skip to main |
skip to sidebar
The mood at today's Pumpkin Patch Ltd [PPL.NZX] AGM seemed a little dire.
Talk of extra expenses due to expansion seemed the main theme of the day and a weaker US dollar and stronger Kiwi having a big impact on profit repatriated back to New Zealand.
The "Patch" is expecting earnings growth to come from local markets, increased interest charges, store opening costs and market development costs in the USA and UK continue to have an impact the on the company's results short to medium term.
Like Burger Fuel Worldwide Ltd [BFW.NZX] the initial costs of establishing a sustainable global brand are a necessary evil and in my opinion will increase before they start to decline. If you are invested in Pumpkin Patch to make a buck short term unfortunately the big bucks for this investment are more likely to be realised long term.
A 3,200 ft² shop at 77 Clarence Street, Kingston, UK
leased to Pumpkin Patch Ltd on a new 10 year lease
at a headline rental of £333,330 p.a.x.
If you unhappy with that as an investor then clearly you should have your money elsewhere.
Quite often, when establishing a brand such as this, companies make losses, so it is to the credit of the management of Pumpkin Patch that as yet this hasn't been the case.
Carefully building up a profitable Australasian business before moving to new overseas markets has put the company in a great position to use cash flow to allow them to borrow to grow their new business.
Michael Hill International Ltd [MHI.NZX] has used the same strategy in building their brand in Canada and like PPL they are still running at a loss there.
Store numbers are now at 200 and management look to add around 20 new stores this financial year, down from last years 35 stores, so associated costs should be ameliorated.
The only real threat seems to be from the currency swap from the strong Kiwi dollar if it continues long term but it is something management will have to deal with if it stays strong, perhaps make it a side issue and not give it the significance they seem to every reporting season, simply because there is nothing they can do about it.
Short to medium term though shareholders like me could be in for a bumpy ride.
The market punished the gloomy outlook by cutting the share price by 16c to NZ$2.72 on good volume.
Disc I own PPL shares in the Share Investor Portfolio
Pumpkin Patch @ Share Investor
Share Investor's Total Returns: Pumpkin Patch Ltd
Share Price Alert: Pumpkin Patch Ltd 3
Share Price Alert: Pumpkin Patch Ltd 2
Share Price Alert: Pumpkin Patch Ltd
Stock of the Week: Pumpkin Patch Ltd
VIDEO INTERVIEW: Pumpkin Patch CFO Matthew Washington
Pumpkin Patch Ltd: 2010 Full Year Profit Analysis
Pumpkin Patch Ltd move downmarket
Long Term View: Pumpkin Patch Ltd
Pumpkin Patch's North American Downsizing a Prudent move
Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?
I'm buying
Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery
Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills
Discuss PPL @ Share Investor Forum
c Share Investor 2007
Sitting in the Takapuna KFC today eating my 3 piece quarter pack I got to thinking about brands again.
Putting the Colonel's badly run brands in this country aside I would like to discuss two up and coming brands that have their genesis in New Zealand and both with ambitions on a global scale.
Pumpkin Patch(PPL) the trendy kids wear manufacturer and retailer and Burger Fuel (BFW) the trendy Gourmet Burger maker share few traits with the well established KFC brand as operated in NZ.
Both PPL and BFW are in the infant stage as far as size and brand awareness go, although Pumpkin Patch seems to have a very high brand recognition even in areas where they don't have stores and one could assume on that fact alone it could become a true global brand.
BFW are well established in New Zealand, with two stores in Australia and the brand is seen as the place to buy quality fast food.
PPL are similarly ensconced in NZ and Australia and have a small presence in the US and UK. They are represented in other international markets via department stores and mail order.
PPL have a total of just over 200 stores and BFW just over 20 and both had their beginnings in the early 1990s.
Both companies have had their images carefully nurtured over the last 15 years or so and that attention to the brand has paid off and will continue to sustain growth as they look to go global.
While BFW only listed this year PPL got the jump in 2004 and has grown substantially since then, entering the US West Coast and now in Texas and New York.
The biggest risk for PPL is the cost factor, as they expand from a small base, likewise ,BFW will struggle as they enter new markets. This is likely to be ameliorated as economies of scale kick in and the brand gets additional awareness.
