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No Signboard's pivot to Western tourist market backfires, but it is making adjustments

Jeffrey Tan
Jeffrey Tan7/23/2018 08:00 AM GMT+08  • 7 min read
No Signboard's pivot to Western tourist market backfires, but it is making adjustments
SINGAPORE (July 23): With its signature white pepper crab — a standout dish compared to the typical black pepper and chilli flavours — No Signboard Holdings enjoyed its best years during the 1990s and 2000s. From a seafood stall at Mattar Road Hawker
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SINGAPORE (July 23): With its signature white pepper crab — a standout dish compared to the typical black pepper and chilli flavours — No Signboard Holdings enjoyed its best years during the 1990s and 2000s. From a seafood stall at Mattar Road Hawker Centre, the business expanded gradually into a chain of four restaurants, including one on Geylang Road run by relatives that is not part of the listed entity.

In recent years, No Signboard has struggled to grow its business as quickly after it tweaked its recipe to make the crabs less spicy for Western tourists’ taste buds. The move backfired. Revenue has been declining since 2016. For the past five years, the company has been losing market share to rival seafood restaurants. For the most recent 2QFY2018 ended March 31, No Signboard’s restaurant segment posted a 9.8% y-o-y decrease in revenue to $5.1 million.

“If you visit our restaurants, you will see only [mostly Western] tourists. [Other than them], other diners could be there for a corporate function or a celebration. You won’t see a casual Singaporean diner,” says Sam Lim, No Signboard’s managing director, in a recent interview with The Edge Singapore. “It wasn’t [always] so,” he laments.

Lim also reckons that No Signboard’s weak performance can be attributed to its positioning as a premium brand, which makes it less accessible to consumers with lower spending power. Rather than the more common crabs sourced from Sri Lanka, Indonesia and the Philippines, No Signboard’s restaurants serve Alaskan, Snow and Giant crabs, which cost significantly more.

To arrest the decline in its seafood restaurant business, for the past year, Lim has reverted to the original white pepper crab recipe first created by his late grandmother Ong Kim Hoi, who started out with a humble hawker stall that paid more attention to the food than the need for a signboard — hence the name today.

For the company as a whole, Lim has put in motion plans to diversify into several new and different F&B concepts simultaneously. They include a mass-market seafood restaurant business, a hotpot franchise and a local-inspired fast food restaurant business.

Last but not least, No Signboard has also taken full ownership of a loss-making beer business in which it used to hold a majority stake. Lim has plans to exercise better control and turn it around.

Lim is not worried that going into several different new businesses will be too much of a juggling act. He is confident he is leading the company in the right direction. “There is more to come,” he says.

Investors, especially those who came on board during the company’s IPO last November, are clearly hoping that Lim’s plans will pan out. From the offer price of 28 cents, No Signboard’s share price dropped to as low as 15.4 cents on June 8.

The lower earnings did not help. For 2QFY2018, No Signboard reported earnings of $474,000, down 71% y-o-y. Revenue in the same period was up 19% y-o-y to $6.7 million, as it saw top-line growth from the beer business.

Lim’s own purchases of No Signboard shares from the open market in late June at just below 19 cents apiece, coupled with the announcements of new ventures, helped lift the share price somewhat. Since, then, however, trading activity has diminished significantly.

Multi-brand, multi-concept

No Signboard’s move into multi-concept F&B offerings under one holding company mirrors that of established players such as the BreadTalk Group, which runs not just bakeries but also food courts and restaurants of different kinds. Another new listing, ­Koufu, also has multiple concepts. For example, it differentiates the positioning of its various food courts by using different names.

No Signboard kicked off its multi-concept initiative on June 18, when it announced a franchise agreement with Little Sheep, a leading hotpot chain from China with more than 280 outlets worldwide. Under the terms of their agreement, No Signboard will open one Little Sheep restaurant a year in Singapore in the first five years.

Lim is aware that the hotpot market here, while thriving, is highly competitive. For one, there are already around a dozen hotpot brands islandwide, including market leader Hai Di Lao, another leading hotpot brand from China, which has eight outlets here. Lim is confident that Little Sheep’s branding and popularity is comparable to Hai Di Lao’s. “If they can like Hai Di Lao, why can’t they like Little Sheep too?” he asks rhetorically. No Signboard will invest between $400,000 and $500,000 for each Little Sheep outlet. Lim is confident of breaking even within a year.

No Signboard is also planning to try out a new quick-service restaurant food concept that taps Singaporeans’ preference for local food. Similar to the Little Sheep franchise, No Signboard plans to invest $500,000 for each of the four outlets it targets to open by early next year.

To be called Hawker, this new chain’s menu will include items such as chili crab burgers, Hainanese chicken rice burgers and roti prata wraps. Lim says the inspiration for this concept came from the success of fast food giant McDonald’s nasi lemak burger campaign last year. He thinks the company can replicate that success with Hawker, and revenue can be further driven by closely partnering with delivery service providers. “Either you follow what people do or you [come up with your own idea],” he says.

Complementary beer business

Last but not least, No Signboard has moved to consolidate its ownership of a beer business it acquired just months before its IPO. On June 19, No Signboard announced that it would be spending $400,000 to buy the remaining 20% of Danish Breweries, which sells beer under the Draft Denmark brand name. Contrary to what the brand name suggests, the beer is brewed by third-party companies in Vietnam and Cambodia.

Currently, Draft Denmark beer is distributed in around 300 outlets, comprising mainly pubs, coffee shops and clubs. Despite this reach, the beer business is not doing well. It recorded a net loss of $400,000 for the quarter ended March 31, as revenue was insufficient to cover the increase in operational costs. No Signboard attributes the losses to “logistical issues”.

Lim believes that with full control of the company, he will be able to set things right. According to him, the previous management spent the marketing money in the wrong places. They should have focused on the supermarkets and convenience stores first before reaching out to the pubs and restaurants, he says. With Draft Denmark now available in cans and bottles, No Signboard is ready to make the push into what Lim believes are the right distribution points.

Lim recognises that competition is tough in the beer market, but he believes Draft Denmark can position itself somewhere between the mainstream brands such as home-grown market leader Tiger and imported brands such as Asahi.

He also wants to make the beer and food business complement each other. Customers who buy Draft Denmark beer by the carton may receive a voucher that can be used at No Signboard’s various F&B outlets. And, of course, Draft Denmark beer will also be sold in No Signboard and Little Sheep outlets to diners who need to cool off from the hotpot or pepper crab.

Further down the road, Lim has plans to expand into other markets such as Thailand, Cambodia and ­Vietnam. Along the way, just like what it is now trying in Singapore, No Signboard will have to identify what local palates prefer so as to get its offerings right. “We have to be very flexible. We need to know the market and who our audience is,” he says.

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