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Singapore at Crossroads of Trade in Southeast Asia
By Bernard Kong
Situated at the crossroads of major shipping lanes and air routes, Singapore has historically been a major trading center for much of Southeast Asia and the Indian subcontinent.
Buyers and sellers in Singapore trade food and other products from all over the world for re-consolidation and re-export to Malaysia, Indonesia, Thailand, India, Vietnam, Laos, Cambodia, Myanmar, and Brunei. With its affluence and lack of trade restrictions, Singapore is a relatively quick and easy market to enter.
Singapore is also important as a showcase for new food products for the rest of the Southeast Asian region. U.S. exporters who are interested in gaining a foothold in Southeast Asia frequently start in Singapore before moving into other countries in the region. Traders from neighboring countries often come to the Republic to investigate new, trendy food items.
Singapore One of World's Wealthiest Nations
Singapore is one of the wealthiest nations in the world. The country's per capita income exceeded $22,000 in 1996, surpassing that of Great Britain and New Zealand.
Singaporeans have money and spend it willingly on branded products. Still, consumers are generally very price conscious and want value for their money in their purchases of food and other items.
It is often said that the two national pastimes of Singaporeans are shopping and eating. In the past decade, Singapore consumers have doubled the amount they spend on food and beverages. They consumed $5.9 billion worth of foodstuffs and drinks in 1996, about half of which was spent eating out.
Singaporean children have a far different diet than their parents. Just a generation ago, most Singaporeans lived in shop houses, trying to feed large families with very limited funds. Fried rice was the daily staple of the diet.
The change in one generation has been astronomical. Teens and kids sport fashion clothing and walk down the street eating brand-name ice cream, toting cellular phones. At home, parents may still eat roti prata (Malay bread), nasi lemak (a Malay rice dish), or rice porridge for breakfast. In contrast, their children are eating cereal from the United States, bread with spreads, bacon and eggs, danish, croissants and juice. Children snack on milk and cookies and fancy cakes, while their parents often eat jellied treats accompanied by Chinese tea.
The taste buds of Singaporeans do not always agree with Western tastes. Most Singaporeans like their food spicy and hot. Meals, including breakfast, are often eaten with chili sauce or cut red chilies on the side. Popular spicy dishes include chili crab and curry fish head. Local consumers are less likely than Westerners to eat large pieces of meat and foods with heavy cheese, butter or cream sauces. Many Western foods are regarded as too sweet or salty.
Eating, Shopping Habits Changing
The eating and shopping habits of Singaporeans are changing, particularly those of young consumers and adults. Food shopping is taking place less frequently and consumers continue to eat a major portion of their meals outside of the home.
There is an increasing demand for home-delivered foods, heat-and-serve meals, semi-prepared foods, and frozen foods. These developments are due largely to the growing number of working women as well a movement away from extended family households.
The average Singaporean family can store and prepare Western-type convenience foods. About 98 percent of local households have refrigerators and 21 percent have microwave ovens. Cold milk, juice, ice cream and bakery products are fast becoming daily part of family life.
Health consciousness is on the rise due to the Government's annual month-long campaign to promote healthy living. Low fat foods, sushi, diet beverages, yogurt, and health foods are slowing gaining prominence in retail outlets. Consumption of fruits and vegetables is also on the rise.
Agricultural Trade Rising
Singapore's agricultural imports reached $5.7 billion in 1996. Imports that stayed in the country totaled about $2.7 billion. Nearly 70 percent of all retained imports are consumer-ready products.
U.S. agricultural exports to Singapore totaled $308 million last year. Growth in exports of consumer-oriented foods has been especially strong during the past 2 years. Since 1990, U.S. exports of breakfast foods, red meats, fresh vegetables, and wine and beer have registered the highest growth.
There is very little domestic agricultural production in Singapore. Agricultural products, such as poultry, orchids and a narrow range of vegetables, are produced locally in small quantities. More than 80 percent of the agricultural products that are available in Singapore are imported.
Singapore's food processing industry is also small relative to that of other countries in Southeast Asia. Sales by firms in Singapore's food and beverage processing industry totalled approximately $2.3 billion in 1995. Among Singapore's major food and beverage processing sectors are dairy products, edible oils, alcoholic and non-alcoholic beverages, bakery products, meat processing, and chocolate confectionery.
Singapore: A Mature Market
Singapore is considered a mature market relative to other Southeast Asian countries. The market is open and is relatively easy to enter. As a result, competition is extremely intense. Products that compete with the United States come from many sources, such as Australia, New Zealand, Europe, Canada, Japan, South Africa, Argentina, Chile, Malaysia, Thailand, Indonesia and Taiwan.
Due to geographical proximity, most of Singapore's staples, such as rice, meat, vegetables and seafood, are imported from neighboring countries.
The U.S. import market share at 13 percent in 1996 is relatively low. However, U.S. consumer-ready foods are well-accepted by Singaporeans and can easily command a price premium over competing foreign brands.
