Mr Lim Hng Kiang at the Singapore Food Manufacturers’ Association’s 45th Anniversary Dinner

​SPEECH BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY, AT THE SINGAPORE FOOD MANUFACTURERS’ ASSOCIATION’S 45TH ANNIVERSARY DINNER ON FRIDAY, 12 OCT 2012, 7.45 PM, SHANGRI-LA HOTEL

Mr Wong Mong Hong,

President,

Singapore Food Manufacturers’ Association,

Distinguished Guests,

Ladies and Gentlemen,

Good Evening

I am delighted to join you here this evening to celebrate the 45th anniversary of the Singapore Food Manufacturers’ Association, or SFMA.

Strong growth of the food manufacturing industry

The food manufacturing industry has been growing from strength to strength, despite the economic volatility over the past few years and challenges, such as cost pressures on food ingredients. The industry achieved steady sales growth of 8 per cent a year. And in 2010, it contributed S$7.4 billion in manufacturing output. Consequently, its value-added rose by 2.2 per cent to reach S$1.9 billion.

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In addition, food exports continued to grow by around 17 per cent from 2005 to 2010 to reach S$7.5 billion.

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  I would like to congratulate the food manufacturers for their excellent performance.

Challenges & opportunities

While the performance of the industry is good news, we cannot be contented. Instead, we need to take stock of the challenges facing the industry today and in the future.

On the global front, the sluggish outlook in the US and Europe will have an adverse impact on consumer demand. Even emerging economies like Brazil, China and India are already showing signs of slower growth. This means that Singapore food manufacturers will need to be nimble in adapting to changing consumption patterns, so that they can tap on any opportunities that are available.

At the national level, Singapore’s GDP this year is expected to grow by 1.5 to 2.5 percent, slower than the 4.9 percent seen last year. However, even as business activities slow, companies tend not to adjust their workforce immediately, given the costs involved in hiring and firing workers. Hence, we are seeing a productivity decline, mainly reflective of the slowing economy. In the longer term, we expect productivity to improve. We need to give some time for this to happen. For companies that have started embarking on productivity improvement projects, time is needed to reap the benefits of these efforts. For those who have not already done so, time is also needed for them to change their mindsets and to take the first step.

At the industry level, our food manufacturers continue to face the challenges of productivity and manpower, rising raw material prices, as well as strong competition in the global export market. To help the industry, the Government has committed S$45 million to boost productivity in the food manufacturing industry over five years, until 2015. Of this amount, so far, over S$6 million dollars have been committed for more than 140 projects. These projects involve automation, productivity improvement tools, product innovation and workforce investment. Food companies should leverage on this fund to innovate, upgrade capabilities and build a sustainable business model to keep up with the intense competition.

Focus areas

Faced with more cost-effective manufacturing countries in the region, Singapore food manufacturers can no longer compete on price alone. We will need to focus on offering premium food products, differentiated from the competitors through branding and high quality production processes. Food manufacturers must look into four focus areas to improve their productivity, stay competitive and move forward. They are new markets, innovation, process improvement and capabilities upgrading. Let me elaborate.

New markets

Given our relatively small domestic market, companies must continue to grow their presence in new markets to remain globally competitive. While overall consumer demand is expected to remain subdued, the global food market value is expected to reach US$4.3 trillion by 2015

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, with the Asia Pacific region contributing the highest growth. Singapore food manufacturers are well placed to ride on the region’s growth by tapping into potential markets to drive exports and increase their production volume. Manufacturers like Super Group and Bee Cheng Hiang have used their consumer insights to grow their footprint across Asia. Bee Cheng Hiang now has more than 90 outlets across 16 cities in China, while Super’s instant coffee can even be found in new markets, such as Myanmar.

Innovation

Besides looking at geographical expansion of markets for existing products, food manufacturers should innovate. They could target niche markets, such as health and wellness, as well as halal food. These niches provide excellent opportunities for our food manufacturers. The health and wellness segment is valued at S$29.6 billion

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, while the halal food market is estimated to be worth S$700 billion.

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Product innovation, or the creation of higher value-added products, will be key to capturing a share of the pie in these markets. One example is Chye Choon’s successful penetration into the competitive US market with its brown rice bee hoon. The company saw an opportunity in the trend towards healthy living, and they created wholesome yet easy-to-cook brown rice bee hoon to meet this demand. Today, Chye Choon sells its products in more than 500 stores in both mainstream supermarket chains and independent grocery retail points, such as Whole Foods and Wegmans, in the US.

