Impact of Covid-19 - FOOD & BEVERAGE

Needed: A shot of vitamin M(oney) in food & beverage sector

At Summer Hill, a two-year-old casual French restaurant in Sunset Way, business has held steady despite the chaos created by the coronavirus pandemic.

Singaporeans who normally love air-conditioning are still turning up to dine there, attracted by the outdoor seating area, which is surrounded by lush plants. Social distancing and not being in a confined space are all the rage now.

Chef-owner Anthony Yeoh, 38, said: “We had to create a comfortable and welcoming al fresco environment from when we opened to entice customers. I have a regular who normally reserves a table inside and the other day called to make sure she got an outside table for dinner. And even before the calls for social distancing, our tables weren’t cramped together as we aren’t a high turnover operation.”

People who have cancelled trips overseas are turning up to dine. Families who live in the area are finding relief from cabin fever over roast chicken dinners. And office workers who normally turn up for dinner are now coming for lunch, because they work from home.

But how long this will last is anybody’s guess. When Malaysia declared a lockdown, chef Yeoh wondered if he should buy a chest freezer to stockpile the Sakura chickens he gets from across the Causeway “to ride it out as long as I can”.

“And if a lockdown happens here, or we have to go purely delivery, that’s a big question mark,” he said.

The life of a restaurateur is full of uncertainty right now.

Mr Vincent Tan, president of the Restaurant Association of Singapore (RAS), which has 450 members who run 4,000 outlets, said that as many as a quarter of the 12,000 restaurants here could close in three months, if the situation remains the same or worsens.

He told The Sunday Times that members are reporting that business has gone down 50 to 80 per cent, in an industry which contributes to 0.8 per cent of Singapore’s GDP, employs 200,000 people, and which operates on razor-thin profit margins of 1 to 1.5 per cent.

It gets worse.

Economist Song Seng Wun from CIMB Private Bank says global growth is set to be the weakest in 50 years, possibly more.

He said: “The external environment will impact Singapore, which is so dependent on trade in goods and services. The jobs and livelihoods of people outside Singapore are under risk. And they are the consumers of those goods and services.

“This is the biggest crisis for Singapore since Independence.”

HOW BAD IS IT?

Talking to people in F&B, a fragmented picture emerges.

Some restaurants, like Summer Hill, are still holding their own. But restaurants which depend on tourists and office workers are getting hit hard.

Even though analysts have said that hawker stalls and coffee shops are likely to be able to ride out the storm, location determines how well they actually do.

Hawker Melvin Chew, 41, of Jin Ji Teochew Braised Duck And Kway Chap at Chinatown Food Centre in Smith Street, said the crowds have thinned out. This took a dive right after news of the coronavirus hit in late January, falling by 70 to 80 per cent, he estimates. Things began to pick up at the end of February, but the announcement by Malaysia that it was locking down, and news of a new spike in cases here, sent the numbers plummeting again.

“There is no queue for Xiu Ji Ikan Bilis Yong Tau Foo,” he said, about a popular stall that usually attracts long queues the minute it opens. “At most, there are five or 10 customers. Liao Fan, maybe eight to 10 people in the queue.” Liao Fan, which serves soya sauce chicken and has a Michelin star, used to attract snaking queues.

His customers now prefer to do takeaways instead of eating at the hawker centre.

He is luckier than most restaurateurs, however. The government is giving stallholders in hawker centres and markets a one-month rental waiver, and the Jalan Besar Town Council is waiving Service and Conservancy Charges and Temporary Occupation Licence fees for stallholders under its management for one month.

“It does help us,” he said.

Business in the F&B sector has reportedly gone down 50 to 80 per cent, in an industry which contributes to 0.8 per cent of Singapore's gross domestic product.
Business in the F&B sector has reportedly gone down 50 to 80 per cent, in an industry which contributes to 0.8 per cent of Singapore's gross domestic product. ST FILE PHOTO

For some entrepreneurs, the picture is decidedly schizophrenic.

Mr Lee Jia Cun, 33, runs six coffeeshops, Windowsill Pies in Haji Lane, and a cafe called Oberstrasse in French Road. Business at five of the coffeeshops is down 20 to 30 per cent. These are located in the heartland and while the usual office lunch crowd has thinned, people who work from home are still going to his coffeeshops for meals.

