30-04-2025
Singapore's F&B sector falls into contraction after year of growth, but bright spots remain: OCBC
[SINGAPORE] Singapore's food and beverage (F&B) sector has softened in recent months amid market saturation and challenging macroeconomic conditions, but opportunities remain, industry players said.
The F&B industry posted a reading of 49.6 in the latest OCBC SME Index – which tracks the performance of small and medium-sized enterprises in Singapore – down from 51.1 in the fourth quarter.
A score above 50 indicates growth compared with a year ago, while a score below 50 signals a decline.
The sector's contraction – its first decline after four consecutive quarters of growth – reflected a broader downturn in the overall index, which slipped to 49.9 in the first quarter, from 50.7 previously.
'Performance of the (F&B) industry could weaken further given that consumers may turn more cautious in terms of domestic spending,' OCBC said.
The Business Times reported earlier this month that Singapore's F&B space has become increasingly saturated, as new store openings have outpaced closures.
A NEWSLETTER FOR YOU
Friday, 8.30 am SGSME
Get updates on Singapore's SME community, along with profiles, news and tips.
Sign Up
Sign Up
A total of 3,793 new brands entered the market in 2024, even as closures hit a 19-year high of 3,047 businesses.
The trend persisted into the first quarter of 2025, with prominent brands such as Eggslut, Manhattan Fish Market and Burger & Lobster exiting the market. Chinese hotpot giant Haidilao also shuttered three outlets earlier this year.
Seah Qin Quan, group chief executive officer of YKGI , cited five factors contributing to the closures: rising operational costs, including rents, labour and raw materials; changing consumer preferences; increased competition; uneven post-pandemic recovery; and tightened foreign labour quotas.
Catalist-listed YKGI's portfolio includes Yew Kee Duck Rice and bubble tea chain Chicha San Chen.
Meanwhile, the increase in new entrants can be attributed to the industry's low barriers to entry and strong interest from overseas players, said Ang Jun Hung, group strategy and operations director at ABR Holdings, which owns brands such as Swensen's and Tip Top Curry Puff.
Ang said: 'It is a great time to be a customer, and understanding the above, what we are focusing on is ensuring that we remain relevant and provide value.'
Bright spots
Despite the 'challenging macroeconomic environment', bright spots remain in the F&B industry, noted Sue Tan, managing director of enterprise banking industries at OCBC.
Tan said: 'Key drivers of this growth include the surge in tourism demand (and) the proliferation of new F&B establishments in mixed-development launches, new malls and MRT stations.'
The 'adaptive reuse' of retail spaces by landlords to accommodate F&B outlets is also supporting the sector's 'upward momentum', she said.
Meanwhile, F&B players are responding by refreshing their menus, improving customer retention efforts, and boosting service levels.
Some are also streamlining operations to enhance efficiency, while others are introducing new concepts at single locations to stay competitive, Tan added.
Seah noted that Singapore's F&B scene remains 'vibrant' despite heightened competition. A 'growing emphasis' on sustainability and health-conscious dining is creating 'both challenges and opportunities for operators', he said.
The influx of international brands also 'underscores the importance of differentiation and brand loyalty', he added. 'Operators who can adapt quickly to changing consumer preferences, manage costs effectively, and leverage technology will be well-positioned to thrive in this dynamic environment.'
