F&B sector has evolved over the course of 2020

THE food and beverage (F&B) industry was hit especially hard by Covid-19, with the economic downturn, lockdown measures and dine-in restrictions leading to the sector reporting a year-on-year loss of almost 30 per cent at the end of the third quarter in 2020. Despite the initial fallout, the F&B sector has had a pick-up in sales, with the advent of Phase 3 reopening signalling the return to pre-pandemic normalcy as Singapore segued away from circuit breaker measures into the safe return of dining-in.

However, the F&B sector has evolved over the course of 2020. Adapting to the hurdles set by the pandemic has transformed F&B into a completely different beast, with the landscape being vastly different in 2021 compared to previous years, making it difficult for even veterans to navigate. As we begin a new year, we look back on how small and medium-sized enterprises (SMEs), the lifeblood of the F&B sector, managed to stay afloat through the pandemic and how the immediate aftermath of Covid-19 will translate into trends impacting the coming years in a post-pandemic Singapore.

DIGITALISATION: THE 'NOT-SO-SECRET' INGREDIENT NECESSARY FOR SURVIVAL

Writer and strategic adviser Max McKeown once said that all failure is failure to adapt, all success is successful adaptation. This mantra could well be the big lesson of 2020, as all sectors have had to quickly adapt despite the whirlwind of panic and challenges, and the global response to ensure resilience in trying times was to turn towards technology.

For many years, countless analysts have preached the importance of digitalisation and investments in technology as the future for businesses, yet Covid-19 proved to be the catalyst in showing companies that digitalisation, innovation and technology are absolutely necessary for survival, particularly in the F&B industry. This sentiment was echoed by Singapore government leaders who urged F&B businesses to accelerate their digitalisation efforts in order to remain competitive, if not just to stay afloat.

The pandemic also served as a stimulus for traditional hawkers to embrace digital ordering systems - iChef had a 66 per cent increase in the number of enquiries in 2020 from the previous year. One key factor in this acceleration towards digital solutions was the government's support, through subsidies and grants such as the Digital Resilience Bonus and the Productivity Solutions Grant (PSG), with the former offering S$10,000 in payouts and the latter supporting up to 80 per cent of funding for information technology (IT) solutions for businesses. These initiatives played a key role in driving digitalisation among F&B SMEs to uplift digital capabilities and drive business growth.

ENTREPRENEURSHIP AGAINST ALL ODDS

While pandemic measures led to F&B being one of the most badly hit sectors in 2020, this did not seem to discourage entrepreneurs from pursuing their dreams - there were in all 1,132 new entrants to the F&B industry - despite the massive set of closures - resulting in a net increase of 96 by the end of the first half of 2020 according to solution provider Handshakes and the Accounting and Corporate Regulatory Authority (Acra).

Considering the usual difficulties of starting up one's own business compounded with the pandemic, one would expect a higher barrier of entry to opening up an F&B outlet amid the uncertainties. However, there are two key factors that entrepreneurs took advantage of to safely settle in the eye of the hurricane.

Firstly, the economic downturn hit hard. However, it takes a true entrepreneur to see the silver lining on the darkest of clouds. A void was left by the exit of many existing players, resulting in cheaper operating equipment, newly available prime locations, lower rental fees, a bigger supply of quality manpower, and increased demand for takeaway services - these made entry into the market very appealing for would-be entrants, especially those who had plans for their own outlet prior to the pandemic.

Secondly, collaborations between the government and existing service providers, such as Infocomm Media Development Authority-approved vendor iChef, enabled SMEs to set up their businesses quickly and digitise operations, optimising efficiency.

WHAT'S NEXT FOR F&B IN 2021

Always be prepared to confront uncertainty with technology

If there is a single key lesson that the industry has learnt from a pandemic year, it is that we should always be prepared to confront uncertainty with technology. Many F&B business owners may have been resistant to change - which, ironically, is the biggest thing that has to change. The older generation of business owners may not view technology as an accelerator, and are traditionally known to be resistant to adopting digital solutions. But F&B entrepreneurs must observe the changes in the landscape and learn to adapt accordingly, and not fear technology as a solution.

This is not to say that mindlessly adding technology to their businesses is the panacea to all of the sector's woes - they need to note what are the core elements of their businesses, how to deliver food and service effectively at scale, and what keeps customers coming back, and be able to pick the right tools to aid their transformation.

However, Covid-19's impact on the industry has made it clear that there is a paradigm shift towards technology in the F&B sector, as moving towards virtual channels reduces costs, improves productivity and speeds up sales cycles, with technology only becoming even more necessary in the years ahead. It would enable F&B businesses to cater effectively to consumer demands in a competitive market where the consumer is king.

Food delivery as a 'necessary evil'

Another trend that stood out amid pandemic measures was the rise in takeaway and food delivery. As at Nov 25, the percentage of seated diners in restaurants has declined by just over 51 per cent globally from pre-pandemic levels, with takeaway and food delivery emerging as an alternative. This service model is quick, convenient and keeps us safe, and is expected to grow exponentially in the region. However, as food delivery services often take a large cut of revenue through commissions, many businesses may come to view food delivery as a necessary evil, in a world where one has to either embrace these additional costs or risk losing large volumes of business.

While demand for takeaway food has fallen with the return of dining-in, it is unlikely that restaurants will be able to escape from food delivery services even with the F&B sector's return to form. Bain's e-Conomy SEA 2020 report indicated that 30 per cent of all local digital service consumers were introduced to the service due to the pandemic, suggesting there is a significant consumer base available through these food delivery platforms. Indeed, in the eyes of business owners, food delivery is likely here to stay.

Rise of younger F&B entrepreneurs

We have seen a rise of the younger generation coming in with a different, smarter approach to the industry. The same entrepreneurs who saved the industry in 2020 are a different breed from their seniors, able to seize the slightest opportunities and hungry for success, embracing digitalisation and utilising social media to its full extent to market themselves effectively. These young entrants take a low-risk approach that often starts from home-based businesses, involving less financial commitment, and slowly expanding as they gain a following. 2021 could see more of these home-based businesses converting to brick-and-mortar shop fronts if these ventures gain more of a foothold.

With 2020 being a year of metamorphosis for many, the F&B industry will come out of the pandemic a completely different beast than before. SMEs brave enough to venture into the industry during such a time are more prepared than ever to face challenges, showing that the spirit of entrepreneurship among Singaporeans remains strong even in the face of adversity. If there is one thing to learn from 2020, it is that innovation and a willingness to adapt will be absolutely key in running a successful business in the years ahead.

  • The writer is international director at iChef Singapore