Yahoo Finance Here’s Why the Foodfare Price Caps Only Stand to Benefit NTUC
It’s almost like a national conspiracy – although we pay hundreds of dollars for gym memberships, it only takes a small $5 bowl of Katong Laksa to undo all that hard work. But the truth is, Singaporeans love food and we love our local dishes most. We even dedicate a small segment of this year’s SG50 National Day Parade will focus on the various local food items that Singapore is most well-known for. It’s no surprise that nasi lemak, fishball noodles and chicken rice are included in our Golden Jubilee celebrations. So, why then, is NTUC Foodfare out to kill our hawker culture?
Wait, what are you talking about?
NTUC Foodfare has been appointed by the NEA to run the Bukit Panjang hawker centre, one of 20 new hawker centres opening across the island. They will soon be opening tenders for 28 cooked food stalls, all of which have to provide at least two “low-cost main dishes”. This means that fishball noodles, nasi lemak and chicken rice are capped at between $2.50 and $2.70.
Great news for us consumers, right? After all, who doesn’t like the idea of cheap food? Except, if you really think about it, the only people who benefit from this price cap is NTUC Foodfare.
Let’s look at how these price caps affect the hawkers, the consumers and NTUC Foodfare.
How do price caps negatively affect hawkers?
Just in case it’s not obvious, putting a price cap on at least two main dishes means a lower profit margin for hawkers. Assuming they even make a profit at all! As one hawker pointed out, there are many costs in running a hawker stall. Forcing hawkers to work with a capped price for their dishes means that they need to cut their costs if they want to stay afloat. What make up the majority of their costs? Raw materials and manpower.
Remember, ultimately, hawkers are trying to run a business. Their purpose is not solely to provide food for people who can never afford to go to fast food chains or pretentious restaurants. This is not a matter of altruism. It’s a matter of working an honest job and earning a fair profit.
With this price cap model, hawkers will be forced to use ingredients that are cheaper. Or find workers that are willing to work longer hours for less. Or both. And guess who’ll be the first people to complain about lower quality ingredients or having to hire helpers from overseas?
You’re right. Us, the consumers.
How do price caps negatively affect consumers?
Now, your first thought may be – you get to eat a full meal for only $2.50. What’s wrong with that? Your wallet’s definitely going to thank you for saving so much money in the long run. Who’s not going to thank you? Your taste buds and your stomach.
“You get what you pay for” goes the phrase and it’s true. If you’re going to be stingy and only buy dishes that cost $2.50, then don’t expect the food to be tasty or healthy. Except in this case, the price cap is not imposed by the hawker, it’s beyond their control! Once you taste their food, however, you’re probably never going back there again. No matter how cheap the food is, it’s usually not worth paying to eat it.
Speaking of worth, don’t expect hawkers to give you the same quantity of food as a full meal. One other way to cut costs is simply to reduce the amount of food that comes with each dish. A plate of $2.50 chicken rice for example? Could only include half a bowl of rice and the boniest chicken meat ever. So no, even though your wallet is happy, the rest of you probably wouldn’t be. Definitely not your stomach.
So wait, doesn’t anyone actually benefit from these price caps?
Actually, someone does! Surprise, surprise, it’s NTUC Foodfare, the operator of Bukit Panjang hawker centre, who will benefit the most from these price caps that they themselves have implemented. Here’s how:
Firstly, rental prices. They’ve implemented a bidding systems for hawkers who want a stall at Bukit Panjang hawker centre. As part of their bid, hawkers have to state how much rent they are willing to pay. Naturally, for a hawker to win the bid, they will need to bid as high as they possibly can, taking into consideration the lower returns as a result of the price caps. Who benefits from choosing the highest 28 bids? NTUC Foodfare of course.
Secondly, reputation. NTUC Foodfare claims it is a “social enterprise” and that it is “not-for-profit”. If the Bukit Panjang hawker centre is a success, then NTUC Foodfare gets the glory. Except, while imposing these price caps, they have not done anything else to help these hawkers reduce their costs. The hawkers do not get any subsidies for manpower or ingredients. Actually, that last point is not entirely true. Which brings me to my third point.
This is the clincher. Hawkers at Bukit Panjang hawker centre actually have the option of buying basic ingredients like cooking oil, flour and eggs at lower prices. Why? Because they can take advantage of a bulk-purchasing deal. And who is behind the deal? Why, NTUC Foodfare of course! That’s right, the same operators of the hawker centre are also bulk purchasers of raw materials. How convenient. So, if hawkers want to keep costs low, they will need to buy ingredients from NTUC Foodfare.
As you can expect, not every hawker is happy with this arrangement. Many of them have long-term relationships with various suppliers and they don’t want to lose that. Others are just afraid that buying ingredients from the same source would cause their food to taste no different from their competitors.
But of course, NTUC Foodfare won’t care. They’re already laughing their way to the bank.
How do you feel about the price caps of these new hawker centres? Share your opinion with us.
The post Here's Why the Foodfare Price Caps Only Stand to Benefit NTUC appeared first on the MoneySmart blog.
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