Singapore
Singapore
The opening of more outlets over the next year, as well as a new headquarters, are among the homegrown coffee company’s upcoming plans.
Homegrown specialty coffee chain Huggs Coffee has expanded into residential areas as it seeks to woo customers working from home. (Photo: CNA/Tang See Kit)
SINGAPORE: After being “completely blindsided” by the COVID-19 pandemic, local specialty coffee chain Huggs Coffee embarked on an overhaul of its business and is now in the middle of a rapid expansion.
Its newest and 21st outlet opens this week at Clarke Quay Central. This comes on top of nine other new locations it has added in the past 14 months.
The brand is not stopping here and intends to open another four to six outlets over the next 12 months, said managing director Lee Haoming.
The company is also expecting its brand-new headquarters in Tai Seng to be up and running next month. This will house its roastery and bakery – new capabilities formed as part of its overhaul – under one roof.
“Right from the start, we knew there would be many steps to take to build a future-proof and sustainable business,” Mr Lee told CNA in an interview earlier this month.
“COVID-19 has been a reset button.”
Huggs Coffee, which first opened its doors in 2008, took a heavy blow when COVID-19 struck.
Most of its outlets were in the central business district and business parks, catering to the throngs of office workers out to grab a quick coffee. These customers disappeared overnight when the “circuit breaker” was called in April 2020, and never quite returned as people continued to work from home for most of the past two years.
The homegrown coffee chain barely had any online presence then.
“Huggs wasn’t digitalised at all,” Mr Lee recalled, citing how the brand, for one, was not on any food delivery platforms prior to the pandemic. “We were completely blindsided by COVID-19.”
A major overhaul was needed, added the 34-year-old, whose involvement in the firm started out as “lending an extra pair of hands” to his childhood friend Ben Choo, Huggs’ second-generation leader.
“Ben shared with me how much COVID-19 was affecting them … and it felt like they could barely hold on because business in the CBD and business parks was completely dead. So I said since I had time, I can help, be it deliveries, marketing, anything.”
Mr Lee was previously in the events industry and organised, for example, the Singapore edition of Bangkok’s outdoor pop-up market Artbox before deciding to take a career break in end-2019.
“But the first week I came in, I knew they needed more than a one day, one week kind of help. The business had so much potential but to survive, it really needed to restructure and think out of the box,” he said.
After several discussions, Mr Lee was roped in to find Huggs Coffee’s next shot at success.
One decision was to expand into the heartlands.
“If people are not coming to the CBD, then we go to them,” said Mr Lee. “But we weren’t complacent enough to think that just because we were successful for so many years in the CBD, the brand would hold its own in the neighbourhoods.”
There was also the consideration that competition is no less stiff in residential areas, from coffee shops with affordable local kopi to cafes with artisanal coffee. Customers in the suburbs also have a “different mentality” – preferring a spot where they can get their caffeine fix while hanging out with family and friends, instead of a “grab-and-go” option.
This paved the way for Huggs’ new store concept in residential areas.
Named Huggs Collective, the spacious outlets – the biggest being a 3,000 sq ft flagship at Maxwell Road – come with member lounges that have amphitheatre-like seating and even private pods with noise-cancelling headphones. More than just courting the work-from-home crowd, the lounges have also seen bookings for birthday parties and other private events.
“We are basically elevating the customer experience to be more than just a functional place for coffee,” said Mr Lee during the interview at JEM shopping mall where one of the five Huggs Collective outlets is located.
The expansion also coincides with how the pandemic has freed up some prime spaces in popular malls. Shifting consumption patterns due to work-from-home trends also threw up “hidden gems”, such as its outlet at Thomson Plaza.
While some questioned the move to open at an old suburban mall, Mr Lee said the mall is frequented by nearby residents, as well as families on weekends for its variety of tuition and enrichment centres. The unit, left vacant for months before Huggs came in, is also located on the same floor as a supermarket which sees high footfall.
