Cameron Gordon shares some valuable insights on the current market for F&B brands in Singapore. Is now a good time to enter this space?
Singapore narrowly avoided a technical recession in the second half of last year and whilst the Ministry of Trade and Industry expects the economy to grow by 0.5-2.5 percent this year, it’s still tough going in the food and beverage (F&B) sector. Distributors are working a lot harder for the same results.
That said, there is still an appetite for new and exciting F&B brands in Singapore and the competition for shelf space at major supermarkets is at an all-time high.
Retailers operate on a “one in, one out” policy. Meaning that for new brands to get listed, current listings must be terminated in order to make room in the planogram.
So, the real challenge for F&B exporters is not securing a place on the shelf, it’s driving sales to ensure long term survival and profitability.
As we embark into a new decade, here’s what’s being reported on the ground in Singapore for supermarket channels and consumers and our insights on how to ensure long term survival for your brand:
Supermarkets
- The Dairy Farm Group (Cold Storage, Market Place and Giant Hypermarket) have been losing further market share to FairPrice according to our Singapore customers. Giant, in particular, is struggling and this has led to store closures.
- Internal changes in the management team and overall strategic direction at Dairy Farm have created uncertainty with F&B distributors who suffer from a lack of clarity around their trading terms with the Group.
- By contrast, the government-owned supermarket NTUC Fair Price is gaining market share. Listing fees and compulsory Advertising and Promotion (A&P) are more reasonable and with SME distributors receiving a 50 percent rebate on listing fees, many distributors are choosing to launch only in NTUC Fair Price in Phase 1.
- Across the board we are seeing a reduction in the range of products being made available to consumers in Singapore as space is made for supermarket private labels (home brands). The high cost of shelf real estate in Singapore also narrows the selection to large brands that are able to shoulder the hefty Listing Fees and A&P commitments demanded by the retailers.
Online Retailers
- In the online space, Lazada’s Redmart and Amazon Prime are the two major players, with Redmart currently having the dominant market share. Despite all the excitement that comes with online shopping, many of our partner distributors tell us that online channels only equate to 5-8 percent of total sales.
Consumer
- While Singapore is a comparatively wealthy market in the region, sales are very much driven by a “buy on discount” mentality. Singaporeans love a bargain and with so much choice, shoppers take notice of regular sales promotions. One owner of a distribution business we work with confided that he has a calendar where rotating price promotions are carefully mapped out, so he knows exactly when to buy his favourite ice cream brands.
- From a brand perspective, participating in the promotions is costly, but it is absolutely necessary to drive sales.
Knowing this, what is your strategy for Singapore?
Partnering with a strong in-market distributor in Singapore provides a platform for success. As a custodian of you brand, a good distributor will have in-house merchandising and marketing capability. This means you will have a reliable team on the ground to ensure your brand always looks good on the shelf and stock levels are maintained. As an exporter, managing stock levels in your export markets is crucial and if you don’t have a great team on the ground to help with this, you could end up with regular out of stock situations.
Cameron Gordon is partner and head of client growth at Incite, a Singapore-based F&B export development company. Email [email protected] or visit www.exportincite.com
