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Singapore Food and Drink Report Q3 2008
Business Monitor International, July 2008, Pages: 63
Our Singapore Food Drink Report provides independent forecasts and competitive intelligence on Singapore's food and drink industry.
While food price inflation might not be triggering widespread consumer protests in the comparatively affluent market of Singapore – after all this is an economy in which per capita food consumption stood at a healthy US$1,470 in 2007 and mere food availability is not a pressing concern – the market is far from immune from this global trend, as the author explores in its newly-published Q308 Singapore Food & Drink Report.
With regard to daily staples, Singapore’s supply is not at risk. The government has not suffered as a result of regional export bans of key agricultural commodities, most notably rice, and has even gone so far as to allow higher imports in order to create buffer stocks to protect against future market volatility. However, if supply is certain, price stability certainly is not.
Here, Singapore has been closely affected by the activities of its neighbours, significantly a 40% fuel price hike recently imposed in Malaysia. With Singapore importing US$6.5bn worth of food in 2007 and with the author expecting this to increase by 48% to 2012, the country is particularly vulnerable to such policy shifts in the economies of close trading partners. Singaporean wholesalers have reported sharp rises in food prices as a result of higher freight costs from Malaysia and while most have resisted passing these costs on to consumers in the short term, almost all have conceded that they may eventually have to.
Wholesalers are not the only band affected. Consumer retailers expressed concern about the impact of a global slowdown and rising inflation on consumer confidence in early 2008. In fact, so seriously does market leader NTUC FairPrice view this concern this it is considering opening up stores specifically catering to low income consumers. At the very least the retailer plans to devote sections of existing stores to low income groups, but should it opt for the specific store opening strategy, FairPrice would be making a very clear statement about how prolonged it expects the current period of shaken consumer confidence to be.
In fact, the author believes that FairPrice is unlikely to open individual low income stores. For one, the retailer’s recent strategy has focused on higher end offerings in a bid to boost value sales in a market that is realistically reaching maturity; its new hypermarket and Finest supermarket openings being good examples. Furthermore, FairPrice has actually experienced some growth on the back of this confidence downturn; since the turn of the year, sales of the company’s private label products have increased by 20%, while private label sales of daily essentials i.e. bread and milk, have increased by 50%.
Although not necessarily good news for branded food and beverage manufacturers, Singapore’s modern retailers should prove able to ride out the current pricing storm by focusing their efforts on lower-priced, but good value produce.
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