By G. Sharmila
Banker-turned-entrepreneur Abdul Rahim Zin rescued local coffee chain San Francisco Coffee when it was on the brink of liquidation. While things are far better for the coffee chain today, the road ahead appears no less challenging than before.
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Seven years ago, local coffee chain San Francisco Coffee (SFC) was ready to bite the dust. Then former Bank Pembangunan chief executive officer Abdul Rahim Zin played the role of the white knight to save the company from liquidation.
Investing some RM5 million into the business, he managed to achieve positive cash flow for the company in 2010, which attracted the attention of government-linked private equity firm Ekuiti Nasional Bhd (Ekuinas). Ekuinas pumped in RM17.5 million in SFC’s parent company in 2011 in return for a 90% stake, retaining Abdul Rahim as chairman and to champion the SFC brand.
“I learned from the mistakes I made. Sometimes when you make instinctive calls, you have to balance them with factual data. Don’t make judgement calls. I still continue to make mistakes, but I’m a bit savvier today because of my experiences.
You need to have a strong bond with your colleagues and the belief that as a team, you can do it. People stayed on despite the problems we had and stuck together as a team,” he tells KiniBiz in a recent interview.
According to Abdul Rahim, SFC is now among the top brands in the market. “ We are the third market player in terms of market share and the number of stores,” he says.
“I don’t want to take credit (for the success of SFC). The credit belongs to the founders and Ekuinas for taking us to another level. I’m just a player in the history of the company,” Abdul Rahim emphasizes.
“I gave my team a free hand to do what they felt was best for the company. They know the business better and know what customers want. Employees know how to improvise, that’s my style of doing things. If it isn’t broken, don’t fix it. The only thing I fixed was the business strategy,” he says, adding that the belief in the SFC brand was what kept them going.
Today, SFC has 35 outlets throughout the Klang Valley and there are plans for more, according to Abdul Rahim. “If all goes well, we plan to open between two and four new outlets in the Klang Valley this year,” he says.
He adds that SFC’s parent company Lyndarahim Ventures Sdn Bhd is well on its way to breaking even this year. “This year we should also be profitable,” he says. After some persuasion, he revealed that the company’s revenue last year was close to RM20 million.
A challenging business
Despite the worst days being over for SFC, Abdul Rahim maintains that the coffee business remains a challenging one. The challenges today are different from when he took over SFC, he says. “Competition is getting stiffer, the young market is going for indie coffee houses. We need to expand and find locations, but find that there are limited locations. The market is also a saturated one,” he adds.
A key challenge faced by the company last year was the spike in milk prices. Milk prices in Malaysia went up by 20% last year, which increased the company’s costs. According to Abdul Rahim, the recent for the price increase was the demand for dairy from China, which has resulted in an artificial shortage in the local market.
“We also have keen competition from more established brands in the market. They know they can lose a certain amount of money, they have staying power because they open for presence, not for profit,” he says.
How then does he plan to counter the competition? “That is not our strategy. Our plan is to find our own niche and not compete head-on with the more established brands. We go to places where they don’t have a presence. Indie coffee houses on the other hand, have their own market,” Abdul Rahim says.
“We were initially seen as a young and fresh brand but now the age group (of customers) has moved to young professionals. Our niche is the white collar crowd looking for serious coffee, that’s why you won’t find us in residential areas and shophouses,” he adds.
What is SFC’s edge over other big-name coffee outlets? “Our unique selling proposition is that our coffee beans are freshly roasted, not more than three days old. We offer high quality coffee, we also have the personal touch; staff in our outlets greet customers by name and prepare their coffees just the way they like it,” he says.
On plans on SFC’s expansion to other states in the country, he replies: “Until we get our act together in the Klang Valley, we won’t be expanding outside of the area. We still haven’t got the level of our desired internal rate of return and EBITDA (earnings before interest, tax, depreciation and amortisation).
“Once we have achieved these, we can then go for other markets. We don’t want to expand too fast, we are taking it slow and steady.”
Yesterday: From banking to coffee: Rahim’s beginnings with SFC
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