The future of F&B in a post-pandemic Singapore

Jay Teo, International Director, iCHEF Singapore

The F&B industry was hit especially hard by the emergence of COVID-19, with the down turning economy, lockdown measures and dine-in restrictions leading to the sector reporting a year-on-year loss of almost 30 percent at the end of Q3. Recently, however, the F&B sector has seen an improvement as the country segued away from circuit breaker measures and eased into the safe reopening of in-dining experiences in Phase One.

At the close of the year, we look back on how SMEs, the lifeblood of the F&B sector, managed to stay afloat through the pandemic and how the immediate aftermath of COVID-19 will translate into trends affecting the coming years in a post-pandemic Singapore.

  1. Digitalisation: the “not-so-secret” ingredient necessary for survival

Esteemed writer and strategic advisor Max McKeown once said that all failure is failure to adapt, all success is successful adaptation. This mantra could be considered to be the lesson of 2020, as all sectors have had to quickly adapt despite the whirlwind of panic and challenges, and the global response to ensure resilience in trying time was to turn towards technology.

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For many years, countless analysts have determined the importance of digitalisation and investments in technology as the future for businesses, yet COVID-19 proved to be the catalyst in showing companies that digitalisation, innovation and technology are absolutely necessary for survival, particularly in the F&B industry. This sentiment was echoed by Trade and Industry Minister Chan Chun Sing, who said that due to the pandemic exacerbating many existing challenges faced by the F&B industry, companies needed to accelerate their efforts in digitalisation in order to remain competitive.

Further echoing the pandemic as a stimulus for traditional hawkers to embrace digital ordering systems, iCHEF saw a 66% increase in the number of enquiries in 2020 as compared to 2019.  One key factor in this acceleration towards digital solutions was the government’s involvement, manifested through subsidies and grants such as the Digital Resilience Bonus and the Productivity Solutions Grant (PSG), with the former offering $10,000 in payouts and the latter supporting up to 80% of funding for IT solutions for businesses, playing a key role in driving digitalisation among F&B SMEs to uplift digital capabilities and drive business growth.

Prime Minister Lee Hsien Loong reaffirmed a vigorous pursuit of digitalisation and Future Economy strategies as we move towards an unpredictable post-pandemic world, stating that these will keep us in good stead.

  1. Entrepreneurship against all odds

While pandemic measures led to F&B being amongst one of the most badly hit sectors in 2020, this did not seem to discourage entrepreneurs from pursuing their dreams, with a whopping number of 1132 new entrants into the F&B industry counteracting against the massive set of closures, resulting in a net increase of 96 by the end of H1’20 according to Handshakes, Accounting and Corporate Regulatory Authority (ACRA).

Considering the usual difficulties of starting up one’s own business compounded with the pandemic, one would expect a higher barrier of entry to open up an F&B outlet amid a shaky and uncertain industry landscape. However, there are two key factors that entrepreneurs took advantage of to safely settle in the eye of the hurricane.

Firstly, the economic downturn hit hard. However, it takes a true entrepreneur to see the silver lining on the darkest of clouds. A void was left by the exit of many existing players, resulting in cheaper operating equipment, newly available prime locations, lower rental fees, a greater supply of quality manpower and an increased demand for take-away services all made the entry into the market very appealing for would-be entrants, especially those who had plans for their own outlet prior to the pandemic, seizing the opportunity to break into the market.

Secondly, collaborations between the government and existing service providers enabled SMEs to quickly set up their businesses and digitise operations, optimising efficiency. These government-supported grants allowed entrepreneurs to utilise services at a PSG-subsidised rates, indicating the surge of interest by SMEs amid the outbreak.

  1. What’s Next for F&B in 2021
  1. Always be prepared to confront uncertainty with technology

If there is a single key lesson that the industry has learned from a year filled with instability and unpredictability, it is that we should always be prepared to confront uncertainty with technology. With F&B being the age-old industry that it is, many business owners may be resistant to change, which ironically, is the biggest thing that has to change.The older generation of business owners may not view technology as the accelerator that it is, and are traditionally known to be resistant to adopting digital solutions.

Business owners must observe the changes in the landscape and learn to adapt accordingly, and should not fear technology as the solution. This is not to say that mindlessly adding technology to their businesses is the panacea to all of the sector’s problems, as businesses need to note what are the core elements of their businesses, how to deliver food and service effectively at scale and what keeps customers coming back, always being prepared to select the right tools to aid their transformation.

However, COVID-19’s impact on the industry landscape has made it clear that there is a paradigm shift towards technology in the F&B sector, as shifting towards virtual channels reduces costs, improves productivity and speeds up sales cycles, with technology only becoming more necessary in the coming years, enabling owners to effectively cater to consumer demands in a competitive market where the consumer is king.

  1. Food delivery as a ‘necessary evil’

Another trend that stood out amid pandemic measures was the rise in take-away and food delivery. As of 25 November, the percentage of seated diners in restaurants has declined by 51.3% globally from pre-pandemic levels, with take-away and food delivery swooping in as an alternative. This service model is quick, convenient and keeps us safe, and is expected to grow exponentially in the region.

However, as food delivery services often take a large cut of revenue through commissions, many businesses may come to view food delivery as a necessary evil, in a world where one has to either embrace these additional costs or risk losing large amounts of business, SMEs simply have no choice but to go along with this trend.

While many F&B business owners have grown accustomed to the large influx of food delivery orders at the peak of the pandemic, the country shifting back to its pre-pandemic norm with the return of dine-in meals in Phase Two has contributed to a drop in demand.

However, it is unlikely that restaurants will be able to escape from food delivery services even with the F&B sector’s return to form. Bain’s e-Conomy SEA 2020 report indicated that 30% of all local digital service consumers were introduced to the service due to the pandemic, suggesting that there is a very significant consumer base available through these food delivery platforms. This substantial increase in food delivery consumers means that F&B owners cannot simply turn away from food delivery without losing a large portion of revenue, even if dine-in orders become more prevalent in Phase Three. Therefore, food delivery is likely here to stay in the eyes of business owners.

  1. Rise of younger generation of F&B entrepreneurs

We’ve seen a rise of the younger generation coming in with a different, smarter approach to the industry. The same entrepreneurs who saved the industry this year are truly a different breed from the older generation, able to seize the slightest opportunities and are hungry for success, embracing digitalisation and utilising social media to its full extent to market themselves effectively.

These young entrants take a low-risk approach that often starts from home-based businesses, involving less financial commitment and slowly expanding as they gain a following. 2021 could see more of these home-based businesses converting to brick-and-mortar shop fronts if these businesses gain more of a foothold.

With 2020 being a year of metamorphosis for many, the F&B industry will come out of the pandemic as a completely different beast than before. SMEs brave enough to venture into the industry during such a time are more prepared than ever to face challenges, showing that the spirit of entrepreneurship amongst Singaporeans remains strong even in the face of the greatest of adversities.

If one thing is clear from 2020, it is that innovation and a willingness to adapt are absolutely key in running a successful business despite a whirlwind of challenges, which is especially true in the F&B sector.