Food Manufacturing Through The Years: A Singapore Story

Friday, September 22nd, 2017

Singapore’s food and beverage manufacturing industry has made great strides since the country’s independence 50 years ago. From the initial trials and struggles it faced, to establishing itself in the Southeast Asian region and the world, the industry has benefited and continues to contribute to Singapore’s economic success today. By Michelle Cheong

In the 1950s, majority of the Southeast Asian countries adopted an import substitution policy that utilised their larger domestic markets to produce simple and lower-priced consumer goods from which they could attain foreign direct investments (FDI) from. Singapore, aspiring to like her neighbours, hoped to create a large market entity by merging with Malaya in 1963 to achieve economic viability.

However, the merger failed and following independence in 1965, Singapore, a small nation with barely any resources, was left with her own version of import substitution that was characterised by a mild protection of policy instruments such as export and exchange controls, tax incentives and a tariff policy.

But with close to two million mouths to feed and a plaguing massive unemployment problem, the newly formed government led by the recently passed Lee Kuan Yew, made the decision of moving into export-oriented industrialisation in 1967, as it relied heavily on FDI particularly in the labour-extensive industries.

The manufacturing industries that flourished thereafter not only helped to alleviate unemployment in the country, but also built the foundation of Singapore’s manufacturing sector today.

It marked the beginning of a new chapter for Singapore’s food and beverage manufacturing industry and laid the fertile ground for the industry to continue to prosper over the next few decades.

Humble Beginnings

Back in the 1960s, food manufacturers were predominantly domestic-oriented and comprised a majority of small and medium enterprises (SMEs) as well as family-run businesses.

With industrialisation, these businesses started to thrive as the added manpower enabled factories to roll out their products at faster rates and produced more on higher scales.

As industrialisation progressed through the 1970s, however, these businesses found it harder and harder to keep up with their foreign competitors. They could no longer compete using existing equipment and traditional ways of processing and packaging, and set to look for new technological strategies to produce higher quality and more innovative products, or reduce costs to stay ahead of their rivals.

By the 1980s, some local companies such as the Super Group or Thong Siek Food Industry had already ventured into the global market. This, however, was not the option for many in the food and beverage manufacturing industry back then.

Majority of these companies were limited by various problems, one of which being the issue of money.

Local companies lacked the capital required for overseas expansion as they had previously only focused in the domestic market, were restrained by high start-up costs, or were already struggling with the high operating costs in land, labour and utilities.

With only local consumers and finance-limited economies of scale, they were unable to reach out to a larger group of consumers even if they had wanted to, without any external help.

A second problem was the lack of skilled labour and professionals. Unlike other industrial sectors, like electronics or chemical that were thriving in the 1980s, the food and beverage manufacturing industry lacked skilled manpower and expertise like food scientists or technologists.

Further, fewer and fewer of the younger generation aspired to or joined the industry as it was viewed as a sunset industry that had ‘no future’. The lack of skilled workers put local companies in a weaker strategic position compared to their competitors, deterring them from wanting or having the capability to expand locally or regionally.

A third and most important problem was that a large portion of these business managers had traditional mind sets that were not open to expanding their businesses overseas or changing their business concepts. Since they were predominantly family-run or SMEs, they were unable to reap economies of scale and made little effort to strategise and identify new markets or expand their current ones.

Governmental & Association Assistance

To counter these problems and further develop the food and beverage manufacturing industry, a few associations and government-led initiatives and strategies came into play to encourage more local businesses to expand locally and within the region.

The Singapore Economic Development Board (EDB), formed in 1961, helped to build up the food manufacturing industry. It aided in the establishment of industrial estates, and also contributed in getting overseas investors for companies who needed capital for expansion.

A second party that made overseas expansion of food businesses possible was International Enterprise (IE) Singapore. Formed in 1983 as the Trade Development Board before changing their name to IE Singapore in 2002, the government agency sought to regulate trade and supported overseas establishments of Singaporean businesses financially.

Together, EDB and IE Singapore both offered a wide range of incentives such as tax holidays and worker benefits to encourage locally owned and partially locally owned business to expand their establishments overseas. They also helped food and beverage manufacturers grow their overseas presence and promoted Singapore products and services through participation in global trade shows to capture the attention of overseas consumers.

Meanwhile, a third agency, the Singapore Food Manufacturing Association (SFMA) which was founded in 1967, helped food manufacturing businesses in their cause to develop and promote locally.

Not only did they connect local businesses with foreign contacts for investment opportunities, they also united local food manufacturers for mutual benefits and growth, and enhanced cooperation between them and supporting industries to reap larger economies of scale.

Upgrading Skills & Capabilities

To overcome limits for business expansion caused by insufficient skills, multiple options were available to help companies build capabilities through improvement of the skills of current workers and leaders of the industry.

These included training, workshops and programmes organised by organisations such as SPRING Singapore that taught for instance, the types of foods to be catered for different age groups, how to manage food hygiene practices, or the types of packaging or material to be used for certain foods to ensure food safety.

The Singapore Institute of Food Science and Technology (SIFST), founded in 1977, was another place to learn more about the industry. Food manufacturers were given more opportunities to learn about food science and technology through interaction and collaboration with professionals in Singapore and around the world, to keep up with the latest technology and trends.

