Getting the Secret Recipe Right

GETTING THE SECRET RECIPE RIGHT

The pricing strategy and implementation
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Author: Nursahira Binti Enji

1.0 COMPANY PROFILE

SECRET RECIPE CAKES & CAFE SDN. BHD. is the popular and largest lifestyle café chain in
Malaysia with Halal certification awarded by Jabatan Kemajuan Islam Malaysia (JAKIM)4, has
been expanding their franchise into an internationally recognized brand since 1997. Secret
Recipe empire is founded by, Dato’ Steven Sim, where his first outlet in SS2 Petaling Jaya
started together with his three nephews (who are bakers)2.

The Chief Executive Officer and Managing Director of Secret Recipe have various of job
experiences before and passion for brand building2, with creative and unique ideas. Datuk
Steven willing to take the risk to venture into Food & Beverages (F&B) group when he
identified the golden opportunity lacking in the industry.

“Something is missing in our food industry1.
We have fine dining at the hotel, yet normal
dining at the restaurant is so simple and less
hygienic. There's no casual dining where we
can enjoy our meals in a fascinating
environment at an affordable price.” said
Dato’ Steven in explaining his café concept..

At first opening of their outlet in SS2 Petaling
Jaya, they are having constraints in doing
marketing activities due to limited resources1.
Therefore, Dato’ Steven himself distribute
flyers with bare foots and giving free coffee to
whoever visit his café and surprisingly his trick
works.

Customers begin to try the cakes together with
the free coffee. Secret Recipe begin to make
his mark to the world when they join yearly
cheesecake competition by sending their
regular cheesecake, and astoundingly won
Grand Champion1. Thereafter, that company
received multiples of award.

Today, Secret Recipe has grown to more than 440-plus café outlets3, company owns and
franchises nationwide. It can be found in prime urban locations and shopping malls in major
cities3 in the region including Malaysia, Singapore, Indonesia, China, Maldives, Thailand and
several other countries.

This international F&B group has seven other brands including Secret Recipe, Beyond Veggie
by Secret Recipe, Hokkaido Baked Cheese Tart, Hey Cha, Red Lobster Roast & Grill, Alibaba and
Nyonya under its wing5. Majority of the brands were conceived internally, with the last two
introduced in 2018, except for Red Lobster5.

01 Geting the Secret Recipe right

2.0 PRODUCTS

Secret Recipe featuring an appetizing menu with 40 different cake varieties and over 50 locals
and international cuisine3. It has its own R&D team of experts to upgrade its unique products.
Inspired by worldwide delicacies and modifying with their unique techniques, Secret Recipe has
created many distinctive and outstanding cuisines4. The uncompromising value of food and
desserts using quality ingredients, combined with rational pricing, has developed a new cult of
lifestyle, compromising both old and young food and cake lovers3.

Cakes Quality has become the focus9 to maintain their
standard and wins customer loyalty. The overall process
Secret Recipe is famously known with of delivering their product to end consumer were closely
their authentic and fine quality cakes monitored to ensure risk to remain uncompromised.
with 40 different varieties to choose With careful planning and forecasting, they could remain
from, refer Table 1. It also has won their product at the freshest level.
numerous awards across the region,
such as:

Best Cheesecake Award in 1998
and 2000 – Kuala Lumpur Cakes
Competition
Most Original Chocolate Cake
Award in 1999 – Kuala Lumpur
Cakes Competition
Best Cake Award for Eastern
China in 2016 – Dianping.com7

Cuisine

Secret Recipe offered variety of savory foods such as
local delicacies and food fusion for their customers.
Menu includes few sections, refer Table 2, which have
won several awards such as:

Best Lamb Stew Award 2001 – Galaxie Magazine
7 Excellence Food Award 2004 – Ministry of The
Information & The Arts Singapore
Best Western Restaurant 2005/2006 – Halal
Restaurant Competition KasehDia
Best Brands Food & Beverage Cafes 2006-2007 –
Brand Laureate
Malaysia’s Best International Lifestyle Restaurant
Award 2014 - Top 10 of Asia

