Food and beverage to Singapore

(Last updated: 15 Aug 2008)

Trends and opportunities

The market

Singapore’s total trade in food and beverages has been registering a steady growth pver the past few years. In 2007, Singapore's total trade in food and beverage was S$17 billion. Japan, USA, Malaysia, Indonesia and China are Singapore's largest export markets for food.

The food industry in Singapore can be divided into three broad segments:

• Retail
  Wet markets still represent the bulk of sales of products such as vegetables, seafood, rice, eggs, chicken and pork; however, supermarkets including hypermarkets (Carrefour and Giant) are gaining market share in all retail food products. Younger consumers are increasingly shopping at supermarkets rather than the usual wet markets, as supermarkets operate longer hours, allowing consumers to shop after work. The cleaner environment and wide product range also attract younger consumers to supermarkets. NTUC Fairprice and the Dairy Farm Group are the two largest supermarket retail players for imported food and beverages. Giant Hypermart, Cold Storage and Shop N Save supermarket chains are subsidiaries of the Dairy Farm Group.
  
  
• Food service
  Singapore is the tourist and transportation hub of South East Asia and has a very large food service industry with many hotels, restaurants, airline caterers, ship handlers, hospitals, and clubs. Two integrated resorts, which will house Singapore’s first casinos, are scheduled to open in 2009 and 2010. As of July 2008, the Singapore Changi Airport has an air network of 79 scheduled airlines, while in 2007, approximately 10.3 million tourists and business travellers visited Singapore. For certain product categories such as gourmet meats and smoked salmon, the food service sector is far more significant than the retail sector. Fine dining restaurants tend to feature these items on their menu.
  
  
• Domestic manufacturing
  Singapore has a significant domestic industry manufacturing a range of foods and beverages, but virtually all raw materials are imported, as there exists little agriculture, aquaculture and livestock farming.

Singapore's multi-racial society and the presence of a large expatriate population have led to a diverse and rich variety of food types being available to consumers. The diversity in consumer taste and preference arises from:

• Traditional culture
• Religion
• Urbanisation
• Overseas travel 
• Access to international media
• Available local foodstuffs and ingredients
• The scope of advertising and promotion
• Government policy and campaigns on food and health issues
• Social status of consumers and purchase decision-makers

All of these factors influence the foods that are eaten, the eating habits of consumers and their buying patterns.

Singapore’s classic Asian food culture has been rapidly diffusing to the West over the years. The level of processed food consumption in Singapore is low when compared to more affluent countries. There are a number of reasons why the consumption of processed foods is low, such as:

• Fresh foods are traditionally preferred over processed foods.
• Frozen and chilled foods are generally looked upon with suspicion because the cold chain system in the past had been inadequate. All frozen and chilled meat products are now transported in chilled trucks and follow the proper cold chain system.
• Processed foods are often more expensive than fresh foods.
• Supplies of imported processed foods can be irregular and therefore are unable to build loyalty among local consumers.

Dairy

There is a strong demand for dairy products from Australia due to its reputation as a ‘clean and green’ country, the competitive prices and the relatively short shipping times. In 2007, 26 per cent of milk and cream, 22 per cent of butter and 38 per cent of cheese and curd were imported from Australia.

Singapore's cheese market can be broadly divided into three different segments: processed cheese, bulk natural cheese and gourmet cheese. The increasing popularity in consuming wine has also attracted more interest in gourmet cheeses.

Bulk natural cheese such as Edam, Gouda, Cheddar and other cheeses (primarily of English origin, eg. Double Gloucester and Wensleydale) are popular because they are perceived to be more closely associated with the popular processed cheese brands. The Singaporean palate has not developed to the level of sophistication in terms of acquiring the taste for brie, blue cheese and other soft cheese.

