SINGAPORE — Embattled grocery startup Honestbee plans to expand its ‘habitat by honestbee’ — a supermarket, restaurant and retail concept — across the region even as it is undergoing a court-supervised restructuring process.
The Singapore-based startup on 2 August applied to the High Court to start the restructuring process as it seeks a six-month reprieve against enforcement actions and legal proceedings.
“Once we do the restructuring and clean up, the actual prognosis for the business is actually good, and parts of the business have tremendous potential, like Habitat” said Ong Lay Ann, the newly-minted chief executive officer of Honestbee, in an interview with Yahoo Finance Singapore on Thursday (15 August).
“There are plans to open Habitat around the region and we have partners that are working with us to develop in other countries,” Ong said.
Honestbee is in “advanced discussions” with partners in South Korea, Taiwan and Malaysia and expects to open Habitat stores in these markets “within a couple of months,” Ong said, as he marked his first month on the job.
The concept’s potential partners include supermarket operators, real estate investment trust (REIT) owners which owns malls, he added.
“We will adopt a partnership model, so we will collaborate with potential operators and work with them to develop Habitat in its current form or Habitat 2.0.”
‘Habitat by honestbee’ is the company’s first foray into a brick-and-mortar business. The Singapore-based startup was founded in 2015 as an online marketplace offering groceries delivery and later expanded into laundry service and food delivery. By 2017, it was even selling tickets for cinemas, tourist attractions and events.
Habitat, which was opened in November, occupies over 5,000 square metres in an industrial building in Pasir Panjang. Comprising a supermarket and dining area with over 15 food and beverage concepts, it also features cashless checkout and a robotic collection point.
“The Singapore store is a proof of concept. It is where we will actually test the technology and make sure the kinks are ironed out before we roll out in other countries,” Ong said. He added that if it were up to him, he would have put the Habitat concept in a mall, rather than an industrial warehouse.
The company, which has been facing financial difficulties since the beginning of the year, took steps between April and June to address its financial woes by restructuring its business, according to Ong’s affidavit filed in the High Court at a pre-trial conference on 6 August.
The company has exited non-strategic markets and discontinued non-core business such as food delivery and laundry and reduced the number of countries it operation to regions where there is a clear path to profitability, the documents said.
Honestbee is exiting India, Vietnam, Indonesia and Hong Kong, and the entities in these markets are in the midst of closure. It has suspended operations in Malaysia, the Philippines, Taiwan, Japan and Thailand.
The company also slashed its global headcount and is paring down its business to focus on the core grocery segment and on Habitat.
While the company will exit the food delivery service in Singapore due to stiff competition, it may keep the service in Malaysia or Thailand, Ong said. It will also keep the grocery delivery service in Singapore.
Ong said the restructuring plan has secured support from the company’s three largest creditors, which account for over 75 per cent of its debt.
“From my perspective, it is a startup within a startup,” Ong said. “I get the ability to pick up the pieces that I think makes sense for the business moving forward.”
“There is a lot of recognition for the Honestbee brand equity,” he said.
Ong said that the problems the company is facing now are what most firms would go through and “is just a small bump on the road” when it looks back in six months’ time from now.
A key reason why the company had experienced “growing pains” was that it had expanded too fast and adopted “one size fits all” strategy of trying to be everything to everyone, Ong said.
“If you are going to do that you will need much deeper pockets to be able to compete in each market. There is no point in being number 10 in each country. The whole idea is to be either number one, number two, or not,” Ong said.
The approach should be to focus on the company’s strengths, establish a strong presence in each country and then roll out additional services, he said.
The restructuring of Honestbee is right up the alley for Ong who is an experienced entrepreneur and has close to two decades of leadership experience in IT, commodities, real estate and infrastructure.
Most recently, he turned around Perth Precast, which he salvaged from judicial management. He acquired the assets of Perth Precast via Precast Australia, and listed Precast Australia on the Australian Stock Exchange via a reverse takeover into Weststar Industrial.
He is a director/chairman at Weststar Industrial and a director of ISDN Investments, the investment and trading arm of Singapore-listed ISDN Holding.
A new chapter in Honestbee’s history began last month when Ong, 46, took over the role from interim CEO Brian Koo. The latter assumed the temporary position when Joel Sng, CEO and co-founder, stepped down in May. That means all three co-founders — Sng, Issac Tay, and most recently, Jonathan Low — have left the beleaguered firm.
The company faces letters of demand totalling S$6 million, and owes at least US$209 million to its largest creditors, according to court documents filed earlier this month.
Honestbee is proposing a scheme to convert all outstanding unsecured debt to equity in the company, Ong said. The pricing and the number of shares to be issued are still being worked out with the potential white knight investors and unsecured creditors. This will help reduce the company’s debt position and allow any capital injections to be used to support its business operations, and not used for debt repayments.
The company has been exploring options to raise fresh capital from a white knight investor prior to the court application for the restructuring process, Ong said. Among the potential investors is Koo, whose family controls LG and is a founding managing partner of Formation Group, a US-based venture fund which is one of Honestbee’s key backers.
The company has received an expression of interest from Formation Group for an investment of up to US$25 million after the restructuring to serve as working capital, Ong said.
While the company had sought a six-month reprieve, Ong hopes to complete the process sooner.
“The biggest challenge is to convince people that we are still around and suppliers need to continue to support us. This can still be a success,” Ong said. “We are here to stay.”
“The restructuring effort should have taken place last year, not this year. Hopefully, it's not a little bit too little too late.”