Diverging fortunes in Singapore's F&B scene as diners turn to cheaper options
[SINGAPORE] Fortunes are diverging in the local dining scene, with restaurant takings on the decline but other food and beverage (F&B) outlets seeing some recovery, based on official data.
Maybank co-head of macro research Chua Hak Bin said: 'Consumers are downtrading to cheaper food options, like food courts and fast food chains, from restaurants.'
Sales of Chinese restaurant Ka-Soh, for instance, fell about 15 per cent since January. Weekday deliveries have plunged from six a day to just one, said owner Cedric Tang.
From January to April, restaurant sales fell 20.1 per cent with a consistent downward trend, based on the government's Food & Beverage Services Index.
In contrast, fast food outlet sales were down 7.5 per cent in the period, but have risen since February. Cafes, food courts and other eateries also picked up since February, and were up 1.4 per cent from the start of the year.
Restaurant Association of Singapore (RAS) president Benjamin Boh said the data reflects trends on the ground, though some of the effect is seasonal.
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January sales were strong partly due to Chinese New Year, but February was a short month and March was Ramadan, when outlets serving halal food typically experience a 15 per cent decline in sales, he observed.
Yet the current decline goes beyond seasonality. Fast casual chain Jinjja Chicken's sales dipped 5 to 10 per cent during Ramadan last year, but 'took a greater hit' this year, said founder Bernard Tay.
Similarly, sales were down 20 to 30 per cent at Enjoy Eating House & Bar, compared with the same period last year. Director James Ang noted that sales have been declining 'for a while', since around the second half of last year.
Loh Lik Peng, founder of hospitality brand Unlisted Collection, believes the trend is affecting 'more expensive restaurants' as well as those in the middle.
'If you look at the one-Michelin stars, if you look at the amount of closures in the last year, it tells you that they have been having a very hard time,' he said.
'But if you look at the very top end of the market, and then you look at the restaurants that are more affordable, they could be doing okay.'
Smaller appetite to splurge
One reason for the decline is that consumers are preferring to spend abroad and tightening their belts at home, said economists and F&B players.
Said RAS' Boh: 'Apart from the seasonality factors above, a big factor that is contributing to most categories declining – except the likes of food courts – is also continued tightening of consumer spending.'
Some consumers now routinely visit Johor Bahru on weekends to 'get more bang for the buck', he added. 'With that, naturally the likes of restaurants would get hit the most, as weekends are when restaurants would make the most revenue.'
Such trips over the Causeway also worry Jinjja Chicken's Tay, who expects the local F&B situation to worsen as transport links between Singapore and Johor Bahru improve.
Beyond Malaysia, the strong Singapore dollar has made travel attractive, said CGS International economic adviser Song Seng Wun. 'People are just flying off to Japan, South Korea, or other places overseas to spend.'
Even if consumers stay home, per-head spending has fallen.
'At the start of the year, many customers bought multiple bowls of noodles and added desserts,' said Ka-Soh's Tang. 'Now, customers typically buy one bowl of noodles.'
Casual cafe chain Grub has also seen customers order less for a meal. Said owner Amanda Phan: 'Previously they might have had a drink or added a dessert; now, they just have water.'
Companies, too, are being more cautious about spending and thus cutting back on corporate dining amid economic uncertainty, said Song.
For individual restaurants, sales have suffered due to rising competition, as new F&B outlets continue to open.
'Many new outlets opening seems to signal positive prospects for the industry, but big brands are the ones opening these outlets, which kill the business of small and independent restaurants,' said Ka-Soh's Tang.
Amid rising competition, Arron Poh, owner of Mexican restaurant Huevos, felt the need to set lower prices for his dishes.
Along with the opening of a second outlet last year, these lower prices may have contributed to a 'steady increase' in sales between January and May, he said – while acknowledging that his restaurants buck the trend.
Such belt-tightening, however, means that casual outlets have not been hit as hard.
While business is 'not as good as last year', sales across Grub's three outlets have not fallen drastically, said Phan. 'I would say that we are probably not a splurge.'
Food courts may be doing better because of their 'location and price point', with meals under S$10, said RAS' Boh, adding that their acceptance of Community Development Council vouchers helps too.
Similarly, fast food 'is not hit as badly because they can still reach consumers on weekdays' and offer meals for S$5 to S$10, said Boh, who is the managing director of McDonald's Singapore.
Spending slowdown expected despite festive bump
Maybank's Chua expects consumers to continue preferring cheaper options amid 'a more uncertain economic and job outlook arising from US President Donald Trump's tariff tantrums and the adoption of artificial intelligence'.
Similarly, Song expects the industry's struggles to persist over the next 12 months, given worries about geopolitics and downside risks to growth, driven by trade tensions.
Said RAS' Boh: 'I foresee that the outlook for sales volume will be choppy and patchy from the second half of the year. Some will do well; some will continue to struggle.'
June sales may be soft as families travel during the school holidays, but he expects 'some uptick in July and August' with SG60 celebrations. 'The festive mood plus the disbursement of more goodies will encourage people to spend more in Singapore.'
'Post-August, I believe people will start cutting back again, so that's when the industry will struggle,' he added.
Restaurateurs themselves are downbeat. Enjoy Eating House & Bar's Ang said: 'The concerns over cost of living are going to remain. The instability of the financial markets is also going to remain. So it doesn't look like there's anything that will brighten the outlook in the near future.'
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