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FOOD & BEVERAGE | Contributed Content, Singapore
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Chu Ho Ting

What's next for Singapore restaurateurs?

BY CHU HO TING

Recently, visitors to Plaza Singapura can expect to be greeted with long queues in which Singaporeans wait patiently between two to four hours just to savour the latest and newest food craze in town, dim sum.

The cheapest one Michelin Starred Dim Sum restaurant from Hong Kong recently opened an outlet in Singapore and has so far been greeted with excellent fanfare from the epicurean crowds of Singapore.

Singapore F&B Scene

Singaporeans have always been known to be especially passionate about food, and they are willing go all out to satisfy their cravings. As of 2012, it was estimated that there were approximately 1,600 full operational service restaurants in Singapore, and this was expected to rise at an estimated annual rate of 3% to 4 %.

A recent survey conducted by MasterCard also indicated that Singaporeans topped the region in terms of being the top spender on dining, with an average monthly dining expenditure of USD 262.

Going forward

Going upscale

Singapore’s emergence as the third richest country (as reported by Forbes), in terms of GDP per capita in 2012, is expected to be a major continual driver in the food service industry. An increase in disposable income levels is expected to result in more consumers switching to mid and fine dining establishments.

Currently, world renowned entrants in the domestic market such as Waku Chin, Guy Savoy and Santi at the new Marina Bay Sands, are already providing increasing finer options for the local palate.

Consumer empowerment

Today’s diners are increasingly more aware and educated about food, and are proactively choosing unique dining experiences. The internet provides an easy avenue for individual diners to gather information about the dining experience of others.

Food blogs and food review websites are playing an increasingly important role in the dining scene of today and tomorrow. To illustrate the value creation potential of this form of media, in 2012, Singtel acquired the prominent local food portal, Hungrygowhere for a value of SGD 12 million.

Mainstay - Value

Despite the evolution of more sophisticated and upscale diners in Singapore, it has been noted in one of The Nielsen Company’s survey, that local diners still place reasonable pricing as their second most important consideration when dining out.

As such, demand for dining in mid-priced dining establishments are expected to remain strong. However, BDO’s research has indicated that consumers are still likely to retain their characteristics of willingness to spend, as long as they sense the concept of value through the experience, quality or service is offered by the establishment.

Labour problems

Recent amendments to labour regulations have resulted in significant labour shortages in the food service industry as the government placed a cap on the hiring of foreigners. Yet the lack of local labour interested in working in this industry is forcing a lot of food service providers to either operate below their maximum capacity or pay more to attract labour.

These practices have resulted in a strong competition for labour resources, building up operation costs and negatively impacting their profit margins.

Intense competition

Restaurateurs are increasingly trying to differentiate themselves from each other in face of stiff competition. Today, it is no longer just about the food. Instead, food service providers want to sell food as a concept, a lifestyle choice.

Differing strategies are aplenty, some like the Spa Esprit Group have chosen atypical locations like the nostalgia Tiong Bahru estate to establish their eateries, bringing to consumers not only a new avenue for dining but also a brand new experience.

What’s next?

Going Overseas

Despite a strong domestic demand for food service locally, competition is heating up strongly and cost pressures are building up rapidly as food service providers continue to outdo each other. Essentially, domestic demand of a mere estimated five million could present a reasonably slow growth scenario moving forward.

Following the emergence of the growing middle class of consumers in Asia, local restaurateurs can capitalise on the rising disposable wealth of many consumers in these developing countries. The elaborated experiences that local players have, accompanied with proper market research and advisory, could grant a notable chance of success beyond the shores of Singapore.

Notable success stories of some bigger brands like BreadTalk and Toastbox should serve inspirational to aspiring restaurateurs wanting to venture overseas. For now, the blue oceans of the Asia-Pacific region provides local restaurateurs an alternative perspective to the pathways to success.

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.

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Chu Ho Ting

Chu Ho Ting

Ho Ting is currently an Analyst within the Internationalisation Advisory Group under the Management Consulting arm at BDO. Graduating from one of the top universities in Singapore with a major in Economics, he is outfitted with the know-how and analytical skills in conducting market feasibility studies and internationalisation among others.

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