However, business is down 35 per cent at his coffeeshop in Upper Cross Street, which relies on the office lunch crowd. He is giving tenants there rent rebates of 30 to 40 per cent.

“Everyone is like family,” he said. “We hate to see them struggling. We are trying to ride through this.”

 
 

But business at the two cafes is down. Oberstrasse, which caters to hotel guests in the area, has seen revenues cut in half, because 40 to 50 per cent of its business came from tourists.

He said: My very big fear is that we might have to close. We are going to burn through our savings and reserves in three months. It’s a very nervy time for us.”

Others are feeling the same way.

Chef Fernando Arevalo, 34, of fine-dining restaurant Preludio in Frasers Tower in Cecil Street, said business took a big hit when Singapore raised its coronavirus alert level to Dorscon Orange in early February.

“Things were starting to pick up all through February but these last two weeks have been most critical. This week, we lost 70 per cent of our business,” he said on Friday (March 20). “Our capacity is 40 to 44. The number of cancellations for lunch today was 25. For our Friday dinner service the last three weeks, we have had 25 diners on average. Tonight, we have three.”

Diners are staying away because they fear coming down with the virus, and are tightening their belts in anticipation of a worldwide recession. Tourists have stopped coming, and so have people who come to Singapore for work. To make things worse, corporate events have been cancelled or postponed.

Mr Martin Bem, 52, who runs LeVeL33, a microbrewery in MBFC Tower 1, Erwin’s Gastrobar in Marina Bay Link Mall, online businesses Perfect Bakes and Locaba, and a wine and beer distribution business, said business at the two restaurants has suffered for all these reasons, having fallen 40 to 50 per cent.

However, business is up for his online bakeries. Perfect Bakes specialises in gluten-free cakes, and Locaba, short for “low-carb bakery”, offers diabetic-friendly food.

Even the Les Amis Group, which runs more than 30 restaurants, from three-Michelin-starred Les Amis to casual restaurants, has been hit.

Mr Desmond Lim, chairman of the group, said: “Sales across the group is down, varying from 10 to 35 per cent across all our 21 concepts. Only 10 to 15 per cent of our outlets are still operating in the black, the rest are all in the red.

“Our concepts based in shopping malls are the worst, since malls now have very little footfall. Casual outlets situated in suburban areas, especially those with al fresco dining areas, are doing better. Concepts which are dependent on tourism and travellers have been very badly hit.”

HELP NEEDED

None of those interviewed have quarrels with what the government has done so far to support the sector. They say the $32 million in SkillsFuture funding is vital for upskilling their workers and defraying business costs.

They hope the second stimulus package, which the government is working on, will help in more significant ways to retain workers and keep businesses afloat.

RAS’ Mr Tan hopes there will be more generous rental rebates that might amount to three months of free rental, and an increase of working capital loans from $600,000 to $1 million. The quantum had been increased from $300,000 to $600,000 in the 2020 Budget. He would also like to see the quantum of temporary bridging loans increase from $1 million to $2 million.

SGTUFF, short for Singapore Tenants United For Fairness, is pressing for even more.

The group, which sprang up after the coronavirus started to affect businesses here, represents more than 400 brands in retail, food and beverage, and services. Its members run 14,000 shops, taking up over 2 million sq ft of retail space and generate an estimated $1.5 billion in revenue a year.

 
 
 

“All of us can fill the entire Suntec mall,” it spokesman said.

Its aim is to help mall tenants fight for fairer rental terms and rebates.

Aside from talking to government agencies to see how they can help, they have also gathered tenants in various malls into big enough groups that they have the muscle to begin collective negotiations with landlords.

The spokesman said there are three to four groups that have sufficient numbers to begin the process, and urged other tenants to join in the effort, by logging on to this website.

In the long term, the plan is to push for legislation that will ensure that rental agreements are more fair, he added.

All those interviewed said landlords can, and ought to do more for tenants, reasoning that shuttered shop spaces do not help anybody.

Mr Lim from the Les Amis Group said: “When footfall in malls drops by more than 30 per cent, they should give tenants rental rebates of that quantum. If their tenants don’t survive, they will end up with properties with shuttered units.

“So far, most of the big landlords, other than Shaw Centre, have been reluctant and rather stingy, giving only token rebates that will sustain tenants for one to two months at most. No point boosting marketing budgets at this time; no one is going to the malls as people practise social distancing.

