Singapore restaurant owners are sending a message to the government that the nation’s status as a gastronomic center could be under threat as rising rents, soaring ingredient costs and tighter labor laws push businesses to either cut corners or close.
Inflation in the city is near a 14-year high, with restaurants bearing the brunt of the increases. But while costs of energy, ingredients and rents have risen worldwide, Singapore’s restaurateurs also face a sustained cost increase that has been exacerbated by government policy: wages.
At the start of 2021, the government tightened hiring quotas — limiting foreigners to 35% or less of staff in services jobs — and this year raised the minimum salaries for local employees in food and beverage roles. That’s made a decades-long manpower supply issue “even more dire,” said Nasen Thiagarajan, chief executive officer of Harry’s local restaurants.
The price of cooking oil has risen by 60% and wages by 25% over the past year, said Ee Chien Chua, who owns Jekyll & Hyde, graft, and Operation Dagger and is “considering all options” to cut costs. Chua was one of nine F&B owners Bloomberg spoke with extensively about the struggles in the industry.
“It’s a bit like Survivor,” said Woo Wai Leong, who opened 16-seat Restaurant Ibid on bar-studded Boat Quay shortly after he won MasterChef Asia in 2015. He’s cut overheads wherever he can, including downsizing the outlet’s garbage bin to a smaller size that costs half as much to empty.
“To attract and retain manpower, F&B companies will need to offer competitive wages and career development opportunities for their workers,” according to a joint statement provided to Bloomberg from the Ministry of Manpower and Enterprise Singapore, an agency that supports the city-state’s businesses.
Among government incentives are a co-funding of as much as 75% of the wage increases for lower-wage workers from 2022 to 2026. Still, the agencies stress that companies will have to “redesign jobs to create greater value for the business, and career progression for their employees,” including flexible work arrangements for those preferring other schedules.
The pain hitting Singapore dining venues is an example of how soaring prices can weave persistent and even structural changes into an economy that can be difficult or impossible to reverse, even after headline inflation has abated.
Michael Callahan, a founding bartender at 28 HongKong Street and owner of Barbary Coast bar, says the labor crunch is the worst he’s seen in his 12 years in F&B in Singapore and he expects it to last many more months, if not years.
No Scenery
The quality and variety of Singapore’s bars and restaurants are important to the city-state’s aspirations as a major travel hub. The island can’t compete with other destinations in Southeast Asia for natural tourism, such as scenery or beach resorts. Instead, “we have food, a lot of food,” said Callahan.
“We are a tourism and financial hub so if our tourism service standards are sub-par and new investments divert away from us, we will be in a very tough spot over the next five to 10 years,” said Thiagarajan.
Singapore has long had a tradition of cheap, tasty food, originally peddled by hawkers who sold cooked meals from carts. With the growth of Singapore’s now-ubiquitous public housing program, the hawkers were corralled into groups of fixed stalls in neighborhoods and shopping malls. As people became wealthier, restaurants sprang up — some catering to rich clients, but most serving a developing middle market.
The food and beverage sector “reflects the growing up, the wealth creation of Singapore,” said Song Seng Wun, an economist at CIMB Private Banking who’s charted the sector as a barometer of the economy for more than three decades.
The government lobbied to get hawker centers Unesco World Heritage status as cultural icons in 2020 and supported the stallholders that ran them during the pandemic. Officials assisted in training, provided grants and helped them go digital.
At the other end of the spectrum, high-end establishments offering meals for S$500 ($370) a head or more get much of their revenue from rich tourists or those dining on corporate accounts. The nation ranked second after Denmark in a 2021 global survey of the most expensive restaurants holding two or three Michelin stars.
But the middle market, catering mostly to local residents, is struggling.
Wei Chan consolidated his 39-year family business of Pine Garden bakeries from seven outlets to focusing largely on online operations during the pandemic and growing through further digitalization. Now he says he has to get “even leaner.”
Several owners complained that one result has been that they are forced to hire lower-quality staff at higher wages.
‘Damaged Goods’
Operators are “having to make do with damaged goods,” who would be fired at any other time, said Barbary Coast’s Callahan. Insubordination, tardiness and lack of output are rife in the industry and owners are being “held hostage,” he said. Entry-level salaries have doubled in the past five years and “we have to pay it,” he said.
Still, he’s trying to persuade fellow owners to resist raising prices. It’s “very, very, very dangerous,” Callahan said, because it alienates long-term customers and reduces clientele to a smaller, more fickle cohort, that may abandon you for the latest new opening.
Yet restaurants have limited scope to cut costs without sacrificing portion size, quality or service. Many are sourcing cheaper ingredients. Most have cut staff, often using Covid-era QR code menus to make customers order without a waiter. Others have simply closed outlets.
Meanwhile competition is increasing for the city-state. Bangkok took four of the top 10 spots on the list of Asia’s 50 Best Restaurants of 2023, even out-shining Tokyo. Dubai’s drive to attract the super-rich — it imported nearly $4 million of truffles in 2021 — has meant greater demand for fine dining and more investment in local chefs. In a 2021 survey of more than 12,000 expats around the world on the quality of life in 57 cities, No. 1 was Kuala Lumpur.
Chan and others have urged the Singapore government to open up foreign-worker lanes with countries such as Cambodia and Laos to help fill positions that don’t appeal to locals. Singapore already has long-established exceptions to labor laws for shipping, construction workers and domestic maids.
Still, some operators don’t expect a change in policy anytime soon. The government did a lot to help during Covid, but “sadly this time round I fear we are not one of their top priorities,” said Philippe Pau, director at Bistro du Vin and élan, part of the Michelin star-winning Les Amis Group.
And in Singapore’s aspirational restaurant industry, new entrants continue to try to make a mark. The growing city — the population has expanded by almost 37% in the past 20 years — and a rebound from Covid have encouraged a slew of new entrants. More outlets have opened than closed every month since August 2021. In the latest data for March, 105 firms started up while 75 shut.
Status Symbol
Many of the openings are “too niche,” with some wealthy new owners leasing outlets as a status symbol, said Woo at Restaurant Ibid.
The pandemic has also changed people’s attitude to dining. During lockdown, many learned how to make food at home or order in. Going out to sit at a table and order similar dishes on your phone, at double the price, has diminished appeal.
If costs stay high, even top-end chains may be forced to downsize. Pau of Bistro du Vin and élan said they’re planning contingencies that could mean firings, freezing staff benefits, closure of some nonperforming operations and salary cuts if things get worse.
“The shortage of manpower is a reality” that will end up hitting the consumer, said Sicilian chef Giovanni Mannino, owner of Gattopardo. “The food shrinks on the plate but the price stays the same.”