Chatime boss Carlos Antonius sees opportunity in leveraging data as online ordering surges

He also teased a FMCG line for the bubble tea brand within the year.

For Chatime Australia CEO Carlos Antonius, the industry has a long road ahead before attaining some sort of new normal.

“Like everybody else, I think we all share, particularly a few months ago, high levels of anxiety and stress around what COVID-19 was having an impact on on the vulnerable in our society. And more importantly, with very little sort of understanding of visibility of how long this pandemic would go on for, how that would relate to not just me personally but our employees, business partners, suppliers, etc.,” he told QSR Media.

Challenges were clear for the bubble tea chain’s chief executive, despite its franchisees being able to trade via delivery and takeaway and before restrictions were further eased. Antonius said they experienced significant revenue decline of up to 60% during the peak of restrictions in the past months.

“For a lot of the [franchise] partners that have been in the system for a number of years, they fortunately had reasonable cash reserves to be able to manage during the current period. The challenge was particularly for those newer investors in the business [for] 12 to 18 months or less than that,” he said.

Aside from federal and state governments able to provide subsidies and tax breaks to support small to medium businesses, Chatime has supported partners by discounting royalty and marketing fees since March, removing fees applicable to aggregators along with extending payment terms to help them manage cash positions.

Concerns remain in outlets within CBD areas, given workers have yet to return to capital cities, along with tourists and international students that are part of the chain’s usual base.

“Whilst we've got rental concessions and deferments in play and have been legislated, it really depends on how long it takes for the general public to feel safe to revisit retail environments [...] It’s about how we manage those partners and their businesses over the next couple of months,” he explained.

Accelerated shift to online ordering, FMCG channel explored
Whilst it won’t offset sales declines at this stage, Chatime is seeing a surge in the use of their in-house app and loyalty programme. Boasting over 650,000 registered users, Antonius says the pandemic revealed an accelerated shift in revenue to online ordering from brick and mortar.

“What COVID-19 has potentially done, amongst other things, has driven consumer behavior to more QR codes, app-based platforms, etc. from a safety perspective, but also [from] an enhanced customer experience perspective if it's been structured and set up correctly.”

“For us, there's been a significant body of work continually being done behind the scenes about how do we continue to leverage the insights that we're capturing from a data perspective.”

Antonius also revealed that they are working on their own FMCG range of products, launching later this year.

“That will be a syndicated national approach to having Chatime in another convenience channel as a separate brand enhancement or product experience,” he said.

Drawing on its previous co-branded initiatives, he also said that Chatime is looking to pair with “large, global” FMCG brands.

“We're looking to finalize that shortly with the view to go to market in Q3 this year,” he revealed.

Antonius remains confident in bubble tea’s bounce back in the market, surmising that the pandemic “leveled the playing field” in vying for locations.

“The Australian market is highly regulated around employment law, etc. and we were having a lot of brands come into the market, and they were taking very high commercial rents that we didn't believe were sustainable even when we did our financial analysis. What COVID-19 highlighted is a lot of these operators are not reopening because they didn't have the warchest of cash to manage,” he said.

“They also didn't have the opportunity to capitalize on the federal government's JobKeeper stimulus package. But to do that, you had to be doing the right thing in the first place. So there was a significant signup of people that were interested in JobKeeper as stimulus packages for employees. But a majority of them didn't progress with it.”

Lower site forecast but “higher caliber” of potential franchisees seen
In terms of expanding, Antonius says the Chatime won’t be able to reach their goal of having 200 stores this year. The chain stands at over 120 stores.

“One, we've missed our target last year, which was at 150. COVID-19 definitely had an impact on what our forecasts are. Originally, our forecast was to open 38 locations this year but that's revised now to 15 locations, given this year is definitely a tale of two halves. So the first half of the year is done and dusted, so to speak. But our agenda is still very much focused on growth,” he said, noting that they are seeing a “high caliber” of prospect franchisees during the current period.

The group, Antonius says, remains committed to identifying a second site for their Korean chicken brand Goobne this year. Unlike their flagship store in Sydney, he expects the second location will have a smaller footprint and focus on executing delivery.

“What COVID-19 potentialy provided, because there are a lot of restaurants going out of business, is opportunity for us to be a little more selective on the sites that we're considering, but also capitalizing on sites that...can reduce our capital costs in investing in that second site,” he said.

But will Chatime add a third brand to their portfolio?

“Potentially in time. We've got a lot on our plates at the moment between potentially launching a few more verticals from a chart perspective, and getting through the COVID-19 challenges that we're facing at the moment and opening the second Goodne. It all bodes well for a very aggressive and very busy second half of the year,” he answered.

“But never say never. We're always looking out for those opportunities and what COVID-19 potentially will bring potentially at the back end of the year is a lot more M&A opportunities, not just for our business, but I think for a lot of businesses - whether good brands that potentially are going to be able to trade through this period, that they may need a stronger brand to come in and provide some support and guidance to continue to trade.”