The Trend Of Bakery: Justo Eat
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 4636 words||✅ Published: 15th May 2017|
Justo Eat is a bakery with experienced bakers serving all customers with undivided passion. The bakery has a wide range of products for the customers, from a simple mini cheese tart to the often sought-after ice cream cakes. The bakery strives to use only the best ingredient in the market in order to create quality products as ingredient plays an important role to baking mouth-watering delicious food.
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When the trend of bakery started growing in early 20s, Alvin Lau flew over to Singapore to learn the skills of baking from the established Bread Story. After several years of training, he came back to Malaysia in the hopes of using his skills to teach fellow Malaysians the fine art of bakery besides to create a better living. The first Justo Eat was formed in 2007 in Teluk Intan with a small number of employees, with most of the operations managed by him. From a humble beginning in Teluk Intan, the bakery expanded quickly to Bidor, Batu Gajah, and several regions in Perak. With 4 bakery and 1 bakery academy to boast in a short span of 6 years, Justo Eat has managed to achieve plenty that most could only dream of.
Breaking sales of more than RM100,000 and also having the ability to achieve break-even point in a short span of 6 months, Just To Eat bakery is indeed intriguing. Hence, we have chosen this bakery for our research due to its remarkable marketing strategy and also the strategic management of the company. Problems that rose during the course of business and how , using sound marketing strategies, the company managed to stay competitive in the industry, all these would be discussed in the following pages, altogether with the discussion of the bakery industry.
2.0 The Environment
Bread is an essential item in all households of Malaysia. It is a necessity that sells very well even in the times of financial turmoil. Though rice is the staple starch for most of the Malaysia population, bread still serves the Malaysia family as it is a choice for breakfast due to the nutrition present in bread.
The production of bakery products consists of a few vital components, primarily, sugar, and wheat flour. Unlike wheat flour, the price of sugar over the years has increased ever since the government began cutting subsidies in January 2010. This has caused a significant of 58.6 percent from Rm1.45 per kilogramme (Ariffin, 2012). The hike in sugar price has caused headaches in the bakery industry since sugar is a vital component in the production. However, on the 3rd of February 2012, the government has signed a long-term sugar supply deal that would peg the sugar price of RM2.30 for 3 years, stretching from January 2012 to 2014. Hence, till then the price of sugar would not fluctuate and this is very favorable to the business.
The value of bakery products in 2003 reached a whopping RM2 billion with an annual growth of RM65 million over the previous year and it is expected to grow by 4% per annum to reach RM2.9 billion in 2006 (Nordin, Simeh, and Shariff, 2008). There was also a growth in production of bakery products by 1.39%, from 259, 800 tons in 2009 to 263,400 tons in 2010. The increase of production and value of the bakery product is due to the increased use of bakery products by Malaysians due to the rising disposable income and a faster pace of life (Shah, 2011) in the last five to seven years. In 5th July 2012, the Danish firm Palsgaard announced its plan to build an emulsifier plant in Malaysia which will be completed in the first half of 2013 (Culliney, 2012). This announcement further reinforces the bakery industry of Malaysia; allowing greater efficiency of the bread production.
The rise of boutique bakery such as BreadTalk, Free Mori, or The Loaf also sparked an increased interest of the public towards bakery products. This latest development of the bakery industry has come to the stage where the choice of buying is not just between white and brown, but a variety of factors due to the emergence of “exotic” range created by these boutique bakeries.
Despite the positive business climate for the bakery industry in Malaysia, the industry still lacks of proper baker association or education that is needed to guide and teach Malaysians regarding this field (Bernama, 2011). Professional training modules need to be implemented in the country in order to create more varieties in the bakery industry and also to gain more knowledge regarding the field. A report released by Euromonitor shows that the retail value of all bakery products in Malaysia has increased from 651.3 million US dollars in 2006 to 742.16 million US dollars in 2011. With appropriate learning environment in Malaysia for the bakery industry, the Euromonitor forecasts that the retail value of bakery product in Malaysia will increase to 871.20 million US dollars in 2016.
