BreadTalk eyes Japan, US markets as it forms $3m joint venture with rice exporter Shinmei

(From left) BreadTalk Group chief executive officer Henry Chu, chairman George Quek, Shinmei Corp President Mitsuo Fujio and Shinmei USA Corporation chief executive officer Mitsuzo Fujio at a news conference at Shinmei Corp's headquarters in Kobe on
(From left) BreadTalk Group chief executive officer Henry Chu, chairman George Quek, Shinmei Corp President Mitsuo Fujio and Shinmei USA Corporation chief executive officer Mitsuzo Fujio at a news conference at Shinmei Corp's headquarters in Kobe on Dec 22.PHOTO: SHINMEI CORP

KOBE - Singapore-listed food and beverage company BreadTalk Group will form a S$3 million joint venture with Japan’s largest rice wholesaler Shinmei Corp.

The 115-year-old Kobe-based company, which is also Japan’s largest exporter of rice with a 30 per cent share, owns the Genki Sushi chain of conveyor belt sushi restaurants.
 
The joint venture firm, known as BTG-Shinmei Venture, will be incorporated in Singapore and begin operations next month. The BreadTalk Group holds a 66 per cent stake, while Shinmei owns the remaining 34 per cent, the two companies announced on Friday (Dec 22).
 
This is the BreadTalk Group’s first partnership with a trading company, and comes a year after the two firms began talks.
 
With this venture, the group eyes cost savings for customers, entry into new markets such as the United States, Europe and Japan, as well as a new revenue stream in the selling of ingredients.
 
BTG-Shinmei Venture’s business is in purchasing ingredients and processed foods, including flour, rice, sugar, dairy products and seafood, either from local producers or from Shinmei’s group of subsidiary companies.
 
Shinmei owns a variety of businesses in rice and processed foods, seafood, fruits and vegetables, as well as in companies dealing with food logistics.
 
BTG-Shinmei Venture will then provide these products to the BreadTalk Group, which already uses premium Japanese ingredients, including Shinmei brand rice, but hopes to introduce more items that tap high quality produce grown by farmers in rural Japanese agricultural regions. These include Hokkaido, where Shinmei has a big footprint.
 
This will allow better cost efficiencies, and the company is targeting at least a 1 per cent reduction in purchase value, which is now estimated at S$100 million a year. 
 
The partnership, potentially, will also allow the BreadTalk Group to secure ingredients in bulk at a lower price – of which any extra ingredients can then be resold in what will be a new source of revenue for the company.
 
BreadTalk Group’s chief executive Henry Chu said: “As an example, instead of buying 10 tons of rice as before, we might be able to buy 20 tons – of which we could use 10 tons for our own business, and sell the remaining 10 tons to other companies.”
 
He added: “With this trading company, we will have the opportunity to sell to other F&B players, or even other bakeries or restaurants. This trading company is not only important for our own demand, as we also can learn from Shinmei’s buying and selling processes.”
 
Meanwhile, both companies hope the deal will open doors for them into new markets.
 
The BreadTalk Group is in 17 countries in Asia and the Middle East, operating nearly 1,000 stores in all with brands such as BreadTalk, Toast Box, Food Republic, Din Tai Fung and Song Fa Bak Kut Teh (Din Tai Fung’s outlets in Japan are, however, not managed by the group). 
 
It will open its first Song Fa Bak Kut Teh outlet in Shanghai on Jan 26, while the first Din Tai Fung outlet in London is due to open in the third quarter of next year.
 
Group chairman George Quek said the company hopes to launch its first BreadTalk outlet in Japan next year, either in Tokyo or Osaka, with other brands including Food Republic and Song Fa Bak Kut Teh in the pipeline.
 
“For a Japanese bakery to open in other markets is very common, but for a Singapore company to be able to get a foothold (in Japan) – the partnership is a very big milestone for us,” Mr Chu added.
 
This is in line with the group’s ambitions towards eventually becoming an “international brand”, Mr Quek said, describing its current footprint as a “more regional” one.
 
Beyond Shinmei’s strong presence in Japan, the company also hopes to leverage Shinmei’s presence to expand into the US market, where the Japanese firm opened a production facility in Sacramento, California, in 2015.
 
Shinmei, meanwhile, wants to tap the BreadTalk Group’s network to expand abroad, including to cement its presence in South-east Asia and China.
 
Shinmei president Mitsuo Fujio said he hopes to introduce new restaurants in Singapore and the region, leveraging the know-how of the BreadTalk Group. These, he said, could range from yakiniku grilled meat to ramen eateries, and shabu shabu hotpot to Japanese curry restaurants.
 
He also expects the partnership to give a fillip to Japan’s shrinking agriculture sector, given that it will connect, through Shinmei, rural farmers with international markets.
 
The latest joint venture caps a year of deals for both companies. BreadTalk joined hands with Song Fa Holdings, which operates the bak kut teh company, in July. Shinmei’s Genki Sushi had also bought a stake in Akindo Sushiro, Japan’s market leader in conveyor belt sushi, in September.