Mr Vincent Tan, President of Restaurant Association of Singapore,
Mr Victor Mah, President of Singapore Coffee Association & ASEAN Coffee Association,
Mr Edward Liu, CEMS Group MD,
Ladies and Gentleman,
1. Good morning. I am happy to join you at the Café Asia 2019 and inaugural Restaurant Asia 2019. Today, we will hear about the new technology solutions and cutting-edge equipment that can help F&B players grow their business, from the front of house reception to the back of house operations.
Productivity Remains a Challenge for the FS Industry
2. Singapore has an international reputation as a food haven, offering a range of cuisines and dining experiences. This is possible because of the hard work of our food services industry, which employs over 180,000 employees and contributes receipts of close to $9 billion. Restaurants make up the largest sub-sector in the industry, at about 36%.
3. Productivity for the food services industry, as measured by real value-added per actual hour worked, has increased by 1.4% per annum from 2013 to 2018.This is a respectable number but it is lower than the productivity improvements in other services sectors such as accommodation (4.4% p.a) and retail trade (3.2% p.a) during the same period.
4. A major reason for this has been the rapid growth in the supply of F&B establishments, which has outpaced the growth in demand for food services. The shift in the allocation of mall space from retail to F&B, as well as the low barriers to entry, have all contributed towards the rapid growth of F&B players. With increased competition, profit margins of our F&B establishments are being squeezed and this has impacted the productivity of many firms.
Technology can uplift industry in some aspects
5. Many F&B enterprises have turned to technology to help manage costs and raise their productivity. While technology is not a magic super bullet, use of digital solutions can help to reduce the reliance on manual labour, which may not be a constraint in some of our ASEAN neighbours, but it is a constraint in Singapore because of our aging workforce and our limited population. It is also important that when we use technology, we need to maintain the “human touch” because this is ultimately still a service industry.
6. Digital service solutions like automated reservation, online food ordering and digital payment can help in managing front-end customer-facing processes as well as streamlining manpower needs. Through such technological solutions, customers can order and pay conveniently through apps, reducing the waiting time during peak hours.
7. For example, customers of Taiwanese bubble-tea, KOI, allows customers to place orders at digital kiosks instead of queueing at a cashier counter. KOI has since been able to redeploy employees to assist customers in customising their orders, offering the opportunity to interact with them and build brand loyalty. By using this digital solution, KOI has also reduced its manpower by one third, shortened the order fulfilment time and increased customer satisfaction. These have translated into over 20% growth in revenue. It is not just using technology, but using technology smartly. Ultimately it will improve customer service and overall experience.
Businesses need to go beyond technology adoption, to adopt interesting business concepts, innovate and internationalise
8. Ladies and Gentlemen, to address the challenge of productivity, enterprises must go beyond technology adoption, to innovate and introduce interesting food products and business concepts and also to internationalise. The focus is not only on cutting costs and reducing headcount, these are the denominator of the productivity formula. But if you overdo the cost cutting and headcount reduction, there will be an impact on your service quality. There is a need to strike a balance. We do not want to have inefficient processes and we do not want to overdo the cost cutting and headcount reduction. How then do we improve the productivity if we cannot reduce the denominator beyond a certain point? It is to increase the numerator. The numerator is your value-add, profitability and top line. My view is that while we focus on cutting costs to improve productivity by reducing labour reliance, it is equally important to help our companies to achieve higher value-add and greater profitability by achieving larger scale and to pool such processes to raise the numerator to increase the productivity in that way.
9. In this regard, I am pleased to note that the industry representatives from ASEAN countries are gathered here today to sign MOU to form an ASEAN Restaurant Alliance.
10. This is a good development. First, it will facilitate F&B players to expand their offerings into ASEAN markets. Second, it will promote the sharing of best practices and use of interesting ingredients or cooking methods across ASEAN. ASEAN is a place where we have a lot of rich food heritage and a lot of tasty food ingredients and food products. If we are able to share these best practices, it will benefit everyone.
11. Whether you are running a large restaurant chain or a standalone café, the heart of the F&B business remains the same; customers want tasty food, quality service and an enjoyable dining experience. Finding ways to address these three critical areas – product, service and experience, is thus key in staying competitive in today’s fast-evolving F&B climate.
Tasty food offerings and products
12. First, customers want consistent good quality food that taste delicious.
13. Take for example home-grown F&B company Jumbo Group, which continues to be a popular seafood dining option for both locals and tourists. One reason for Jumbo’s success is ensuring high-quality and consistent food across all their restaurant chains. This is made possible by centralising the production of its key ingredients such as sauces and soup bases in its central kitchen, allowing greater control over the production process, while reducing the manpower requirements.
14. It is not only large restaurant chains that focus on providing tasty food. I met one young chef recently at a RAS dialogue, his name is Chung Deming and he owns a restaurant called “The Quarters” in Tanjong Pagar, selling Singapore-inspired food. Vincent may remember that this was the young man who stood up and asked me the first set of tough questions. We had a good robust discussion that evening. I was impressed with Deming’s passion during the dialogue, so I decided to visit his restaurant with a friend to try his food. He has interesting dishes like foie gras with kaya toast (sounds like an odd combination but the taste is heavenly), and his delicious dessert durian can-boleh (a play on the word crème brulee). Deming differentiates himself by focusing on innovative recipes and importantly, by ensuring that his food tastes good because he is passionate about the art of cooking.
