Free to Read: Singapore’s Food and Beverage Industry Buckles Under Influx of Chinese Brands

Diners eat out in Singapore on July 12. Photo: VCG

Closures of food and beverage (F&B) businesses in Singapore picked up this year as an influx of Chinese brands ratcheted up the pressure on locals to hold on to customers and keep costs under control.

An average of 274 F&B businesses shut down each month in the first nine months of 2024, reaching a total of 2,465, according to a new report by consultancy Knight Frank LLP. That average is up from 229 last year and 170 in 2020, when pandemic restrictions brought dining out to a near standstill in the city-state.

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Competition was the culprit, according to the report, particularly Chinese brands trying to capitalize on Singapore’s travel boom. “In tandem with the rising number of Chinese visitors, more Chinese brands made Singapore the first stop,” the report said.

More businesses competing over the same commercial space has driven up rents, adding to the financial pressure that local F&B brands were also facing from high material and labor costs.

A Singaporean restaurateur told Caixin that the biggest challenge facing their business is a shortage of labor. In addition, Singapore’s limited agricultural output means they have to import large quantities of ingredients, making it challenging for them to ensure a stable supply, he said.

Some smaller brands in the city-state may have been forced out of the market as they cannot compete with larger rivals that are expanding faster, Ethan Hsu, head of retail at Knight Frank’s Singapore branch, told Caixin.

Knight Frank’s report said that many F&B companies in Singapore are being forced to innovate or consolidate to keep their businesses sustainable. The current retail environment is “very Darwinian,” it noted.

Many Chinese F&B chains, including tea and coffee brands Hey Tea, Chagee and Luckin Coffee, as well as spicy fish specialist Tai Er, have accelerated their overseas expansions since last year to escape a slump at home. Southeast Asia in particular has emerged as a popular destination thanks to more apparent cost advantages and consumer dividends in the region.

In China, price wars have been rattling several F&B segments such as coffee and hotpot, squeezing retailers’ profits. In Beijing, for example, the combined profits of major F&B companies slumped almost 90% year-on-year in the first half of the year, government data showed.