Process improvement

On top of that, food manufacturers need to continue to drive costs down through process improvement. I believe this morning’s Food Manufacturing Productivity Conference has provided you with valuable tips and new ideas to improve your processes for a sustainable business. Some of the ideas shared include process redesign and automation. Through these, food manufacturers will be better able to deploy their limited manpower resource and create higher value-added jobs. They would also be able to overcome space constraints in their factories.

Capabilities upgrading

People are the cornerstone of every good organisation, and upgrading their capability is key to catalysing your business growth. It is thus imperative for food companies to look into human resource (HR) development and talent retention. Food manufacturers have a suite of schemes to employ for this purpose. These range from SPRING’s recently enhanced HR Capability Toolkit, to WDA’s WSQ Food Manufacturing courses, and a whole series of management capability development programmes under SPRING’s Business Leaders Initiative.

Going beyond this, R&D is another key factor that enables companies to stay relevant and resilient. For example, companies are increasingly tapping on design thinking and consumer insights to create new flavours, as well as new ways of cooking or new packaging to better reach out to and meet the needs of their target market. With the support of the Food Innovation and Resource Centre, or FIRC, in new product and process development, food manufacturers can focus on consumer-led innovation to develop marketable and high value-added food products. Companies can tap on SPRING’s Innovation and Capability Voucher, as well as the Technology Innovation Programme, for such funding.

I would like to add that food science graduates are a good source of talent as they have the right technical expertise. Food manufacturing companies could hire these graduates to build up their internal R&D capabilities and eventually, leverage on them to strengthen their middle management and develop a pipeline of successors.

LEAD 3

Achieving all these is not easy, and I am glad that SFMA has been playing a significant role in driving the industry towards further growth and sustainable businesses since its inception in 1967. Through workshops and seminars, SFMA has been a promoter of key productivity tools and other capability development programmes. In addition, SFMA is also working closely with government agencies, such as IE Singapore, to help food manufacturers grow their overseas presence and promote Singapore food products overseas. This is done through participation in tradeshows, such as ANUGA

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and Gulfood

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. Moving forward, SFMA is taking a lead role in banding together food manufacturers in projects for more sustainable growth. I commend SFMA for its many achievements in helping the industry in the past 45 years and extend my congratulations to the association for this significant milestone today.

Today, I am pleased to announce that SFMA will continue to lead the industry in its pursuit of excellence for the next few years. It will embark on its third Local Enterprise and Association Development, or LEAD programme, a three-year effort starting from January next year.

Under LEAD 3, SFMA will help to drive productivity improvements in the industry and provide the strong support needed to sharpen the global competitiveness of local food manufacturing companies. For example, more resources have been allocated to help the industry capture overseas demand. This is done through Singapore food promotions with foreign supermarkets and malls, as well as industry flagship tradeshows that bring together buyers from everywhere and across different distribution channels.    

One new key initiative in LEAD 3 is the Logistics Consolidation and Outsourcing Project. To encourage greater collaboration among players and across industries, SFMA will take the lead in outsourcing and consolidating the deliveries of a group of food manufacturing companies to common locations, such as supermarkets in the same vicinity. This will effectively reduce the number of trucks and drivers needed for the logistics processes. Through this resource optimisation, food manufacturers will become more efficient and can dedicate more time and resources to focus on their core activities.

Conclusion

As SFMA drives more industry productivity initiatives under LEAD 3, I hope more food manufacturers will come forward to support SFMA’s efforts and embark on their journey towards productivity improvements. Food manufacturers should take advantage of the programmes available and come together to achieve bigger things – be it for consolidation of logistics needs, overseas ventures or partnerships for resource sharing to achieve greater economies of scale. I would like to encourage SFMA to continue to take the lead and continue the good work, in helping the industry achieve sustainable business growth.

I strongly believe that this collective effort will ensure many more good years for the food manufacturing industry. My heartiest congratulations to SFMA, and I wish you all a pleasant evening ahead.

Thank you.

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EDB Census of Manufacturing, 2010

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IE Singapore, 2010

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IHS Global Insight, 2011

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NutraIngredients-usa.com, 2011

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Reuters, 2011

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The largest food tradeshow in Europe

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The largest annual food tradeshow in the Middle East