LORICA, RICA MKC14A

4CMC

Company: Auro Chocolate

Country: Singapore

Opportunities

1. Relies heavily on imports

As a small country, Singapore has limited agricultural land and domestic food production.

Agriculture contributes less than 1% of the country’s GDP per capita and 1.3% of labor force by

occupation in 2016. Singapore produces mainly leafy vegetables and beansprouts, all for local

consumption. With a total landmass of 1,465 hectares (3,620 acres), its six Agro-technology

parks, comprising of 200+ farms, produce a diverse range of products including livestock, eggs,

vegetables, fruits, orchids, and aquarium fish and food.

Due to its limited agricultural land and resources, Singapore is almost entirely dependent.

Singapore is almost entirely dependent upon imports for all of its food requirements. Due to

scarce agricultural land and resources, Singapore imports nearly 90% of its food products from

abroad and this, in turn, generates a vibrant and diverse retail foods market, with an assorted

range of food products, from basic to high-end organic foods. Due to its limited agricultural land

and resources, Singapore is almost entirely dependent upon imports for all of its food

requirements. There are no import tariffs or excise taxes for all food and beverages, except for

alcoholic beverages and tobacco products. A Goods and Services Tax (GST) of 7% is levied for

all goods and services at the point of distribution.

2. Multinational and multicultural country

Singapore is the only major city in the world that is also an independent country. Positioned at

the very end of the Malay Peninsula, where the Indian and Pacific Oceans meet, Singapore is

ideally placed to be the important hub of Asian trade that it has become. But while the specific

demographics of Singapore are accidents of its history and geography. this alone can not explain

Singapore’s unique multiculturalism.

Singapore’s demographics alone would make it stand out as a city that is interesting for its

multiculturalism, but Singapore also stands out for its policies around

multiculturalism. Singapore’s policies are both a recognition of the city’s demographic realities

and something that shapes them. Singapore’s management of race, language, and religion each

highlight different facets of how active management and encouragement of multiculturalism can

work.

Ethnic Chinese 74.3%, Malay 13.4%, Indian 9.1% (includes Sri Lankan), other 3.2% (2016

groups est.)

Religions Buddhist 33.9%, Muslim 14.3%, Taoist 11.3%, Catholic 7.1%, Hindu 5.2%, other

Christian 11%, other 0.7%, none 16.4% (2010 est.)

Languages Mandarin (official) 36.3%, English (official) 29.8%, Malay (official) 11.9%,

Hokkien 8.1%, Cantonese 4.1%, Tamil (official) 3.2%, Teochew 3.2%, other Indian

languages 1.2%, other Chinese dialects 1.1%, other 1.1% (2010 est.)
3. World’s third-largest financial capital

Within only fifty years of independence, Singapore has become one of the top three financial

hubs in the world. The first two being London and New York, Singapore has pushed Hong Kong

down the list of the top financial hub and secured the third position. Singapore’s financial market

is regarded as one of the most competitive financial markets across the globe. In the Opportunity

Index of PWC, this country ranked 2nd, and on Deloitte’s list of top wealth management centres,

it ranked 6th. Singapore has emerged as one of the principal markets for the investors and the

financiers across the world within such a short duration.

The capital market of this country has enormous depth, and the liquidity of the market helps the

investors a lot which further attracts more investors across the world. Almost 800 companies are

registered on the stock exchange of Singapore and made the foreign currency market very strong

due to the trade between various countries.

4. ASEAN Trade in Goods Agreement (Singapore-Philippines being part of ASEAN)

The ASEAN Trade in Goods Agreement (ATIGA) seeks to establish a single market and

production base with free flow of goods in the ASEAN region, a major component of the

ASEAN Economic Community (AEC). It was signed by ASEAN member states in February

2009 and entered into force in May 2010. The ATIGA is an enhancement of the Agreement on

Common Effective Preferential Tariff of the ASEAN Free Trade Area (CEPT-AFTA) scheme.