02Geting the Secret Recipe right

2.0 PRODUCTS 3.0 PLACE

Beverages Secret Recipe is a must-have
outlet in the big city areas in
In 2019, the boba craze among Malaysian Malaysia. This wide-range
is insane and Secret Recipe is not missing franchise that focus on populated
the opportunity to participate. Refer to area has made Secret Recipe
Table 3, they are offering 8 flavors Boba more accessible for customer to
Series drinks starting in June in selected enjoy their products and services.
outlets, such as Nilai, Puncak Jalil, If physical store is unavailable or
Balakong, Mid Valley Kuala Lumpur, unreachable, customer can
Setiawangsa and PJ New Town6. More change to online purchase
outlets have been releasing this drink through their official website,
starting July 2019. Not only that, they also Lazada or Grab plaform.
offer coffee, chocolate, fresh milk, tea and
ice blended in variety flavors to For those who wanted to order
compliment the meal. cake online, now you can. Secret
Recipe provide cake delivery (for a
03 Geting the Secret Recipe right whole cake), which you can order
4 hours before prior take out and
will be charge RM10.60 for its
delivery fee, using Honestbee
services.

4.0 PRICING STRATEGY

A) LINING

Generally, Secret Recipe uses price lining
concept on certain product categories in order
to simplify the choices of the customers by
introducing same pricing for foods of the same
category8. As referred to Table 4, the cakes
offered are divided into several categories e.g.
cream, cheese, premium, square cakes and
brownies. For Cream cakes and Cheesecakes
categories, it is price as RM98.00 per whole
cake, RM9.80 per slice for take away and
RM10.75 per slice for dine in.

B) SKIMMING As compared to other brand that provide a
similar concept of dining cakes (Refer figure
For overall of their products, Secret Recipe below), Secret Recipe has been using skimming
use skimming strategy, which setting a strategy in pricing its product. To make a
price that is close to their Value to comparison among competitors, each of this
Customer (VTC) and be perceived as high brand has a unique attribute that makes their
price by the customer. Nevertheless, product different and thus influence the price
customers are willing to pay for their setting.
product and services because Secret Recipe
never fails to deliver their promises; in For instance, Secret Recipe, Starbucks and
serving fine quality cakes and cuisine in a Baskin Robbins are targeting the middle-upper
fascinating environment at an affordable income group by providing a fancy, hipster &
price. In addition to that, it also has exclusive surrounding and offering a variety
successfully maintained their image and choice of food and beverage. And in addition,
brand for more than 20 years and have Starbucks are specifically focus on their coffee
become the main brand whenever product while Baskin Robbins specialized in ice
customer think about cake (refer Table 6). cream product.

On the other hand, King’s Bakery and Baker’s
Cottage are targeting for low-middle group.
King’s Bakery does not provide dining area or
selling cakes per slice; thus, they have reduced
the fixed cost involved (staff, kitchen, assets)
and manage to offer a cheaper cakes but with
limited choice.

04Geting the Secret Recipe right

4.0 PRICING STRATEGY

C) IN-LINE

Meanwhile, Secret Recipe use in-line
strategy for introducing the new Boba
series drinks. As you know that during the
craze trends for “Boba tea”, variety of new
shops open for business in introducing
this drink as their main product e.g. Xin
Fung Tang, Daboba, Tiger Sugar, The Alley
and also joining the trend as
complimentary product is Tealive and
Chat Time. Thus, to compete with the
others, Secret Recipe introduce their price
as below.

Refer to figure beside, the price is
compared among brands that provide
boba brown sugar milk or milk tea. As you
can see, Daboba set the highest price for
its boba which is RM13.90, while Tiger
Sugar is RM12.90 and Xin Fung Tang is
RM12.50 for cold drink. The cheapest price
for boba brown sugar milk tea is at Tealive,
RM8.10 for large size. Secret Recipe use in-
line strategy by setting the price to be
RM9.50 for large size drink.

