BREADTALK TO BUY FOOD JUNCTION! WHAT ARE THE RISKS?

It was announced yesterday that Breadtalk would buy Food Junction for $80 million. When I heard this news, I was surprised but at the same time, personally thought that this decision for Breadtalk to diversify into the foodcourt business was not without risks.

There are two main risks. First the foodcourt industry here in Singapore is already a very competitive one, not to mention that there are so many cafes and restaurants of which an increasing number are offering  meals that are priced just slightly higher than those at food courts but with a better environment.

Next is the dilution of the Breadtalk brand. Already, Breadtalk holds a number of brands like Toast Box, and franchise partners such as Din Tai Fung and Song Fa Bak Kut Teh. So much so that Breadtalk is now like a food holding company. In the past, customers associate Breadtalk with the flossy buns. But with so many diverse eateries which is not really a bad thing in terms of diversification, the question is can Breadtalk become a leader in each of these saturated and competitive food niches just like it is a leader in its main business in the business of bread?

Already it seems to me that Breadtalk’s diversification may be due to the more competitive bread business here. But when it diversifies, Breadtalk is entering into even more competitive industries.

 

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