From the source – Serge Infanti, Foodco Group
BIO: Serge Infanti has been with Foodco for more than 16 years, working as the group’s director of development until 2007, when he jumped into the captain’s chair as managing director. He’s been steering the ship ever since, shepherding its brands through numerous international expansions.
Foodco Group has been trading in the coffee and food retail categories since 1989 through franchise operations across its Muffin Break, Jamaica Blue and Dream Donuts brands. There are more than 420 franchises trading in seven countries, including New Zealand, China, UAE, Singapore and the UK.
Matthew Elmas: How has Foodco navigated staying relevant in the food retail category over the past decade?
Serge Infanti: We play in the coffee niche and there’s been an explosion of coffee retail. The market sophistication in Australia is also world leading, so as a retailer you have to keep up with coffee trends. If I look at beverage and coffee I would say that as a group the need for specialisation – in-house baristas, skills training and constant beverage evolution – is much more prevalent today than it was 10 to 15 years ago. As a coffee retailer, we have to be leading edge in coffee.
As a food retailer, the trends have been very clear. There’s been a drive towards knowledge. Consumers now need to know more about the products they are consuming and there’s also been a drive towards freshness. Consumers really do expect to have fresh products that are locally sourced and have good provenance. Those things are in the forefront of the purchase decision.
The other thing that’s evolved over the past decade is the need for the total experience. Customers are saying that the environment they are dining in needs to be to their liking and to their pleasure. Little things like furniture and upgrades have become increasingly important. About 15 or 20 years ago, we used to think refurbishment every seven to 10 years was sufficient. Today, you are talking about a refurbishment every five to seven years.
ME: What are those refurbishments looking like for Foodco?
SI: It’s about the consumer space, not so much just about how you are selling your product. It’s about what’s around, part of the customer feel in your shop and what kind of technology is available. Can customers interact with you reasonably and easily? Is their purchase decision made easy or do they have to line up for half an hour? How is your design complementing the customer and the ambience around it? Those things are much more prevalent now.
ME: That ambience is also influenced by the surrounding retailers and the surrounding area. How has that influenced where you’ve decided to put stores?
SI: Jamaica Blue is typically in fresh food or fashion areas; it’s the high-end coffee offer. It will sit in upmarket fashion areas of centres or even in high street. With Muffin Break we talk about ambience. We’ve seen what I call the slowdown or minimisation of the food courts. I don’t think you’re going to get today the cafeteria food courts that were popular in the 1980s and 1990s. Instead, you are going to get a food court that’s much more about providing a lifestyle area for people and the food offer in there needs to be almost restaurant quality. You’re seeing this change in the way the food is being presented to the consumer and if we are playing in those precincts, then we’ve got to move with those precincts. It’s moving very fast.
ME: Are you changing your offering to reflect that? Making it more up-market?
SI: No. There’s a brand for all types of people and you have to be very careful not to cater for the 10 per cent niche market that’s there. You have to cater for your market. Muffin Break is a fantastic middle-class Australian offer that provides terrific value for money and the highest quality products. I don’t want to shift that. I don’t see a need to shift that. Jamaican Blue is much more high-end. It’s a franchise cafe that acts as an independent. What we do with Jamaican Blue is we tailor the local menu to the demographic segment that it’s trying to compete in. Jamaica Blue can act like an independent, but with the infrastructure and support of a franchise chain.
ME: Word is that, like many other retailers, Foodco is moving towards a more customer- centric business model. What’s been first on your agenda?
SI: We focused in on this three to five years ago and it’s something that we’ve embraced across our value system. Our first value is customer service. But you can’t just say the word customer satisfaction. You have to embrace it as part of your culture and then it has to go through your staff and right through your team. Clearly you need to have customer service education and customer skill workshops. All of those things have to happen, but the real thing that we focus on is maintaining a connection. When I say that, I mean that the customer has to connect with you – not only from a personal staff-to-customer perspective, but also in terms of your product range. You need to be relevant. They need to connect with your store fit out, with your social media, with everything you do. When we talk about customer service or enhancing customer satisfaction, we don’t just talk about the transaction, we talk about all the associated things that make the customer want to come to our brand. A lot of retailers say they are embracing customer service and satisfaction, but all they are really interested in is the transaction. They don’t really look around it to ask what else is important.
ME: International competitors like Starbucks are trying to make a mark on the Australian market. What has that done to the way you do business?
SI: Absolutely nothing. Sorry to be blunt, but I have to be honest. The McDonald’s coffee or Starbucks operators are so far behind Australian coffee shops and what we do here that they aren’t really a concern, nor can we learn anything from them.
ME: What could they learn from you?
SI: Where the American chains get it wrong is that they produce very standard fare food and average coffee and try to believe that the brand will bring people to it. It may well do that in the Asian market, but when you are trying to enter a market as sophisticated and as multicultural as the Australian market is, which has wonderful food and fantastic coffee that’s as good as anywhere in the world, you can’t be a Starbucks – they aren’t even in the game.
ME: Starbucks pursues a destination model. The idea is that you don’t just go to get a coffee. You go to hang out or use its Wi-Fi. It’s marketed as a place. You touched on environment earlier. Is that something Foodco would look at?
SI: Yeah. The reason that Starbucks goes down the place format is because it used to compete on High Street in Asia and in America where there weren’t things like free Wi-Fi. In Asia, it’s bloody hot so people try to get into air conditioned areas. But when you are talking about an Australia that’s very much into a shopping centre mentality, it’s different. The shopping malls themselves create the hub, so they create free Wi-Fi, television screens and eat streets. Retailers have to become part of that, not create it all themselves. There’s no way that you can allow people to sit in your restaurant like Starbucks do with free Wi-Fi, with a lemonade for two and a half to three hours. It just makes no commercial sense. Starbucks failed here some years ago and it needs to re-asses.
