Halo-halo economics

At Chowking Food Corp., summer officially arrives when the daily sales of halo-halo shoots up from 10% of gross sales to 25%. For the three months of March to May, each of the food chain’s 250 stores nationwide will be selling between 500 and 1,500 servings of halo-halo a day.

The mathematics of 25% is astounding. Consider this. Each Chowking outlet generates a low of P40,000 per day in total gross sales to a high of P200,000 per day, for an average of P70,000 in gross sales every day. Also consider this. The bulk of halo halo sales of P1.8 billion last year was generated during the summer months.

"Our focus group discussions with customers–what we call ‘alert analysis’– have anticipated flattened sales this year because of the weaker economy. Our customers are looking for either affordable food or right-sized food," said president and chief executive officer Rufino dela Rosa.

In the case of halo-halo, that has translated to the summer launch of the petite size, which is three-fourth the size of the regular order and P10 cheaper.

"To date, we have seen a 20% increase in the peso value of halo halo sales. In terms of volume, orders for the regular size have gone down but orders for the petite size have shot up because it is easy on both the wallet and the stomach. For many of our customers, the P10 that they have saved in ordering the petite size has been used to purchase another food item in our stores," said Dela Rosa.

To further drive sales, Chowking has been pushing the consumption of halo halo not just as an afternoon stand-alone snack or merienda but also as dessert.

Secret

At the heart of Chowking’s halo halo success is its ingredients, 70% of which are made by Amelia Sweet Products, a sole proprietorship of Amelia Valenzuela.

"Aling Mely and I hit it off immediately. Coming both from Bulacan, which is the heart of halo-halo country, we both know what a good halo-halo should taste like," said Dela Rosa, who improved the food profile when Jollibee Foods Corp. purchased the company in 2000. "Bulacan is our benchmark and Aling Mely is our unofficial consultant."

The Chowking commissary receives daily deliveries from Amelia Sweet Products equivalent to 300 servings per store. During the summer months, the commissary also takes up part of the load of making sweetened purple yam or ube and sweetened banana or minatamis na saba.

"Our research and development staff have tried to mathematically work out the recipes for many of the 15 ingredients that we use but there are just too many variable factors. For example, the ripeness of a batch of bananas and even where the bananas were grown would determine how much heat is used in cooking them," said Dela Rosa.

Aggressive

As in previous years, the company targets an aggressive 20% growth in stores opened this year. Right now, 170 of Chowking stores are operated by franchisees, most of whom operate an average of two stores.

A Chowking franchise currently goes for P8 million, down from P12 million a year ago, basically due to reengineering .

"For one, we have simplified how things are done. We know when the space in a proposed store is too big or too small for the business. The right size depends on the location. For example, our 198-square meter outlet in SM Manila is the right size for the area and so is our 300 sqm. outlet in Global City," said Dela Rosa. "For another, we have standardized our equipment so can negotiate better prices for our partners."

The payback is between three and five years over a 10-year franchise program, renewable for another 10 years.

Other business models available are the express store, which costs P3 million, and the kiosk, which costs P500,000 but must be anchored to a regular store.

"In a fast food chain, execution is the difficult part, not the potential of the business. This is more so in an Oriental food business where you have to train the staff how to handle and cook food. In our case, we have 1,200 cooks nationwide, which translates to 5.6 cooks per store. That is hard to replicate by our competitors," said Dela Rosa.

Aside from the technical training–cooks in cooking and managers in managing the business–which all staff must go through, the company is also honing up on customer relationship.

"When you get down to it, everybody can serve good food. That is just R&D. Everybody can find a location. That is just capital expenditure. The frontier for this business is customer relationship. I want our people to go to institutional customers for bulk orders, which could easily contribute 30% to our total sales. Our model is the drug company detailmen," said Dela Rosa.

Clearly, Chowking is looking at a future that will, on the one hand, contribute more to the bottom line of its mother company and, on the other hand, compete with its mother company for consumer top-of-mind. At 12%, Chowking currently places third to Jollibee’s dominant 40%.