'King of buffets' eyes bigger slice of pie

Under founder Neo Kah Kiat, Neo Group has grown to be the largest player in the food-catering industry here, with around 1,100 staff and net profit of $7.4 million. It plans to kick off a new catering concept targeting the high-end market, using the
Under founder Neo Kah Kiat, Neo Group has grown to be the largest player in the food-catering industry here, with around 1,100 staff and net profit of $7.4 million. It plans to kick off a new catering concept targeting the high-end market, using the manufacturing expertise of Thong Siek Holdings.ST PHOTO: MARK CHEONG

Neo Group founder buys stake in food manufacturer, plans overseas growth

Even in his younger days, Neo Group founder Neo Kah Kiat was always focused on the big prize - being the head of a thriving enterprise. At 22, he started his catering business, known then as Neo Garden, with a $15,000 loan, eight staff and no experience in cooking.

"I don't believe in working for someone else," Mr Neo, now 44, told The Straits Times. "I believe in being the boss."

In 2007, the company, which had a sizeable catering business, branched out into food retail.

It opened Niwa Sushi, later rebranded as Umisushi. The chain now has 24 outlets across Singapore and one in Jakarta.

Neo Group listed on the Catalist board in 2012, posting a $3 million net profit in its first year.

Today, it is the largest player in the food-catering industry here, with around 1,100 staff.

Its net profit has more than doubled to $7.4 million.

Its market capitalisation has trebled from $43.2 million to about $115.2 million. The stock closed unchanged at 80 cents last Friday.

Now, Neo Group is diving into a new business - food manufacturing. It shelled out $7.35 million to acquire a 55 per cent stake in food manufacturer Thong Siek Holdings, which owns the DoDo brand of fishballs.

"From the day I listed this company, my objective was to find a manufacturing company that can merge with us," said Mr Neo, noting that it will give him greater control over the food-production process while lowering costs.

The group, using Thong Siek's extensive manufacturing expertise, plans to kick off a new catering concept targeting the high-end market.

Prices would likely be set at around $100 per person, compared with the mid-market price of $50 per person.

"We want to be able to capture the top 5 per cent of the market with this premium catering brand. But we will need time to prepare for this," Mr Neo said.

Neo Group also aims to launch "innovative concepts" that will bring Thong Siek's DoDo products directly to customers while developing new income streams from the company's ready-meal products.

"Both (Neo Group and Thong Siek Holdings) are large companies and we have the same goals," said Mr Neo.

"The partnership will allow us to continue to build on our strong brand and solidify our market leadership as Singapore's No. 1 catering group."

The acquisition, added Mr Neo, was just the beginning of the group's plans for a bigger bite of the catering industry - both here and overseas.

"Our intention is to capture at least 30 per cent of the market share in the next few years," said Mr Neo.

Neo Group has about 10 per cent of the market share in the catering industry.

Its catering business comprises Orange Clove for the mid- to high-end market; Deli Hub, which offers halal food; and Best Catering, which does daily tingkat, or tiffin, deliveries.

Thong Siek chairman and managing director Lim Boon Chay was impressed by the confidence and assertiveness with which Mr Neo - known in his circles as the "king of buffets" - drives the business.

"He's young, but he has a thing for doing business," said Mr Lim.

Thong Siek joins a growing list of businesses under Neo Group's portfolio.

"We need to capture all market segments, so we can capture more business," said Mr Neo, adding that the company's need to grow has been driven in part by its move to a bigger facility in Enterprise Road in 2013.

The central kitchen's capacity is almost four times larger than in previous premises.

Last May, Neo Group set up I Do Flowers and Gifts, which provides floral arrangements for its catering set-ups.

Five months later, it bought over two bakeries: Choz Confectionery, which offers traditional Chinese wedding cakes and cake packages to celebrate a baby's first month, and Fu Yuan, which makes Nonya kueh and traditional handmade snacks.

"Doing business in the food industry today is not easy, especially for the smaller players," noted Mr Neo of his acquisitions.

"But we have the space to accommodate them.

"Why not include these small businesses, especially those that have good products and are in line with the company's proposition? If we don't do it, they will be 'eaten up' by other companies."

Neo Group also opened a 1960s-inspired eatery, LJJ Cafe, in Circuit Road, riding on the trend of nostalgia-themed cafes.

Last November, the group opened its first Japanese restaurant, Issho Izakaya, at the Sports Hub in Kallang.

It also expanded the Umisushi brand to include a new arm, Nanami Udon, offering Japanese noodle meals.

Mr Neo noted that with the new businesses, the group can promote cross-selling and reap economies of scale.

At the same time, it can cater to more people across different market segments.

"We need to appeal to their (ever-changing) tastes to stay relevant in the market," said Mr Neo.

"By allowing more customers to try our food across different concepts, we can build up their confidence in our brand.

"You can think of it as a marketing strategy."

Expanding beyond Singapore is just as important, said Mr Neo.

The group's blueprint for growing overseas will largely comprise acquiring the "big ones" within the food industry which have a good understanding of the local markets .

"Expansion has always been in the pipeline for us.

"We can go (overseas) any time, but we need a solid partner with the vision and the connections to grow the products," said Mr Neo, who is married with two young boys.

He noted that the partnership with Thong Siek - which exports its products to 22 countries, including the United States and Germany - could bring that plan to fruition.

"Thong Siek has the experience and friendships overseas, so it will be easier for them to link us up with the right people.

"The addition of Thong Siek to the company is a very good recipe," Mr Neo said.

As for the type of companies he prefers, Mr Neo said: "As long as it's food, we're interested."

A version of this article appeared in the print edition of The Straits Times on July 13, 2015, with the headline ''King of buffets' eyes bigger slice of pie'. Print Edition | Subscribe