The secret sauce in Secret Recipe's global success

Malaysian cakes and cafe chain Secret Recipe could be excused for sticking to a tried-and-true business formula.

However, managing director Patrick Sim CPA is not content to stick to the status quo.

Having stepped into his current role at the family business in late 2022, Sim is determined to continue to expand the customer base across the group’s two brands, Secret Recipe and Hokkaido Baked Cheese Tart.

Family ties

Secret Recipe has come a long way since Sim’s uncle, Dato Steven Sim, and a few of his nephews opened the doors to the business’s first store in 1997 in SS2, a suburb of Petaling Jaya.

The family spotted a gap in the market for a lifestyle cafe where customers could enjoy gourmet cakes and coffee in a lovely setting. The business gained a first-mover advantage before the likes of Starbucks and Coffee Bean entered the Malaysian market a year later.

“We were lucky to start early,” says Sim, who heads up the second generation of family members now guiding the business.

“It is so much more competitive nowadays, but we have a very strong and trusted brand in the market.”

 

"If you analyse data, you can make better-informed decisions without relying only on your gut feeling."

 

Today, in addition to about 380 Malaysian stores, the Secret Recipe group has 150 outlets internationally across countries such as Singapore, Indonesia, Thailand, Brunei, Maldives and Bangladesh, employing about 3400 people.

With 10 family members working for Secret Recipe, Sim must factor in familial relationships. “The good part is that there are very strong levels of trust between us,” he says.

“We have some disagreements on how to move the business forward or how things should work. We try to make everything very business oriented, not personal.”

With a mix of generations among the family members in the business, Sim is conscious of providing ongoing operational and leadership training across all facets of the group as part of succession planning. “They are young and have great ideas,” he says.

“Each generation of the family is driving the next generation forward.”

After attaining a commerce degree in accounting and completing his CPA certification in Australia, Sim worked at PwC and Deloitte in Malaysia for about four years, before he got the call to serve from the family in 2013.

After working his way up through the ranks at Secret Recipe, Sim now must ensure the business stays the course in a rapidly changing market and has overseen several initiatives to ensure the evolution of the business.

This includes refurbishing stores to improve the ambience for customers and employees and creating Instagram-worthy cakes for a younger cohort of social-mediatech-savvy diners.

Sim has also guided the increased usage of business intelligence, social media and mobile apps as part of a data-led growth strategy.

For a lover of numbers like Sim, getting data-driven insights into the business to identify the latest market trends is logical and exciting.

“If you analyse data, you can make better-informed decisions without relying only on your gut feeling,” he says.

“For example, with a marketing campaign for a product launch, we can drill down immediately to see which outlet this product does best in, what time or day it does best, and which type of customer is the top purchaser.

Then we can adjust our marketing message or operational processes to cater better to the launch.”

“We try to be relevant with the new generation of customers,” he says. “They are changing in the way they consume advertising and social media, so we have to make sure we target the right platforms and that our brand does not become old.”

That means having a presence on TikTok and other Gen Z and Millennial-dominated sites, and forging partnerships with the likes of potato chip brand Lay’s and music label Universal Music Malaysia to collaborate on food and promotional campaigns.

“It is not just about what we do, but how we pair and collaborate with different partners within the industry,” Sim says.

Rise to the challenge

Despite its strengths, Secret Recipe faces undeniable challenges.

A post-pandemic surge in trade has slowed due to inflation hikes, cost-of-living pressures and higher costs for dairy imports from Australia and New Zealand, which have put the squeeze on margins.

A company with more than two decades in business comes with inevitable infrastructure legacy issues that management is seeking to address, Sim adds.

Getting older employees up to speed on digitisation strategies can also take time. “We are spending time on training and working on mindsets,” he says.

“Changing culture is a big challenge, so you have to continuously drive and communicate and emphasise these things with the team.”

As he navigates myriad market threats, Sim will keep putting his CPA training to good effect to improve the business’s outlook.

He has ramped up Secret Recipe’s business-to-business ventures, which include supplying cakes to major international brands such as McDonald’s, Starbucks and Ikea.

Expansion into additional overseas markets – such as the Philippines, Türkiye and the Middle East – is also on the agenda.

Perhaps most importantly, Sim and his team will continue to reinvent the menu to cater to new customers – red velvet and sweet potato are among the latest cake offerings – while continuing to dish out some perennial favourites.

“I love the Hokkaido triple chocolate cake. You cannot go wrong with chocolate.”

Three tips for franchising success

Franchising is at the heart of Secret Recipe’s growth strategy, with franchisees running about half of the 380 Malaysian stores and all the international outlets. Patrick Sim CPA offers three tips for successful franchising.

1. Get the core business right first. Before trying to establish franchise outlets, detect and address any weaknesses in the business format, otherwise you risk expanding with a flawed model.
2. Create a business model that is easy to replicate. For Secret Recipe, this means all products are baked in a master kitchen, so that ready-made food and cakes can be sent to the stores. This allows franchisees to concentrate on store operation.
3. Keep investing in the model. Ongoing investment in the business model is important because, without it, a franchised brand can start to go downhill, leading to larger problems.

One piece of advice

“Engage in continuous learning,” Sim says. “I’m an introvert and prefer to look at numbers, but I would not be where I am today if I did not take the time to learn and keep improving as a leader.”