After NTUC’s buyout, new Kopitiam boss wants to keep food costs low, use tech to solve labour woes

SINGAPORE — While visiting his son who was studying in Australia some years ago, Kopitiam head honcho Alden Tan was astounded by the prices of the “zhap cai png” (Singlish for “economy rice”) there.

“It cost me S$13.50 for the cai png, and even the Coke cost S$3.50,” mused the new chief executive of the Singaporean food court operator. “If you look at it this way, food prices in Singapore are actually relatively affordable.”

Yet in Singapore, similar commercial pressures are placed on stallowners at food courts and hawker centres to follow suit and raise food prices too.

Food prices here have surged an estimated 10 per cent since 2013, as the industry faces a labour shortage, and growing business costs for water, electricity, rent and services such as dish washing and tray returns. More than 90 per cent of food supplies are imported, which means costs hinges on global trade conditions too.

KOPITIAM NOW A SOCIAL ENTERPRISE

So when Kopitiam was acquired by NTUC Enterprise in December last year, Mr Tan, an executive in the company for 23 years, knew that transitioning a purely for-profit commercial business into a social enterprise would be a difficult task.

The acquisition also came amid a furore surrounding the 13 hawker centres run by social enterprises today, including those run by NTUC Foodfare, with some commentators arguing that the business model is not sustainable for stallowners.

Kopitiam manages three hawker centres, including one at Our Tampines Hub. It employs around 1,200 people and manages more than 1,000 food stalls.

“Ever since our company was founded in 1988 and I joined in 1996, we have always been providing good food at relatively affordable price to the customer. Back then, it was easier to do so, but now it is a bit more difficult,” said Mr Tan, 58.

“We have to mitigate this trend of rising food prices. Because we have to take care of the group of people who are not able to move with the rest, as they may not have choices to dine elsewhere as those who are more well-to-do,” he added.

Since taking on the role as Kopitiam’s CEO from its founder Lim Bee Huat, who is known in the industry for his business savvy and for building up the Kopitiam empire, Mr Tan has had to repeatedly convince his own staff that the company is heading in a new direction.

“Very importantly, every time when I meet up with my heads of departments and my colleagues, I have to reiterate and emphasise Kopitiam’s role within the bigger family of NTUC as a social enterprise,” said Mr Tan.

“Along the way, they get it too. I have to change their hearts and reshape their thinking,” he said.

MITIGATING LIVING COSTS

Speaking to TODAY at the Funan mall, where Kopitiam unveiled its 78th food outlet “Kopitech”, Mr Tan shared some of the company’s efforts to combat the rising cost of food.

Despite accusations from some quarters that the acquisition by NTUC was anti-competitive and could lead to increased rent for stall owners, Mr Tan said Kopitiam has not changed the rents since the consolidation deal took place last December.

That month, the Competition and Consumer Commission of Singapore had given the green light to the acquisition as the move would not lead to “a substantial lessening of competition”.

“They have cleared us unconditionally,” he said, adding that it has been business as usual since the acquisition, with zero retrenchments or resignations.

Instead of raising rental fees, Mr Tan said Kopitiam is looking into reducing costs for some tenants, such as by capitalising on the NTUC Fairprice network for ingredients and supplies. This is still being explored, starting with Kopitiam outlets that are co-located with the Fairprice supermarket, such as in Funan.

NTUC Enterprise also said previously that it is looking into plans to extend affordable meal initiatives and lower the price of coffee and tea to Kopitiam. To reduce costs for some consumers, holders of Kopitiam stored value cards get a 10 per cent discount, while staff in hospitals and at Changi Airport get 20 and 30 per cent discounts respectively.

The costs of these goodwill efforts are shouldered by the organisation as part of its corporate social responsibility duties, while tenants operate on a purely commercial basis.

Mr Tan said: “As Kopitiam, we ourselves will have to take care of how we can take out a portion of our profits to plough towards a good cause, but we will not be asking the same of our tenants — I rather that they do well.”

“But our own margins are thin. We face the pressure of maintaining a profitable business, but also to work for this good cause of keeping food prices relatively affordable.”

In 2015, a study found that four in 10 small F&B establishments in Singapore do not survive beyond five years of operation.

MANPOWER CRUNCH

While Mr Tan has ideas on managing food prices, rents as well as the cost of ingredients, he admits that the labour crunch faced by the industry is a tough nut to crack. Kopitiam was slammed last year for its 24-hour requirement in the tenancy contracts with stallowners at Our Tampines Hub.

Following criticism from stallowners over the low footfall at night, poor work-life balance and the high manpower costs involved in running a stall round-the-clock, the National Environment Agency led a review of contractual terms to give stallowners at social enterprise hawker centres greater flexibility to determine their operating hours.

Mr Tan said he believed in the 24-hour requirement, which would allow vibrancy at food outlets, but he also understood the reasons for the change.

“We believe that hard work will pay off, and we apply the same kind of philosophy to the business that if we can work harder, increase your productivity, the business will benefit. But we have to also strike a balance for our staff on work-life balance,” said Mr Tan.

Some have argued that the toil needed to be a hawker or a stallowner has also led to the current labour crunch, since younger Singaporeans are seen as unwilling to work in such industries.

Mr Tan agreed that the labour crunch is at the root of the issue: “It is hard work, but we will have succeeded if we can encourage more people to develop passion to go into food… This has to be a concerted effort by the Government and the industry to think of how to attract people in.”

He thinks technology can help ease labour woes.

At Funan’s Kopitech, the company forked out S$500,000 to build an automated ordering kiosk system that accepts cashless payments, including cryptocurrency. Instead of buying and paying for food at each stall, customers can pick their meal at centralised kiosks and wait for their queue number to be displayed on screens placed around the food court.

Mr Tan said the system is a first for Kopitiam, and will serve as a testbed to see how consumers and stallowners react to a tech solution that could reduce the need for a worker to take orders and collect cash payments.

It is not the first time that Mr Tan has turned to technology for a solution. In 2004, he mooted the idea of the Kopitiam stored value card to allow stallowners to focus on food preparation, rather than fumble with changing money. Kopitiam has issued 2.5 million of these cards ever since.

He said: “We have to think of ways and means to overcome the labour shortage… Because there are surely people who are very passionate in food and this is what they want to do.”