What’s the secret sauce in F&B stocks?

From fast food to fine-dining restaurants, Singaporeans love eating out. But why aren’t F&B stocks more popular than their tasty offerings?

From Hainanese chicken rice to fish head curry and nasi lemak, Singaporeans take great pride in their food, which is a cornerstone of their national identity. This passion shines through in how we eagerly share our favourite food haunts, debate over the best versions of local dishes and engage in passionate banter with neighbouring countries over the origins of specific recipes.

Every meal in Singapore celebrates heritage, community and the joy of good food. Renowned as a food lover’s paradise, the city offers a rich culinary scene, from hawker centres to Michelin-starred restaurants, catering to all tastes and budgets. Each dish reflects the nation’s history, with recipes passed down through generations.

In light of National Day, The Edge Singapore features homegrown businesses that keep Singaporeans well-fed daily. From chilli crab specialist Jumbo Seafood and Peking duck expert Tung Lok to curry puff maker Old Chang Kee 5ML

5ml, these F&B operators work diligently to satisfy the appetites of those within and beyond the island’s shores.

Jumbo, for example, operates outlets across China, Taiwan, Vietnam, Thailand, Cambodia, South Korea and Japan. Tung Lok has licensed locations in Vietnam, Indonesia, Japan and the Philippines, while Old Chang Kee is present in Malaysia, Australia and Indonesia. Several privately held companies have also successfully brought a taste of Singapore to international markets. For instance, Ya Kun’s famous kaya toast is available at franchise outlets in China, Myanmar, Japan and other locations, but Ya Kun is not listed anywhere.

It is not easy being a local F&B player. The F&B industry was among the hardest hit by the Covid-19 pandemic as measures were imposed during the “circuit breaker” (CB) period. To curb its spread, lockdowns, social distancing measures and travel restrictions forced many restaurants, cafes and hawker stalls to curtail or halt their operations, leading to significant revenue losses and job cuts.

According to a report released by the Singapore Department of Statistics (SingStat) in April 2021, retail and F&B sales contracted up to 52% during the CB period. In nominal terms, retail and F&B sales declined about $4 billion in total during the CB period, around 40% of the 2020 full-year decline in the total retail and F&B sales of $10 billion.

For many of these businesses, the sudden shift to takeaways and delivery services was insufficient to counter the decline in dine-in customers. Supply chain disruptions exacerbated the situation, causing ingredient shortages and increased costs. Despite these challenges, the industry showed resilience, with many businesses adapting to the so-called “new normal” by embracing digital food delivery platforms like GrabFood and foodpanda to innovative models like cloud kitchens.

In its economic survey, the Ministry of Trade and Industry noted that F&B services volume for 2023 remained 5.5% lower than in 2019. At the segment level, the sales volumes of food caterers and cafes, food courts and other eating places grew by 2.5% y-o-y, while those of fast food outlets remained flat. On the other hand, the sales volume of the restaurant segment dipped 0.7% y-o-y.

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For F&B operators, cost pressures may be easing but are expected to persist. In 2023, Singapore’s hawker food prices saw a significant increase of 6.1%, the highest since 2008, due to the higher cost of raw ingredients. According to a SingStat study, the average price of chicken rice and char kway teow, for example, rose from $3.40 and $3.80 in 2019 to $4.15 and $4.52, respectively, in 2023.

While hunting for the best Michelin-starred restaurants and eating at legendary hawkers stalls may be favourite pastimes among Singaporeans, the stocks of F&B companies are less popular. Many listed F&B operators in Singapore are trading below their pre-pandemic levels, with share price performances failing to reflect the industry’s recovery.

Take Japan Food Holdings, for example. At its peak in 2019, the counter traded above 50 cents apiece. Today, the stock trades around 30 cents apiece, about 40% lower. Similarly, shares in Soup Holdings 5KI

5ki traded at 19 cents at its 2019 peak. Today, the share price has tumbled over half its value to 7.2 cents.

There are still reasons to cheer for these homegrown brands. For one, there is an ongoing recovery, with SingStat data showing F&B services sector sales growth of 0.3%, 3% and 1.8% y-o-y in April, May and June, respectively.

The stronger-than-expected recovery in air travel and tourism is set to support this growth further. With the return of major events such as Mice (meetings, incentives, conferences and exhibitions) and promising developments like the opening of the Johor-Singapore Rapid Transit System, local F&B players could experience a significant increase in foot traffic and revenue. On the other hand, more Singaporeans may cross over to JB for a cheaper spread of familiar food. Therefore, it is also important to recognise that Singaporeans have a key role in supporting local vendors and helping them survive and thrive this year and beyond.

In this cover story, we examine the performance of several public and private F&B companies in Singapore to determine if they have found the secret recipe for success.

Read the full cover story here: