This is the case reaction for "92-Year-Old Singaporean Distributor Closes Shop Forever." It's a case about FoodXervices, its eventual bankruptcy, and its liquidation in 2026.
If you consume this case the way it was meant to be consumed — side by side with the Ample Hills Creamery case — it becomes quite difficult to reason about what the mistake actually was. What mistake did the Ng siblings make when they were running the company? Unlike Ample Hills, which was a bog-standard story of novice businesspeople expanding too quickly and in an unhealthy manner, pursuing bad growth until the whole business collapsed under its own overextension, FoodXervices was different. It's not at all clear that what they did was wrong.
If it weren't for the COVID-19 pandemic — which, I would remind you, nobody saw coming in 2019 — I would wager that FoodXervices would still be around today. Nichol says in the case that they were the poster child, the most successful example in their segment, at least in terms of perception. They had even started a nonprofit arm. In fact, that's one of the funnier bits at the end of the case, where Nichol's dad essentially asks, "Why did you upskill all your staff? Why did you build an NGO from scratch off the profits of your company?" He told her not to spend money on charity. Then again, her dad is a traditional Chinese businessman who is focused on making money, and he also lost everything during the Asian financial crisis, so that would probably colour his perception quite a bit.
But think about it: the Ng siblings were very successful businesspeople. You can't say they weren't good at what they did. They grew the family business from single-digit millions to double-digit millions over the course of slightly over a decade, taking it over in 2007. Everything was going very smoothly until 2019, and then COVID-19 hit. A once-in-a-generation, once-in-a-lifetime event. You simply cannot expect anyone to have prepared for that.
Even though it's quite difficult to figure out what they could have done differently, I think this case captures the fact that expansion is genuinely risky. You need to expand in order to survive — if you don't grow in a dynamic, competitive market, which FoodXervices certainly was in, you will eventually die. But every time you expand, you take on risk. The risk comes from the temporality of cash flows: you have to spend money, take on debt, build an asset or grow the business, and the return on that capital only comes in a couple of years later. In that intervening period, if your balance sheet isn't strong enough and anything happens to your cash flows, you suddenly cannot service the debt load you've taken on.
That's exactly what happened here. They took out a mortgage to buy a piece of property, demolished it, and rebuilt the warehouse from scratch, envisioning it as a multipurpose space. And it really was quite a impressive building — not just a warehouse, but a venue for events and a potential home for their NGO as well. If COVID-19 hadn't happened, I'm willing to bet the business's cash flows would have paid off that mortgage, they would have owned that building free and clear, and they would have emerged stronger for it. It just so happened that COVID-19 occurred, and they didn't survive it.
I'm not sure it's entirely fair to say they should have held more cash on the balance sheet. This kind of business had decent margins, especially when they had the Kimberly-Clark deal, which sounded like a Cornered Resource for a number of years. In the final years, though, Nichol and Nicholas were facing competition from Chinese suppliers undercutting Kimberly-Clark at a fraction of the price, so that monopoly wasn't nearly as valuable as when they'd first won it in 2008.
In an alternate universe, they would still be the poster boy and girl of the industry — remarkable, successful, worth emulating. But we don't live in that universe. We live in one where COVID-19 happened, and it turned out that the warehouse was their undoing. Unlike Ample Hills Creamery, these were competent businesspeople. They'd been in the game for a decade and had grown the business successfully throughout.
So there are no clear-cut 'lessons'. You could argue they should have been even more conservative — holding more cash, maintaining credit lines they could draw on in the worst-case, unimaginable scenario of a global pandemic shutting down their industry. You could also argue they should have diversified, but that's asking them to hedge against a pandemic nobody could have imagined. So my reaction is simply that this story is very sad, and it's worth keeping in the back of your mind whenever you're thinking about expansion. The Ngs got unlucky with this one.
