F&B chain Spa Esprit Group to halt expansion plans following foreign labour curbs

SINGAPORE — With more than 10 beauty and food-and-beverage (F&B) brands under its portfolio, Singapore’s Spa Esprit Group had its eyes set on growing its businesses further.

However, the homegrown company told TODAY that it will have to put a brake on its expansion plans here because a crucial human resource — foreign manpower — will be cut. Instead, it will have to focus its efforts overseas instead.

On Monday (Feb 18), Finance Minister Heng Swee Keat said in the Budget statement that the Government will be imposing tighter foreign labour restrictions in the service sector over the next two years, noting that the number of foreign workers in the industry has been growing over the years.

“If this trend persists, foreign manpower growth will be on an unsustainable path,” Mr Heng said.

The Spa Esprit Group employs close to 800 employees, both Singaporean and foreign. The company did not want to disclose how many foreign workers are under its payroll but most are from China, Malaysia and the Philippines and they perform largely manual work as beauticians, cooks or service crew.

Its director, Mr Chua Koon Beng, would like the Government to defer reducing the foreign worker quota. It is an “almost impossible task” to make the necessary manpower adjustments within two years, he said.

“We could use a higher foreign quota to expand our business here. An ideal ratio would be 50 per cent like in the early days.”

The company was founded in 1996 by Mr Chua’s sister, entrepreneur Cynthia Chua, and it began operations as a beauty spa in Holland Village before expanding to have 17 lifestyle brands under its portfolio. It now has a presence in nine cities around the world including London, New York and Shanghai.

In Singapore, the group manages F&B brands that include Tiong Bahru Bakery, the Tippling Club, the Open Farm Community, Common Man Coffee Roasters and BoChinche. Its beauty and grooming brands include Spa Esprit, Strip and Browhaus, with the latter two managed by its related company WonderScape Holdings.

Mr Chua said that most businesses, not just his, rely on foreign manpower to survive because there is a “dearth of local talents interested” in working in this sector.

Despite making it a top priority to offer “comprehensive staff welfare programmes and remuneration packages”, the group still faces challenges in hiring and retaining Singaporean employees due to “fickle-mindedness and job-hopping”, he added.

“The work is essentially ‘heart’ work, and it seems that some locals are not prepared to take up a job that requires long hours of manual work.”

The Government’s latest announcement compounds the problem and Mr Chua said that the group will now have to “reconsider and hold back” on growing its F&B outlets here.

It was already preparing to export homegrown Tiong Bahru Bakery for overseas expansion next year, Mr Chua said, so the company will now focus more on such overseas ventures.

The only exceptions will be the commitments it has made. For instance, when the revamped building where Funan DigitaLife Mall used to be reopens around May this year, the group plans to have 50 new hires to operate its businesses there, which will include a new farm-to-table concept.

“It pains us that we will not be able to execute some of our (other) cool concepts here, and be part of the vibrancy of the local F&B scene,” Mr Chua said, but did not want to go into details on what these are.

SPILLOVER EFFECTS OF LABOUR CRUNCH

Mr Chua cautioned that a potential long-term impact of the labour crunch for the service sector is that it could be harder for businesses to grow and be competitive here and in global markets.

He also foresees “more consolidation” within the F&B sector, with businesses giving up when they cannot find the minimum workforce needed to continue operations.

There might be an influx of self-servicing dining concepts one day, he added.

Even after hiring Singaporeans and maximising the foreign workers’ quota, the Spa Esprit Group meets just about 80 per cent of its manpower needs.

“The workforce here is simply insufficient to meet customers’ demands… That is the reality we face now as operators in the services sector,” he said.

"Being a cook, chef, wait staff or restaurant manager may not be one of the top career choices for locals."

It is “difficult to say”, Mr Chua added, if automation or a greater use of technology can fully cover this gap. There may be a trade-off if they relied too much on it.

“Many, if not all, of the tasks involved cannot be automated.”

While using machines to take orders or dispense food would increase productivity as a whole, Mr Chua believes that the customer experience, the quality of food and service will “suffer significantly” as a result.

He suggested that the Government could “go further in-depth” to understand the service sector’s challenges, such as studying the “spectrum of positions” needed to keep Singapore brands globally competitive.

NOT YET OUT OF A SLUMP

Just like their F&B counterparts, some retailers are finding it hard to hire Singaporeans to front their shops for similar reasons.

Mr John Wesley, the business development director of Singapore fashion label Bysi, said that even if the company managed to find Singaporeans to fill the vacancies, their comparatively higher salaries will only drive up its operating costs.

This, he noted, is problematic as the retail industry is still facing a slump.

Predicting that there would be further restrictions in foreign labour, along with other unfavourable market conditions such as high rental fees and competition from e-commerce, the company took steps to trim its manpower.

Around 2013, it started reducing the 11 stores it had island-wide to the current five. However, a sixth store was planned for when Jewel Changi Airport opens later this year.

Bracing for the manpower shortage, Mr Wesley is unsure if the company may have to close more stores now.  

“If the overall market scenario doesn’t improve, and with the Government’s latest move, there might be no other choice.”

While technology may help with “labour-intensive” backend processes such as merchandising, he added that smaller companies might find it hard to adopt such technology because of the costs involved in adapting it to their needs and the recurring costs.

However, he acknowledged that there are government subsidies available to help defray costs and that the company is looking into making use of these.

Even then, another challenge is that it takes time for employees to get used to using new technology, Mr Wesley said, and this cannot happen overnight.

There are ways to reduce the reliance on manpower when serving customers, such as having interactive kiosks that make it easier for patrons to browse and pick up the designs they want, but Mr Wesley said that this works only for certain business models.

“We still prefer to cater to our customers directly and provide that personal touch.”