Singapore's cheese sector has some unique characteristics:

• Mild, young natural cheeses are generally preferred over more mature, stronger flavoured cheeses.
• Singaporeans don’t usually buy large packs of cheese. The optimum retail size appears to be 200 grams.
• Singaporeans don't usually eat large quantities of cheese in a single sitting. Cheese is also rarely eaten after dinner.
• Singaporeans are gradually moving away from processed cheese to explore different tastes and variety. This may be due to a growing sophistication of the market as processed cheese is largely seen as a snack and also commonly consumed in sandwiches by children.
• Price, taste and smell are all very important to the average Singaporean's cheese-buying decision.
• Singaporeans generally have poor knowledge of cheese and need to be educated. They are not familiar with different types of cheese or how they might be eaten.
• Brand loyalty is weak, even in the processed cheese segment.

Seafood

More than 50 per cent of all fish and fish products consumed in Singapore are imported, mainly from Indonesia, Malaysia, Thailand, Vietnam and Taiwan. There are 96 seafood processing establishments licensed to manufacture fishery products, 99 floating fish farms and around 1800 fish (and meat) traders, licensed by the Agri Food and Veterinary Authority (AVA).

As Singapore's home waters are tropical and sub-tropical, all coldwater fish and seafood products are imported live, fresh/chilled, frozen or in processed forms. Some processed and frozen products are re-exported to neighbouring countries such as Malaysia, Brunei Darussalam and Hong Kong.

Australia and New Zealand are often scouted by local importers for trout, salmon, abalones, oysters, yabbies, lobsters and scallops.

Singapore's retail and institutional markets for fish and seafood have very different demand characteristics. The major source of demand comes from the hospitality trade, especially from major hotels that cater to business travellers and affluent tourists, and major restaurant chains and single restaurants (both Asian and Western), that cater to the middle to higher income group.

The following general market characteristics also need to be considered:

• Consumers have a better understanding of tropical and sub-tropical products
  Traditionally, warm water fish and seafood products are preferred over their coldwater equivalents. This buying trait arises because local consumers are more familiar with products from local waters in terms of their preparation, cooking and methods of consumption. In addition, both retail and institutional buyers are easily able to identify the freshness of such fish based on appearance.
  
  
• Price and quality sensitivity
  While Singaporean retail consumers generally accept that imported foods will be more expensive than local foods; they are still price and quality-conscious. Consumers expect the imported product to be of a higher quality than local products and still be value-for-money.
  
  
• Traditional shopping habits
  The majority of daily shoppers are usually older housewives who prefer to shop at neighbourhood wet markets. It is important to note that frozen fish and seafood, whether coldwater or warm water, are currently not favoured by local consumers who are accustomed to purchasing fresh/chilled products from the wet markets. Singapore's local population also don’t consume large volumes of different types of fish and seafood, unless the product is part of their food culture, eg. canned abalone.
  
  
• Poor consumer knowledge
  Singaporeans are not familiar with Western techniques in cooking coldwater fish and seafood and will usually try to cook it in the same manner as an Asian dish. Unfortunately, coldwater fish is usually not suitable and does not cook as well using Asian recipes.
  
  
• Consumer reaction to prepacked fresh fish and seafood
  Singaporean retail buyers tend to compare packs of similar types of fish and seafood to look for consistency in the product quality. If inconsistencies are noted the buyer will assume that the products were yesterday's stock that has been re-displayed with new stock. As a result, the products will probably be rejected and ignored by the consumer.
  
  
• Buyer sensitivity towards product quality
  Fresh/chilled and frozen fish and seafood deteriorate rapidly if the product comes into direct contact with Singapore's hot and humid climate. As a result, buyers are always looking out for signs of product deterioration.

Opportunities

Opportunities for Australians exporting food and beverage products to Singapore will arise from the following factors:

• Consumers seeking convenience
• More working women (but also more domestic servants)
• Health issues (in particular, artificial additives)
• Greater affluence relative to the rest of South East Asia
• Greater ‘Westernisation’ than in neighbouring countries, especially among the younger population
• Higher levels of education, changing perceptions and therefore demand
• Singapore's ageing population
• Government policies on social, health and educational issues
• Enhanced local or traditional food sector
• Rising average income levels among the whole population

Dairy products

Australian dairy suppliers should focus on gourmet cheese (includes blue cheese, smoked cheese, spiced cheese and other flavoured cheese). This market has existed for many years with demand from Singapore's sizeable European expatriate community and hotel and other Western food restaurants.