This is the case reaction for a 92-year-old Singaporean distributor closes shop forever. Uh, this is the case about food services, um, and its eventual bankruptcy and liquidation in 2026. Um, and if you consume this case, uh, the way that it was meant to, that means side by side with the Ample Hills Creamery case, then it becomes actually quite difficult to reason about what was the mistake here. What, what mistake did the Ng siblings make when they were running, um, the company? Unlike Ample Hills, which was a bog standard, uh, novice businesspeople expanded the company too quickly and in an unhealthy manner, right? Uh, pursuing bad growth, and then eventually the whole business collapses on itself because it overextends itself. In food services, it's not very clear that, um, what they did was wrong. If it wasn't for the COVID-19 pandemic, which, uh, I would remind you, nobody saw coming in 2019, right? I would wager that food services would still be around today, right? And Nicole says in the case that they were the poster child, uh, they were the most success- successful example in their segment, at least, uh, in terms of perception. Um, they had started a nonprofit line. Uh, in fact, that's one of the funny bits about the case at the, at the end there, sort of, uh, Nicole's dad sort of says, "You know, why, uh, [chuckles] why did you upskill all your staff? Why do you build an NGO from scratch off the profits of your company?" Uh, the, her dad w- then, you know, told her, like, you know, "Don't spend money on these kinds of things like doing charity." But then again, you know, her dad is like a traditional Chinese businessman that focuses on making money, and her dad also lost everything during the Asian financial crisis, so that would probably affect his perception quite a bit, right? But if you think about it, right, the Ng siblings were very successful businesspeople. You can't say that they were not, um, um, good businesspeople because they grew the b- the, the family business, uh, from single digit millions to, uh, multi, you know, double digit millions, uh, over the course of slightly over a decade. They took it over in 2007. Um, everything was going very smoothly until 2019, and then COVID-19 occurred. And COVID-19 is not... It's literally like once in a generation or once in a lifetime sort of thing. Um, it's so, so incredibly rare. You can't expect them to have prepared for COVID-19. I think, you know, even though there, it's quite difficult to sort of, uh, uh, figure out what, what, what, um, things they could have done differently, uh, it, it, this I think captures the fact that expansion really is risky. Um, expansion, you need to expand in order to survive because if you don't grow, you will eventually die if you're in a dynamic, uh, competitive market, which I believe food services, uh, was in. Um, and, uh, on the other hand, um, every time you do expand, there's a risk. And, uh, we've already mentioned why, uh, it's risky to expand. The risk comes from the temporar- temporality of cash flows, uh, which is that you have to spend money and take on debt in some cases, uh, especially in this case, um, in order to, uh, build an asset or to expand the business, and the return on that capital or the cash flow coming in from that investment only c- uh, hits a couple years later, right? It only comes in a couple years later. And so in that, uh, intervening period, you're sort of at a risk if your balance sheet is not strong enough, if it turns out that the cash flows for your company, uh, anything, if anything happens to the cash flows of your company, you suddenly cannot service the debt load that you took on, which is what happened in this case. They, they took on a mortgage to buy a piece of property, uh, and then they demolished it, and they rebuilt the warehouse from scratch, and they envisioned that warehouse to be a multipurpose space, right? It was, it was really quite a sexy building that they had built, uh, in, in, in that warehouse. So it wasn't just their warehouse. It was, uh, it was also a place to, to hold events and to, uh, pr- possibly house their NGO, um, and so on. Um, and, and if this were, if, if COVID-19 hadn't happened, I am willing to bet that the cash flows of the business, uh, would have been able to pay off that loan, that mortgage on that building, um, and then they would be h- they would have that building free and clear, um, and then, you know, they would emerge stronger once they've paid off that loan. It just so happened that COVID-19 happened, and then they died. Um, and I, pfft, I don't know whether it's safe to say that they should have had more cash on their balance sheet. Um, uh, this kind, this sort of a business, um, they had decent margins, it sound like, it s- it sounds like, especially when they had the, um, the deal with Kimberly-Clark. That sounded like a, you know, a corner resource for a number of years. But then, uh, in, in, in the final years, right, uh, it sounds like Nicole and Nicholas, they were both facing competition from Chinese suppliers that were undercutting Kimberly-Clark at a fraction of the price. And so therefore, that, uh, monopoly, that corner resource wasn't as valuable as when they first started, when they, when they first won it in 2008. Um, so, poof, I, I don't know. Um, uh, in an alternate universe, we would s- they would still be the poster boy and girl of, of the industry. We would still say that they are remarkable and, you know, uh, a great success worth emulating. But we don't live in that universe. We live in a universe where COVID-19 happened, um, and it turned out that the warehouse really was their doom because unlike Ample Hills Creamery, these people were, uh, competent businesspeople. They'd, they'd been in the game for, for a decade, and they had grown the business very successfully for all of that time. Um, so, uh, I, I f- I feel like this is a really sad case. I don't think there are very clear-cut lessons. You could say that you should be even more conservative than that. You should have enough cash to sock away. Um, you should have credit lines that you can pull in ca- in the worst case scenario, in the unimaginable scenario that a global pandemic shuts down, uh, your industry. You could also say that perhaps they should have diversified, but again, you're asking them to diversify in the face of a pandemic that nobody could have imagined. So yeah, my, my reaction here is that it's really quite sad, this story, um, and it's worth holding on to the story in your head every time you're trying to deal with, um, expansion. Uh, and I think, uh, it's fair to say that, uh, the Ng's got unlucky with this one.