Local F&B products find niche overseas

Singapore's food and beverage (F&B) exports are booming but shoppers will struggle to find many of these locally made goodies on shelves here.

That's partly due to the domestic market being smaller, more crowded and competitive compared with overseas markets, say manufacturers.

Another deterrent is the high costs local supermarkets charge for shelf space. The listing fees - a levy a manufacturer must pay before a product is stocked - can be sky-high - about $2,500 to get a single product onto a shelf here. This is apart from other advertisement or promotion fees.

Some local retailers might charge less than $50 for a listing but $4,000 to $6,000 for advertising and promotional support several times a year.

"It's too costly for us to introduce our product here, and the return may not be justifiable with that kind of investment," said Mr Jimmy Soh, managing director of Chye Choon Foods, which sells its Peacock rice pasta in nearly 30 countries. "There are only three major supermarket players - which gives them stronger bargaining power over suppliers."

Mr Lachman U Babani, founder of Tri Gateway Exports, said he tried "strenuously" to market its 12-product Perfect Choice brand in Singapore when production began 10 years ago.

"We couldn't get access to the market here... We couldn't afford the (listing and advertising) fees."

Vega Foods, which sells canned food, grains and instant coffee under three umbrella brands in 35 to 40 countries, said listing fees were "definitely" a factor in not retailing here. "Also, the volume consumption of the market is not as high as in other countries," said manager Pooja Srivastava.

A FairPrice spokesman said its business costs with its suppliers, including processing and listing fees, are "benchmarked competitively against industry rates". It carries close to 4,000 locally made and locally packaged products. He added that a FairPrice programme has spent about $1.1 million in fee discounts and seminars since 2009 to help over 230 smaller local firms.

Other retailers said they could not comment as the fees were part of private business dealings or did not respond by press time.

While things have become tighter at home, exporters have found an increasingly willing world keen to take local products.

Exports have seen a 10.47 per cent compounded annual growth rate in the past five years and hit $10.66 billion last year.

Chye Choon's export sales have been growing 30 per cent year on year and now account for about 20 per cent of its revenue.

Mr Soh said he hopes exports will hit 40 per cent of revenue within the next five years. "It's important for Singapore companies to look outside... The world should be our market."

Exports account for 100 per cent of Vega Foods' revenue. Ms Srivastava said it has about $3 million to $5 million in annual sales in several African countries.

Singapore firms find the costs of getting on foreign shelves are generally less than here although they acknowledge that listing fees and conditions in China and Hong Kong can be even higher.

On the other hand, stores like Harmons and Wegmans in the United States may ask only for one carton free of a product - perhaps under $50 in all, said Chye Choon's Mr Soh, also deputy president of the Singapore Food Manufacturers Association.

But it also takes longer for his firm's products to get onto the shelves of US retailers as the market is "very big and layered".

He added: "We've been in the US for more than five years, but only managed to get listed in mainstream retailers two years ago."

Mr Babani of Tri Gateway Exports, whose turnover is $20 million a year, said sales of its coffee, tea and snacks started in Australia after a food show and took off after he attended Dubai's Gulfood exhibition in 2007. In Libya, annual revenue is now $2 million, up from $300,000 to $400,000 when it started exporting to the country four years ago.

But Mr Babani still hopes to sell in Singapore by possibly avoiding the big retailers and targeting traditional "mom and pop" stores. He has been getting support from government bodies like trade promotion agency International Enterprise (IE) Singapore.

Mr Lee Yee Fung, group director for lifestyle business at IE Singapore, said it is planning seminars and workshops to bring consumer insights to local firms.

Mr Sunny Koh, chairman of the membership and industry groups function committee at the Singapore Manufacturing Federation, added that paradoxically, a product geared towards the mainstream export market may end up too costly to sell well here.

"For example, if you want to sell to a mainstream US market, there are stringent demands placed on you, your ingredients have to conform to their requirements. Manufacturing is expensive."

wrennie@sph.com.sg

This article was published on May 19 in The Straits Times.

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