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From Kuwait to Australia—how Potato Corner is conquering the global snack market The homegrown brand is now in 12 countries. By year’s end, it will be in 15 more markets By: Angelo Comsti

Philippine Daily Inquirer / 07:15 AM May 16, 2019

Potato Corner’s Dom Hernandez (left) and Joe Magsaysay

When plans for the impressive Jewel Changi Airport in Singapore were drafted, many food companies expressed interest for a space, though not all of them could be accommodated. But one brand that airport management couldn’t say no to was Potato Corner. According to Keith Kek from the airport’s leasing team, “We see a lot of potential and growth in Potato Corner. And the food is easy [to sell] because it’s a grab-and-go item.” Potato Corner, a homegrown Filipino brand, was one of 17 companies chosen to operate in the Jewel’s Food Hall, where kiosks are open 24 hours. It’s a wonderful opportunity for the brand as the airport doubles as a showcase for other potential investors and franchisees.

“Singapore is a good launching pad because it’s a melting pot in terms of multinationals,” says Potato Corner CEO Joe Magsaysay. “This brings the brand and company to the next level.” Growing rapidly

It has been 27 years since Magsaysay, aka Jomag, and his partners put up the first Potato Corner stall at SM Megamall. It has grown to over 1,000 branches all over the world—and the number still continues to grow at a rapid pace. International expansion wasn’t really on the drawing board for the company, but when opportunity kept knocking, it was hard to ignore. “Our first branch outside the Philippines was in Jakarta in 2006. It is a joint venture,” says Magsaysay. Now, Potato Corner has more than 100 stores all over Indonesia. The United States was next. As with many branches abroad, prospective partners expressed interest to join. In 2010, it set up shop in the Westfield Santa Anita Mall in Los Angeles, California. Not long after, Potato Corner opened in Thailand and Panama. Magsaysay attributes the wide interest to avid young customers back in the 1990s who are now twentysomethings eager to be business owners. “When you market to teenagers and adults, they will shift to the next big thing,” he says in another interview. “But kids? Once you get them, they’re yours for life.” Potato Corner is found in 12 countries, including Kuwait, Cambodia, Australia and Saudi Arabia. By year’s end, it will be in 15 more, totaling over 300 branches overseas, apart from the current 1,160 outlets in the Philippines. Product development Potato Corner began its aggressive global expansion in 2016. To match its growth, the flavor and product development team has been working on overdrive. With access to a lot of insights and inspiration from territories outside the Philippines, the team gets to conduct focus-group discussions, which allows for more specialized flavors. The brand’s four core flavors—cheese, BBQ, sour cream and chili BBQ—are staples in all outlets. And when it feels the local market is ripe and ready for it, it releases original varieties, like the larb in Thailand, and a potent wasabi flavor in Hong Kong. In the Philippines, it has introduced chili cheese, sweet corn and truffle fries, to much success.

Potato Corner has also grown its offerings. In the US, for example, it carries other potato snacks like tater tots and loopy fries, as well as sets that combine them with fried chicken—be it wings, chicken tenders or poppers. COO Dom Hernandez confesses that there have been a number of experiments that have failed. They were mostly sweet flavors such as cotton candy and chocolate. There are also markets that are proving hard to penetrate, such as Vietnam which has a strong loyalty to its own line of savory snacks, and Europe, which is more into condiments and dips than powdered flavorings on its french fries. But Magsaysay and his team are not considering these as setbacks, but as challenges they are willing and ready to find solutions to.—CONTRIBUTED

Use the CAGE Distance Framework to identify the main cost and risk of expansion that Potato Corner faced when they decided to adopt a Global Strategy. 1. Cultural Distance Different languages this is very obvious and usual, unless if the language being used in a country is English. There are lots of languages and dialects and Potato Corner hired locals who can help them in greatly in lessening the gaps. There will also be lack of ethnic networks since there will be few connections for example, in Indonesia. Lack of social networks. Lack of trust. Different values, norms, religions and dispositions. There are religions which do not eat pork for example, the Muslims, and Potato Corner have a barbeque flavor-they will adjust based on their market. Beef must be avoided if the target market is the Hindus. Before the pandemic, during the peak hours, in Philippines, there are two employees of Potato Corner that assists the customers, because Filipinos are more of a collectivist more than individualist. In some countries, there are just one employee because of individualism, they perform better when they are alone. It will also depend if there are gender barriers, there are countries which do not let women work, most of the jobs are for men, but there are researches that women are better than men because of perseverance. There are people who have long-term orientation, they plan to work for good in a certain company, most of the Filipinos are like this, but there are also short-term orientation, which are just focused on present or past and considers them more important than the future. For the power distance, for example, Koreans value respect to those who have higher position in their workplace. There are also some nationalities which do not value higher degrees or those in higher position. For indulgence, there are countries which have 2-3 hours of breaktime and