Constant promotion and advertising are necessary to maintain and to expand market share. Many counties used government funds to promote a variety of high-value food products. Horticultural products and meat were among the most heavily promoted items, and are likely to remain the focus of future market development efforts.
Future growth in American food exports to Singapore is expected to take the form of the introduction of new items to capture market share from competing sources. Best sales prospects include snack foods, breakfast foods, meats, fresh fruits and vegetables, fruit and vegetable juices, preserved and processed fruit, frozen foods, tree nuts, pet foods and dairy products.
Government Import Regulations
Singapore is a virtual free port. There are no duties on most imported products with the exception of tobacco, tobacco products, and alcoholic beverages.
However, U.S. exporters must pay attention to a number of government regulations. All imported foodstuffs must be registered with the Food Control Department of the Ministry of Environment. Imports of meat and products must be accompanied by inspection certificates that are issued in the country of origin. Other important regulations concern ingredients, packaging, labeling and expiry date requirements (listed in order of day, month and year). These regulations are found in the Sale of Food Act of 1973, the Food Regulations of 1988 and all subsequent amendments.
All packaged food must bear a label describing the product. The label can either be marked or securely attached in a prominent position on the package. The labeling must be in English and include the common and brand names, ingredients, nutritional value, net weight, country of origin, and name and address of the local importer of the product.
Entering the Singapore Market
Processed and pre-packaged goods are brought in by more than 300 large and small trading firms, of which about 80 are known to handle U.S. foods. Some of these firms act as sole agents for products. Goods usually move directly from the importer to the large supermarket chains or foodservice buyers. In contrast, wholesalers may be involved in delivering imported products to the many small provision shops and food stalls that are located on the island.
The distribution of perishable products is more specialized. Fresh fruit and vegetable importers usually handle only these commodities and may specialize in a particular segment, such as tropical or air-flown produce. Some imported fresh fruits and vegetables move directly to the major retail buyers, but a large amount is sold by importers and wholesalers through the Pasir Panjang Wholesale Center.
Similarly, companies that import frozen and chilled foods are specialized in nature. These firms often act as agents for a particular brand and deliver goods directly to supermarket chains, restaurants, hotels and wet markets--street markets where residents can buy fresh and dried foods.
Estates Dominate Local Market
About 80 to 90 percent of Singaporeans live in Housing Development Board (HBD) estates where most of the food shopping takes place. Most estates have shopping and eating facilities, including a supermarket, provision shops, a wet market and restaurants. In the past, the shopping and eating facilities in the estates were very traditional in nature and price-oriented. Now, modern shopping malls with international retailers and restaurant chains are moving into these areas.
The local retail sector is well-developed and supermarket chains target different market segments. For example, Jason's Supermarket and Tanglin Marketplace attempt to capture the affluent expatriate customer. Cold Storage is the second largest supermarket chain in Singapore targeting middle and upper income consumers. NTUC FairPrice, the largest chain, is located in many of the HDB estates and appeals to middle and lower income residents.
Other retail outlets include convenience store chains, hundreds of small provision shops, and wet market retailers. Wet markets still play an important role in the Singapore food scene. It is estimated that as much as 80 percent of the chicken parts that are sold to consumers move through wet markets. A high proportion of fresh produce is also channeled through these retailers.
Among the older generation, there is a strong preference for traditional foods which are sold in "hawker centers." These are similar in concept to food courts, but are non air-conditioned and offer a wide variety of inexpensive local ethnic foods. In recent years, more modern food courts have taken root. These offer fare, such as chicken rice and char kway teow, in an air-conditioned modern environment.
Worldwide attendance records were broken when Western fast-food outlets first came to Singapore in the 1970s. Generally, Singaporeans like both the food that is served and the "way-of-life" that if offers. Fast food restaurants are particularly well-liked by youngsters, who exert enormous influence over family decisions as to where and when families eat out on weekends. Among the fast food chains in Singapore are McDonald's, Burger King, Pizza Hut, Kenny Roger's Roasters, and Kentucky Fried Chicken.
The yuppie culture in Singapore is reflected in a growing number of family and fine dining restaurants. Western franchises, such as Hard Rock Cafe, Dan Ryan's, Tony Roma's, Chili's, Planet Hollywood, and TGI Friday's are present on the local food scene. The number of Italian and other continental style restaurants has nearly doubled in the early 1990s.
Distribution System Changing
The food distribution system in Singapore is changing dramatically. Among the more important developments is the entry of David's, a major Australian food wholesaler, which is consolidating importers' goods and warehousing and delivering products for the major supermarkets; increased direct importing by major supermarket chains from exporters and consolidators in the United States; and an expanding number of importers who are trading and parallel importing products for buyers in Singapore and other Southeast Asia without agency agreements. These developments are making it easier for new U.S. exporters to enter the market, but more difficult to obtain good market penetration.
The author is an agricultural marketing specialist at the U.S. Embassy, Singapore. Phone: 011-65-737-1233; fax: 011-65-732-8307.
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