ME: The Foodco brands are expanding quite aggressively. What’s next?
SI: We have 500 stores in seven countries. We look at expansion strategically. There’s no point in us expanding in a country with two or three stores. That doesn’t make any sense. Our strategic hubs are the UK, China, Southeast Asia the Middle East and Australasia. We’ve got Jamaica Blue stores in the Middle East and we’ve opened up two new Jamaica Blue stores in the UK to complement more than 60 Muffin Break stores there. We’ve also got 25 Jamaica Blues in China. So we’re expanding in those hubs, but strategically.
ME: China has been called the land of opportunity for retailers, but it’s also a very risky area. A lot of retailers have failed. How are you approaching the Chinese market differently to western markets?
SI: With the Chinese market, you have to understand that coffee is not the first beverage. The way you enter the Chinese market is not with an arrogant Australian approach. You need to enter it with a strong brand that has strong fundamentals. But you also need to be prepared to alter your brand to localise it to the Chinese demographic. That means that if we are targeting the young professionals in China, we have to be very active on social media. You’ve got to be flavour of the month. You’ve got to have the right products, but you’ve got to localise those products as well. A mistake a lot of Australian retailers make is to go over there with an Australian proven success story. They can’t cut the mustard because they haven’t adapted or adjusted their product to meet local demand. People in China will drink a higher percentage of cold beverages than hot ones. That’s a simple change that you need to make, but there’s no question that if you get a foothold in China, your brand can become very quickly recognisable because they’re very active on social media and word travels fast.
I’m proud to say that Jamaica Blue is one of the strong premium western coffee brands in China and we’re growing very rapidly.
ME: Where do you see your biggest international expansion opportunity?
SI: The biggest opportunity for us lies in the UK. We already have 60 Muffin Breaks there and growing. The population is three times that of Australia’s and the coffee sophistication isn’t anywhere near the level it is in Australia, so it offers pretty fertile ground. As I said before, we’ve opened two Jamaica Blue stores very successfully and the demand for that brand is through the roof. I can see us growing rapidly in the UK and maybe that will open gateways to other parts of Europe.
ME: That’s interesting. Brexit is forcing a rethink of UK expansion plans for many retailers. What’s your take?
SI: I think we’ll be fine. Food and beverage is a recession proof industry. It doesn’t really matter what’s going on economically. At the end of the day, if you are good at offering coffee and food at the 10 pound mark, then you’re always going to have demand for your products. It’s a huge market. London alone is a large market and you also have all the cities outside of London. The level of quality of the coffee shops are also no where near the Australian level. I don’t think Brexit is going to bother us. We’re in an industry where that won’t affect us.
ME: What about Southeast Asia? It’s been pegged by lots of other retailers, in food categories and otherwise, as pretty fertile ground.
SI: China aside, it’s difficult to do business in Southeast Asia. It’s not an easy business climate. Real estate is extremely expensive. When you’re dealing with sites in Singapore or in other parts of Southeast Asia, you are dealing with rental rates that are the highest anywhere in the world and at the end of the day, you are selling a product that’s $2 or $3. You have to be conscious of the fact that it’s a very low cost product. You have to drive a lot of sales to meet rental expectations. The Southeast Asian equation is not an easy one.
ME: I’m keen to hear about your diversification plan at home. How has that been coming along?
SI: We are clearly already in shopping malls on high street in Australia. Our diversification includes international expansion as well as our recent joint venture with Crocs Play Centre. These are play centres where children go and play laser tag among other things. The only element missing is satisfactory food and beverage. Crocs offer a premium play space for children and we offer exceptional food and dining for their parents. It’s a key area for future growth. We’ve already got 16 up and running and the response has been overwhelming because these centres used to just cater for kids, but now we are catering for the entire family.
ME: Franchising has been in the media for what could be called the wrong reasons over the past 12 months. As a franchisor, how do you approach maintaining long-lasting and mutually beneficial relationships?
SI: We’re business partners at the end of the day. Franchisees are at the front-end and we’re at the back-end, doing strategy and project implementation. We’ve got a great relationship with our franchisees. Recently, we had a national conference with over 850 attendants, which is more than 90 per cent of the total network. Yes, unfortunately some franchisors have hit the press recently with situations that have tainted the franchising industry. We’ve always maintained a healthy relationship with our partners and continue to do so through inclusion.
We fully understand the relationship and what’s involved. The trick to the relationship is to have an element of trust. We have to trust their execution and they have to trust our strategy, and the key element there is communication.
ME: Beverage retail has been undergoing somewhat of a technological renaissance in recent years, with online and mobile integration playing an increasingly important role. What has Foodco done in this area and are there any plans in the pipeline?
SI: We have online coffee purchases, so people can buy coffee online and we send it out directly. Our mobile app development for Muffin Break has gone very well and we are soon to launch a new app for Jamaica Blue, which will be a cutting edge app. In my view, technology is wonderful with the proviso that it does something for the customer. If technology is only an avenue to collect information, then it’s of no value to the customer and I don’t think it’s doing what it’s supposed to do. Technology needs to provide the customer with aides to facilitate the purchase. We’re looking at a situation where a you can go into a store and say your name. We can then say: ‘Hi Matt. Here’s your coffee and bacon and egg roll.’ And that’s the last you see of the transaction. The transaction would then flow straight through onto your credit card. You would have paid for it, collected it and you would move on. That sort of technology to me is something I want to see in our system very quickly.
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