D) MARK UP

In order to cover up the overheads generated to operate the business,
Secret Recipe’s markup to 250% to arrive at menu price8, which is at
the industry average level range. The pricing objective is to be as
reasonable as possible for the average household income who
demands a good dining experience8.

Secret Recipe is focus on high catchment area, serving in middle-
upper customers, where they are more willing to pay for more tastier
food served in a clean, comfortable and pleasant environment. In
order to maintain its brand, proper management team in each outlet
will ensure standard must be above satisfactory level; in terms of
productivity, satisfaction, quality control and growth.

05 Geting the Secret Recipe right

5.0 MARKETING

Secret Recipe is an award-winning company (for company above RM25 million), which have won
Platinum award for Best in Marketing and Best Brand in a row for the year 2018 and 2019 in Star
Outstanding Business Award (SOBA). Secret Recipe has also won the Malaysian Business of the
Year for 2019.

A) BRAND POSITIONING B) LIMITED TIME-VALUE SET

In order to be the best brand, its Director said Secret Recipe also has introduced limited-
that “The majority of our marketing activities time value set to attract more lower income
are predominantly communicated through customer for dining or experienced their
digital and social media channels in order to products. The offers are seasonal i.e. Mother’s
match the changing digital trends”. Day, Father’s Day, Cake Mania, Merdeka
Promotion and Secret Recipe anniversary.
Secret Recipe has remained at the forefront
of consumers' minds throughout company For instance, their Merdeka promotion is
changes by paying special attention to the according to the year itself. In 2019, Secret
consumption and media habits of its Recipe given 62% discount for the second
audience, as well as technological and food slice of cake, in order to celebrate the 62nd
trend influences. Merdeka celebration. Meanwhile in 2017 for
60th Merdeka celebration, they offer RM6.00
Affirms Dato’ Steven, “However, for some of our per slice for cream, cheese and square cake
specific brands we will work within the target and RM60 per whole square cake. This kind
segments to strengthen our brand proposition, offers were so limited and had made a very
engaging the customers at all times.”9 long queue of customer in every Secret
Recipe outlet. How about in the future 2038? I
guess there will be free cake give away.

On last year 2017, they celebrate 20th
anniversary and launches 3 slices of cake for
RM20 and they also offer 3 slices of cake for
RM21 in 2018 for celebrating their 21st
anniversary.

06Geting the Secret Recipe right

6.0 'SMART' STRATEGY

Secret Recipe who is a household name under Group Umbrella, with outlets expanding
towards 10 Asia Pacific countries is currently practicing a commissary business model. This
business model includes ensuring the product consistency, stable production, simplified
operators, reduced rental costs and smaller retail footprint has makes them very competitive
and remain to be the leading brand in cake & café industry in Malaysia.

By using price lining and skimming strategy,
Secret Recipe can easily provide customers a clear
set of choices of flavors to choose and
management can creatively execute promotional
activities to attract more new customers.

For instance, an annually celebration, Secret
Recipe’s Merdeka promotion gives 62% off toward
the second slice of cake, in 2019. The terms also
include that it is only available for Cheese, Cream
Premium and Square cakes only. That make the
second slice of cake to be RM3.72, RM4.48 and
RM3.12 respectively.

In order to control its profitability, this kind of
promotion was executed for 1 day only, started
from 12pm – 5pm. This kind of promotion will give
market a perception that Secret Recipe is very
limited and expensive brand with premium
quality cakes, that only makes offer for very
limited time, and this is the opportunity to grab if
they are a new customer.

07 Geting the Secret Recipe right

6.0 'SMART' STRATEGY

Several researches made have found out that This price modification made by Secret
Secret Recipe has slowly increase their price in Recipe have occurred because of several
this 6 year (Refer figure below). Previously in factors such as raw material with
2014, the price for Cheese and Cream premium quality, sourcing vendors,
categories are RM75 per whole cake and increased store rental fees and marketing
RM7.50 per slice, while for Premium cake are expenses with technological expansion
RM120 per whole cake and RM10 per slice. In that contribute to additional cost of
2017, the price for Cheese and Cream variable and fixed cost. This also influence
categories are RM88 per whole cake and by their leader advantage, that increase in
RM8.80 per slice, while for Premium cake are price (equal with their values) will give less
RM130 per whole cake and RM11.80 per slice. impact towards revenue compared to
And currently, the price for Cheese and Cream other competitors in the market.
categories are RM98 per whole cake and
RM9.80 per slice, while for Premium cake are
remain the same.