3.0 The Industry
Our research is based on a bakery store “Justo Eat”, thus the bakery industry of our assignment is based on the bakery industry in Malaysia, but it is of the bakery industry in Kampar, Teluk Intan, and Bidor instead since these places are where the bakery operates. Since the bakery is not available nationwide, hence, to include major competitors such as Breadtalk or King’s Confectionery which dominate the scene would be unnecessary since they do not provide a direct competition to the bakery in these places. Instead, we would be writing an analysis around these areas in order to provide a better understanding regarding the bakery’s business situation.
The threat of new competitor in the bakery industry in Perak is very low. This is because bakery is actually a specialized skill is hard to come by, therefore to compete in this industry, one needs to be a learnt baker with enough resources prior to his entry to the industry. It should also be noted that the bakery industry in Malaysia is still very new albeit it is very promising, hence there is not a well-known bakery organization that could produce qualified bakers in Malaysia (Bernama, 2011). Also, the start-up capital for this business is also pretty high, ranging from RM50,000 to RM100,000 for the price of the equipments needed for baking. These baking equipments and machineries are essential for business since the business need to produce thousands of breads everyday. The specialized set of skills needed for the business, coupled with an above average cost of start-up capital, make the threat of new competitors in the market rather low.
However, the industry is not without competition. Just-To-Eat faces severe competition in places such as Teluk Intan from a local firm, “Happy Angel”. The Happy Angel bakery is an established bakery in this region, thus they have extensive resources to compete. Happy Angel bakery has competed with Justo Eat by opening branches wherever they operate in the hope of damaging Justo Eat’s sales overtime till it is forced to close down eventually. Happy Angel bakery also has competed directly with Justo Eat using pricing strategies in Teluk Intan due to the advantage it has from economies of scale. The price war between these two bakeries went on for a year with Justo Eat emerging as the ultimate winner, however, when Happy Angel bakery was forced to move out due to the diminishing profits.
Since bread is a type of fast moving consumer goods (FMCG), there’s a variety of substitutes. Substitutes of bread include instant noodles which relatively cost a little higher than bread, yet it provides a better taste for consumers. Whole wheat bread easily available in all convenience store is also a substitute for bread, especially for the health-conscious consumers due to the low level of carbohydrates. Consequently, instant food such as “Twiggies” and “Roti Koko” that can be conveniently consumed are substitute products too since it is cheaper. It should also be noted that the small packets of “nasi lemak” which makes a more filling meal for a cheaper price is also another good substitute product. These products relatively make business a lot harder for bakeries such as Justo Eat because not these products are cheaper, they also offer much better taste than bakeries.
Bread is a product of low-involvement, therefore the bargaining power of buyers in the market does not provide a threat to the industry. The low prices of these products do not affect the customers significantly, hence the buyers alone do not impose a great pressure on the bakery. The real threat comes from the variety of substitute products instead since not only these alternate meal options provide a better taste, these products are also subject to price changes constantly. The bargaining power of suppliers is also limited due to high number of suppliers in the market. Suppliers for bakery usually supply raw material, hence these first tiers suppliers can easily be found in the market. Various suppliers compete for the large account of Justo Eat, therefore most often the power to bargain prices usually fall in the hands of this bakery instead.
4.0 Justo Eat Marketing strategies
Objective of marketing strategy
Product objectives of Justo Eat are desire to grow and enhancing the company’s position in the market. Justo Eat is producing high variety of products and maintaining the high quality of products to differentiate and enhance itself in the market.
The objective of promotion for Justo Eat is to create awareness among customers and attract more customers in order to increase demand.
Pricing objective of Justo Eat is market-share objective. Justo Eat seeks to maximize sales and increase market share for its products.
Justo Eat is having distribution channel objective of establishing direct sales contact with final customer to enhance networking generating good relationship for retaining customer.
The target market of Just-to-Eat is household who frequently purchase its products especially during special event of wedding and birthday celebration. Justo Eat has high coverage of target market because its product can be consumed daily and convenient to target market. The products being sold are also economically affordable to all customers with low price and full satisfied.
Justo Eat has competitive advantage of good networking with its supplier. The good relationships with suppliers enable Justo Eat to acquire high quality of ingredients with a reasonable cost. The high quality of ingredient will further ensure the product quality. In addition, good relationship with suppliers can help to avoid shortage of ingredients. Secondly, Justo Eat positioned as guaranteed high quality of products which can serve as an instrument to retain customers and carry positive word-of-mouth.
