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3 Drivers For Jumbo Group Ltd’s Success

Jumbo Group Ltd (SGX: 42R) is a Singapore-based company that runs food & beverage retail outlets in Singapore as well as China. It has a number of different brands in its portfolio, with the most well-known – and certainly the most important revenue contributor – being its namesake seafood restaurants.

The company had announced its latest results on May 2016 and turned in some solid growth numbers. For the six months ended 31 March 2016, Jumbo’s revenue had grown by 13.5% year-on-year to S$70.6 million while its profit had spiked by 42% to S$7.9 million. The balance sheet also held very little debt – there was S$51.3 million in cash and equivalents and just S$753,000 in total borrowings.

Jumbo’s numbers made me curious about the possible ingredients for its success. As part of my research. I found a recent interview that Jumbo’s chief executive Ang Kiam Meng had done with The Business Times. The interview contained some aspects of the company’s business that I think has contributed to its results. Here they are:

1. Standardization

Jumbo has created a set of standard operating procedures for the operations of its food & beverage establishments. The company does not have to depend on a skilled chef to make its famous crab dishes – what’s needed is for its employees to attend the company’s simple training.

In the Business Times interview, Ang said: “We have already made it [referring to the company’s chili crab dish] so simple that my 15-year-old son can make it too.”

The presence of standard operating procedures could also make Jumbo less susceptible to labour cost increases. Jumbo is currently planning for three more outlets to be opened in Shanghai China (the company already has three restaurants in the city) over the next two years.

With the standard operating procedures in place, it may help the company with food-quality and as well as profitability issues when it comes to the opening of new restaurants.

2. Trade secrets

While standardisation helps Jumbo expand its business relatively quickly, it raises the question of how the company’s restaurants can differentiate itself from competitors.

The answer lies in the company guarding important trade secrets closely. For instance, Jumbo’s recipe for the paste used in its chilli crab dish is a secret. The chili crab paste used in Jumbo’s restaurants in China are actually made in Singapore and air flown over.

3. Focus on productivity

The company has long emphasised the importance of productivity in its business. For example, it was stated in the Business Times interview that Jumbo was one of the first few Chinese restaurants to implement point-of-sales systems 20 years ago.

In 2015, Jumbo was a winner of the Singapore Productivity Awards for the F&B segment. Some of the company’s achievements that helped it to win include the creation of a central kitchen in 2008 to help with the efficient preparation of food. The company’s introduction of electronic table reservation and walk in systems was also a highlight.

Jumbo’s business has grown steadily over the past few years. Its revenue has climbed by 50% from S$88 million in fiscal 2012 (fiscal year ended 30 September 2012) to S$131 million in the 12 months ended 31 March 2016. Meanwhile, its profit has more than doubled from S$7.5 million to S$15.1 million. Let’s see if the company’s three traits I’ve shared above can help it to continue growing.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat doesn’t own shares in any companies mentioned.