Singapore: The Gateway to Southeast Asia

Singapore’s population is very motivated when it comes to products that can help improve health and well-being.

By Paul Altaffer & Grant Washington-Smith

This is the first in a series of reports that will deal with some of the un-ique market and business opportunities presented by countries in Southeast Asia, which include some of the fastest growing economies

in the world. The countries that make up this economic zone, which is often referred to as the ASEAN bloc, include Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Roughly bounded by the Indian subcontinent to the west, China to the north and the Pacific Ocean to the east, this region has a population of approximately 550 million. From a natural products industry perspective, the major focus should range from Indonesia (with a per capita GDP of $505), Malaysia, the Philippines, Vietnam, Thailand and Singapore (at the other end of the per capita GDP spectrum at $12,720).

According to a strategic analysis report on Southeast Asia by Frost and Sullivan (2006), this region generated $2.3 billion in revenues from nutraceutical sales, a figure that is expected to more than double in the next six years to nearly $5 billion. Southeast Asia boasts a biodiversity equal to any other part of the world. On the retail side of the business, the region offers a dynamic economic presence equal in size and value to that of China’s booming coastal region. While Thailand remains the largest market in this region in total revenues, it is Singapore that is considered strategically important.

Singapore is a significant importer of natural products. However, it offers more to the brand manufacturer than those on the supply side of the industry. While it appears that the this market is well serviced by brands, there are some opportunit-ies in high growth areas of which existing and future exporters should be aware.

Singapore’s population of 4.6 million is comprised mostly of Chinese (77%), Malays (14%) and Indians (7%). This multi-racial population fosters a variety of ethnic product opportunities. Some ethnic groups have specific dietary requirements. The Malays, who are mostly Muslim, follow Halal slaughter requirements and abstain from eating pork and drinking alcoholic beverages. Most Indians avoid eating beef. Strict Chinese Buddhists refrain from eating meat on religious holidays.

The Supplement Situation

Singapore enjoys a high standard of healthcare, provided by a well-funded and comprehensive state system. This is complemented by a sophisticated complementary medicine and natural products sector. It is estimated by Singapore’s Health Supplements Industry Association that annual sales of nutritional supplements for 2005 will reach $225 million, carried forward with a growth rate of 20%. Not a bad result when one considers how the market in 2003 was threatened by SARS, or the damage that was done to the industry’s reputation by the illegal activities of Australian contract manufacturer, Pan Pharmaceuticals—the natural products equivalent of the Enron debacle. (A copy of Singapore’s health supplement regulations is available from the Health Supplements Industry Association’s website; www.hsias.org.)

For years Singapore has been seen as the gateway to the Southeast Asian market for westernized nutritional supplements, functional food and beverages. Singapore has management and control over warehousing and distribution to countries such as Malaysia and Thailand for natural products from the U.S., Canada, Europe, Australia and New Zealand. Perhaps even more important, Singapore is also viewed as the style and trend leader for other Southeast Asian countries.

Despite nearing a point of saturation, Singapore still places a high priority on the health and wellness of its society. In fact, the government’s Health Promotions Board has been actively promoting the messages of preventative health through nutri-tion and exercise, as well as stress reduction and smoking cessation. It is interesting to note that this messag-ing is clearly targeted at a younger demographic than that seen in the West. An example of this is the use of an “American Idol” styled “HealthZone—Teenstar,” where teenagers can vote for their favorite “healthy” teen star. To assist and engage their teen age audience, the Health Promotions Board provides teens with a free (and cool!) download for their mobile phones, all sporting a health promotions message.

Underpinning the natural products market in Singapore are approxim-ately 180 western style specialist health food retailers, 40% of which are dominated by General Nutrition Center (GNC), which has 57 stores; Nature’s Farm Pte Ltd, which has 27 stores; NTUC Healthcare Pharmacy; Origins Healthcare; and Guardian, which is currently the largest chain of pharmacies operating in Singapore today. But for every western style health food retailer, there are four family-owned, traditional Chinese medicine shops in Singapore.

