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It started as a rant on Facebook.
I walked up to Cedele one morning and discovered my beloved half-sandwiches are no longer being sold and prices have increased.
All across the island, I was observing the labour crunch in action, especially in the area of F&B. McDonalds was just at my estate, conducting a never-before-seen recruitment campaign, more restaurants were reported to be closing down and price increases observed at some eating places.
A friend of mine saw my rant and hooked me up with Ms. Cathy Yeap, the chief of Cedele. Amidst a soft breakfast crowd at their One Raffles Quay outlet, we talked at length about good food, productivity, labour and the F&B business.
I was adamant to discover the reason behind the increase.
The conversation left me with no doubt the leadership of this cafe chain is obsessed with the quality of their food. Healthy, organic, natural and prepared fresh for every diner. Everything is made from scratch and baked true to the artisan’s call.
“…for example we use organic unrefined sugar, these cost 50% more than refined sugars”, revealed Cathy. “Prices of sugars used in our organic fair trade coffees cost $40 a kg, compare that with the $6 per kilo used in normal coffees,” she lamented. This is the same for other ingredients: wheat, hams, milk, coffee… without the option of buying cheaper, inferior quality products, the management has to keep up with the prices that the suppliers demand.
When asked about rental, Cathy remained neutral. However, I believe rental contributes heavily to upward price pressure. In my opinion, I’d like to think that the property giants can do more to make life a little easier for SMEs. Prices go up with each contract renewal and these increases need good justification. Property is also difficult to regulate – you can’t raise taxes, for that would drive up their costs. You can’t give handouts, for there is no reason we should help multi billion dollar property giants.
Then there is labour. Revised levies and dependency ratios have forced many a business to revisit their hiring strategies. “Who doesn’t want to hire a Singaporean? They communicate better and build better rapport with our customers ” she explains. “I really want to, but when you place ads, they just don’t turn up.”
“We have heard of technologies that can solve our productivity problems, but they’re expensive and how many of us can afford that?” That was where I had to point Cathy to the Inclusive Growth Programme (IGP) funds given out by the e2i. IGP funds companies that embark on projects that lead to productivity gains, resulting in better wages paid to employees.
As an ex-MD of Watsons, the feisty director clearly understands the necessity of productivity. “In Singapore, you have no choice but to be efficient.” she exclaims fists slammed on the table. I had to point out productivity does not necessarily mean staff having to work more: a common misconception. It means that staff have to be able to do more with less, and staff needs to be well equipped to do so.
“I’d like to know what sort of skills an employer would pay more for”, I asked. Talking, interacting and being friendly with the customers is second nature. “Front line staff need to be proactive. They need to sell our products, our values and really be great friends with the customer”, she said, hinting at higher wages would be paid to pay for individuals displaying such qualities.
In markets like this, businesses should consider their pricing strategies carefully. Instead of competing on price, they must compete on value, productivity and speed. This and a carefully prepared marketing communications plan – for you can love your customers for all you care, but if they don’t know it, then efforts are futile.
“We exist for the customer and if they didn’t love us anymore, we would be heartbroken,” said Cathy with a smile.
[plinker]
