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[SINGAPORE] The United States administration’s tariffs have roiled markets, sparking concerns over a full-blown trade war and a global recession.

Unsurprisingly, markets in trade-reliant Singapore have also been on a rollercoaster. Certain sectors, such as banks and Singapore-listed real estate investment trusts, saw a sell-off before rebounding when US President Donald Trump paused the tariffs on Apr 9.

Against this backdrop, Singapore’s supermarket listings have been mixed. Sheng Siong’s stock price rebounded to end at S$1.75 as at Apr 24 after a brief dip following Trump’s “Liberation Day” tariffs on Apr 3.

On the other hand, DFI Retail Group, which recently agreed to divest its Giant and Cold Storage supermarkets to Malaysia’s Macrovalue, saw its shares drop since Apr 3.

Despite the mixed performance, analysts say that supermarket counters remain a defensive play for investors. Defensive stocks are those that provide stable returns even when an economy does poorly, as their products or services are always in demand.

Macrovalue’s acquisition of DFI’s grocery segment shows that there remains a “business proposition” for supermarkets here, despite the high competition, says one analyst.

While investors may have their eye on stock prices, for consumers or the man on the street, their biggest concern would be whether the cost of their groceries is likely to jump.

In the US, food prices are expected to go up by 2.8 per cent if tariffs are imposed, according to a report by Yale University’s policy research centre Budget Lab.

Will supermarkets in Singapore face a similar challenge?

Analysts say that on a consumer level, tariffs are unlikely to impact product prices, but supermarkets will have to widen their product offerings at lower, competitive prices to cater to consumers who are tightening their belts.

How Singapore’s supermarkets stack up

The supermarket scene in the city-state is dominated by three major players. FairPrice, a cooperative under the National Trades Union Congress, has 164 stores while mainboard-listed Sheng Siong has 77 stores. Mainboard-listed DFI was the third major player before it recently sold its 41 mass-market Giant supermarkets and 48 Cold Storage stores, which caters to more upscale customers.

The three organisations were estimated to make up around 60 per cent of market share in Singapore.

These players have been making moves in recent times. The Business Times previously reported that Giant closed nine stores in six months in 2024, which observers attributed to high rental rates and competition from other supermarkets.

On the other hand, FairPrice and Sheng Siong have expanded, with the latter opening eight new stores in 2024.

The latest development was DFI’s sale of its grocery segment to Malaysia’s Macrovalue for S$125 million, announced on Mar 25.

DFI said it will focus its resources in Singapore on the Guardian and 7-Eleven businesses.

The group’s operating profit for its supermarket segment has lagged behind its health and beauty, and convenience store segments.

DBS analyst Andy Sim notes that while revenue for DFI’s Singapore supermarket business amounted to around S$1 billion in 2024, the business was still loss-making in the first three quarters of the year before turning profitable in the fourth quarter.

“From a bottom-line basis, the Singapore supermarkets business is suboptimal compared with the health and beauty and convenience segments, which have better margins,” says Sim.

During the company’s H2 results briefing on Mar 10, DFI’s chief executive Scott Price said that he expects supermarket revenue to remain stable at best, amid heavy competition, despite turning profitable.

Meanwhile, Macrovalue, which is co-owned by Malaysians Andrew Lim and Gary Yap, say that they aim to provide “superior” customer service and elevated offerings at Cold Storage and Giant.

Supermarket counters still a defensive option

Besides the latest industry changes, the uncertainty surrounding recent US tariffs could also affect supermarkets’ operations here, say analysts.

Carmen Lee, head of OCBC investment research, says that the global trade situation is getting “more murky and complex”.

If uncertainty over the tariff situation drags on throughout the year, a weak economic outlook and higher consumer prices will “significantly impact” consumer demand. Lee expects most sectors – including supermarkets – to be hit.

Meanwhile, retail sales in supermarkets have also seen a huge pullback, dropping 13.3 per cent year on year as at February 2025.

Nevertheless, analysts are confident that the supermarket sector remains a defensive option, even with Trump’s tariffs posing a looming threat on the horizon. This is particularly so as consumers tighten their belts ahead of a possible technical recession.

OCBC’s Lee says that with prices for food and consumer products rising, consumers are likely to make fewer trips to restaurants and prepare more food at home instead.

“This could help to spur demand for some basic food items carried by supermarkets,” she says.

Likewise, DBS analyst Chee Zheng Feng expects higher demand for groceries, which in turn, would support stronger revenue and profitability for supermarkets.

During the Covid-19 pandemic, Sheng Siong’s share price hit a then record high of S$1.86 per share, after the lockdown prevented customers from dining out.