This Rise in Organics

A relatively recent change in dietary habits amongst Singaporeans is their growing interest in organic food and produce. “More than 60% of Singaporeans claim to consume organic foods and the majority (65%) of these consumers cite personal health as their main motivation for purchasing such products. This is a reflection of growing health concerns, as well as the heightened awareness of healthy lifestyles,” commented Mr. Charan, managing director, ACNielsen Re-search Singapore. “There is an opportunity for marketers to find a positioning for foods claiming health benefits to be credible and not prohibitively expensive.”

In 2002, only an estimated 50,000 consumers purchased organic, pay-ing about $4.7 million during the calendar year. Most were imports, since only a very limited selection of organic vegetables is supplied through domestic production. New Zealand and Australia dominate the organic fresh produce import market in Singapore, while the U.S. has captured most other organic food product sales. Due to their proximity and developing organic certification programs, however, Thailand and Malaysia promise to be future alternative sources of organic produce.

In 2005 Singapore saw its first Organic Farmers Market called L’Organic open on Wednesday and Saturday offering certified organic produce flown in from New Zealand and Australian producers. Despite the rapid emergence of this sector, however, there is still relatively low awareness among the average Singapore consumer for organic products. That’s why an effective marketing and promotional effort to differentiate organic products and reasonable pricing must be part of a successful sales campaign. Most important, considering more Singaporeans are very price conscious, the premium over non-organics should be kept below 50%.

Singaporeans are most receptive to organic vegetables (up to 45% purchasing), eggs (32%) and fruits (28%). At the other end of the spectrum, or-ganic types of beverages, delicatessen and tea products were the least purchased by most consumers.

According to the ACNielsen Re-search (December 2005 global report on Functional Foods and Organics), “whole grain” and “high fiber products” are the most widely consumed in the Singapore market—41% of respondents said they regularly purchase foods included in this category. Over a third of Singaporeans are also buying such functional foods as “cholesterol-reducing oils and margarines” (38%), “soya milk” (36%), and “bread with added supplements/vitamins” (35%). (See Table 1.)

ACNielsen believes both functional foods and organics have room for expansive growth, but they tend to be held back due to perceptions of price and availability.

Growth in functional foods is further evidenced by Danisco, which opened a new dairy foods innovation center in Singapore to capitalize on growing demand for functional dairy. Demand has been strong in the Asia-Pacific region, with sales up by more than 40% in 2005 as the region saw booming demand for dairy products.

Finally, the National University of Singapore conducted a survey about the awareness of functional foods among Singaporeans and found that:

Many respondents (88%) are aware of existing functional foods in the market.
• However, only 60% believed that they could promote health and prevent diseases;
• Only 18% were willing to pay more for functional foods products;
• 35% would purchase functional foods even if the taste (flavor) is not as good as “normal” foods, but was proven to have health promoting effects;
• 55% were not sure if functional foods were safe to be consumed; and
• 77% claimed education on functional foods would prompt them to purchase and consume them.

Summary

The strengthening economy and subsequent improvement in the local labor market continues to help boost Singapore’s economy. Consumers have been relaxing slightly, and although they remain cautious with their spending, there is renewed consumer optimism that reflects the change in outlook on the country’s economic conditions.

Key areas of interest and opportunity in Singapore include:
• Family health and well-being with the emphasis on prevention, younger children’s health and well-being, and teen audience (antioxidant and chemo-protective compounds could be useful);
• Products geared toward osteoporo-sis in functional food or confection-ery form; perhaps offering new classes of compounds that support the polymer phase of bone and bone quality rather than the traditional calcium supplements;
• Stress reduction could be a great opportunity for a functional beverage or confectionary product;
• Smoking cessation; and
• Weight management.

In general, product opportunities are more likely to be successful in the form of a functional food or beverage, rather than a traditional dietary supplement. Organics will continue to grow, and as this market evolves there will be opportunities to move the consumer from organic produce to organic prepared and packaged foods.

As with all potential export markets, it is recommended that interested exporters conduct more detailed research to obtain a solid understanding of the market potential that exists before developing a market entry strategy. Remember to allow yourself extra days in-market, if for no other reason then to enjoy Singapore because it is a truly delightful country to visit. NW