Empire-building Is No Piece of Cake
From a humble cake shop in a small coastal town, Yannick has blossomed into a patisserie chain with millions in annual sales. What challenges did it face on the way?
Empire-building Is No Piece of CakeBy Ming-ling Hsieh
From CommonWealth Magazine (vol. 363 )
The first striking aspect of Yannick chairman Wu Tsung-en is his somewhat odd attire.
As Wu steps out from the company’s product development lab on the second floor of an office building in Taipei’s Neihu District, he is carrying a briefcase and turning off his cell phone, yet he still wears a baker’s outfit and gloves. With more than ten years of experience in professional baking, Wu is quite a rarity among bakery operators in Taiwan.
However, the biggest challenge that Wu has been facing recently is switching tracks from being a good pastry chef to being a good manager.
Yannick’s business has been growing rapidly over the past few years. Meanwhile the company has expanded from its original 20-square-meter store in Wanli, an out-of-the way coastal town in northern Taiwan, to eight retail stores. At the same time, its annual turnover has mushroomed from NT$800,000 to NT$400 million. Presently, Yannick is trying to transform from a legendary seaside shop into a genuine corporation.
Yet during the transition process, the company went through some truly painful experiences. While its total annual turnover grew 30 percent year-on-year in 2006, its total profits declined. Similarly, sales per single outlet were not as high as they used to be.
“I am not very cheerful these days,” admits Wu in his honest and frank manner, adding: “The pressure is too high.”
He has started to rack his brain to find which link in the profit chain is causing the problem.
One factor is the changing business environment. Comparable businesses keep entering the market. As coffee shop chains such as 85°C crop up everywhere, the market is carved up into increasingly smaller pieces. While the pie has gotten bigger thanks to the recent coffee and cake boom, the various coffee shops and bakeries lack differentiation, so customers find it difficult to distinguish among them. Also, when it comes to cake, Taiwan’s consumers are not yet savvy enough to tell good quality from bad. As a result, marketing campaigns easily lure customers away to competing brands.
Adjusting Managerial Capability
Yannick now needs to adjust internal management capability as its sales rise and the number of its stores increases.
One item on Wu’s to-do-list is product cost control and pricing strategy. Wu frankly admits that in the past he used to calculate costs from a traditional baker’s perspective – by only considering the price of his ingredients. Only recently has he come to understand that cost calculations also include expenses for man hours, staff, sales and administration, equipment amortization and so on. Since Yannick did not have accurate cost control, its prices were not able to reflect actual costs. Wu recalls that he unwittingly sold strawberry cakes so far below cost that he effectively “gave away one cake for each cake sold.”
On his path from pastry chef to chain store operator, Wu has been studying diligently.
He candidly recalls that at the outset he thought, “If you’re going to make something to eat, don’t be afraid of people eating it.” He focused solely on customer satisfaction, and seldom calculated figures or thought about managerial issues like profitability.
But now that Wu’s single store has expanded into a chain, he is forced to face certain new issues, such as personnel management and logistics, as well as how to target existing and potential customer groups.
Wu needs to adjust his pace if Yannick is to stay in business for the long haul after the current cake mania has subsided. In 2006 the company introduced an employee stock ownership system to raise employee cohesion. At the same time Yannick switched to round-the-clock production to have its cakes and pastries ready for delivery in the early morning. In January, the Yannick store on Zhongxiao East Road in Taipei is being remodeled. Given that consumers in Taipei like to pay with plastic rather than cash, Wu has also for the first time introduced credit card processing services.
Wu is also anxious to reinvent Yannick, turning the company from a “cake shop” into a “professional confectionery kingdom.” Aside from cakes, the Wanli store is now developing cookies, while the office in Neihu is doing research on chocolate and ice cream. In the future Wu does not rule out producing wedding cookies. And for the first time, Wu has established a management framework, adding new posts to his management team such as quality control manager, sales manager, marketing manager, and R&D manager. He is establishing a set of personnel regulations, and no longer taking all matters into his own hands as he did in the past, overseeing everything without being sufficiently professional.
He has also begun to demand from himself that he think more like an entrepreneur. With fifteen-hour workdays Wu was too busy with everyday issues in the past to think much about Yannick’s mid- and long-term development. But recently he has traveled abroad several times to better understand the global market.
“If problems crop up it’s a good start for understanding what could be changed,” Wu says in explaining his philosophy for overcoming setbacks.
The Yannick story has made many bakers who aspire to found their own companies carefully consider their plans. The challenges that one faces when developing a chain-store business are a far cry from the challenge of running a single store with its own unique personality. For these entrepreneur hopefuls, Wu’s lessons are superlative teaching material indeed.
Translated from the Chinese by Susanne Ganz