Seafood

In Singapore, virtually all of the seafood imported from the traditional supply countries such as Indonesia, Malaysia, Thailand, Vietnam and Taiwan are tropical and sub-tropical fish. At the mass-market level, these products are extremely price sensitive. Taking these into consideration, Australian suppliers should focus on the following products:

• shellfish
• oysters
• lobsters
• crabs
• coral trout
• salmon

Organic food and beverage

While organic products remain relatively niche, interest is increasing in this sector with the continued focus on general well-being and healthy living in Singapore.

Australia's strengths include:

• Strong presence based on proximity to Singapore.
• Strong player across the food and beverage sectors.
• Most products are very price competitive when compared to major competitors.
• Packaging is generally well suited to Singapore's distribution environment. Australian product pack sizes are well received compared to larger packs from USA. 

Competitive environment

Competition is driven by:

• The abilities of importers to target a niche sector and meet the needs and demands of customers in the hospitality trade
• Promotion to the hospitality trade, particularly in convincing chefs to use the products
• Quality, appearance/colour and freshness
• Price, with business costs and the cost of living rising, this factor is becoming increasingly important to Singapore's buyers, whether retail or institutional

Malaysia is the main source of fresh fruit and vegetables, with Australia also a significant supplier of these products along with meat and dairy products.

The European Union, Australia and New Zealand are major suppliers of virtually all dairy products. As Singapore consumers are particularly brand-conscious, it is difficult to displace existing established European and Australian brands in the Singaporean dairy industry.

There are two major local manufacturers of dairy products: F&N Food Pte Ltd and Malaysian Dairy Industries. Both manufacturers are large importers of powdered, fresh and frozen milk.

Australia is also a major player in Singapore's seafood industry and its main competitors (apart from Singapore’s neighbouring countries) are Japan, USA, Norway and New Zealand.

Tariffs, regulations and customs

Most goods can be imported freely into Singapore. The Agri Food and Veterinary Authority (AVA) regulates the safety of all imported or locally produced food until just before it hits the retail market. AVA is responsible for setting and enforcing food safety standards as well as overseeing food labelling. AVA's expertise in accrediting food sources, backed by its up-to-date diagnostic capabilities, ensures that food arriving at the retail end is safe and wholesome.

There are relatively few restrictions on imports into Singapore. Most food and beverages do not attract any import duties; however alcoholic beverages attract very high levies.

All meat products, processed egg products and eggs exported to Singapore can only come from sources approved by AVA. Australia is on AVA’s list of countries approved to export beef, mutton, pork and poultry. Poultry meat, however, must be derived from AVA-approved establishments in Australia.

Fish products refer to any of the varieties of marine, brackish water or fresh water fishes, crustacea, aquatic mollusca, marine sponges, trepang and any other form of aquatic life and their young and eggs. Fish products here do not include the ornamental varieties. Fish products may be in chilled, frozen, processed or canned forms.

Fish may be imported from any country, subject to the following restrictions:

• The import of chilled shucked raw oyster, chilled cockle meat, chilled cooked prawn/shrimp and chilled crab meat is prohibited for food safety reasons.
• Live oysters may only be imported from countries which meet AVA's requirements for a shellfish sanitation program. The countries currently approved for such exports are Australia, Canada, France, Ireland, the Netherlands, New Zealand, UK and USA.

A seven per cent GST is levied on all goods imported into or manufactured in Singapore. GST is applied on an ad valorem basis on all dutiable and non-dutiable goods. The GST taxable is calculated based on the CIF (Costs, Insurance and Freight) value plus all duties and other chargeable costs, whether or not shown on the invoice.

Industry standards

Singapore is recognised internationally for its high standards in food hygiene and safety. The AVA and the Ministry of Environment are the regulatory authorities, which ensure that food and beverage establishments maintain stringent standards of hygiene.