Strong branded companies like Starbucks have expanded this way. From their local area of Seattle they quickly spread their well managed brand across the US States and then globally.
Burger Fuel and Pumpkin Patch will attempt something similar in reverse. Probably harder to achieve than Starbucks but with their strong brands both these companies have a great shot.
The US market is arguably the most important market for both companies and the scale and exposure that will be available to them will either make or break them.
The cost of expansion will be high and must be done carefully and with much thought and planning. Getting it wrong in the US could well mean the death of either company. It is a very competitive market and there are giants there ready to match your product.
Thankfully, as management of Burger Fuel and Pumpkin Patch have been careful to keep their brands as strong as they are, as they have grown, this has given them an edge as they expand overseas and any company with an edge on the competition through strong brands and therefore brand recognition will have a better chance of surviving in a though market like the USA.
The possibilities for growth of these companies is truly mind boggling.
With around 100 Pumpkin Patch stores in Australia and a population of 20 million, it doesn't take much to extrapolate the figures in the US alone, with a population of 300 million.
The possibilities in India and China, while probably many years down the track, is enough to make ones eyes water.
Burger Fuel's future growth story isn't as easy to gauge as they have just started their foreign expansion although it will probably be tougher for them to expand than PPL as the fast food sector in which they operate in has a lot more competition. Their strong brand and differentiation to the competition will make this task easier however.
While not guaranteed global success and the associated riches that would surely follow, Pumpkin Patch and Burger Fuel have put their global expansion plans squarely in the hands of two very strong brands in the markets in which they currently operate.
Their success will hang largely on how new consumers respond to their carefully crafted brands and the backup management give them.
Disclosure I own PPL Shares
Burger Fuel Worldwide @ Share Investor
Burger Fuel Worldwide: Losses Mount
Burgerfuel: Dubai Marketing Hype!!!
Burger Fuel 2010 Full Year Profit Analysis
Burger Fuel 2010 Full Year Profit Preview
Burger Fuel Worldwide: 2009 Half Year profit analysis
Stock of the Week: Burger Fuel Worldwide
Download full company analysis from Thomson First-Call
Burger Fuel doesn't rule out capital raising
Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungryBurger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary
Discuss BFW @ Share Investor Forum - Register free
c Share Investor 2007
The opening of a new Burger Fuel Worldwide [BFW.NZ] outlet in Sydney a couple of days ago shows me that Directors at Burger Fuel are great marketers.
Their style of marketing clearly didn't and doesn't suit their IPO as it was a dismal failure but the siting of the new Sydney store under the coke sign at Kings Cross, the 24hr sex and nightclub area of Sydney, is marketing genious in my humble opinion.
Site of the New Sydney Burger Fuel Outlet
Josef Roberts was the founder and CEO of the Red Bull energy drink business in Australia and New Zealand and as a director of Burger Fuel he is clearly using his marketing experience to catapult the company's image, food and brand into the realms of an Australian household name, just as he has done with Burger Fuel in New Zealand.
I and many others have been critical of Fuel Worldwide [BFW.NZ] and their appallingly bad IPO but the company has today announced some positive news.
I will quote the press release directly release from Burger Fuel:
BurgerFuel opens flagship Sydney store.
BurgerFuel has taken its international expansion programme an important step
forward, opening its second Australian store yesterday.
Located right under the iconic Coke sign at the entrance to Kings Cross,
Sydney, the landmark store is a key element in BurgerFuel's global expansion
plans. 
BurgerFuel founder, Chris Mason, says this store represents a foundation
stone for the company's overseas development and its high-traffic location
will not just generate interest in the brand in Australia, but further afield
as well.
"Kings Cross is very much a tourist Mecca, so this new store will be a
showroom for our brand and the BurgerFuel formula."
"The Australian market poses some challenges for us, but the growing sales
and great response from the locals to our Newtown store, which opened last
December, shows there is a market for us across the Tasman."
He says the company will continue steady expansion in New Zealand, while at
the same time building the brand in Australia.
The new Sydney store is the 23rd BurgerFuel store to open, with a further one
opening in Napier, New Zealand, later this month.
