How The French Baker started by creating his own market
By Margie Quimpo-Espino
Philippine Daily Inquirer
First Posted 18:46:00 07/19/2008
Filed Under: Economy, Business & Finance,Food
SIXTEEN YEARS BEFORE TWO TOP professors of Insead (Europe’s top business school) wrote the Blue Ocean Strategy that became the hottest marketing trend over the last two years, a young college graduate from the University of the Philippines was already practicing this concept quite successfully.
W. Chan Kim and Renee Mauborgne wrote “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant” in 2005 and won international recognition from the business community. Their idea was that companies or entrepreneurs should not directly compete with others, but instead create a different market (a blue ocean) to make competition or other players irrelevant.
Johnlu Koa, who graduated cum laude from UP Diliman with a bachelor’s degree in Business Administration in 1979, did this when he went into the bakery business.
All of the top multinational companies offered him jobs with an attractive salary of P5,000 a month (a brand new car then cost about P45,000), but he chose to work for himself.
The budding businessman did his calculations and concluded that if he worked and got a 10-percent salary increase every year on top of inflation, it would take him forever to get rich.
And Koa wanted to be a millionaire as quickly as possible. After all, his classmates voted him as the first most likely to achieve this milestone.
Just how he did it became one of the points of discussion during his recent career talk to senior students of the Southridge School for Boys in Alabang, Muntinlupa.
Did not want to work
He told the boys: “I didn’t want to work after college, so I decided to go into business.”
With a P50,000 loan from his father, he set up in Brgy. Kapitolyo in Pasig City a bakeshop, Honey Bread, making pan de sal, hamburger buns, hotdog buns and other stuff typical of Philippine bakeries in the 1970s.
His choice of a business was partly influenced by the long-time wish of his parents, who were in the garments business, to put up a bakeshop, having taken several baking classes.
He was also inspired by a nearby bakery in Cubao where the Koas lived -- where the young Johnlu would often stop to buy ‘baon’ before taking the jeep to UP -- that was always buzzing with activity.
But his training in business school told him he could not just rely on walk-ins for clients, so he sought institutional buyers and his first stop was the canteen in Meralco, since the electric firm’s office was near his bakeshop.
But Koa was rejected because the concessionaire said somebody was already supplying them bread.
Not one to accept ‘no’ so easily, an idea struck him: What if he supplies the cafeteria with freshly baked pan de sal during the linemen’s midnight shift? He said at that time he did not really know how he was going to do it but he just felt he had to get the business.
The concessionaire liked the idea and agreed to have pan de sal delivered at 1:30 a.m. To save on labor cost (he agreed to pay himself P750 a month at the start), Johnlu was the driver and delivery man, sleeping at 9 p.m. waking up at 1 a.m. to deliver the pan de sal by 1:30 a.m.
This was how he says he entered a market that no one wanted to serve, exactly what the Blue Ocean Strategy espouses. He had no competitors in the midnight hour.
He got more institutional clients and was soon delivering to Mercury Drugstore, Unilab and Abbott Lab -- where work goes on 24 hours a day. Since the offices were near his bakeshop, he had no problem serving his clients.
He told the Southridge students that from being a “party animal” during his college days, he was in bed by 9 p.m., up by 1 a.m., back to bed again by 5 a.m. after making his delivery rounds and then up again by 8:30 a.m.
During the day, he would work in a little conference room that he turned into his research and development room, experimenting on new baked goods.
“One dough can do so many [baked goods], and it’s fun!” Johnlu tells SundayBiz.
By that time, Johnlu recalled he was already earning “hundreds of thousands,” which was perfect timing for his alma mater UP that invited him to teach marketing.
Academic career
He accepted the offer but now admits that it felt strange initially to be called “sir” by students just a few years younger than he was. He eventually got used to the epithet.
Not content with running a bakeshop and teaching, Johnlu decided to pursue his MBA in UP in 1982. By that time, of course, he already had a driver and did not have to wake up in the wee hours of the morning. He graduated among the top in his graduate class in 1984.
“It was not difficult because I was teaching and doing business. If you’re serious about work, everything else is easy,” he says.
His academic career did not end with becoming an instructor. After his MBA, he was asked to become the college secretary by current UP president Dr. Erlinda Roman. He was just 25 then.
