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February 15, 2015

The Wine Business in Singapore.

Singapore river- Then

The wine business in Singapore
-some untold truths from a new business owner

 

The owner’s profile

With the advance of information technology, social media and an open and transparent business environment in Singapore , it is not difficult to know who are the proprietors, shareholders and other entities related to businesses in our wine industry. No, you do not need to meet them to know them in this age.

Many of the local owners share a common trait-they do not make their money from wines to start off with.

Among them are former private and investment bankers, remisiers, doctors , lawyers , major shareholders of listed entities in the electronic, marine , property, automobile industry or what have you. Whether they are still in the industry that brought them their current wealth and status or have sold off that part of their business is another matter.

The question is what draws them to wines in the first place?

Take a look at this example.

The boss of a company in the marine industry loves wine. With his success, he consumes better quality and more wines either in this country or during his overseas trips. He then developed a flair for the big Italian reds.

As we all know, the true entrepreneur’s mind never goes on holiday.

“Instead of buying from others why not I start a company to import my Chiantis, Amarones, Brunellos and Barolos? I can give, sell or share my wines with customers, friends, and relatives. And my wines are special i.e. not found elsewhere in Singapore as they are imported only by me. I can be proud of this.” He said to himself one day.

With his own office building sitting on 30,000 sq ft of land, he will have no difficulty in allocating space for an office, storage area or even a custom-built cellar for his wines.

An office building

An office building

His first customer is very likely to be a supplier who came to meet him and feel obliged to buy a bottle from him. Isn’t there a saying, “ You scratch my back and I will scratch yours”? So never mind his wine knowledge is limited to what he drinks, he has made a sale.

Then you have the ex-banker turned restaurateur, wine importer and retailer.

From working in the financial sector, he has transformed into an importer with links to on-trade and off-trade entities. But it can be second nature for him, for doing this combines his passion for food & wine with his love for challenges in life . A testimony to his business acumen.

And this “on-trade” approach can be quite successful in Singapore. He imports what he wants to sell in his restaurant(s) directly or through another subsidiary /closely-linked entity so that cash flow is kept in the loop and the account books look good. But there will be more overheads and maybe rising rentals and labour shortage to deal with by extending one’s arms.

As an ex- banker who entertains his clients often, he certainly knows how and where to eat and drink well-long before he made foray into the F&B sector. Talk about connections with restaurants here.

Business Entertainment

Business Entertainment

There you go. Two more stores which wine-searcher can add to their list of Singaporean wine stores.

We have been told to emulate successful stories.

But I think for a successful Singapore wine story, we should first try to emulate the success formula of the ex-investment banker who made 30 million dollars before the age of 35 or the business honcho who made 100 million dollars a year selling marine spare parts.

Success breeds success. Money makes money.

With money, some people start to indulge in a life of debauchery and end it worse off. This happened to many lottery winners , we read that in the papers.

The business owners who are still running their business certainly do not belong to this category.

Having made their money elsewhere now come the question of preservation and further creation. Where else better to put your money than in something you always have passion about?

And with wealth already created somewhere else and patronage from people they know, are they worry about the consequences if their wine business does not take off?

I have told you before once you start your business, your data base will be updated by the market watchers and you will be hounded by suppliers in no time, especially if you have a physical outlet.

One supplier will write to you saying “our wines compliment your portfolio” , never mind the fact that you have just started your business and do not have much of a portfolio.

Another one will write saying he is “very sure the business relationship will be mutually beneficial” without explaining how buying, promoting and distributing his wines will be good for you knowing very well such activities will cost you money and resources. But you know for sure why this is a one-sided love affair.

Finally there is the one who says” we can help you organise wine tastings and exhibitions when you distribute our wines” knowing very well such activities are well within your own operation capabilities and that he will be tapping your clientele .

So you see, never worry about whether you have wines to sell but rather more on whether you have the place to store them if you can’t sell any. But this in reality is also not a problem in this country.

The Singapore River Quay’s analogy

“So are you saying nobody in Singapore made their money from selling wines alone?”

Such a statement will be too assertive and almost confrontational. But the answer may be found in our famous River Quays.