With the coming into force of ATIGA, Brunei Darussalam, Indonesia, Malaysia, Philippines,

Singapore and Thailand have eliminated intra-ASEAN import duties on 99.56 percent of their
tariff lines, while Cambodia, Lao PDR, Myanmar, and Viet Nam have reduced their import

duties to 0-5 percent on 98.86 percent of their tariff lines.

5. High purchasing power parity (PPP)

Per Capita Actual Final Consumption of Households (AFCH) AFCH measures the amount of

goods and services consumed by households. High-income economies generally have higher per

capita AFCH. Based on the 2005 ICP, Luxembourg, United States, Iceland, United Kingdom and

Norway had the highest per capita AFCH at PPP while Singapore’s per capita AFCH at PPP

(US$15,564) was about two and a half times the world average (US$6,095) and the third largest

among high-income Asia Pacific economies (i.e. Brunei, Macao, Hong Kong and Taiwan)

6. A free port as more than 99% of all imports enter Singapore duty-free

Singapore is generally a free port and an open economy. More than 99% of all imports into

Singapore enter the country duty-free. For social and/or environmental reasons, Singapore levies

high excise taxes on distilled spirits and wine, tobacco products, motor vehicles and petroleum

products.

7. Increasing health-consciousness of the locals

The health benefits of chocolate and the trend toward luxury have spurred sales in the gourmet

chocolate market. This has been proven by studies suggesting that cocoa or dark chocolate may

contain certain beneficial effects on human health. With increasing health conscious consumers,

the demand for chocolate confectionery in smaller pack sizes will continue to grow in terms of

value growth than volume due to higher unit prices.

8. Locals are more willing to spend on premium quality chocolates

Singapore chocolate market can be divided into a few segments which covers low end Asian

produced dark compound chocolates, chocolate bars and novelties, imported gourmet chocolate

and gift chocolates. Gourmet chocolates represent a considerable market share in Singapore

because consumers are more willing to spend on premium quality confectionery products as

compared to the past. This upward trend has led to the resurgence of chocolate boutique or café

in Singapore. The main competition for Belgian gourmet chocolates are imported Swiss

chocolates and fresh handcrafted chocolates by chocolate boutiques in Singapore.

Revenue in the Chocolate Confectionery

Revenue in the Chocolate Confectionery segment amounts to US$70m in 2018. The market is

expected to grow annually by 6.1 % (led by international companies) (CAGR 2018-2021)

Threats

1. High level of competition with international brands

Ferrero recorded the strongest increase in value share to reach 22%, strengthening its leadership

in chocolate confectionery during 2017. Its strong portfolio of brands including Ferrero Rocher,

Kinder Bueno and Kinder Joy, which gained strong consumer awareness and interest over the
review period, was a key contributor to this. Furthermore, Ferrero Rocher remained a favourite

for gifting and consumption during festive seasons due to its gold-colour packaging that signifies

auspiciousness in Singapore. The company’s favourability was also reinforced by the player’s

investments in marketing campaigns during the year.

2. Very open economy which makes it vulnerable to global economic downturns

Singapore was the first East Asian country to fall into a recession from the current global

economic crisis after July 2008. This clearly reflects the greater vulnerability of the Singapore

economy to global economic shocks.

3. Expensive retail trade

The retail trade is rather expensive for chocolate products in highly sales performance oriented

supermarkets and hypermarkets. Listing fees for retail trade are dependent on the stock keep unit

(SKU) of a particular brand. This does not include brand management and marketing support.

Hence, most importers in Singapore source for established international brands or chocolate

companies that would invest on brand building especially in the retail trade.

4. Economy is highly competitive

The economy is highly competitive due to its global nature. This can make it difficult for startups

with poor connections. Singapore has historically acted as a global trading centre and is the most

cost competitive region in the world for trading across borders

5. High land cost

In addition to high labour costs as highlighted above, land costs in Singapore is as ridiculous as

Justin Bieber’s singing career. Due to our very limited country size and strategic port location,
it’s expensive to buy as well as rent land space in Singapore. We are literally a resourceless small

island that is only 710 square kilometres surrounded by sea water. Renting an office, building a

semi-conductor factory or even renting a retail shop space is going to cost around twice as much

compared to neighbouring Asian countries.

