Right ingredients to succeed

  • SMEBiz
  • Monday, 21 Oct 2019

Tightening the belt: While the F&B sector is still growing, there is a noticeable trend of lower spending among the middle-class consumers.

THOSE familiar with the vibrant food and entertainment scene in Changkat Bukit Bintang will probably agree that this strip offers some of the hippest choices for leisure in the city.

But the wide variety of watering holes and eateries in the area also mean that customers are spoilt for choice, and many of the entertainment spots and restaurant operators will be hard pressed to cook up a compelling mix that will differentiate them from the bar next door to capture a slice of the F&B market.

For Olive Tree Group, a leisure and entertainment group that operates a chain of restaurants and bars, the secret ingredients to such a success seems to be the old reliable trio of diversification, innovation and a refined operating system.

The group runs a total of six F&B outlets in Changkat Bukit Bintang itself – under different names, themes and food offerings – that cater to a diverse segment within the area.

“The idea is to capture the largest possible footfall within the area. Around 70% of the group’s clientele are made up of tourists and expatriates, and they usually move around to try out different things in a single night out, ” says group founder and managing director Leslie Jerome Gomez.

A hotelier by training, Gomez learnt the ropes of the industry from his stints in various hospitality groups including India’s famed Taj Hotels.

By 2003, Gomez had set up his first restaurant, Taste of India. Three years later, another Northern Indian-themed restaurant – Ghazal Mahel – made its debut and Gomez has not looked back since. The F&B bug had caught on and the group saw some good growth from 2007 onwards, with new outlets making their mark under various brands and themes.

Olive Tree currently operates some 18 restaurants and bars throughout Malaysia, 12 of which are located within the Klang Valley and the rest spread out over other tourist hotspots including in Melaka, the resort city of Genting Highlands, Johor and Penang.

The brands under the group include Rockafellers Kitchen & Bar, Sutraa, Bar Shack, Pride of India, WhyNot Bar, Olive Kitchen & Bar and the latest addition to the fold, Frangipaani Bukit Damansara.

But Gomez says its main brands, Rockafellers and Rock Bottom, will be the ones driving the group’s expansion plans.

Staying true to Gomez’s roots, the group specialises in Northern Indian cuisine. But over the years, Olive Tree has expanded its offerings to include local favourites and western fare to appeal to a wider group of people. It also added other elements like live music and sports to some of its outlets.

Its mainstay will remain in the food services, and Northern Indian-themed dining still has plenty of room to grow in this region, he says.

Nonetheless, Gomez acknowledges that the market for discretionary spending, including entertainment and dining, is experiencing a slowdown due to weaker consumer sentiment.

But given that Malaysia is still one of the most visited tourist destinations in South-East Asia, the local F&B sector is still able to enjoy some growth and the industry is still big enough for everyone to have a fair share of the pie.Finding the niche

The F&B industry is fiercely competitive, thanks in part to the relatively low barriers to entry in setting up a restaurant. Consumers have also become more discerning and as food entrepreneurs become more innovative, the challenge and need to stand out has intensified in recent years.

Finding your niche can be a difficult task, notes Gomez. Sustaining a restaurant business requires an astute combination of art and science.

The fact that Gomez’s Olive Tree is still thriving with 18 – and counting – restaurants and bars is a testament to the success of its strategy. The group looks to establish a strong foothold in its choice location and aims to dominate the competitive dining and entertainment scene there.

Brands looking to enter tourist hotspots have to offer a unique proposition to capture the widest market possible. Having a niche factor will help a business sell itself here. And with 18 outlets under its belt, Olive Tree is arguably one of the more prominent players in the local F&B scene.

Gomez cut his niche in the Northern Indian cuisine. He believed the concept would appeal to the modern Malaysian palate and serve as an entry point to penetrate the booming tourism market.

“We started with Northern Indian cuisine as it is one of the most saleable and has always been one of the most widely accepted cuisines in India. Northern Indian food is mainly characterised by its spices and is generally less spicy, ” says Gomez.

The group managed to maintain its edge by preserving the authenticity of the food by hiring chefs from Northern India with proper culinary knowledge. This is crucial to maintain the recipes as they are.

There are still growth opportunities to be had in Malaysia’s F&B sector, Gomez notes, and he hopes to fill the gap in the market for an affordable lifestyle-driven dining and entertainment experience.

“We see an increasing number of our clients asking for a combination of fine dining and ‘real’ local fare, ” he says.

Changing trends

Although Olive Tree has grown considerably in the last 10 years in terms of its brands and number of outlets, Gomez points out that there is a noticeable trend pointing towards lower spending power within the middle- and upper-middle-class consumers, a key market segment for the group.

With much talks of uncertainty in the economy, it is only natural that consumers are increasingly a little more tight-fisted in their spending and many are cutting down on unnecessary expenses.

In order to continue luring customers into their establishments, restaurant operators have often resorted to using prices as a competitive advantage, more so in such a competitive area like Changkat Bukit Bintang. While beneficial for the customers, a price war would end up hurting margins and even make a business unsustainable. Notably, the F&B industry has seen its fair share of turnovers as restaurants come and go every other day.

Taking the competition in his stride, Gomez says the group will stay true to its business philosophy of providing value for money. The company is also looking at ways to continue innovating its customer experience and product offering to expand its reach.

“Price competition is often used as a pull factor in order to continuously draw in customers because they are not only competing for the crowd but this is also used as a gimmick to help promote higher margin merchandise such as food sales among themselves. But we look at it a little differently. We focus on retaining customers by offering quality and delivering value for money instead, ” he says.

Moving forward, Gomez says the group is looking at expanding through the franchising method within the next three years. They may also explore plans to bring the business overseas, starting with the regional markets.

Its potential first stop could be the vibrant entertainment and leisure industry in Singapore, he says.

But Gomez wants to ensure that the group builds a stronger foundation for its operating model back home first before it starts exploring new opportunities in other markets.

This includes details such as its food menu, which is planned centrally. This will enable the group to improve on its operating model, products and operating system as it draws from the various trends, cultures and preferences in the diverse tourism market.

The group currently has a sizeable staff of more than 400 people and recorded an annual turnover of more than RM60mil last year.

Gomez says the group also does not rule out the possibility of investing in other hospitality-related segments that could provide synergistic value to its existing entertainment business. This includes his interest to expand into the F&B-themed leisure business.

Olive Tree has proven its longevity in an industry that is often characterised by quick turnover among operators who have to deal with the perpetual question of sustainability. Gomez believes Malaysia’s deeply entrenched tourism industry means the opportunities for future expansions will remain intact.

“We don’t look at the number of competitors or the proliferation of similar leisure and dining offering and wonder if we have reached a saturation point. Businesses will go to where the people want you, ” he says.

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