Attending these helped local businesses gain knowledge and a better understanding of their target consumers and how to maintain their company reputations.

Completing certain workshops or programmes could also get workers certified with the National Skills Recognition System, or later the Workforce Skill Qualifications. These not only upgraded the skills of the workers, but also the image of the companies they represented as well as the industry as a whole.

Incentives For Younger Generation

The Food Science and Technology (FST) programme of the National University of Singapore (NUS) attempted to attract more people of the younger generations to the food and beverage manufacturing sector.

Previously, only the polytechnics had a food science programme, and these diploma holders had to go overseas or pay expensive tuition fees at private universities to further their studies. In the process, it deterred individuals with proper qualifications and foundation from pursuing work in the industry.

With the skills and knowledge expertise as well as research and development that the locally trained FST graduates have to offer, food and beverage manufacturers could improve food quality and better ensure food safety.

Scholarships were also provided by several institutes such as NUS or the various polytechnics offering food science and technology courses as incentives, in hopes of attracting more younger-aged individuals into the line of food manufacturing.

Improving National Reputation

To further improve the image of Singaporean businesses and guarantee food safety and product quality, the Agri- Food and Veterinary Authority of Singapore (AVA) was established in 2000.

With its many policies regarding food safety especially to raise standards of hygiene, it aided Singaporean businesses to earn a good image and reputation for producing products of quality in the eyes of foreign investors.

Forging Ahead

Today, Singapore’s food and beverage manufacturing industry has prospered, with a total output of about S$8.5 million (US$6.3 million), a strong value-added growth of about S$2.3 million (US$1.7 million), and a compound annual growth rate of about 8.7 percent over 10 years as of 2012.

However, challenges remain such as in productivity and manpower, rising raw material prices, and strong competitions in the global export market. To differentiate themselves from regional competitors, local businesses in Singapore have shifted their focus to branding, innovation, and high quality production processes.

Over the years, several Singaporean companies have grown their footprints across the region, such as the Super Group and Bee Cheng Hiang.

As a success of their branding strategies, both have expanded in countries including Malaysia and China, with the former having a total of 15 overseas facilities and the latter with 262 overseas outlets.

Others have created innovative products that are healthier, more convenient, ethical or catered to specific groups of consumers like Halal or vegan to draw more customers locally as well as overseas.

Chye Choon is one company that has successfully entered the US market with its brown rice bee hoon (rice vermicelli), which was developed for healthy living.

More businesses have sought to reduce operation costs through process improvement, such as by redesigning their food-making or packaging processes, or automating them. Especially with automation, this has helped them better deploy their limited manpower resources to create higher value-added jobs, and aided in dealing with space constraints in the factories.

To stay relevant and keep up with the latest technology, process or food trends, many businesses have also expanded to include research and development teams in their enterprises.

Not only that, but the Food Innovation and Resource Centre, launched in 2007 by Singapore Polytechnic and SPRING Singapore, as well as the recently established Clinical Nutritional Research Centre also help to further support and develop Singapore’s food and beverage manufacturing industry.

Government Initiatives

The Singaporean government has and is still playing an active role in supporting the industry to keep it ahead of competitors. Current methods of support include grants, setting up of programs, creating facilities, aiding in branding and giving incentives to local manufacturers.

In 2012, the government pledged S$45 million (US$33.1 million) to boost productivity over five years. The money has since been used for improvements in automation, adoption of productivity improvement tools, product innovation and workforce investment.

In 2013, SFMA launched the Local Enterprise and Association Development (LEAD) program, a multi-agency effort aimed to enhance industry and enterprise competitiveness.

The program has helped create multiple partnerships among industry associations, and driven initiatives to improve the overall capabilities of SMEs in their industries. To provide and facilitate the program, SFMA also set up Export Club, SME club, the aforementioned FIRC, and Capability Building Committee.

A food hub is currently being constructed at Senoko by JTC, and is slated to be completed by 2017. The hub will be able to house different sizes of SMEs as modular units can be combined where necessary, and will also feature shared integrated cold room-warehouse facilities that allow tenants to operate at lower costs and reap better economies of scale.

These will enable the hub to suit companies engaging in food manufacturing activities or companies with central kitchen operations.

Branding for Singaporean food manufacturers in the export market has also been promoted through the Tasty Singapore Brand initiative developed by IE Singapore. This initiative encourages unity among Singaporean food manufacturers to promote a coherent image of the country in the export market by exhibiting products that demonstrate the attributes of the Tasty Singapore Brand.

To further encourage local food manufacturers to extend their reach overseas and build on the success of the Tasty Singapore Brand, the SFMA has introduced the Great Singapore Food Gift Award that recognises food exemplifying the ‘Product of Singapore’ brand.

With this award, it is hoped that the local businesses are able to sell the distinctiveness of Singapore food, promoting a stronger value proposition.

The Singaporean food and beverage manufacturing industry has since come a long way in the 50 years following the nation’s independence in 1965. With the help of the government’s decisions, policies, and driving agencies such as the SFMA, IE Singapore and EDB, it has become the economic success it is today. However, there is and will always be a need to strive for innovation and technological advancement to stay ahead of competitors. With this much improvement already in the past 50 years, where will they be in another 50 years’ time?