“That’s why while COVID-19 was a challenge, it also opened up a lot of new opportunities.”
Huggs also revamped its franchise model – a necessary move, Mr Lee said, after “inefficiencies” that became apparent during the thick of the pandemic.
Under the previous model, franchisees operated their outlets independently. This meant that during tough times, cost-cutting decisions were made at the expense of quality and customer service.
“Everyone was only fixated on their own outlet,” recalled Mr Lee, adding that the same mindset also resulted in slow responses to ever-changing COVID-19 safety rules.
“This was one of the biggest weaknesses of the old franchise model … it had to change,” he added. “Essentially now, franchisees just have to invest and Huggs will run the show for you.”
Doing so has ensured brand consistency, quality service and quick responses to evolving situations. It is also a “win-win” for franchisees as resources can now be shared and optimised, resulting in better returns, Mr Lee said.
In the push to go digital, Huggs also went beyond online deliveries and cashless payments to set up its own online reward system.
Running its own roastery and bakery is a key part of its goal to become self-reliant. Huggs does not want to be “held hostage” by suppliers amid rising costs and supply chain disruptions, said Mr Lee. These in-house capabilities can also help the firm to grow its business-to-business operations.
That’s not all the company is doing. It is also launching a “Huggs academy” soon to try and tackle the F&B industry’s perennial manpower woes.
Mr Lee said the academy, which will offer a variety of barista and customer service training courses, will be a key source of talent for the company. Beyond that, it also hopes to convince people that there are opportunities for career development in the industry.
“Within our stores, you can work up to be head barista or manager. If not, you can be transferred back to the headquarters to be a trainer at the academy, or be involved in R&D at the roastery and bakery. There’s also the option of office roles so our employees don’t have to be stuck at the stores.”
Asked how Huggs has been funding these plans, Mr Lee said franchisee investments have helped with the start-up costs of new stores. The firm also tapped on government schemes for loans.
But for the most part, it has been “bootstrapping on sales revenue” and carefully timing every move.
While in a better position compared to two years ago, the company is keenly aware of a still-uncertain business environment.
Even as the country moves to living with COVID-19, new challenges have emerged in the form of rising costs, from food ingredients, labour and construction materials to logistics.
The inflationary environment and unpredictable economic and geopolitical circumstances could mean that the year ahead may even be “more challenging” than the past two years, Mr Lee said.
“Because you get less support, less relief and less leniency. There will also be a lot of unforeseen curveballs.”
While Huggs is forging ahead with expansion, it is not doing so blindly. For example, it has chosen not to renew the leases of some of its outlets in the business district.
“Expansion is not just about blindly opening. It’s also about strategically closing certain outlets so that we cut losses as well,” said Mr Lee.
“Others have asked us too – why are you expanding so rapidly? Why are you even expanding? Surely you’d want to take on a more conservative position?
“From how I see it, expansion does not just mean spending. Expansion also means adaptability and innovating. Because if you have a wait-and-see mentality and stop moving forward, you will eventually die.”
The ambitious restructuring and rebranding moves it has taken on during the tough times embodied that, Mr Lee said, as he gestured to the brand’s new teal logo and bear mascot.
“Do you know why the bear is looking to the side and at a certain direction? It represents our hopes to be forward-looking and be open to whatever that may come,” he told CNA.
“We have redone everything to give people a new look. I see it as an opportunity to introduce ourselves all over again and a chance to get it right this time.”
This service is not intended for persons residing in the E.U. By clicking subscribe, I agree to receive news updates and promotional material from Mediacorp and Mediacorp's partners.
Copyright© Mediacorp 2022. Mediacorp Pte Ltd. All rights reserved.
We know it’s a hassle to switch browsers but we want your experience with CNA to be fast, secure and the best it can possibly be.
To continue, upgrade to a supported browser or, for the finest experience, download the mobile app.
Upgraded but still having issues? Contact us