CHEF’S SECRET, INC.

Chef’s Secret, Inc. is a manufacturing corporation involved in the creation of baked

goods. Particularly, the company prides itself in supplying premium sandwiches and pastries
fresh from the kitchen. Over the years, the company’s mantra of “meeting the standards of
its customers” has enabled them to forge strong long-term relationships with its clients. In
fact, the company has been a major part of the growth of one of its clients, Starbucks
Philippines, which now accounts for roughly 50% of the Chef Secret’s sales.

ABOUT THE COMPANY

Chef’s Secret is the brainchild of Belinda Cacho, a Spanish-native who has been
residing in the country ever since she was a child. She, with her sister Marilen, and some other
entrepreneurs, started out with a Dunkin Donuts franchise in Manila. This establishment has
had considerable profit for several continuous years, but the sisters felt that their creative
minds were being unchallenged by the current setup. The sisters saw themselves constricted
by the standard Dunkin Donuts menu, not being able to experiment on other types of food.
These two audacious Spanish entrepreneurs noticed what was lacking in the food industry
then – “nobody could do European”. And so, Tri-Vision Ventures, Inc. (TVI) was born in the
kitchen behind the Dunkin Donuts franchise, starting with selling Spanish bread to a small
network of family and friends.

Tri-Vision Ventures became known to a wider network of both end-consumers and

businesses for its high-quality high-end sandwiches, and eventually even became the local
maker of donuts for Dunkin Donuts Philippines. TVI then wanted to focus on its Dunkin Donuts
operations, and incorporated its European bread line, giving birth to Chef’s Secret, Inc. The
new company quickly gave off steam, and was able to draw in Starbucks as a major customer,
early on in the life of the company. It could even be said that the company grew as Starbucks
in the Philippines grew.

Currently, the company operates in a B2B (business-to-business) setup, but it was not
always like that in the beginning. They tried B2C (business-to-consumer) when they opened

1 Written by Joseph Ian Esguerra and Justin Reginald Nery, 2015.

up a sandwich store in some malls. However, this kind of operations only stretched its hands
too much, and were getting profit that was too thin. Since then, they focused on their B2B
customer relations instead. Now, besides its long-term relationship with Starbucks, whose
sales account for more than 50% of the company’s total sales, Chef’s Secret also supplies to
other businesses requiring high-end European-style bread products, like S&R, a membership
wholesale grocery outlet. They maintain their client base by emphasizing on always catering
to the needs of its customers. This is well-defined in their treasured mantra of “meeting the
standards of the customer”. For example, seldom does Chef’s Secret decline a recipe
suggestion from Starbucks. In fact, the company’s Research & Development team includes
representatives from Starbucks. Additionally, their way of maintaining the quality of their
products is to evaluate potential clients by the fit of their demand to Starbucks’ current
products.

INDUSTRY AND COMPETITION

Chef’s Secret is the first, and as of 2013, the only player in the premium European-
style bread product manufacturing industry. Before Chef’s Secret, food establishments would
make their own sandwiches, cakes and breads. In addition, playing in the industry requires a
high level of capital, because the firm services businesses and not the consumers who actually
consume the sandwiches. Thus, it could be said that food establishments could either produce
their own premium quality bread products or have Chef’s Secret manufacture them.

However, the firm heavily depends on end-consumers’ demand for Chef’s Secret’s
customers. For example, if S&R or Starbucks sales go down, Chef’s Secret’s sales and overall
profitability will also go down.

Indirectly, its substitutes are other B2BC pastry providers such as Purple Oven,
Starbucks’ cake supplier, although competition with this outfit is not seen as an imminent
threat.
CURRENT PROCESSES

Product management

The company’s baked foods are broken down into five product lines: bread, bakery,
pastry, food and cake. Moreover, most of their products are predominantly customized
according to the specifications required by their customers. It has always been reiterated by
the management that the company should meet the minds of their consumers. In fact, the
firm defines quality as “meeting the standards of the customer.”

In addition, in order to properly meet demands of its consumers, the plant operates
24 hours a day, seven days a week. The plant employs 50-60 people running in two separate
shifts per day. Also, the products manufactured each day is based on a careful planning
process based on the total customer orders received by the company. As such, the plant
normally runs at its maximum capacity in order to properly accommodate all of the orders
received by the company. Moreover, to minimize the company’s inventory costs, its
inventories are ordered on a just in time basis.

Despite its tight production schedule, the company is able to maintain its high
standards for its products. In fact, currently, only 1% of production is considered spoiled,
which is considered excellent given the nature of the firm’s line of business.

