Tuesday, March 19, 2013

Red Crab: Developing Multi-Brand Restaurant Concepts Case Analysis

RED CRAB GROUP: Developing Multi-Brand Restaurant Concepts

Situation Analysis
The Red Crab Group started when Mr. Raymond Magdaluyo’s mother was offered a commercial space at the Mimosa Leisure Estate in 1998. The mother did not want to pay for expensive franchise fees so they decided to develop a restaurant concept on their own. She started by concocting their own crab recipes with the help of some friends and then hired consultants to complete the rest of the menu. The main concept was vague; they were just known to serve good local food. Raymond Magdaluyo’s involvement was mainly on the marketing side after leaving his job as a researcher at the AIM.

Relevant Facts:
·         The first Red Crab restaurant succeeded even without a specific identity.
·         Though Raymond Magdaluyo used to be a research assistant at the AIM, there was no market research involved in the initial stage of the Red Crab Group.
·         After a year, they decided to open a Red Crab branch in Malate, Manila. Sales were good during the first 5 month and then a 30% decline happened after that. This is when they realized that they need to study and analyze the location and situation of their businesses.
·         In 2001, they opened two more branches in Tomas Morato and Alabang.
·         During the process of opening the two branches, Raymond Magdaluyo started to conduct market research.
·         In 2002, Greenbelt invited him to open a restaurant in their new mall, Greenbelt 3. They required him to come up with new and unique concept. He came up with the Seafood Club.
·         Likewise, in 2004, the new Power Plant mall, also in Makati, invited him to establish a unique concept. He demanded for a space in the ground floor where he established Crustasia, a high-end Asian-inspired seafood bistro.
·         Unlike in his previous restaurants, he conducted intensive market research and product development for Crustasia. He even had consultants from abroad. They had 15 food tasting sessions covering some 300 recipes.
·         Their business model is “single product, multi-concept approach”
·         They believe that the product follows the location; you should find a location first and from there you can study and analyze the location to provide what the local market needs
·         For advertising, they believe having influential people (celebrities) endorse their restaurant to have the best impact.
·         Its first non-seafood concept, Heaven n Eggs, did not take off like their sister brands did.
·         They also established Seafood Island, a Filipino seafood restaurant, to cater to groups of friends and also families. It has a more informal theme than the other concepts.

Problem Analysis
Having too many brands under your umbrella can be quite challenging; it’s hard to manage varying missions and visions, menu items and overall theme. However, high-end malls require restaurant operators to come up with new concepts should they pursue the opportunity offered to them. By the time Crustasia was established, Mr. Magdaluyo already knows how to properly come up with a restaurant concept. Market research and intensive product development provide then with information they needed to create a concept that will succeed. The problem would be sustaining their expanding array of brands as their company further develops.

Alternatives Generation
Here are the alternatives I have thought of:
1.)   1.) Continue with the strategy of product follows location. In their business, they do not have full control of their decisions. Malls provide them with good opportunities but with corresponding conditions. In their case, requiring them to create a new concept is a prerequisite to leasing a prime mall space. How can you turn an opportunity like that? You cannot force your existing brand to a mall that required you to create a new one. Here are the alternatives should they continue to respond to offers and invitations of malls and other property management.
a.       Since they already have varying crab and seafood restaurant brands catering to different markets, they can try to be more aggressive in looking for commercial space. They have concepts for the upper and working classes. They can opt to expand in CBDs (Ortigas, Makati, BGC), provinces (Sta. Rosa, Batangas, Laguna, Davao, Cebu etc) and in places where seafood are best eaten (beaches – Boracay, Subic, Davao, Cebu)
b.      They can also provide more tummy-filling menu items since seafood are not usually filling. This will hopefully help gain them more market share. Many casual dining restaurants offer cheaper and filling set meals during office lunch times. They can follow this move and provide filling meals either during lunchtime or all day long for those who aim for value-for-money. Seafood, especially crabs, are very expensive and not even enough to fill our tummies thus the vast majority of the population cannot afford to pay a thousand pesos for a lunch that cannot even satisfy their appetite.
c.       Venture in non-seafood concepts even after the failure of Heaven n Eggs. Many new non-seafood concepts are still thriving nowadays which proves that the market is still lucrative.
d.      Create more themed seafood restaurants. They can look into American, South American, Chinese or Singaporean cuisine to draw some possible concepts.
2.)    2.) Avoid creating new concepts and stick to their current brands and build up on it. This will allow them to better manage their brands and provide focus.

Decision and Action Analysis (Deciding on best alternatives)
Given the prices of crabs, prawns, shrimps and other seafood, the Red Crab group cannot further position itself lower than its current Seafood Island concept. As a result, they can stay on its current position as a leading seafood restaurant operator and further strengthen its foothold on the market by following the first alternative.
As opposed to waiting and responding to invites, they can aggressively look for prospective locations for their current brands and even for future concepts.  Currently, their strategy is to find a good place and develop products the best suits the new location. They can also implement the opposite and find locations for their existing brands. Good places to penetrate are near tourist attractions like Boracay and Subic. Foreigners love to eat seafood in the Philippines since we are known to have an abundant source of it. They should take advantage of that specific market.
 For people who have huge appetite, eating seafood might not be the most practical choice since it is very expensive and not enough to fill our tummies. I suggest they create set meals with meat and seafood to achieve higher value-for-money. They can partner pork/beef/chicken and fish since there are now inexpensive but quality fish products. This will hopefully attract those people who always look for value-for-money options aside from those seafood lovers.
Since they are already considered to be veterans in the restaurant industry, they can now venture into non-seafood restaurants provided that they do their marketing research homework. This move will further capture more people and the market outside the seafood-lovers’ zone.

Submitted by: The Great White

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