Singapore's food regulations feature relevant standards that are applied internationally and have been adopted and/or modified to suit Singapore's conditions. Such controls are in place for public health, security or safety reasons. Under circumstances where any foodstuff or ingredient falls outside the scope of the Food Regulations, permission is first required from the Food Control Divivsion of AVA before approval can be obtained to import it into Singapore. In addition, all new food ingredients being introduced into the country are to be submitted to the Food Advisory Committee for approval before they can be accepted for use by food processors in Singapore.

The Sale of Food Act Chapter 283 gives regulations on:

• Packaging
• Sale by date/expiration date
• Labelling requirements
• The minimum or permitted levels of certain constituents of each food type

Product labels and packaging should provide the specific names of all ingredients.

The Food Regulations provide specific requirements on the processing and constituents of food products. These include the following food products:

• Flour, bakery and cereal products
• Meat and meat products
• Fish and fish products
• Edible fats and oils
• Milk and dairy products
• Tea, coffee and cocoa including chocolate
• Fruit juices and fruit cordials including jams and fruit jelly
• Non-alcoholic drinks including soy bean milk
• Alcoholic drinks
• Special purpose foods including infant formula and infant food

The import of meat products and fish for food is regulated under the Wholesome Meat and Fish Act and its subsidiary legislations. For importation, all importers are required to apply for the AVA Licence for Import/Export and Transhipment of Meat Products and Fish Products.

Consignments of any meat, live/frozen oysters, frozen blood cockle meat, frozen cooked prawns or frozen raw/cooked crab meat, must be accompanied by a health certificate issued by the relevant authority of the exporting country, certifying that Singapore's animal health and food safety requirements have been complied with.

Health certificates must contain the following details:

• Description of product and packaging (including brand, trademark, if any)
• Quantity, by weight
• Name and address of the processing establishment
• Name and address of consignor
• Name and address of consignee

The Fisheries Bill (Amendment) 1994 allows the AVA to seize any illegal consignments or contaminated products. Each import consignment of high-risk shellfish products must be accompanied by a health certificate issued by the competent authority in the country of origin. These products are automatically detained upon arrival for physical inspection and laboratory testing.

It is very important that importers seek clarification on all regulatory matters from the AVA before any shipment of coldwater fish or seafood is received in Singapore.

Marketing your products and services

Market entry

The key barriers to entry into the Singaporean food and beverage industry include:

• Limited access to high quality local sales and marketing personnel
• Limited access to distribution channels
• The intense price-based competition
• The strength of existing players, particularly those with well-established distribution functions and strong marketing, technical and research support
• Local taste and preferences

To enter this industry successfully, the following points should be considered:

• Enlist the services of a distributor who knows the hospitality trade and can gain access to it
• A high level of advertising and promotion (A&P) at the initial stages of entry. All A&P activities should include personalised introductions of the product to relevant chefs and food and beverage managers
• Follow-up A&P activities to ensure the products are always in the mind of the buyer and consumer. National level promotions are also highly appropriate at this stage
• Careful handling of the products to ensure freshness and quality
• Brand management to nurture constant market development
• Feedback to the supplier from the user and consumer, so that any problems can be rectified as quickly as possible
• Compliance with consumers' food quality specification

The three main market entry points specifically for the seafood sector include:

• Importers: Most importers have their own distribution networks, collect cargoes, re-pack in warehouses and deliver to clients.
• Wholesalers: AVA operates two fishery ports at Jurong and Senoko. They provide 24-hour service daily to foreign and local fishing vessels for bunkering, discharging and transhipment of fish. The ports also house the wholesale fish markets whereby buyers can buy fish wholesale in bulk.  These ports play an important role as a major fish landing and distribution points in Singapore. The Jurong complex handles the bulk of fresh fish landed from fishing vessels as well as those imported by air and road.
• Retail: A majority of households purchase seafood from wet markets, which are traditional small traders’ stalls, which operate at lower overheads than modern supermarkets. However, an increasing number of more affluent consumers don’t mind paying more for quality and convenience and prefer to buy fish from supermarkets. Consequently, supermarkets are expanding their seafood sections to meet this demand.