they are allowing enjoyment of whatever desired during those times, like in Paris, unlike in Philippines, which only have 1 hour breaktime. Uncertainty avoidance is a society's tolerance for uncertainty and ambiguity. There are countries which still have wars or doesn’t have a righteous government. This is the way the people reacts for example, through protests. 2. Administrative and Political Distance Sometimes, people in the government can be a very great advantage, but if you move to a new place in a certain country, you will lack of connections. This was experienced by Potato Corner. There are different currencies all over the world, the Philippine peso have different value like for example, in US dollars. They must exchange the Philippines peso to US dollars in order to pay their expenses or liabilities, or simply, for the changes that they will give to their customers that is called, lack of a common currency. There will be lack involvement or membership in international trade organization. The international trade organizations play a vital role because they deal with the global rules of trade in order to ensure that the trade flows as smoothly, predictably and freely as possible. If there will be political hostility, they will protect their locals first before other nationalities, may it be the person or business itself. If there is a political hostility between Philippines and other countries, it can happen that the trade might be delayed or even postponed. Tariffs are made in order to protect the local companies of a certain country. The percentage tariffs will vary from country-to-country. There are countries which doesn’t allow ownership of land, therefore, Potato Corner can only rent, specifically in malls as where they usually are. There are restrictions and quotas per country. There are weak or strong legal and financial institutions. There are countries which are very strict, and there are who doesn’t. This is for the legal requirements needed by Potato Corner in order to operate in that country. They must comply in order to have their business operation in that certain country. 3. Geographic Distance There are differences in climates and there are countries which are extremely hot. While travelling the products, it might spoil if there is no refrigerator while it was being travelled to far places. The fries are being served hot, it might not boom in that certain country, unless they will offer a refresher aside from the fries. The time zones will be different, and the management, since they are based in the Philippines, they might reply for longer period of time, what if the matter or the discussion is urgent, it will be a problem if not coordinated properly. Access to waterways and the oceanthis have both positive and negative effects. It is positive because the transportation of goods will be faster, but if there are typhoons in that area, the goods might be wiped out in a snap. If the roads are smooth, there will

be faster transportation of goods, but if the road is rough, it will be slower, the traffic and safety in the roads must be considered. The power and telecommunications might be a great problem if it is unstable all the time. The fries must be kept in a low temperature in order to preserve it. The main office is in the Philippines, there might also be problems in telecommunication/signal. The physical size of the of the country, like for example, Canada is way bigger than Singapore. There should be proper planning on where to build the stores and how many stores to build, what is the scope of that certain store, can it accommodate up to 8km radius? Because it is important to properly address the demands of the customers. For the infrastructures, the basic physical and organizational structures and facilities for example, the malls shall be taken into consideration if it is safe to open a branch of Potato Corner there, if the roads and power supplies there are good. The topographies might create opportunities or risks for the business like it can make a beach area attractive, but nearby mountains, cliffs, rocks, or granite can prevent people from using the beaches. If a business is to be placed in that area mentioned, it will not be safe. For the within-country distances to its borders, sometimes, there are borders which are exclusive or close, and there are also which are open. A government will be more particular in protecting a domestic industry esoecially if it is a large employer, because it is seen as their national pride, it is vital to national security, it produces staples, it produces essential goods and services, it exploits national resources, or it involves high sunk-cost commitments. Policies of individual governments can pose barriers to cross-border competition. Whether the countries are contiguous, but Philippines was being surrounded by ocean. 4. Economic Distance Differences in cost there are countries which have more expensive products and labor costs and there are also ones which are way cheaper than the Philippines, well it will depend in that country, there should be proper people, and planning in order to address this, as well as the financial means. There will be huge or minimal differences in human resources, for example, we, Filipinos are known for being persevering, in Japan, they value work more than family, and there are also other countries which do not value work in the same manner. The labor costs vary from country-to-country depending on their prevailing laws. There will be differences in knowledge and access to information since there are countries which are more advanced, maybe, technologically, or their locals are more skilled than the others. Potato Corner will be able to get more ideas since they are in the larger market. Rich/poor differences, as well as the different financial means-if there are many people who are rich or who can affordable the price set by Potato Corner, they will have more sales, but if in that country, the people cannot afford to buy fries

