EVEN in the best of times, the food and beverage industry suffers from volatility, gauging from the number of outlets that open and close annually.
With the Covid-19 outbreak, normally bustling places have emptied out and socialising has been cut down. Singapore prides itself on being a food haven. What’s being done to preserve its reputation in a crisis? Andrew Tjioe of the Tung Lok Group, Thomas Choong of Xi Yan, and Anthony Wong of Creative Eateries voice their views on the impact of Budget 2020 on their various outlets. Anthony Joanath, a newbie to the industry hopes to raise more glasses of wine imported by Sarment.
A Real Threat To Business
Andrew Tjioe, President & CEO, Tung Lok Group
President Adviser of Restaurant Association of Singapore
THERE is no doubt that it is a very comprehensive budget, to the extent it is quite complicated, and we need some time to understand the details.
What’s relevant to F&B is the support we can get for skills upgrading and training, including support of absentee payroll during training. Details are still being worked out.
We were hoping for a more meaningful rental rebate, ideally 50% rebate over 3 months. The half-month rebate will not help meaningfully in view of the huge drop of revenue (50–80% drop since DORSCON turned orange), which could prove devastating.
We were already in an economic slow down before the Covid-19 crisis. During good times, net profit for most restaurants is a single digit percentage only. During the slow down, it became minus or a low single digit percentage.
With revenue dropped so drastically during Covid-19 crisis, losses will be -40 to -50%.
Private developers/landlords are watching what the government-owned properties will do. With government only giving half a month rebate, there is no pressure at all for the other landlords to give more.
Let me give you a simple example.
Let’s say the normal sales of a restaurant is $200K per month, rent is $30K or 15% per month.
During this crisis, if the sales dropped by 50% to $100K, and rent remains the same, the rent component will become 30%.
If sales dropped by 75% to only $50k, and the rent remains, the rent will become 60%. This restaurant would have to close.
Manpower expenses plus rental expenses cannot be more than 50%, or the business will not be viable.
The Singapore F&B industry hires about 200,000 staff. In order to protect jobs, we must first ensure business is still viable during this crisis, otherwise huge job losses are unavoidable.
Time To Transform
Anthony Wong, CEO, Creative Eateries
MY industry peers were hoping for a pro-enterprise budget to assist in mitigating the impact from the current situation addressing the high rental and labour costs.
While there was some assistance in the Stabilisation and Support package, we need to look further at our own operation and work out a plan to stay the course for the next few months.
We also expected more relief from the foreign workers levy but there was no help in that area. The fact that there were no further reduction in the DRC (Dependency Ratio Ceiling, or ratio of foreign to local workers) is already a boon.
The message was quite clear. We need to reduce the reliance on foreign workers within our industry.
Lastly, the urgent need to transform our industry and diversify our market is now a top priority once the industry returns to normalcy. Hence there is some support in the Transformation and Growth package.
More emphasis can be placed to assist companies in their market penetration into new markets.
More Needs To Be Done
Anthony Joanath, Business Development Manager, Sarment
Working as a wine distributor in the Food and Beverage industry has been difficult in the past few months due to the coronavirus outbreak.
GST is already considered high in Singapore for alcoholic beverages. An increase would have drastically hindered sales of wine in the current economy. So, the announcement to not increase GST for now is a relief.
The added plans to help the food industry, such as rental waivers and other measures will bring a much needed helping hand to assist restaurants and hotels to keep afloat, which, in turn, will help wine distributors who rely heavily on restaurants for business.
Although the budget will provide some relief to the food and beverage industry, perhaps more measures could have been put in place to provide further aid to an industry that has been hard hit by the current situation.
Perhaps a reduction in GST or other monetary incentives would help businesses stay afloat.
The Right Assistance Needed
Thomas Choong, Managing Director, Xi Yan
For the F&B industry, the two largest cost items are manpower and rental.
Even prior to COVID-19 many in the industry have been struggling with high labour costs, and now it is crippling to a collapse for companies that may not be able to sustain the losses beyond COVID-19.
Skilled foreign labour still make up a significant percentage of manpower in the F&B industry, so reducing the foreign labour levy (which is a tax) for at least 2 months would be of help. But, there is nothing to assist.
Similarly, waiving 50% of rental for half a month for commercial properties (in government-managed properties) is too limiting and too little. The peak of COVID-19 new cases would probably be in March, and hopefully decline after. Support should be for at least the months of February and March.
Links to all the Budget 2020 reaction articles: