‘Who's going to buy a S$9 croissant?': Singapore's artisanal bakeries crumble under cost pressures, softening demand

Business Times

6 days ago

[SINGAPORE] The pie is shrinking for artisanal bakeries in Singapore as they battle a triple threat: rising ingredient and rental costs, labour shortages, and weakening demand for baked goods.
With hopes of a post-pandemic dining revival fading, the pressure on operators is reaching a boiling point, forcing many to lay their cards on the table by pivoting offerings, consolidating, or closing outlets altogether.
Among them is Keong Saik Bakery, a home-grown brand known for its nostalgic yet modernised local bakes.
'We went from profitable to not profitable. The last two years have been very challenging for us,' says its founder and chief executive Tan Yuzhong.
'A lot of people thought business would be good after Covid, including us, so we expanded,' he adds. 'But it turned out the opposite… We definitely suffered because we expanded too fast and didn't expect the headwinds to hit this much.'
Keong Saik Bakery opened its second outlet at Chip Bee Gardens in 2022. Foot traffic at the store – located in the Holland Village area – was 'decent' at the time, Tan recalls.
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But just a year later, as borders reopened and outbound travel increased, visitorship fell by 10 per cent. The launch of One Holland Village later in 2023 further diverted crowds, causing footfall to decline another 25 per cent.
Tan adds that a stronger Singapore dollar in 2024 prompted further outbound spending, which likely contributed to an additional 20 per cent dip.
The Chip Bee outlet is now Keong Saik Bakery's worst-performing store. It also operates two other outlets in Bendemeer and Jewel Changi Airport.
'From 2022, it was just down, down and down,' says Tan.
'There was no recovery, and it is very challenging for us at Chip Bee as there's no natural traffic to the space,' he adds, pointing out that, in total, sales at the outlet dropped 50 per cent from 2022 to end-2024, with takings in some months insufficient to cover expenses.
At its peak, Keong Saik Bakery produced around 600 pastries daily across its three outlets. Today, output has halved.
'Margins for bakeries are very, very low,' says Tan. 'If you don't have the volume, it's very hard to survive, and you can't price bakes too high. Who's going to buy a S$9 croissant?'
Across the island, similar stories are playing out.
Data from the Department of Statistics shows that food and alcohol sales fell 4.5 per cent in May 2025 from a year earlier. As demand for baked goods softens, bakeries are seeing slower sales, with some throwing in the towel.
L'eclair Patisserie, known for its artisanal French-style eclairs, experienced thinning traffic and falling sales at its Jewel Changi boutique store after opening in 2019. The outlet closed earlier this year.
'We noticed a slump after the half-year mark and footfall wasn't as great as what was estimated,' says founder Michelle Looi. When it was still operating, the store sometimes saw as few as 10 to 15 transactions a day.
'Jewel is more a destination spot – people come to take photos and leave,' Looi observes. 'At best, they'll dine at one outlet, so despite the crowds, conversion to sales remains low.'
L'eclair Patisserie's Jewel Changi Airport boutique store sometimes saw as few as 10 to 15 transactions a day. Founder Michelle Looi cites dwindling footfall and high operational costs as reasons for its closure this year. PHOTO: L'ECLAIR PATISSERIE
Since the Jewel store's closure, L'eclair's operations have continued at its other outlet in Singapore Shopping Centre, as well as online.
Looi says the business needs about S$100,000 monthly revenue to break even – a steep target given tepid sales and high overheads. Even now, though, it remains in the red, with monthly revenue down 10 to 20 per cent. Online sales, which represent over half of the bakery's monthly revenue, have fallen 35 to 50 per cent over the last two years.
'It's just been a whole year of bleeding,' says Looi. 'We took out a working capital loan earlier this year, and we are just trying to survive.'
Other casualties of the slump include Madu Bakery, which started as a home-based business in 2021 and shuttered its physical store in June last year after just two years. Tigerlily Patisserie, by former Les Amis chef Maxine Ngooi, closed last April after three years in Joo Chiat.
Even more-established home-grown brands are feeling the heat. Cheryl Koh, founder of Les Amis spinoff Tarte, says business in the first half of 2025 has been slow, aside from a few bright spots during festive periods and major events. Tiong Bahru Bakery, meanwhile, recently shuttered its Funan Mall and Scotts Square outlets. The chain now operates 20 stores, having expanded in the past two years into heartland malls such as Jem and Tampines 1, as well as The Centrepoint in Orchard.
Though the Funan outlet had loyal customers, business dynamics have changed since 2020, says Tiong Bahru Bakery's general manager Matthew McLauchlan.
'We had come to this decision after reviewing priorities and digesting observations on the current food and beverage (F&B) landscape.'
International heavyweights, too, face challenges.
French patissier Pierre Herme, meanwhile, told The Business Times in July that he is aware of global economic shifts, changing consumer habits, and rising competition in the high-end segment, but he remains undeterred. Pierre Herme Paris will open its largest flagship in the world on Aug 1 at the Weave, Resorts World Sentosa's new dining and lifestyle enclave.
Pierre Herme Paris will open its largest flagship in the world on Aug 1 at the Weave in Resorts World Sentosa, even as patissier Pierre Herme acknowledges the challenges facing the F&B industry. PHOTO: ST
Cedric Grolet's eponymous patisserie-cafe in Singapore opened in 2023 with long queues at Como Orchard. The initial hype has since tapered off.
'Since our opening nearly two years ago, we have actually maintained a steady and healthy performance with the daily footfall and revenue,' a Como spokesperson tells BT. 'While the initial buzz has naturally evolved, we have maintained a healthy and consistent volume of business from both walk-ins and online orders.'
The cost crunch
At the heart of the crisis is a rising cost structure, but falling revenue. 'Even with a healthy footfall, margins in F&B are always tight,' Tiong Bahru Bakery's McLauchlan points out.
Operating expenditure in Singapore's F&B sector hit a record S$12.3 billion in 2023, up 8.8 per cent from 2022 and 37.3 per cent since 2020, Knight Frank Singapore reported on Jul 16. Operating revenue was slightly lower at S$12.2 billion.
' 'When I started the business (10 years ago), butter cost S$8 to S$10 per kg; now it's up to S$25. Chocolate was S$12 to S$15 per kg; now it's S$30 to S$50 due to logistics disruptions and weather – things consumers don't see.' '
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Michelle Looi, founder, L'eclair Patisserie
L'eclair's Looi notes that ingredients in particular have become more expensive. 'When I started the business (10 years ago), butter cost S$8 to S$10 per kg; now it's up to S$25. Chocolate was S$12 to S$15 per kg; now it's S$30 to S$50 due to logistics disruptions and weather – things consumers don't see.'
Manpower costs and availability add to woes. Ervin Yeo, CapitaLand's commercial management chief executive and group chief strategy officer, noted in a Jun 9 LinkedIn post that bakeries 'typically have higher manpower costs relative to ingredients because the magic is in the skilled baker turning flour and eggs into a S$12.50 tiramisu millecrepe'.
In Singapore, F&B businesses have a foreign worker quota of 35 per cent of their total workforce.
'The challenge then is that the local pool is shrinking,' wrote Yeo. With birth rates going down, the number of Singaporeans willing and able to work in the service sector will continue to dwindle, especially as older staff retire.
'The blanket policy does not work,' says Keong Saik Bakery's Tan. 'Unfortunately, the fact of the matter is, not many Singaporeans are clamouring for F&B jobs and most of them only work it part-time.'
The Chip Bee outlet, he adds, had no full-time employee in April and May. It currently runs weekday shifts with just two to three staff.
Rent's a crust too high
Rents have also become a heavy burden. Flor Patisserie, which serves Japanese-inspired French cakes, closed its Siglap Drive outlet on Jul 13, after a 57 per cent rent hike to S$8,500 per month, from S$5,400 previously.
'We have been around for 15 years, so we have quite a customer base. Even though the market is slow, we could sustain operations at Siglap,' says Flor's founder Heidi Tan. 'Really, the nail in the coffin is (the) rent hike… There's just no way we can continue with such an increase.'
Flor Patisserie closed its final outlet at Siglap Drive on Jul 13, after rents rose by 57 per cent to S$8,500 per month. PHOTO: FLOR PATISSERIE
Flor had already shut its Duxton and East Coast outlets in 2024, citing dwindling footfall and high rents. Monthly rents were about S$9,000 for a 1,200 square foot (sq ft) space in Duxton, and S$8,500 for a 2,200 sq ft unit in East Coast.
Footfall and order sizes fell about 50 per cent post-pandemic, as office crowds stayed home and travel resumed. 'Cakes are not essential goods. It's a niche market, and we don't serve the masses,' says Tan. 'The sales didn't justify the high rents in Duxton and East Coast.'
Rents have been rising across the board – not just for shophouses, but for mall spaces as well.
Prime monthly rent for the Orchard area is now back to pre-pandemic levels; it was S$35.77 per sq ft (psf) in 2019 and S$35.83 psf in 2024, Cushman & Wakefield data shows. In suburban areas, prime monthly rent rose to S$32.90 psf last year, from S$31.76 psf in 2019.
Rents of retail space increased by 0.9 per cent in Q2 2025 , reversing from the 0.5 per cent decrease in the previous quarter, latest data from the Urban Redevelopment Authority showed.
L'eclair paid S$40 to S$50 psf for a ground-floor space in Jewel that was smaller than 300 sq ft. Looi says that on lease renewal, the mall operator – a joint venture between Changi Airport Group and CapitaLand – requested renovations and a 30 per cent rent hike.
Amid all this, competition is getting stiffer as more home-based F&B businesses, including bakeries and cafes, are added to the mix. While there is no official data, there are reportedly over 150 listings of such operations.
Keong Saik's Tan notes that the playing field may not be level, as home-based businesses are not subject to the same compliance costs, such as licensing and renovation fees, which can run into the thousands.