since it is not a necessity, or not healthy, then, they will have less sales or probably, a loss. That is why proper research is needed in order to know the markets with high potential. The access to low-cost input factors will be low because it must be travelled if it is not available in a certain country where Potato Corner is operating. It will be an example if wealthy countries trade with poor countries. Wealthy countries engage in more cross-border trade when it comes to wealth and per income capita income of Potato Corner’s consumers. The trade to another wealthy country of a wealthy countryeconomies of experience, scale, scope, and standardization and imilar infrastructure and resources. US and Philippines have far per capita income. The dealings will vary on the transactions of wealthy and poor country. Philippines have lower to middle income economy. Which Mode/s of Foreign-Market entry did Potato Corner adopted when they went Global? What are the advantages of using this mode of entry? Joint venture There are lots of advantages for using this mode of entry. The access to new markets and distribution networks will be greater and easier. There will be increased capacity. There will be sharing of risks and costs with a partner, it is less burdensome for Potato Corner especially for advertising and marketing costs. Since it is a joint venture, the access to new knowledge and expertise will be better and faster, including for specialized staffs. Different countries or continents offer different expertise, thus, there will be better access to greater resources, for example technology and finance. Joint ventures often enable growth without having to borrow funds or look for outside investors. There will be more access to needed information and data because Potato Corner can use joint venture partner's customer database to market their existing products. The partner's services and products to the existing customers can be offered. The partners involved can join forces in purchasing, research, and development, resulting for faster and efficient information gathering. There are always exit in joint venture because it offers a creative way for companies to escape the none-core businesses. Another benefit of a joint venture is its flexibility. For example, a joint venture can have a limited lifespan and only cover part of what you do, thus limiting the commitment for both parties and the business' exposure. Consumer needs and preferences throughout the world are converging, becoming homogenous. Before, fries are being patronized by Americans only, but now, it is all around the world. However, I would just also like to add the disadvantages associated in joint venture that Potato Corner possibly faced. Oftentimes, the objectives of the venture are unclear, the communication between partners is not great because of limited face-to-face interactions. Mostly, it was done virtually. The

risk for clash of culture is there. The partners expect different things from the joint venture, the level of expertise and investment isn't equally matched as there will be one partner who will offer less, may it be in human resources or etc. and another partner who will offer more, the work and resources aren't distributed equally, the different cultures and management styles pose barriers to cooperation, the leadership and support is not there in the early stages, the venture's contractual limitations pose a risk to a partner's core business operations. There will only be limited opportunities outside for Potato Corner because it was stipulated most of the time in the contracts. Exporting Exporting is a contract-based. The advantages of exporting are the following: The markets of Potato Corner can be expanded significantly, thus, making them less dependent than any single one. The competitiveness as well as the sales will be increased, therefor, there will be higher profits, because of the bigger market. The greater the production of the famous products of Potato Corner can lead to larger economies of scale and better margins. Lower Per Unit Costs. Capturing an additional foreign market will usually expand production to meet foreign demand. The domestic competitiveness will be higher. Their research and development budget could work harder as they can change existing products to suit new markets. Here are the disadvantages: The management of Potato shall be very careful, as they can lose focus on your home markets and existing customers which is the Philippines. There are high transportation risks. The competition might bring them down if there were no proper planning and actions. The administration costs may rise as they may have to deal with export regulations when trading outside the European Union, which they mentioned in the article. They will be managing more remote relationships, sometimes thousands of miles away. In overseas markets, they may lose some of the control that they are used to at home. They will need to think of their new market differently to the home market. They will be different customers with their own reasons for buying your products.

https://businesstown.com/12-advantages-and-disadvantages-of-a-jointventure/ Which Global Strategy did Potato Corner took: Cost Reduction or Local Responsiveness or Both? Were they successful with their chosen strategy? Local responsiveness because Potato Corner tailored to the specific preference of their customers in a certain country. They get to add something more than just fries. They adopted the culture of that certain

place through adding famous delicacies or original varieties. Just like in what they mentioned, in the Philippines, it has introduced chili cheese, sweet corn and truffle fries, larb in Thailand; a potent wasabi flavor in Hong Kong, in US, they carried other potato snacks like tater tots and loopy fries, as well as sets that combine them with fried chicken—be it wings, chicken tenders or poppers. For local responsiveness, there are differences in consumer taste and preferences, depending on what country they are targeting. Of course, there are also differences in traditional practices and infrastructures, as well as the distribution channels-it can be long or short depending if the products will be delivered through air or sea. The host government’s demand vary, especially in tariffs and taxes, also the laws prevailing for the laborers and for the business to operate. They were very successful because they have a total of 1,460 branches inside and outside the Philippines; it was based on what was mentioned in the article. It is not easy compete globally because there are lots of constraints. Their sweet products were not successful but they kept on trying and improving. They are open for changes....