The Kings Cross store is employing the proven parts of the BurgerFuel
formula. Its menu, which comprises high-quality burgers that are big on
flavour, is consistent with that enjoyed by its New Zealand customers.
"Our distinctive in-store design, which is a strong aspect of the BurgerFuel
experience, is also being used in Kings Cross. After 12 years of development
we have refined our approach to the brand, the stores, and the products to an
international level.
"We intend to build a successful operation in Kings Cross and use that to
offer franchisees in Australia the opportunity to be part of the BurgerFuel
system".
The Kings Cross store will be company owned. All BurgerFuel's New Zealand
stores are franchised, other than the company's first ever store in Ponsonby
Rd, which opened in 1995.
Conclusion
The area of Kings Cross where BF have sited their new store is, as Mason says a "tourist Mecca" and concepts like BF do well in areas such as this because much of the human traffic passing through like to spend money on food while being entertained in the 24hr sex and nightclub centre that is Kings Cross.
Living in the cross during the late 1980s(ahh those were the days) there were many new food outlets of concepts that were tried there first.
I remember one of the first Mc Cafes' being tried out there and look at them now.
Mason and BF have certainly come to the right place to get exposure.
I wish them luck.
BFW Shares closed even today at NZ .61c
Burger Fuel Worldwide @ Share Investor
Burger Fuel 2010 Full Year Profit Analysis
Burger Fuel 2010 Full Year Profit Preview
Burger Fuel Worldwide: 2009 Half Year profit analysis
Stock of the Week: Burger Fuel Worldwide
Download full company analysis from Thomson First-Call
Burger Fuel doesn't rule out capital raising
Burger Fuel Worldwide: Closer look at Company Accounts
Analysis - Burger Fuel Worldwide: FY profit to 31/03/09
Burger Fuel: Running on Empty
Burger Fuel leaves investors hungryBurger Fuel management cagey over company progress
Burger Fuel cooks up Dubai deal
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary
Discuss BFW @ Share Investor Forum - Register free
c Share Investor 2007
While trying to put a market order in today on the NZAX for Burger Fuel (BFW) it appears an individual cannot make his own mind up just what the market price for a particular share is on a given day.
I wasn't fully aware of this, only just in passing but for shares trading between 10c - $1 you have to bid a minimum of .7 multiplied by the closing price of the share on the previous day. Shares above $1 are multiplied by .8 , shares between 5-10c .6 and below 5c .5.
This little market manipulator came into force early July 2007 and really pumps my blood warmer than a ten year old relieving himself in a public pool on a cold Winters day!
I mean where do Mark Weldon and co get off, it is a Market Limit , what that means to this capitalist pig is that the market is supposed to decide what a share or company is worth on a given day, prospective shareholders are the market and it should be up to us to decide what value we place on a company.
I can understand why this little handbrake may have been applied-to stop a market from sliding too quickly on a bad trading day-but surely this kind of market manipulation must be open to all sorts of jiggery-pokery?
I'm quite sure the upper offer market limits are not enforced similarly so why the hell do weak companies need their hands held as their share prices get hammered on any given day?
Quite frankly they don't and Mark Weldon and the NZX board would be wise to take another look at this recent hamstringing of a so-called free share market and let the market decide what New Zealand listed companies are worth.
Incidentally, I wanted to bid $NZ .20c for 5000 BFW shares as the share price as of today has fallen almost 15% to .65c today. I have lowered my value of the company as I see further costs related to increased borrowing for the company and possible franchisees having an affect on medium term growth, expansion and obviously profit.
Related Share Investor Reading
NZX share trades with strings attached
Don't buy Burger Fuel, yet
Burger Fuel: Inside info?
Burger Fool IPO: Burger Fool?
Exclusive Interview with Burger Fuel's Josef Roberts
Burger Fuel's Daytime drama
Burger Fuel share price out of gas
Beefing up store numbers
Director explains share price drop
Burger Fuel slims down in value
Burger Fuel and Coke
Marketing Burger Fuel's future
Pumpkin Patch VS Burger Fuel
Burger Fuel results and commentary
Discuss Burger Fuel @ Share Investor Forum
c Share Investor 2007
The mood at today's Pumpkin Patch Ltd [PPL.NZX] AGM seemed a little dire.