' 'People don't usually associate Keong Saik Bakery with lunches, but market shifts left us no choice.' '
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Tan Yuzhong, founder and chief executive, Keong Saik Bakery
Baking up new strategies
Faced with thinning margins, some bakeries are exploring new strategies to stay afloat.
Keong Saik Bakery, for instance, introduced lunch items such as rendang chicken stew and Nonya curry chicken this year. It also rolled out a new range of eclair-shaped croissants called the Clairssant Collection.
Keong Saik Bakery has rolled out a new range of pastries, as well as lunch items; these have helped boost the bakery's top line. PHOTO: KEONG SAIK BAKERY
'People don't usually associate Keong Saik Bakery with lunches, but market shifts left us no choice,' says Tan.
The new offerings helped boost sales by 20 per cent, though the business remains in the red. 'The goal for this year is to at least achieve parity, and that will be a win for me,' says Tan.
L'eclair has also diversified into pasta, croissants and sandwiches to appeal to different tastes. Looi plans to partner more with other brands for pop-up events, noting that the exclusive nature of such experiences tends to attract greater attention and engagement.
Flor's Tan, meanwhile, has exited the F&B industry. 'The Siglap outlet is my only kitchen, so when that closes, there's no cakes. It's a full closure.' She now runs baking tours, bringing Singaporeans to Japan to learn from professional chefs.
Some bakeries are also broadening their reach through increased business-to-business sales.
CakeInspiration, a decade-old home-grown bakery specialising in custom cakes, pivoted from consumer sales – which dropped to near zero during Covid – to brands and corporate clients.
Corporate orders now form half of CakeInspiration's revenue, providing steadier though slimmer margins, says chief executive Chan Kai Yang. They handle three to four corporate orders monthly, such as 1,000 to 2,000 cupcakes retailing at S$5 to S$8 each, depending on design and ingredients.
Corporate orders provide steadier though slimmer margins for CakeInspiration. PHOTO: CAKEINSPIRATION
Still, diversification plans may only go so far, unless structural issues are addressed.
Lee Siew Ling, JLL Singapore's executive director of retail, has observed strategic partnerships where bakeries team up with complementary retailers or food operators to share operational costs.
She cites as examples Bynd Artisan, which shares a space with Patisserie Woo at Ion Orchard, and coffee chain Alchemist, which shares its space in Funan Mall with Arcade Clothing.
Guy Llewellyn, assistant professor at EHL Hospitality Business School's Singapore campus, says such co-sharing arrangements are one way to manage costs.
'This helps small F&B businesses mitigate rental risks… You're kind of hedging your bets,' he adds.
Location matters
Others may find more resilience in strategically located storefronts. Lee says bakeries need a strategic balance between visibility and manageable rent.
Bakeries in prime high-footfall locations, such as MRT stations or street-facing units, can benefit from both destination traffic drawn to their specific offerings and the natural footfall generated by surrounding complementary uses, she notes.
Tarte's Koh contrasts her Shaw Centre and Raffles City outlets, noting that the latter, which opened in 2020, attracts more walk-ins and natural footfall; Shaw Centre sees a more measured crowd, mainly customers already familiar with the brand.
On average, Tarte fulfils between 300 and 400 orders daily, with weekends seeing higher volumes. Takeaways and deliveries make up about 70 per cent of sales, while dine-ins account for the remaining 30 per cent.
'Between the two outlets, Shaw Centre contributes more significantly to our overall sales, especially through dine-in and online channels,' says Koh, adding that the differing dynamics of the two locations complement each other and have helped with business.
Joan Chen, CBRE's head of retail, says that success hinges on 'clearly defining the bakery's concept and matching it with its ideal consumer profile and consumption patterns'.
Local or Asian-style bakeries are typically volume-driven and work best in high-traffic environments with a mass-market appeal, she adds.
Conversely, European-style artisanal bakeries with premium pricing do better in shophouse enclaves that complement the ambience and encourage dining in. 'While foot traffic is low, store traffic once built through word-of-mouth recommendations… (and) memorable customer experiences will ensure regular visits.'
JLL's Lee also notes that successful bakeries adopt hybrid models: central production kitchens supplying multiple smaller retail outlets, gaining production economies of scale and minimising rental frontage.
' What lies ahead is whether landlords are prepared to share their tenant's plate of cost challenges and take a cut in their rent revenue to support a tenant… and contribute to a healthy business cost model. '
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Joan Chen, head of retail, CBRE
On the policy front, Prof Llewellyn suggests taxing unrented commercial units to motivate landlords to lease instead of waiting for 'perfect tenants'.
'Rental costs are staggeringly high and unfortunately, spending has remained flat. There's just less money going around and costs continue to rise,' he says. 'If nothing changes, the closures are going to keep happening.'
CBRE's Chen, meanwhile, says improving small F&B survival needs flexible leasing, such as shorter leases and turnover rent. She also calls for inclusive licensing policies for temporary formats and opening underused public spaces for pop-ups.
'What lies ahead is whether landlords are prepared to share their tenant's plate of cost challenges and take a cut in their rent revenue to support a tenant, whether it is to trade off the brand name or to support a tenant's business initiatives and contribute to a healthy business cost model.'