SME profile: SugarMoo a sweet spot of their own

Running a franchise makes little creative or financial sense for one-time hotelier Raki Phillips and his college friend. So they have set up SugarMoo, a successful desserts maker with an online delivery service.

Raki Phillips, a co-founder and chief executive of Sugarmoo, a confectionery maker that produces 'East meets West' hybrid desserts. Pawan Singh / The National

Raki Phillips knows that he has taken a risk by quitting his job as the regional head of sales and marketing at FRHI Hotels & Resorts - the parent of the Fairmont, Raffles and Swissotel brands.
It was a job that gave him the opportunity to be involved in opening high-end hotels such as he Fairmont Bab Al Bahr in Abu Dhabi and Fairmont The Palm in Dubai.
But Mr Phillips has left the post to pursue his dream of running his own business. "It is a big risk, but when you are passionate about something you really want to do, and you've done your research . you've got to take calculated risks," he says.
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Mr Phillips and his business partner - Jawad Yehia, a Lebanese-Canadian friend from college - have been looking to run their own business in the food and beverage industry for a couple of years. They spent a lot of time researching dessert-focused businesses because they felt there was a gap in Dubai's market, and they had initially planned to launch a franchise of an existing brand.
Mr Phillips even flew to New York to meet the owners of the franchise.
"Unfortunately, what you find out when you try to open a franchise here, when they hear the word 'Dubai', they go 'Great, we want 10 locations and a million dollars'. It just becomes ridiculous," he says.
"We're little guys, small entrepreneurs who are trying to do something fun. Going in that direction lacked creativity and financially didn't make sense for us. So out of frustration we came up with our own concept."
SugarMoo started with a playful name incorporating the two most common ingredients in desserts - sugar and milk. That was in late 2013, and the pair spent the next 12 months refining their idea and raising funds before embarking on a soft launch last November.
Mr Phillips describes its products as hybrid desserts inspired by Dominique Ansel, the New York-based inventor of the Cronut.
SugarMoo uses a mix of ingredients traditionally used in Arabic sweets to create "East meets West" desserts, he says. For instance, there is a pistachio rosewater baklava cheesecake and a saffron mousse rice pudding in a jar.
Their research in Dubai revealed "two extremes".
"You had Arabic sweets and you had cupcakes," says Mr Phillips. "Everyone was doing cupcakes. We wanted to be the anti-cupcake establishment."
The pair have raised about US$1 million for SugarMoo's launch.
"A big portion of that was invested between me and my partner, and the rest by entrepreneurs or like-minded investors," he says, adding that the pair produced a "solid" business plan before approaching investors.
"We made sure the financials were tight. It was very, very important to perfect that."
The pair were planning to set up SugarMoo as a traditional retail venture, but after talking to a potential investor, the owner of a large pizza chain, they were dissuaded from taking on leases with heavy overhead costs in malls.
However, SugarMoo is not avoiding retail completely. It sold confectioneries using pop-up kiosks at events such as RedFest and Dubai Jazz Fest. Next month, SugarMoo will open its first permanent kiosk in the main entrance area of the MCN Hive, a tower in the Tecom district.
"I strongly believe that is the future of retail - to move away from the high-cost malls and other venues. You've seen it here. Dubai has seen a big surge in food trucks," says Mr Phillips.
The core of SugarMoo's business is an online delivery service, with a website, various social media platforms and a free phone line (800 Sugar). Deliveries within Dubai are guaranteed within 90 minutes and there is a minimum order value of Dh50, with a Dh10 delivery charge. A smartphone application is due to be launched next month.
SugarMoo has also been offering a commercial catering service to hotels and restaurants. It recently provided the desserts for Le Brunch, a weekly brunch event at Iris Lounge in The Oberoi hotel in Dubai.
"It lets them [the hotel] focus on the atmosphere, the drinks and the food products they offer. Together we created a menu for them and delivered a large amount of desserts," says Mr Phillips.
This is a decent compromise, he says, because some restaurants and smaller hotels have limited budgets and may not be able to dedicate the same resources to hiring specialist pastry chefs or equipment.
SugarMoo has been doing well since its soft launch in November. "The [food] delivery business in Dubai is a $700m business, so it's pretty substantial, and desserts are almost non-existent," he says.
He and Mr Yehia have set their sights on setting up their next SugarMoo outlet in Abu Dhabi, while a potential partner has approached them about setting up an outlet in Japan. But Mr Phillips says he wants to make sure that SugarMoo's concept is properly established in its home market before venturing abroad.
In the UAE, tens of thousands of food deliveries are made via online sites each month, and this figure is growing by double digits monthly. That is according to Mehdi Oughiri, a co-founder and managing director of Hellofood.com, which acquired 24h.ae, an online food delivery site, this year.
"The main competition for us is the telephone. Most people still order by phone," says Mr Oughiri. As a result, even the majority of customers - between 50 and 60 per cent - who place orders online still pay by cash.
24h.ae aims to fulfil between 98 and 99 per cent of all orders placed through the site, and partner restaurants' inability to cope with the volume of business is the main reason that some orders are not fulfilled.
"Either they become too busy to fulfill the orders or they don't have the driver capacity," says Mr Oughiri.
Therefore, when working with new partner restaurants, 24h.ae will educate them about the likely flow of orders and driver requirements, based on experience and on volumes handled by similar businesses.
"We tell them to make sure that orders are picked within two to three minutes so that they are handled and delivered as soon as possible."
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