Singapore’s F&B Sector Faces Challenges, Brands Expand Abroad

Singapore’s food and beverage (F&B) industry is grappling with significant challenges, prompting some brands to explore opportunities overseas. The rising costs of operations, coupled with shifting customer preferences, have led to a wave of closures within the sector. Notably, long-established establishments such as the 86-year-old Cantonese restaurant, Ka-Soh, and Burp Kitchen & Bar, which ceased operations in July 2023, are among the casualties.

Sarnies, a popular café that began its journey in Singapore’s Central Business District in 2011, serves as a case study for this shifting landscape. Co-founders Benjamin Lee and Eric Chan initially thrived in a burgeoning café scene. However, by 2015, they faced mounting operational pressures, including rising rents and labor restrictions, which prompted them to look beyond Singapore’s borders. After exploring potential markets in Manila and Malaysia, they eventually found success in Bangkok, where they adapted their offerings to cater to diverse local tastes.

Adapting to New Markets

The transition to Bangkok was marked by careful consideration of local preferences. Lee and Chan acknowledged that the Thai market demanded a more varied menu compared to their original concept in Singapore. “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,” Chan remarked. Today, Sarnies operates two outlets in Singapore and eight in Bangkok, each tailored to the specific neighborhood it serves.

This expansion reflects a broader trend among Singaporean F&B brands seeking growth opportunities abroad. Many operators now view internationalization as essential for survival. The harsh realities of the local market, characterized by high operating costs and increasing competition, have forced numerous establishments to close. In 2022 alone, more than 3,000 F&B businesses shut their doors, averaging 250 closures each month—the highest level of attrition in nearly two decades.

Despite these challenges, the allure of Singapore remains strong for many entrepreneurs. According to the Accounting and Corporate Regulatory Authority (ACRA), 3,102 new food businesses have launched in 2023, even as established brands have exited the market.

Singapore: A Testing Ground for Success

Veterans of the F&B scene emphasize that navigating Singapore’s competitive landscape can serve as a valuable training ground. Lee noted, “If you can make it work in Singapore, you have a good shot at making it work in other places.” This sentiment is echoed by other industry leaders, including chef-owner of Artichoke, Bjorn Shen, who views Singapore’s discerning consumers as a critical factor in refining offerings before venturing abroad.

However, the high costs associated with running a business in Singapore present significant hurdles. Shen described the local market as a “bloodbath,” where even full houses may not guarantee profitability due to soaring overheads.

The Ice Cream & Cookie Co, led by Natasha Chiam, has also faced these challenges. The brand has maintained market presence through innovative offerings but acknowledges the thin margins that leave little room for error. Chiam stated, “With thin margins, you have less buffer to absorb shocks or unexpected costs.”

While many brands find success in adapting their concepts for overseas markets, the process is not without risk. Shen’s experience in Bali illustrates the difficulties of aligning offerings with consumer expectations in different locations. Despite initial optimism, his Bali venture resulted in significant losses, highlighting the complexities of expanding into markets with different consumer behaviors.

In contrast, Shen’s establishment in Penang has flourished, benefiting from a supportive local demographic. “We naturally attract a certain crowd there that is either already a bit more adventurous or willing to subject themselves to something new,” he explained.

As Singapore’s F&B operators increasingly consider international horizons, the importance of local adaptation remains paramount. Each market presents unique challenges and opportunities, requiring brands to balance their identity with local preferences. For example, Little Red Dot, which operates in Indonesia, has tailored its offerings to suit local tastes, a strategy that has proven effective.

Future Directions

Singapore’s government has recognized the challenges facing local businesses and is actively supporting international expansion. Enterprise Singapore (ESG) has facilitated over 700 overseas market exploration projects in the past three years, focusing on Southeast Asia as a key region for growth. Markets such as Indonesia and the Philippines are particularly promising, with Indonesia’s food services sector projected to exceed US$55 billion by 2024.

Despite the pressures of high costs and competition, many operators regard Singapore as their foundation. The credibility gained from operating in such a challenging environment enhances their appeal abroad. Lee and Chan of Sarnies noted that their status as a Singapore brand has garnered attention in Thailand, while Chiam views Singapore as a vital hub for innovation and distribution.

As F&B operators navigate these turbulent waters, the resilience of the Singaporean market continues to shine through. While the landscape may be fraught with challenges, there remains a sense of optimism among industry leaders. The journey of Sarnies and other brands underscores the importance of adaptability, innovation, and the enduring value of a strong home base in the competitive world of food and beverage.