The top sales product of Justo Eat is bun. Justo Eat bakery provides freshly prepared bakery buns at all times to ensure fresh baked goods are always available. As a result, fresh and high quality buns produced successfully attracting a lot of customer for frequent purchase. Buns such as hawaii pizza, hot dog chicken floss and garlic cheese are generating more sales compare with other bakery products such as cakes.
Product line expansion is best to described Justo Eat product strategy. In order to expand the market and boost market share, Justo Eat believed that with wide variety of bread and cakes, different taste of customers can be tailored. In general, it also helps to retain the loyal customer by satisfying their desires through providing a wide variety of bread with good quality, innovative and creative design. For example, Justo Eat carrying variety of products such as fresh cream cakes in cheese series, chocolate and coffee series, fruit series, ice-cream series. In addition, Justo Eat also introduced a product line for festival series such as cartoon series, numbering, wedding and engage, and fullmoon series ( Justo Eat bakery, 2011).
On every new opening of branch, Justo Eat rely on banner advertising to grab customer attention. The orange colour of banner can actually brings Justo Eat an identity.
Banner is not the only method in advertising the bakery shop, Justo Eat also use brochure. Creative brochure with some important information about company are distributed. Brochures is a low cost advertising method that used by company to create awareness of company to target market.
With good reputation, Justo Eat enable to form postive word-of-mouth among the customer. Satisfied customers will spread the positive comment and information about company to their acquaintances and peer groups when they are satisfied with the product purchased. This word-of-mouth is effective and efficient in free advertising.
The price range set by Justo Eat for buns is RM1.20 to RM3.60, tart is RM2.20 and each slice of cake is ranged RM3.20 to RM4.50 while 1kg cakes is in price range of RM28 to RM40. In bakery industry, price war is inevitable, price setting of Justo Eat is relatively lower than competitors. This is useful for rapid market acceptance and maximum sales when come to time for intensive competition with other bakery. Competitor of Justo Eat, Happy Angel Cake House set 1kg of cakes in price range of RM30-RM45 which higher than Justo Eat. (Happy Angel, 2010)
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A powerful pricing tactics used by Justo Eat, RM 1 price promotions for all breads. Obviously, this is aiming to increase the sales and market share by attracting new customer. Nonetheless, the core advantage Justo Eat can gain from this price promotion is beating down its competitor. The lauching of RM1 per bread promotion is lasting for nine months in order to gain high profit and generated high market share. Competitors had been killed by Justo Eat in this critical period.
Justo Eat is using direct market channel to reach the market. Justo Eat selling products only in their bakery shop. Justo Eat believed that direct contact with customer is the most effective way to satisfy them.
Justo Eat also distribute products to some entertainment shop and campus cafeteria. However, this only serves as a promotional tactics to reach more potential customer to try on Justo Eat bread. As Justo Eat hold that the using of intermediate channel does not earn much profit to them.
Justo Eat also invited Taiwanese for demostratation in its shops to attract customers and grab opportunity to learn and improve skills from them. Place strategy that using by Justo Eat is pull strategy which involves a massive word-of- mouth to create demand for product that draws the consumer to seek for it. Pull strategy can easily gather customer feedback on ways improving products. This strategy also can create high demand of products in a short time especially during the period of new open bakery branch.
5.0 Justo Eat challenges and its course of action
Despite Justo Eat’s success, every business surely has to face some problems and challenges among the industry. The trend of the business will lead Justo Eat facing the lowest point of the career with the poorest sale performance due to bread is not the main course for people daily life especially Malaysian. People have other choices of foods such as noodle or rice. In addition, Justo Eat is small in size and the shop recognition is not popular in Malaysia compare to those famous bakeries such as “Bread Story”. Thus, although the sales is high at the beginning stage, yet the sales drop for a certain period when consumers no longer feel fresh with the bakery. This is a common phenomenon for all businesses. The dropped sales caused Justo Eat to rethink its strategy in order to bear the huge business expenses. As a store with low profit still need to pay for rental, water and electric bill, and employee wages. This kept a critical question for Justo Eat to maintain the business at this short term trough trend.
