density of Mexican offers, so Australia has really embraced Mexican. When you look at the international markets, there really is a whole globe of opportunity. Europe has been slow to pick it up and Asia is very slow. There’s really a massive opportunity there.
IR: Plant-based food and veganism are on the rise, as people become more conscious of their health and the environment. Do you see that as being a significant part of the Mad Mex offer?
CY: We believe we have a moral obligation to be part of the solution (to climate change). We launched Meat-free Monday as a permanent fixture of our menu. Currently the offer is $2 off any vegan or vegetarian product on a Monday. Flexitarian diets are the most pragmatic outcome, so our goal is to make it as easy as possible for people to enjoy a fantastic vegetarian or vegan menu and to have [their meal] taste as good or better than the traditional meat-based option.
The planet has to find a way to survive, but people don’t want a sub-par experience. I’m proud that we’ve been able to deliver products that are as good or better than the real thing, to the point that half of our office is eating the spicy vegan chicken burrito, not because they have a political stance, but because it tastes better than the other options.
In the marketplace in general, the big transformation is that vegan products are now starting to taste really good. Two years ago, it was a minefield, but now really smart people doing great work to make sure the user experience is great and once that happens, then the barrier [for customers] to adopt a flexitarian diet drops a lot.
The second barrier is price. [Plant-based meat brand] V2 is doing great work in the mince space and their values are around driving a great product, but at a price that will get people to migrate to it.
Our goal is to see 30 per cent of our menu sales being vegetarian or vegan by the end of 2023. It’s important to us because we have kids and we want them to enjoy the planet. It’s important because we want to make it easier for people to make that choice. It’s not an ethical position around animal rights, it’s a moral position, we have to help people make better choices that are good for the environment.