6. Poor air quality

By some measures, Singapore’s air quality is terrible – twice the World Health Organisation’s

(WHO) guideline limits, and worse than Manila’s, according to this report in the Guardian UK

on global air pollution.

Air pollution has many components. Carbon dioxide, while tagged as a greenhouse gas culprit,

isn’t super bad for us, but oxides of nitrogen, which come from diesel vehicles amongst others,

are. Particulate matter of 10 microns in size (or PM10s) such as visible soot and smoke are

considered bad, but not as bad as PM2.5s which are small enough to enter your bloodstream via

the lungs.

Pollution from the transportation is the key problem in Singapore’s urban areas

Like many other major cities, air emissions from the industries and motor vehicles are the two

key sources of air pollution domestically. Transboundary smoke haze from the land and forest

fires in the region are also problems which affect Singapore’s air quality intermittently during the

South West Monsoon period from August to October.

Integrated urban and industrial planning, as well as development control, has enabled the

government to put in place preventive air pollution control measures during the planning stage.

In addition, legislation, strict enforcement programmes and air quality monitoring have helped to
ensure that air quality remains good despite our dense urban development and large industrial

base.

7. Rising labor costs

Singapore has been steering it’s local workforce towards higher value occupations like finance,

biochemistry and industrial engineering through education and propaganda. However, this

creates a gap in the hospitality, F&B, tourism and retail sector because less locals are willing to

work these ‘lower-tier’ positions, not just for remuneration reasons but because of pride as well.

The only way to fill this void is to accept an influx of immigrants willing to work such positions.

Simple supply and demand. This is where the irony appears: Singapore is clamping down on low

skilled foreign talent with it’s high foreign worker levies and quotas, thereby increasing the cost

of labour for small businesses by at least 15%. Supposedly the idea is to provide employment to

the locals who don’t want to do such jobs in the first place. Bizarre.

Anyway, the bottom line is that finding good labour in Singapore is an uphill and costly task,

partly due to the poor attitudes of locals as well as the protective spoiling nature of it’s

government.

8. Saturated chocolate market

Singapore is no longer an emerging market for chocolate confectionery because the chocolate

market is too saturated and well-developed by international players. Ferrero SpA maintained its

leadership of the category in 2015 with a 23% retail value share4 due to its strong portfolio of

brands. Premium chocolatier, Lindt has a strong position in the chocolate retail market. Earlier

this year, Lindt announced their plan to work with market expansion service group, DKSH

Singapore (www.dksh.com.sg) to further strengthen its position where the demand for premium
chocolate is rising. DKSH provide marketing, sales, merchandising, distribution, logistics and

back office support for confectioners such as Lindt and Perfetti Van Melle.

SOURCES/REFERENCES:

https://www.gov.uk/government/publications/exporting-to-singapore/exporting-to-singapore

https://www.export.gov/article?id=Singapore-Agricultural-Sectors

https://www.statista.com/outlook/40100100/124/chocolate-confectionery/singapore#market-

driver

https://www.flandersinvestmentandtrade.com/export/sites/trade/files/market_studies/SINGAPOR

E%20CHOCOLATE%20CONFECTIONERY%20SECTOR%20REPORT

%20%282016%29_0.pdf

http://www.euromonitor.com/chocolate-confectionery-in-singapore/report

https://themarketmogul.com/the-rise-of-singapore/

https://atlas.media.mit.edu/en/profile/country/sgp/

http://www.dti.gov.ph/15-main-content/dummy-article/682-free-trade-agreements

https://2016.export.gov/Singapore/doingbusinessinsingapore/index.asp

http://www.worldstopexports.com/singapores-top-exports/

https://www.theseus.fi/bitstream/handle/10024/57443/Polevikova_Maria.pdf?sequence=1

https://sites.google.com/site/onwardsingapore/strategic-analysis/opportunities-and-threats