“Restaurants will need vitamin M ($) to help keep afloat. I sincerely feel it’s not fair that rank and file staff have been made to take the biggest hit, with salary cuts, while landlords sit behind in the shadows, not sharing the burden of helping their tenants through this difficult time.

“A one-off half month rent rebate is only equivalent to a reduction of 4.15 per cent of annual rental.”

A MATTER OF SURVIVAL

Meanwhile, restaurants here are rolling out offers and promotions to entice diners. On a recent Monday night, all of Centrepoint mall in Orchard Road was quiet. But Beauty In The Pot on the fifth floor, a hotpot restaurant by the Paradise Group, was hopping. The lure? The restaurant group is offering a 30 per cent discount for dine-in and takeaway in its restaurants until April 30 for its members and those who pay with Citibank and Maybank credit cards.

RAS’ Mr Tan said: “We have to find ways to bring customers back. Everyone is coming up with promotions. Some of these measures are working. Diners can decide which ones are more attractive.”

This is a double-edged sword. If diners swarm in, malls are justified in saying there is footfall in the mall. But the customers are there for promotions which eat into already slim profit margins.

Mr Tan said: “We are trying to stem losses, not make money.”

SGTUFF has also come up with some survival strategies.

It is exploring new business opportunities in e-commerce, for instance. Tenants in the grouping are also sharing mailing lists. Some are doing cross-promotions. For example, diners in a cafe might get discount vouchers for a clothes shop two doors down.

Mr Lee is looking at ways to get Windowsill Pies to its fans, and is supplying several cafes, including Ryan’s Grocery in Great World City. Business has been encouraging.

Both LeVeL33 and Erwin’s Gastrobar have removed some tables to give diners more space between tables. It did this ahead of co-chair of the Multi-Ministry Taskforce on Covid-19 Lawrence Wong’s announcement on Friday that diners at hawker centres, coffeeshops or restaurants will have to sit 1m apart.

The Les Amis Group’s Peperoni, Nam Nam, Con Nam, Mui Kee, Lino, Yujin Izakaya and Tarte brands are already available on delivery platforms such as Deliveroo, and its other brands offer takeaways. It is looking at how to make it easier for diners to order in advance for self collection.

Chef Arevalo of Preludio has come up with Tough Times Tickets. For $188++, the price of a six-course meal at his restaurant, he will offer diners an eight-course meal. They can buy the tickets online and can redeem the voucher within a year of buying it.

Mr Song says out-of-the-box thinking is crucial at this time.

“How about a meal from a three-star-Michelin restaurant delivered to homes in a limousine?” He asked. “You need to create demand.”

GOING FORWARD

Some restaurateurs are working to rethink and consolidate their businesses during the down time.

Mr Ricky Ng of the Blue Lotus Group does not think he will have to close either of his two restaurants, which are located on Sentosa and in Alexandra Road.

He said: “We are taking this opportunity to relook our strategies and making use of this time to do strategic planning for our local and overseas expansions.”

The Alexandra Road restaurant will be rebranded and will be renamed OPIO Kitchen & Bar, a brand which has been a success in Perth.

New restaurants will continue to open in Singapore.

Ms Quek Sue-Shan, 39, founder and managing partner of SPRMRKT, with two cafes in Cluny Court and Robertson Quay; and Telok Ayer Arts Club, an all-day dining and drinking venue; is set to open Tuga, a Portuguese restaurant which will also sell wine and gourmet products, in Dempsey Hill next month.

She is going ahead despite business losses from lower footfall and event cancellations at her three outlets.

“It’s business as usual,” she said. “When we want to import stuff and it can’t come in, we have to manage that.”

Hiring staff has also been difficult - candidates have withdrawn their applications, preferring, at this time, to stay put at their current jobs.

How the F&B landscape will look like in six months is hard to predict, given how quickly the Covid-19 situation evolves.

But those interviewed talk of more cautious investments in food businesses. Potential entrepreneurs will, they said, look more carefully at rental rates and terms and conditions.

Mr Song said: “Is the local food and beverage scene over-crowded? Probably. It’s inevitable that the weeding out will take place.

“It will be the survival of the best.”

 
A version of this article appeared in the print edition of The Sunday Times on March 22, 2020, with the headline 'Needed: A shot of vitamin M(oney)'. Subscribe