From 0 to $ 65 million in 10 years

From 0 to $ 65 million in 10 years  -  Pastamania's recipe for success

		Monday, Feb 27, 2012 The Business Times ( Singapore )
By Leslie Teoh FOR Pastamania's managing director, Andrew Kwan, quality people form the backbone of every successful company. Mr Kwan's experience at the casual restaurant chain proves this. Despite being unfamiliar with the food and beverage (F&B) business, the gutsy man made the decision to invest in Pastamania in 2002, four years after it was set up. Then, the company had two food court operations, one at Scotts Picnic and another at Lau Pa Sat. Things were 'tough going', which spurred Mr Kwan to reinvent the brand's image. 'Food courts generally don't allow you to brand . . . and we felt that we should go after the younger crowd, the working executives, the women folk in particular,' he says. He fondly recalls how a devoted team of employees played a vital role in Pastamania's early days. 'We had a young team of management staff who, without an extra cent, would have to work at night. It was our due to them that we were prepared to put money behind developing a new concept.' Changes that were made to Pastamania's concept include the colour of the brand logo - from green and black to a more eye-catching bright red and yellow. It also positioned itself as a brand that provides affordable and authentic Italian cuisine. The hard work paid off. Today, Pastamania has 28 outlets in Singapore and 17 outlets spread across Asia and the Middle East. And to Mr Kwan, this shows that what's important in running a business is the people behind it. 'Many people focus on the product and if you have the wrong people doing it, your product will never truly be unique, never truly be breathtaking, so finding good people is key,' he says. Mr Kwan was previously part of Globamatrix Holdings, where he oversaw operations in the solar control window film business. On his decision to enter the vastly different food and beverage (F&B) industry, Mr Kwan noted that it was purely coincidental. 'It wasn't by design, it was by providence really. A mutual friend put me in touch with the former founder of Pastamania . . . In January 2002, we consummated the deal and got into F&B,' he recalls. While being relatively unfamiliar with the industry could be perceived as a major hurdle in penetrating such a competitive sector, Mr Kwan believes that this inexperience may have been an unseen advantage. He says: 'When we walked into this, we had no experience whatsoever and maybe that was a plus because we didn't carry any preconceptions of how a F&B (company) should be run.' According to Mr Kwan, Pastamania managed to see a 24.8 per cent revenue compound annual growth rate from FY2002 to FY2011, despite crises like the Sars outbreak in 2003 and the financial meltdown of 2008. He believes that its resilience is due to its positioning in the market. The cost of a meal at Pastamania can be 'as little as a third of a sit-down fine-dining Italian restaurant', says Mr Kwan. In an uncertain economic climate, conservative consumers would tend to shy away from spending an extra $50-80 on a meal, making Pastamania attractive to them. Mr Kwan believes that Pastamania can fill this niche market for affordable Italian dining. Although a wide array of affordable Asian cuisine is available, the market for affordable and authentic Western fare is relatively untapped, he notes. 'I think there is a market for that, so long as we continue to deliver good quality ingredients, well-prepared, and quick service all together at an affordable price,' he says. In remaining true to the fundamentals of the brand - using good quality ingredients to create authentic Italian food at affordable prices - Mr Kwan staunchly believes in sourcing high-quality produce. He says that it was a common misconception that cheap food is synonymous with low quality. He emphasises that Pastamania imports most of its ingredients from Europe and the United States. Its costs, however, are kept down by buying in volume and economies of scale. Besides this, Pastamania's success is also the result of Mr Kwan surrounding himself with trustworthy and capable staff. 'I think it's people who will drive programmes that will create winning products. When you find the right people, everything else falls into place, the programmes and the plans will all come out and then from there you get really great products.' It is clear from the way he speaks of his business relationships that trust, chemistry, and people played a key role in his decision to acquire Bakematrix - Pastamania has a 60 per cent stake in Bakematrix - which in turn owns the bakery chains Swissbake and Swisstreats. When asked what the rationale behind this move was, he says that it did not begin with a rationale, but was a result of him 'clicking' with Swissbake's managing director Xavier Baumgartner, who was introduced to him by a mutual friend. 'I found him to be very likeable and I think the make- up is quite similar. We may look different but I think our business thinking is quite aligned. Above all else, the people running the business must have chemistry. Otherwise they will always be looking behind (each other's) backs as a partner thinking if he is doing anything that is crooked, or we're constantly fighting over fundamental ways of doing business and that's very unproductive,' he says. The acquisition - which is expected to generate a combined revenue of $65 million this year compared to $53 million in total unaudited revenue last year - is more of a growth-oriented rather than cost-driven exercise, according to Mr Kwan, who has emphasised that he does not envisage any job cuts. When it comes to his staff, Mr Kwan strongly believes that it is important to help them reach their full potential - a belief that is aligned with Pastamania's corporate value to strive to develop its people to 'be the best that they can be'. It is particularly surprising for a businessman like Mr Kwan to speak about qualitative rather than quantitative outcomes. He believes that one of the most satisfying outcomes of the partnership with Swissbake was the opportunity for staff to be cross-trained in different culinary skills, as well as the morale boost and enthusiasm it generated. 'Some of the chefs on my side were very excited when we told them we were going to have a plant tour at Swissbake. Everybody was volunteering because they said this is a new area for them, so I think we have, by this combination, rejuvenated and created a lot of excitement at the companies,' he says. Currently, Pastamania employs about 600 staff while Swissbake has over 200. Mr Kwan says he hopes to add a further 300 employees, but that the biggest constraint would be finding people of good quality to join the organisation. He also hopes that the two businesses will continue to grow together, although he has slightly different aspirations for each. He sees domestic growth as a key focus area for Swissbake in the next few years and hopes to add to its existing 32 retail points in Singapore. 'I really hope to see Swissbake available everywhere, even to neighbourhood areas . . . I want to take away the mindset that 'Oh this is gonna be expensive' but it's not, it is affordable.' For Pastamania, Mr Kwan hopes to continue expansion in regional markets and expects the first Pastamania location to open in the United Kingdom in the third quarter of this year. He says: 'We have come to a point whereby our footprint (domestically) is not yet saturated I would say, but we are starting to look overseas in a more serious way. (We hope to) keep ourselves nimble and fleet footed like a small company, but punch like a heavyweight with the enlarged resources of an upsized corporation.'