Figure 1: Plant structure

Customer Management

The company divides its customers into three separate clusters – (1) Business to
Business (B2B), (2) Business to Business to Customers (B2BC), and (3) Coffee shops. Chef’s
Secret classifies their customers as B2B when they merely purchase uncustomized generic
bread products, which the customers further process in their own kitchens. On the other
hand, B2BC consists of customers who collaborate with Chef’s Secret in the formulation of
their recipes. The third classification, “Coffee Shops”, is a separate classification for Starbucks,
which otherwise would have fallen into the B2BC category. In fact, the plant facilities of Chef’s
Secret is designed particularly for Starbucks’ needs. And so, other customers’ requests will
only be acted on if they sufficiently fit with Starbucks’ setup.

But although Chef’s Secret closely monitors their Starbucks account, its customer
relations team collectively takes care of their clients very well. They make sure that goods are
delivered on time and are of high quality. At maximum, goods are in the hands of the
customer two days from the day of requisition. With regards to quality, its products are
consistently awarded by various quality accreditation bodies in the Philippines.

Supplier Management

The company gives much importance to the quality of the raw materials that they use
as major components for their products in order to maintain its premium make. Some
components used are bought from its suppliers in the country such as San Miguel Foods, but
a significant portion of the materials is sourced abroad.

Chef’s Secret builds a strong partnership with its suppliers through honoring its
agreements with its suppliers such as the on time payment of its requested supplies. In turn,
the company is promised quality ingredients delivered within a reasonable lead time.

Organization Structure

It was under Belinda Cacho’s term when the company obtained the Starbucks account.
After Belinda Cacho passed away several years ago, her sister Marilen Cacho took over as the
Chief Executive Officer of Chef’s Secret. Her main role is in overseeing the overall strategy of
the firm looking forward, as well as client relationship management. Chef’s Secret is not the
only venture Marilen is into – she also has a high-end restaurant serving pasta and pastries in
Makati.

Directly under her is the Chief Operating Officer, who is in charge of the day-to-day
operations in the company. Accordingly, he reprimands the responsible employees for the
slightest deviation from operating standards. Since the firm is operating 24 hours a day and
is practicing just-in-time management, there is great pressure on the management, especially
the COO, to the strictest standards without any room for error. On top of that, he always
emphasizes that it is imperative for the firm to double its sales each year, which it has anyway
achieved for the past several years since its inception.

Everyone else is under the COO, notably including Sales & Marketing, and Operations.
There is some conflict going on between Sales, which is constantly struggling to expand their
clientele, and Operations, which is also struggling on how to fill in all customer orders on time.

Figure 2. Organizational Structure

CHALLENGES

Since its early days, Chef’s Secret enjoyed a steady growth due to its partnership with
Starbucks. The company’s sales to the coffee chain brand have always been a substantial part
of its revenues accounting for more than 50% of its total annual sales. As such, the
management has always been adamant on taking care of such a crucial client. According to
the management, they have configured their operations to be market-driven – “what the
customers want, we shall adjust.” In fact, their plant is configured to meet the demands of
Starbucks.

Because of the company’s heavy reliance on Starbucks, their basic design and
operations have been molded to conform to the standards set by the coffee brand. In their
design process for new product offering, they initially get the basic design of the bread and
sandwiches from Starbucks. The basic design will only contain the bare minimum that
Starbucks requires for their pastries. Then, the management gets an opportunity to fiddle
with the design and customize it in order to produce a premium quality product.

Although this relationship with Starbucks has contributed heavily to the success of
Chef’s Secret, it has also continuously constrained the company into just maintaining the
specific standard employed by Starbucks. In fact, the company’s plant has been set up to
service Starbucks’ orders. As such, the products currently offered by the company to other
customers other than Starbucks are only limited to those products which are similar to the
designs required by the coffee chain. This has caused the company to reject orders from
customers not in line with these standards.

Despite this constraint, the company also tries to expand its customer base and
increase its revenues. The COO has been very keen in achieving the goal of doubling its sales
every year. As such, they have been aggressive and looking for new potential clients.
However, because of the current setup of their manufacturing plant, they can only supply
products to customers with needs very similar to Starbucks.

Moreover, the company’s intermittent plant is already reaching its full capacity. The
company is pondering the idea of relocating to southern Metro Manila, where there is room
for expansion. Chef’s Secret is currently located in New Manila along Balete Drive, which is at
the heart of a major residential area in Quezon City. Supervision and logistics, however, is
efficient with regard to the current location since the facility is close to their customers, as
well as to the residence of their major stockholders. These are two primary issues that prevent
them from relocating and expanding.