As a boy who lived on the second storey of a 3- storey shophouse not too far from Boat Quay, Sundays consist of a bicycle ride to where the old Merlion statue used to be situated and checking out what people caught from the smelly Singapore River.

And of course, who can missed the coolies carrying (on their bare shoulders)what look like sacks of rice from the wooden bump boat to the godowns that lined the sidewalk?

I also remember counting rotting half-eaten green apples floating on the river surface. Why apple and why green? I can’t really explain it now but I do love apples and believe me in a time when the river is filled with sewage, food remains , floating wooden planks, discarded goods from the godowns, a green apple is easier to spot than a dark red apple.

But look at it now without going into how it has transformed aesthetically. Cleanliness of the river aside, the quays are lined with restaurants serving food from what I called the big four food culture: French, Italian, Chinese and Japanese. You do not need to agree with me on this. Walk along Boat Quay, Clarke Quay and Robertson Quay and count the restaurants that serve food outside these four countries. Not many, isn’t it?

Singapore river- Then

Singapore river- Then

 

Singapore river- Now

Singapore river- Now

So where is the answer? To make money from wines you need a wine drinking culture among the general population and establishments that promote wine indulgence prominently.

In the past, most people go to street hawkers for their meals even if they go to a restaurant it will most likely be a Chinese one. Look at the table setting in a typical Chinese restaurant. Yes there is a wine glass beside the cup for the Chinese tea.

But that piece of glassware is for you to choose between your coke, orange juice, plain water, beer and not necessarily wine(they may not even have it). If you asked for hard liquors then you will get another glassware.

So when did the bloom for our wine establishments begin? Well, the rotting half-eaten green apple only truly disappeared from the river surface in 1987. But it took close to another decade due mainly to makeover of the godowns and piping of utilities and facilities before Boat Quay or for that matter Clarke and Robertson Quay became the enclave for expatriates and tourists.

With the influx of people came the French and Italian restaurants and along with that came the wine drinking culture. That was just 17 years ago.

If the Quay’s analogy is anything to go by that means we, the general public only start to learn how to appreciate wine 17 years ago. Sounds incredible?

But it may not be so if you know what our founding fathers have been advocating.

“First, learn the fundamental skills to feed ourselves, before arts , music and other forms of cultural appreciation.” You will hear similar tunes from the prominent politician from time to time.

As a result, many industries such as petroleum refining, electronics components assembly, ship building , finance infrastructure development moved by leaps and bounds spearheaded by policies of the government.

Remember the tycoons who made it big in the marine and financial sectors? They are the direct beneficiaries of the importance given to such sectors since the nation’s founding years.

Fast forward to our rich cosmopolitan society today, we have wealth , the right people and if we slow down a little , we will have time to appreciate the finer things in life.

So if you are hitting the right tune at the right time, you will be applauded. Wine bars, wine appreciation classes , new wine launches are now everywhere. People know and appreciate wine and they have the means. They now jet-set and trample on vineyards while on holidays, use nebulous descriptors like “high minerality” for a white burgundy and “fruit-forwarding” for an Australian semillon. Suddenly everybody is an “expert”.

So why wait? Hit the iron while it is hot. Come on in more local and international players, there is money to be made! Welcome to the “Monaco of the East”!

To conclude

I therefore believe you can make money from wines. But to be able to do that simply as a retailer? I shall leave you to draw your own conclusions.

The older ones among us will probably remember the tussle for control for one of Singapore iconic brands, Yeo Hiap Seng(YHS), coincidentally a beverage distributor and producer .

Everyone knew the eventual winner, a patriarch and real estate mogul was not after the brand but the land the production facility sits on and the adjoining land assets YHS possessed at that time.

If YHS’s profits slipped due to board and management change, lack of production know-how, poor knowledge of the beverage business or what have you, the party in control can simply resell the land or build condos on it since some of the land has already been zoned for residential development.

Most of us will probably never encounter a transaction of this magnitude in all our business endeavours. But it is not infeasible to attempt something smaller in scale based on the very same philosophy. Understand what I mean?


Mr Benny Chia shared his views with some close friends and associates on 26
th July, 2014. The above is an extract of his presentation. All views expressed here are solely those of the author in his private capacity.