That position taught him valuable lessons that he put to good use in his business.
“I had a chance to practice what I had been teaching. I experienced how to work for somebody -- a school,” he says.
As college secretary, he had under him 2,500 students, 80 faculty and about 100 nonacademic personnel.
“I was a young instructor dealing with 60-year-olds. It was an opportunity to learn how to run an organization,” he says.
As for his business, he had already expanded into the retail market starting with delivering pan de sal to Cherry Foodarama twice a day . Later on, he entered SM, backed by his impressive list of clients.
“For the first time, I realized mass marketing is so different from industrial selling. In retail, they are happy with three types of bread. But after six months, they are asking about what’s new so we had to make new types,” he says.
The late 1980s proved to be a turning point in Johnlu’s business -- SM was building the North Edsa mall amid all the doubt and uncertainties of the times brought about by attempted coup d’etats against the presidency of Corazon Aquino.
Taking a risk
Johnlu was invited by SM tycoon Henry Sy himself to set up a branch in North Edsa. Johnlu immediately said yes despite the misgivings of others.
The timing was perfect as he had been going to Paris several times and got so enamored with French bakeries. He brought the concept to SM, which asked him to put up something new. Thus was born the The French Baker in 1989 in SM North Edsa.
French Baker was the first bakeshop to do the actual baking in store. All the others simply had the finished products delivered. And that was one of the reasons for its success and it made Johnlu a millionaire at 28.
It is also said that with Johnlu’s decision to take a risk in investing in SM North Edsa amounting to P2 million, he got into the good graces of Sy, who sources say requires that Johnlu, along with hair stylist Ricky Reyes and Bench, be among the first to be invited as tenants whenever a new SM mall opens.
The French Baker today has 36 branches, 20 of which are in SM.
Although Johnlu admits that there is competition all over the place, he remains undeterred and has once again put the Blue Ocean Strategy to the test with his new baby -- Lartizan.
While Honey Bread still exists, now managed by a younger brother and catering to small bakeshops and entrepreneurs, The French Baker serves the broad C, B and A markets, Johnlu says there remains a segment that is untapped -- the high or triple A market that Lartizan hopes to tap.
“I saw this trend seven to eight years ago, we would go back to basics and nature. This started in Europe, spread to the US now in Asia. There is an untapped, unserved market,” he says.
Johnlu recently opened Lartizan Boulangerie Francaise along Jupiter St. in Makati City.
The bakery specializes in sour dough -- a unique bread popular in Europe that does not use chemicals and artificial flavors. The name is a play on the l’artisan, meaning the artisan in French.
“In any business or idea or challenge, you find an opening. In the case of Honey Bread, the opportunity was in the delivery time -- nobody wanted to delivery in the wee hours of the morning because at that time people were doing well, the economy was good. People were comfortable,” he says.
Johnlu says that with Lartizan, he addresses that segment of the market that can afford P150 for a loaf of bread.
(The loaf bread in the market these days range from about P40 to P56 per loaf).
“Instead of trying to get a market share of my competitors, I would rather serve a market that is not being served. This with the growing wellness awareness,” he says.
Although with only one outlet now, Johnlu has tapped delicatessen Santi’s to be a distribution point for Lartizan breads and hopes that all Santi’s branches will carry the sour dough by the end of the year. He says he will deliver bread in Santi’s twice a day to ensure the quality of the bread.
Filled with challenges as it is, Johnlu loves the path he took and has no plans to veer off it. He adds that of his three siblings, only one—Johnip—opted for the employment route, and he ended up becoming the first Filipino head of Procter & Gamble Phils.
Johnlu says he owes part of his success to UP -- not only for the learnings but for the network that the school provided him.
After finishing high school from Xavier, he says he was accepted in all the top universities. But he felt that if he had opted for Ateneo, La Salle or UST, he would have had “more of the same.”
“I wanted to be in UP to be with the masa intellectual. I wanted something different,” he says.
Not only did he get what he wanted, he also learned to make his business different.
He got married 13 years ago and has three kids.
What will it take to become an entrepreneur (according to Mr. French Baker, Johnlu Koa)
1. Be driven or motivated not necessarily because of money.
2. Do something excellently, do it the best way you can do it.
3. You have to take risks to accomplish something.
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