To maintain and even enhance the business during the trough point of the trend, Justo Eat expand the business by opening more branches in other area. The new branches can acquire more customers to gain more sales and eventually increase the popularity of Justo Eat. By doing this, the profitable branch can compensate the low sales branch. Instead of controlled by the trend, Justo Eat take initiative to open bakery academy which provide bakery course. The courses include one day self-interest DIY baking class, specialist certificate course, and professional diploma in baking and confectionery. Different courses had fulfill different student needs to learn a bakery skill. It also brings revenue to Justo Eat. The students who joined the courses in the first year of the commercement of bakery academy can enjoy the priority for partnering with Justo Eat to start own bakery business. By doing this, Justo Eat believed that their venture can be sustained despite the slow trend at certain period.
In order to maintain the bread and cake business during the slow trend, Justo Eat put more effort in ensuring the performance at store level. The management emphasizes in cleanliness and hygiene of the shop. This helps the firm to earn some credits for the operating environment. It will influence perceive value of consumer, and then it will affect consumer’s purchasing decision making. Furthermore, the quality of product never been neglected and the best service is provided for customer. To establish employee morale in doing this, Justo Eat management had built up a clear reward performance system culture among the employee. Justo Eat only hire those employee with capability and good working attitude. Moreover, monthly meeting held in headquarter with the entire branch manager is necessary to understand every branch situation and giving opinion to improve the management team. During the meeting will discuss the problem facing and solution in different branch. Therefore Justo Eat can ensure the employee provide the customer with best service to increase customer satisfaction so that positive word-of-mouth can be established among the customers. With this, customers are willing recommend the bakery to others.
When considering a business, location is always a very critical element to be considered. The classic advice “location, location, location” is right on the mark for a business. The same is to Justo Eat, the location plays an important factor that lead to the firm success. Justo Eat bakery has the fifth branch in sitiawan early in the year of 2009. The opening of this branch had boom the bakery industry in sitiawan at the early stage. Justo Eat had ripped off majority of the market share from the competitors in that particular area. The shop was perceived to be placed at a good location as it located at the main street in Sitiawan and it was located beside The Store supermarket. Initially, Justo Eat believed that the exposure and the awareness of Justo Eat can be exploited from The Store as the bakery shop is viewable from The Store. Thus, the customer surely can notice and recognise the shop. Nonetheless, the shop location is believed to have satisfied number of pedestrian.
However, few months later, the sales had dropped tremendously. Justo Eat overlooked the attractiveness of the location. Although there is many customer patronage The Store, but they are not guaranteed to visit the bakery shop. What’s more? Justo Eat overestimated the pedestrian traffic at the particular place. A business should ensure that the area is to be guaranteed to have pedestrian around the shop location from time to time. There is lack of pedestrian around the bakery shop, or can be inferred that during day time, there is not much pedestrian along the road. Therefore, in the end, Justo Eat decided to milk this branch to avoid further losses. Fortunately, the company’s sales from the early period is enough to compensate the later stage loss, thus the company able to cover the initial start-up cost and any other operating expenses.
The location problem not only existed in Sitiawan, the bakery branch in Kampar also faced location problem but it derived from another aspect. The increasing population in Kampar is really an attractive factor which can gauge business to come in. The number of student no matter in TAR College or UTAR is increasing, the company can exploit this opportunity to gain market share in Kampar. At the opening, the students are also attracted by the RM1 bread promotion, Justo Eat had also achieved high sales at this stage. However, Justo eat failed to anticipate the student study period. Students from both college and universiti will have a 3-week of semester break after final exam. During this time, they will not been in Kampar, therefore, there will be very low sales during that particular month.
During the semester break month, Justo Eat can only rely on the sales from household in Kampar. Unfortunately, the location of the bakery shop only serves as a convenient place for the student in Kampar but not for the resident in Kampar. After few semester of lost, Justo Eat decided to milk this branch. Although the location is not suitable for selling their product, yet the store is remained and turns into a bakery academy. The idea of bakery academy is not merely for solving the problem in Kampar, it is a new strategy formulated by Justo Eat for future expansion as mentioned above. Since Justo Eat was searching for store space for bakery courses, while the bakery shop location is suitable for opening bakery academy, Justo Eat subsequently exploit the store space in Kampar to open their first bakery academy. By doing this, Justo Eat can eventually reduce the cost in market research and store renovation in Kampar.
