Couleur / Pixabay
In a place where cultural cuisine flourishes, NYC’s innovative and unique Asian dessert shop, Snowdays, finds itself struggling. With a market that is cutthroat, significant supply chain issues and all 4 locations not turning a profit, owner Tony Quach reaches out to Marus Lemonis for help. Marcus is intrigued by the concept because he has never seen anything like Snowdays shaved ice cream dessert.
Snowdays signature product, shaved cream, is based on a traditional Taiwanese dessert that uses milk powder as it’s base. Shaved cream is an ice cream based dessert similar to shaved ice, however, it is dairy based and not water based. Snowdays product is light and fluffy in texture but creamy and full of flavor. Their proprietary ice cream recipes are made with a lower butterfat content which also allows it to contain fewer calories than traditional ice cream. The product is frozen into a solid block and then put into a shaver to add air and texture. Tony has put a western spin on a classic Asian treat. He wanted to tap into markets that are untapped and found a market for shaved cream. Customers can select a unique flavor from their 10 recipes, choose their size and toppings.
Although Snowdays had 4 locations, none of those locations were profitable and sales across the board were down 20% over the previous year. In reviewing the root cause of the downward financial trend, Marcus discovered that all of the branches have supply chain issues and consistently run out of toppings and flavors. Although 10 flavors can be found on their menu, they most often are out of stock in at least 5 of those flavors as they only have one delivery truck and a commissary that is 1.5 hours away from the storefront locations.
Why do you think inconsistent branding is an issue? #TheProfit pic.twitter.com/Hu6pnDLAwj
— CNBC’s The Profit (@TheProfitCNBC) February 27, 2019
Communication trouble also plagued the management team and the staff as a whole. Tony often gives the management team vague directions and then is upset when the outcome is not what he expected. Conversely, he is very direct to the rest of the staff and is accusatory when they get a bad Yelp review–even if that review is reflective of their supply chain woes. Tony expects a lot from his staff but is not willing to listen to their ideas. If the company wants to move forward, they will need to work on how they best communicate with each other.
While touring each facility, Marcus noted that each store had a different brand vibe to it and lacked consistency from location to location. Along with the branding and decor of the stores, customer traffic was also widely variable at the locations with East Village being the busiest location. Marcus would like to see Snowdays focus on how to increase the frequency of their customers’ visits. The frequency of visits is determined largely by the diversity of the offering. If you want to increase profitability, you must understand how to increase the frequency of your customer’s visits and how to improve your margins. Another way that Snowdays can increase their revenue is by offering a wider breadth of Asian snacks and sweets to attract new and repeat customers.
“Frequency of visits is determined largely by diversity of offering.” Jot that down!! #TheProfit pic.twitter.com/O15oISjp1d
— CNBC’s The Profit (@TheProfitCNBC) February 27, 2019
Marcus tours Snowdays manufacturing facility and notes that not only is it an hour and a half from their main location, but it is not properly temperature controlled or set up for ice cream manufacturing. The drop in revenue could be attributed to the manufacturing process not being refined enough for their business to be successful. This leads to a lack of product in stores, which ultimately means that a customer could walk in and then walk right back out when they don’t find what they are looking for. Marcus urges Tony to consider using a third party for his manufacturing. This would ensure that he is in compliance with all FDA regulations and it would cut down on manufacturing costs. Tony struggles with this idea as it means giving up full control over his proprietary recipe and process.
Marcus decides to offer Snowdays $300,000 for 50% equity in the business. He proposes that to get back on track, they need to start over. To do this, it is critical that the East Village location is remodeled and becomes the primary location of Snowdays. All additional branches will be shut down. His idea is that the company start completely over and embrace the Asian culture instead of trying to Americanize a traditional Asian dessert. If you give customers something new and different that they can’t get anywhere else, you will increase the frequency of their visits and drive revenue.
As they begin to wind down operation at the other 3 locations, Snowdays will take one location, start new and make it a perfect model by focusing on the 3 P’s: People, Process and Product. To help with the people part of the business, Marcus will work with Tony and the management staff on communication and openly and honestly sharing feedback. They will also focus on respecting each other’s ideas and opinions. When reviewing processes, it is imperative that Snowdays streamlines their ordering process so that they never run out of the product. They also will need to fix their manufacturing issues and diversify the offering to create additional revenue. To improve the product offering, Marcus wants to create a curated Asian sweet shop that has a variety of exotic candies and snacks from an array of Asian cultures. To do this, they will need to find new products and then utilize focus groups to find out if the new store was successful.
To prepare for the total renovation of Snowdays, Tony works with a graphics company to design a whole new concept for the East Village location. He also works with Marcus and his managers, Ovie and Carolyn, to source additional Asian sweets and beverage to test and offer at the store as add on items to the shaved cream. An essential part of the company’s makeover is to discontinue manufacturing its own product. Tony meets with Mr. Green Tea and agrees to allow them to manufacture and deliver his product to save money on manufacturing and supply chain costs. by partnering with Mr. Green Tea, Tony has been able to focus on the most important part of the business upgrade: the physical redesign of their space and sourcing new products.
That was a huge, and necessary step to handoff the manufacturing process to @Mrgreen_tea so that Tony can now focus on the concept for the @SnowdaysNYC stores.#TheProfit
— Andy Kunzmann (@andykunzmann) February 27, 2019
When Tony unveils the newly remodeled and reimagined Snowdays, he receives very positive feedback from his customers on the changes that have been made to the physical space and product line. He is very proud of how his managers have stepped up and been instrumental in all of the changes. He is very proud of his team and the progress they have made with Marcus’ help. By adding multiple streams of revenue, Marcus predicts Snowdays can reasonably increase their revenue to $1 million which would allow Tony to have a better work-life balance and allow him to spend more quality time with his young family.
This episode was packed full of great business advice for young companies. Which tips did you find the most helpful? Do you agree with the overall strategy shifts that Snowdays went through? Would you purchase products from their unique Asian sweet shop? Start the conversation below!
“The Profit” airs Tuesday at 10 p.m. on CNBC.