08Geting the Secret Recipe right

7.0 SUGGESTION

Baker’s Cottage is a café and bakery that provides pastries, cakes, mooncakes, buns and
roasted chicken. It provides halal products with an affordable price, comfortable dining space
and provide catering services too. Their outlets are not attached to any mall or shopping
complex and currently only available on 6 states in Malaysia. To date, Baker’s Cottage is only
provided 15 variety of cakes, and only a whole cake is for sell.

From my point of view, Baker’s Cottage current
practice is using penetration strategy for its initial
price, price range around RM40 to RM70. By using
this strategy, it helps them to create customer
awareness about their business and already
collected loyal customers, but only limited to that
particular group. The potential market is limited to
certain area because the news spread was not
strong enough (marketing activities were less
aggressive).

My suggestion is for Baker’s Cottage to create a
collection of new cakes with higher quality
ingredients, design and packaging with
introduction price starting RM100. Enhance the
product VTC together with more aggressive
marketing promotions to attract more customers
to try the worth of their product. If their product
successfully fulfill customer expectation, customer
will remain loyal and spread the news to new
potential customers even faster.

09 Geting the Secret Recipe right

SUMMARY

Secret Recipe is one of the leading brand in the
industry that is smart in setting up their pricing
strategy, thus, having revenue worth more than
RM750 million to date. The marketing mix
strategy (Product, Place, Promotion, Pricing) is
well implemented and cooperated with
technological advancement. 

Their competitors e.g. Baker's Cottage and
King's Bakery still unable to mimic Secret Recipe
strategy because of differences in production,
target market and market share.

Check out my video summary:
https://youtu.be/h9oT918EIzk

10Geting the Secret Recipe right

APPENDICES

Table 1: Secret Recipe cake category

Sources: Secret Recipe Malaysia website
Table 2: Secret Recipe menu category

11 Geting the Secret Recipe right

Sources: Secret Recipe Malaysia website

APPENDICES

Table 3: Secret Recipe Boba Series

Sources: Chua, S. (2019)
Table 4: Price of cakes offered by Secret Recipe

Source: Secret Recipe Outlet. Date: 19 June 2020
Table 5: Price of Boba Series offered by Secret Recipe

Source: Chua (2019) Date: 26 June 2019
Table 6: Product-Needs Framework for Secret Recipe cakes and cuisine

12Geting the Secret Recipe right

REFERENCES

1. (2014). E-Station: A view on Entrepreneur & Entrepreneurship.
Usahawan Ketiga, Datuk Steven Sim [Online]. Available at
http://maha219002.blogspot.com/2014/09/usahawan-ketiga-datuk-
steven-sim.html

2. Successful Malaysian Brands (2009). The secret of Secret Recipe
[Online]. Available at https://www.thestar.com.my/business/business-
news/2009/03/21/the-secret-of-secret-recipe

3. Secret Recipe Cakes & Café Sdn Bhd (2020), Official Website [Online].
Available at www.secretrecipe.com.my

4. Secret Recipe. (2016, Sep 26). [Online]. Available at
https://studymoose.com/secret-recipe-essay

5. Yap, C. (2019). Getting the Secret Recipe right [Online]. Available at
https://www.thestar.com.my/business/business-
news/2019/09/06/getting-the-secret-recipe-right

6. Chua, S. (2019). Not just cakes: You can get bubble tea at Secret
Recipe [Online]. Available at https://says.com/my/makan/secret-recipe-
boba-series-is-coming-to-an-outlet-near-you-1-july

13 Geting the Secret Recipe right

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Author: Nursahira Binti Enji
GETTING THE SECRET RECIPE RIGHT

The pricing strategy and implementation