6.0 Suggested alternate courses of action and its implementation
To engage in business in a good location is essential to attain exposure in the short-term and to gain profit in long run as agreed by every entrepreneur and businessman. However, by depending solely one’s own “sixth sense” which is considered as an entrepreneur’s alertness, is not always reliable. Therefore, it is critical to conduct a thorough survey and analysis before entering a market and location. This can help a company to better understand what the attraction in that particular area or location is, how to draw potential target customers and who its competitors are. Justo Eat, a family-style bakery shop, should create a small marketing team in which they gather useful information, analyze the new shop locations and strategies as well as carry out simple surveys in a particular location to ensure there is a high chance of being able to target its customers. The founder and brains behind Justo Eat is a successful entrepreneur who had depended on his business acuity to correctly analyze the potential success of a location for a new shop, but there have also been some unforeseen mistakes which is the reason the small marketing team. The marketing team will be able to assist him by delving deeper into his judgment and help him explore his ideas by using survey and analysis research from his marketing department.
Tea break is an increasing trend in Malaysia among youths, young adults and oldies, where they will spare some time for a short break no matter how busy they are. To seize this golden opportunity, Justo Eat should include different types of beverages in their shops and chairs and tables where customers can easily enjoy a combination of bread and coffee, and think of Justo Eat when they want to have a tea break. Other than that, the company can also improve the quality of the cake by providing training for its employees. This is due to the poor emphasis on cakes, rather than bread from the company. When compared to the breads, the sales of cake of the company are not always on target. For that reason, improving in the quality of their cakes may be an advantage to the company, to an extent, boosting its sales and revenue. The customers can not only have bread but also enjoy cake during tea time in any Justo Eat shop. Although this will be another operating cost to the company as the company has to increase the number of employees, in the long-term, the company is able to increase its profit and target another new opportunity, enhancing the patronage of customers. This will be its competitive advantage in the bakery industry, as opposed to being just limited to only selling bread and pastries.
The overall marketing strategy used by Justo Eat targets the family-based markets. Families often go to bakeries to buy different breads for their children’s breakfast, for them to bring to school or serve as the lunch for the adults. However, there are also unmarried individuals and youths, who prefer more variety in their lives. The variety of choice in Justo Eat is limited and after some time, the single individuals and youths will begin to feel bored due to the lack of new variety. In regards to this, Justo Eat can implement a ‘Weekly Special’ program, where they introduce new breads to spice things up. This will encourage them to patronize the store at least once a week, using the weekly special bread to attract them, which will boost sales and allow differentiation among the other bakeries in the area.
Justo Eat has good strategies to overcome the company problem, and it also has a complete management system for the daily operation. Throughout its five years of existence, Justo Eat has developed the organization with more and more branch. Developing the business had created the well-known reputation of company.
However, in spite of the successful strategy and expansion of company, the future of Justo Eat is challenging. The major challenge is competition among the industry. The company do not have brand strategy that customer can differentiate the company product when compete with others. It does not have a unique product that able to impress the company brand. In other words, there are no products that can makes customer to recall Justo Eat when they think of breads or cakes. Secondly, culture and eating habit towards the Malaysian when having the main course. Consumer may not eat a bread or cake for their lunch or dinner but they will have noodles or rice. Breads and cakes will not be their only choice when considering a meal. Moreover, the society is moving towards healthy food habit. This creates a challenge for Justo Eat in considering the ingredients used in cakes and breads baking.
In order to make the first decade, Justo Eat has developed the business by opening bakery academy. It is not merely for increasing the profit but also serve as an opportunity for future expansion. The graduation candidates from Justo Eat can partner with the company to open branch in other location. Therefore, company can have a sharing of the business risk with others and expands the business at the same time. It also helps the company to be well-known as the students will probably spread their experience to others.
Upon the venture of Justo Eat, it cannot be denied that the observation of the market and a strong network relationship can really affect a successful business thoroughly. A complete and appropriate management system is essential for daily operation. Still, it is very important how a person can implicate the experience or learning to the venture.
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