15. F&B enterprises must also look beyond the current landscape to see how consumer preferences and tastes are evolving, and adjust their product offerings accordingly. A point which I remember Dr Takeshi Shimmura made when he presented on Japan’s food services industry at a SkillsFuture forum last year. For example, we are seeing increasing consumer demand for healthier menus that are still tasty. Many companies are responding to this trend. I know Andrew Tjioe from Tunglok for example is trying out different recipes that are healthier but still taste good. It is not easy as you have to try different recipes, cooking methods and ingredients but that is what consumers are looking for. Today, we have to go with what our customers are looking for. There is a growing demand for specially curated and customised menus to meet the varying consumer preferences. Enterprises that are able to offer new, unique and customised menu items to meet consumers’ preferences will be able to maintain a competitive edge.
16. Second, quality service. Enterprises can extract value from the huge amount of data collected daily through their Point of Sales (POS) and loyalty programmes to better serve their customers. If properly analysed, such data can help you to understand your customers’ purchasing habits and preferences. Data can, therefore, be harnessed to enable better business decisions and develop more targeted marketing strategies including online to reach out to customers and customise products.
17. I am happy to note that some food services startups are already using data to estimate demand and manage delivery speed. An example is Grain, a food business that delivers meals to your doorstep without a physical shop. Grain uses data to forecast demand, which allows for more preparation time so that it can achieve island-wide deliveries in under 20 minutes, a valuable service offering for busy working adults. Through data analysis, Grain was also able to revise its menu to serve the needs of its customers, while improving its margins by over 50% three months after its inception. I was told that the people who started Grain are not from F&B but are from the data sector. They worked with F&B people to produce good tasting and quality food that are healthy. At the same time, they use their data analytics skills to be able to help to augment their business. So they have the expertise in two different sectors in the F&B and data sector.
18. At the same time, a sector-oriented sector like Food Services can only flourish if it continues to provide high, customised service delivery, where people remain at the heart. Grooming and retaining good quality staff is thus important to better service delivery. Staff who are motivated and passionate can make a big difference to the quality of service rendered. Imagine that if you have the service staff that are motivated passionate and happy, when they serve the customers, they transmit the positive energy to the customers. On the other hand, if you have staff that are unhappy, they will transmit negative energy to customers. So how you treat your staff, how you motivate them can make a big different in your overall service quality.
19. Over the years, our economic agencies have been working closely with F&B enterprises to support them in training their staff and building a pipeline of local talent. We have also enhanced existing schemes to support companies that are actively transforming their businesses. For example, as announced in Budget 2019, we will be enhancing the Productivity Solutions Grant (PSG) to include a new subsidy to support 70% of out-of-pocket cost for training on top of the 70% to 90% skills future grant. Therefore it is 70% that is up to a maximum of $10,000 per firm.
Enjoyable dining experience
20. Third, offering an enjoyable dining experience. Many of us bond over food. Foreign visitors discover Singapore’s unique flavours and multicultural heritage through food. Thus, offering an interesting and unique dining experience can become an important competitive edge in the crowded F&B marketplace, and allow restaurants to command premium prices.
21. Dining trends have evolved to meet the changing consumer preferences. From farm to fork concepts to private dining with highly customised menus, F&B players are constantly coming up with innovative dining areas to attract customers.
22. For example, NOX offers a unique dine-in-the-dark experience. While this may not be for everyone, this concept seeks to set the customer on a culinary journey that allows for a deeper appreciation of the meal through other senses and thereby better appreciating the various flavours and ingredients within the dishes served. I see John Ting in the audience who is an active member on the board of the Singapore Association of the Visually Handicapped. They too run a restaurant that offers a dining in the dark experience. I visited their premises before, they brought me in. You cannot see anything and you cannot see what you are eating, so you have to experience it through your other senses.
23. Another example is Tiong Bahru Bakery which has refreshed its dining experience by introducing unique themes to its different outlets. For example, it recently unveiled an African Safari theme to its bakery in Dempsey Hill, in line the natural environment in the area. It has also partnered with luxury retail brand Tiffany to make “Breakfast at Tiffany’s” a reality. These are just different themes to enhance the dining experience for customers.
Government will work alongside businesses and TACs to build capabilities
24. The Government is committed in partnering with our F&B players in your transformation journey. Over the years, Government has introduced and enhanced our programmes to support firms in areas such as technology adoption, internationalisation and workers training and skill upgrading. We will continue to find ways to better support and partner with industry players in taking the industry forward.
25. More importantly, one priority area for us is to work with our industry associations because you are our intermediaries that help to level up and scale up our industry players. I also want to see how we can work with the industry associations to encourage more of our companies to team up. This is because when companies work together. Just like a recent example of Mr Bean and Udders bringing their respective strengths together to produce soy-based ice-cream.
26. These are all examples of how our companies are working together for mutual benefit. We want to be able to support you through our industry associations. We want to help our companies build stronger capabilities so that you can do well not just in Singapore, but more importantly it is to take some of these overseas because that is where the growth is. The growth rates overseas are high. How do we benefit from those growth rates? We have to think through how to plug in to regional networks and how to work with regional partners. That is why the MOU signing that is taking place this morning is important as it helps us to be able to network with our partners in ASEAN.
27. Let me conclude by extending my congratulations once again to Singapore Coffee Association and RAS on the launch of the inaugural Restaurant Asia 2019. I wish you a fruitful symposium today.
28. Thank you.