S'pore eateries out to tempt Shanghai

S'pore eateries out to tempt Shanghai
Mr Wilson Lim in front of PastaMania's third outlet in Shanghai, which opened in February 2015. The store is located at the popular Raffles City Mall at Renming Guangchang. Mr Lim is the executive director, China and international business, Commonwealth Capital Group. The group is Pastamania’s parent company.

More local food and beverage (F&B) companies are striving to become household names in Shanghai despite China's slowing economic growth.

Shanghai, the nation's commercial capital, is home to more than 24 million consumers.

The megacity accounts for some 10 per cent of Singapore's total foreign direct investments in China, with more than 3,900 projects across various sectors, according to trade agency International Enterprise (IE).

The city hosted Asia's largest professional F&B show, SIAL 2015, last month.

"Compared with the rest of China, Shanghai's residents have the highest expectations when it comes to food. Its F&B market is the most competitive," said Mr Fong Chi Chung, CEO of Putien Holdings Singapore.

Putien will be opening three outlets in the city by the end of this year, its first so far in China.

Mr Fong is undeterred by China's slowing growth. After all, Putien managed to open five outlets in Singapore amid the 2008-09 financial crisis.

Mr Wilson Lim, executive director for China and international business at Commonwealth Capital Group, is equally unfazed. The group is the parent company of PastaMania. He said: "People still need to eat... Affordable casual dining is the in trend anyway."

Still, China's slowing growth has hit some Singapore F&B companies already in the country.

For instance, Breadtalk Group's earnings from its bakery and food atrium divisions were affected by weak consumption spending in China, according to an RHB report last month.

Mr Samuel Tung, chief executive of Remedy 365, said "bricks and mortar will be affected (by slowing growth) if they are not able to retain loyalty". The restaurant is a unit of traditional Chinese medicine giant Eu Yan Sang.

But Ms Liane Ong, regional director for East China at IE Singapore, said the disposable income of the Shanghai consumer remains the highest in China, reaching $10,200 last year.

"Despite slowing growth in China, Shanghai's service-oriented industries are among the fastest growing segments of the economy today," she added. "More Singapore F&B brands have made their way to Shanghai over the past year, with Shanghai being an important starting point."

And as the city teems with dining options, players from Singapore must jostle to stand out. Putien will be one of the first restaurants there to specialise in Heng Hwa dishes, which consumers are less acquainted with, said Mr Fong.

PastaMania is seeking to capture the niche pasta market instead of joining the pizza crowd. It is promoting a pasta eating culture through a "Doughworkz Programme" for families. Some Singapore companies are offering more traditional flavours.

Remedy 365's menu caters to southern China's prominent "soup culture". To make its name in the promotion of health and wellness, the eatery has sponsored some of Shanghai's dragon boat and volleyball tournaments.

Ms Ong cautioned that innovation and publicity efforts should be consistent: "Companies should be cognisant of swiftly evolving local tastes and preferences... by keeping abreast of consumer trends."

She urged companies to use social media platforms like Dianping.com, China's largest food rating site, which claims to have 170 million monthly active users.

Meanwhile, IE Singapore plans to set up national stores on some of China's e-commerce sites, including Alibaba's Tmall.com, to host the products of Singapore-based companies.

But before firms can even mull over long-term survival, they would have to tackle some of Shanghai's regulations - regarded by some as a baptism of fire for newcomers.

"Fire Services and Food & Drug guidelines don't always match up, and you don't know who to listen to," said Mr Tung.

For PastaMania, which has outlets in three different municipal districts, Mr Lim said he had to adjust to the requirements of the various personnel and district offices.

For F&B manufacturers, regulations on importing of food products can prove tricky, said Ms Ong. They range from labelling issues to the interpretation of import regulations.

"Another challenge is finding good distributors committed to work with a company to grow the brand."

And as with Singapore, companies must also deal with rising labour costs. Employees' social insurance contributions rise annually, reaching 38 per cent this year.

But in an employee-driven market like Shanghai, F&B bosses cannot afford to scrimp on training and wages. Mr Lim said: "Most of Shanghai's F&B workforce is dominated by workers from the countryside. Their level of education may not be high.

"They may not be used to multi- tasking... at times, teamwork in the kitchen area may be missing due to a lack of communication."

So while PastaMania hires local Chinese workers, its restaurant managers are staff from China already trained at its Singapore outlets and are familiar with both local and company culture.

Despite the challenges of operating abroad, Singapore's F&B firms are not settling for a mere handful of outlets.

PastaMania hopes to have more than 50 outlets in China four years from now, while Putien is looking to other major cities, such as Beijing.

Mr Fong said: "If we can make it in Shanghai, we will be able to perform even better when we expand across China."

hphyllis@sph.com.sg


This article was first published on June 3, 2015.
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