Singapore’s F&B Industry Faces Challenges, Brands Seek New Markets

Singapore’s food and beverage (F&B) sector is undergoing significant transformation as many brands grapple with mounting operational challenges at home. Faced with increasing rental costs, labour shortages, and a more price-sensitive consumer base, some businesses are expanding their presence overseas to remain viable. The story of Sarnies, a popular café chain, exemplifies this trend.

Founded in 2011 on Telok Ayer Street, Sarnies quickly became a favourite for the burgeoning brunch culture in Singapore’s Central Business District. Co-founder Benjamin Lee recalls the initial success, noting, “It was a sea of people.” However, by 2015, rising costs and shifting consumer preferences prompted the team to explore opportunities beyond Singapore. After initial explorations in Manila and Malaysia, they found a promising market in Bangkok.

The team established their first Bangkok outlet in a shipping container in 2016. Eighteen months later, they relocated to a heritage building in the city’s old town, where Sarnies flourished. Today, the brand operates two locations in Singapore and eight in Bangkok, each tailored to its respective neighbourhood. In addition to cafés, Sarnies has diversified into cocktail bars and restaurants, including F*nkytown and Carritos.

The success in Bangkok was not without its challenges. Adapting the menu to suit local tastes was crucial. “If we were to take the Sarnies in Telok Ayer and plonk it somewhere in Bangkok right now, it probably won’t be received as well,” said co-founder Eric Chan. The diverse clientele in Bangkok, comprising locals and expatriates, required a different approach than the primarily office crowd in Singapore.

This experience highlights a crucial lesson for Singaporean F&B brands: while internationalisation is essential for growth, understanding local market nuances is vital. According to Dr Samer Elhajjar, a senior lecturer at the National University of Singapore, “Brands that fail to adapt often struggle.”

The Singaporean F&B scene has seen a wave of closures, with over 3,000 businesses shutting down last year alone, averaging 250 per month. Notable recent closures include the 86-year-old Cantonese institution, Ka-Soh, and the Prive Group, which closed all 10 of its restaurants in August 2023. Operators attribute these challenges to high operating costs and a competitive environment.

Despite these difficulties, new entrants continue to emerge. Data from the Accounting and Corporate Regulatory Authority (ACRA) indicates that 3,102 new food businesses have launched this year alone. Industry veterans argue that Singapore’s competitive market serves as a rigorous training ground for F&B entrepreneurs.

As Mr. Lee stated, “If you can make it work in Singapore, you have a good shot at making it work in other places.” Chef-owner of Artichoke, Bjorn Shen, echoed this sentiment, highlighting Singapore’s discerning dining audience as a testing ground for innovative concepts.

However, the high costs of operating in Singapore remain a significant barrier. Natasha Chiam, founder of The Ice Cream & Cookie Co, noted that thin margins make it challenging to absorb unexpected expenses. The company has opted to explore markets like Hong Kong, where rental costs are more manageable.

The challenges in Singapore’s F&B landscape have led many operators to consider expansion as a means of survival. Douglas Ng, co-founder of Little Red Dot in Indonesia, shared his experience of facing a competitive local market and the difficulties in hiring staff. After shifting his operations to Indonesia, he found a more accommodating business environment, with lower labor costs and easier access to fresh ingredients.

While overseas expansion offers opportunities, success is not guaranteed. Bjorn Shen faced significant losses when he opened a pizzeria in Bali, struggling to connect with a more price-sensitive customer base. In contrast, his venture in Penang has thrived, benefiting from a more adventurous clientele.

As brands like Sarnies and Awfully Chocolate look to balance local roots with international growth, they remain anchored in their Singaporean identity. Lyn Lee, founder of Awfully Chocolate, emphasized the importance of Singapore as the core of their brand strategy, stating, “We will always be proudly Singaporean.”

Despite the challenges, the resilience of Singapore’s F&B operators shines through. Many believe that the community spirit and the potential for innovation in Singapore will continue to drive the industry forward. As Mr. Shen noted, “While costs are high and labour control measures are tight, there’s still a silver lining.” The enduring optimism among these entrepreneurs reflects a commitment to not only survive but thrive in an increasingly competitive landscape.