Ichido: Growth Challenge (B)

Ichido was founded by Bingrong Tsai, and grew from one store in 1999 in Shanghai’s Xuhui District to 115 stores in Mainland China as of June 2017. Tsai had been in the bakery industry for more than 30 years. He first spent eight years in Japan starting 1984, then worked in three bakery companies in Shanghai over six years from 1992 to 1998, and then started his own business, Ichido, in 1999. Ichido had revenues of more than CNY 300 million in 2016. Ichido was mainly focused in the Shanghai market (i.e., approximately 100 out of 115 stores were in Shanghai), and the company's revenue model was based on the sale of bakery products (breads, croissants, rolls, etc.) until 2012. Due to fierce competition in the bakery industry in China, different consumption preferences among different generations of consumers, and other changes in the industry (such as retail formats, the growth of ecommerce, etc.), Tsai realized the need to change the business model. He initiated a brand transformation in 2012, when he separated the business into 6 brands in order to better serve different target customers. These included ICHIGO, a store format developed for the Shanghai metro that targeted daily commuters in the subway system; ICHI Bakery Blue, a high-end bakery that mainly produced authentic French handmade breads with natural yeast; ICHI Bakery Orange, a family-style bakery aimed at communities in residential neighborhoods; ICHI Table, a light-meal restaurant providing fare for daily light meals and weekend brunches; ICHI Sweets, a French patisserie that served light luxury desserts and afternoon teas; and ICHI Bonbons, a premium chocolate outlet. At the same time, Ichido starting selling its products on e-commerce platforms in 2016 and running businesses on third-party platforms such as Tmall and JD in order to become an omni-channel player. Based on the advice of his advisors, Tsai decided to strengthen the management team. However, since most of the management team members were recent recruits (who joined in 2016 or 2017) and came from unrelated industries such as electronics, it took time for them to understand the specific challenges of the bakery business. Currently, Tsai had an expansion plan according to which ICHIGO would be the main focus of growth, aiming for 50 new metro stores by the end of 2017. Tsai also considered raising external funding to finance growth. This case is designed to stimulate in-depth discussion based on the two questions: i) How should Tsai expand Ichido to achieve growth? This question requires students to think about the challenges faced by Ichido’s management team, and which of the retail brands should be prioritized for growth and which cities/regions should Tsai and his team focus on; and ii) Should Tsai seek financing from a strategic investor or from a pure financial investor?