Singapore has a number of important barriers to overcome before coldwater fish and their products enter local food culture at mass-market level. These barriers mainly arise from a lack of product understanding. In developing future mass-markets for such products, it will be necessary for innovative education campaigns to be run, eg. cook-ins and tasting sessions.

Other barriers include price and cool chain distribution, which has improved in recent years. Inadequate cool and frozen distribution means that the country’s tropical climate deteriorates fresh and frozen products rapidly unless appropriate refrigeration or handling is maintained.

It has to be stressed that any mishandling of products along the distribution chain for these products, whether from outside or within Singapore, will ultimately affect the reputation of the supply source. In many cases, the receipt of poor quality products by Singapore-based users has lead to the supply source being blacklisted. Trade sources indicate that it is very difficult to reverse such action.

All companies seriously considering entering Singapore should obtain a detailed knowledge of ‘how to do business’ in the country. Proper research on the background of distributors and their capabilities is vital to doing business in Singapore, as with any country.

Distribution channels

There are a number of structural concerns, which need to be considered by any companies distributing food or beverage products in Singapore. These include channels that are:

• Fragmented with a large number of distributors
• Multi-tiered
• Controlled by local suppliers and their agents

The main reason for the distribution system lies in the way trade has developed in Singapore. Singapore has a private enterprise culture whereby traders, both large and small, import merchandise for the area of the market that they supply and/or control. Over time some of the original traders became the retailers of today and others developed into larger trading houses.

Singapore's complexity has developed because of its capacity to accept imports. It is a low tariff country and has a small affluent population that consumes imported products.

The present distribution system is an anachronism that thrives because of the large number of people who have an interest in its continued operation, either because of profit or as a source of employment and wages.

Unfortunately, for exporters to Singapore and the country's food processors, the number of firms in Singapore's distribution network has grown along with the network's complexity. The larger retailers and importers of foodstuffs are striving to deal with this problematic system. For those with larger order requirements, this means purchasing direct from their suppliers. In this instance, major retailers such as NTUC Fairprice and Cold Storage are sourcing their products directly. Smaller business are unable to skirt around the system and so are inclined to maintain links with the most reliable supplier they know, ie. a ‘time tested’ Singapore based distributor.

The archaic distribution practices and highly fragmented retailing system mean that there is a high degree of price competition in the local market. Margins being earned at all levels can be very thin placing financial constraints on local food processors attempting to produce high quality products. Inexpensive imports of high quality branded competitive foods from other countries are very common, further distorting the pricing scenario.

Transport

With cheaper airfreight and short delivery times, seafood from Australia arrives in Singapore fresh. Seafood is imported both by sea and airfreight by agents/distributors. The freight time varies depending on the port of loading. For more specific information on freight, please contact your local freight delivery companies.

Links and industry contacts

Food and beverage related resources

Carrefour – www.carrefour.com.sg
Cold Storage – www.coldstorage.com.sg
NTUC – www.fairprice.com.sg

Government, business and trade resources for Singapore

Singapore Customs – www.customs.gov.sg
The Agri Food and Veterinary Authority – www.ava.gov.sg

Australian resources

Dairy Australia – www.dairyaustralia.com.au

Contact details

The Australian Trade Commission (Austrade) is the Australian Government’s trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.

Austrade assists Australian businesses contribute to national prosperity by succeeding in trade and investment, internationally, and promoting and supporting productive foreign investment into Australia.

Austrade:

• Delivers services that assist Australian businesses initiate, sustain and grow trade and outward investment.
• Promotes Australia as an inward investment destination and, with the States and Territories, supports the inflow of productive foreign direct investment.
• Administers the Export Market Development Grants scheme.
• Undertakes initiatives designed to improve community awareness of, and commitment to, international trade and investment.
• Provides advice to the Australian Government on its trade and investment development activities.
• Delivers consular, passport and other government services in designated overseas locations.

A list of Austrade offices (in alphabetical order of country) is available.

More information

For further information please contact Austrade on 13 28 78 or email info@austrade.gov.au

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