Alfie Yeo, senior equity research analyst at RHB Singapore, says that in a scenario where consumers cut back on purchases, mass market operators are likely to benefit more than higher-end grocery retailers.

Although competition is high among the supermarket players, analysts say that the market is not saturated yet.

Sim of DBS says that while the grocery space is a “relatively deep and competitive market”, DFI’s deal with Macrovalue shows there is a “business proposition” for supermarkets in Singapore.

He notes that Sheng Siong has a net profit margin of about 10 per cent, while FairPrice, as a social enterprise, has a net profit margin of around “a couple of percentage points”.

There is also still room for expansion, say analysts.

Sim says that while there is a high density of supermarkets within some localities here, Singapore still has a lower density of supermarkets compared to other cities like Tokyo and Taiwan, on a per capita basis.

He believes there is still room for supermarkets to expand due to Singapore’s population growth and the formation of new estates.

Will consumers feel the pinch?

Despite being a defensive stock option, supermarkets will have to contend with increasingly price-conscious customers on the product front.

On the whole, analysts say that tariffs would impact the prices of groceries here to a small extent.

Assistant Professor of Economics Mei Yuan from Singapore Management University says that the direct impact of tariffs on the prices of food and daily consumer goods will be limited as these products are mostly supplied from countries within the Indo-Pacific region.

However, some items may see a more pronounced price increase due to the tariffs, he says. They include electronic items, or those whose supply chains involve the US, that are sold in larger supermarket stores.

“The Trump tariffs and China’s retaliatory tariffs will substantially increase the production cost of these products that involve the US in their supply chains,” says Asst Prof Mei.

While food suppliers from China could increase the price of their exports to Singapore with a view to offset tariff charges from their US exports, the professor does not expect this to happen on a large scale.

“This is because most daily consumer goods have multiple suppliers from China. In this kind of situation, grabbing larger market shares from competitors usually has higher priority than increasing profit,” he says.

Associate Professor Lau Kong Cheen from the marketing programme at Singapore University of Social Sciences also expects the price of most items to be stable as supermarkets have diverse food sources across various countries.

However, prices of processed foods may go up due to an indirect impact from tariffs.

For instance, some countries that process food may be dependent on American machinery that has been assembled with parts imported from tariffed countries.

This could increase the production cost of such food, leading to higher prices when they reach supermarket shelves in Singapore.

Even if prices of staple items remain stable, supermarkets’ performance may be affected on the whole if consumers cut back on their spending, says OCBC’s Lee.

In this situation, supermarkets will have to continue offering more products at competitive pricing to attract customers.

Growing in-house brands

DBS’ Sim expects supermarkets to expand their range of house-brand products, which are typically cheaper than external brands due to lower marketing and research and development costs.

FairPrice’s house brands are FairPrice and Pasar, while Sheng Siong’s are Tasty Bites, Heritage Farm and Happy Family. Giant’s are Giant and Meadows.

FairPrice says that its house-brand products, which range from toiletries to groceries, are 10 to 15 per cent lower in cost on average compared to leading brands. They comprise more than 3,500 products and are sourced from more than 50 countries including Malaysia, Thailand and Norway.

Close to S$1 billion, or 20 per cent of FairPrice’s sales in 2024, was from its house-brand range – double its 2022 figure.

Prof Lau says that it will now be easier for supermarkets to expand their house-brand lines, as many consumers are already familiar and confident with the variety of house-brands available at supermarkets.

He expects supermarkets to search for lower cost producers who can supply cheaper production of their house brands.

“This is a good way to manage risks and costs to ensure the continued supply of affordable items for Singapore consumers. This will also stabilise item prices,” he said.

That said, there is still room to cater to more upscale consumers, say observers.

Sim of DBS says that supermarkets can tweak their offerings to suit the demographics of the locality.

For example, a supermarket in a suburban area like Bukit Batok could offer more house-brand products or produce imported from regional countries, while a supermarket located in the city could offer more European-imported products or fresh cut meat to cater to a more expatriate or upscale demographic.

Claire Gwee, a 39-year-old sustainability consultant, says she is increasingly more conscious about grocery prices when shopping. She now compares prices more closely, and keeps an eye out for discounts.

She also holds off on non-essential purchases until there are promotional discounts offered, or chooses supermarket outlets which allow her to accumulate reward points for shopping so that she can use the points to offset prices from bigger purchases in future.

However, Prof Lau says that higher-end supermarkets like Cold Storage or FairPrice Finest will still maintain their customers.

While consumers may be cautious currently due to economic turbulence, they may be less cost conscious in the medium term when there is more certainty on the economic outlook, he said.

Moreover, customers with middle to above-average income will still be excited to have better shopping experience at supermarkets. To that end, higher-end locations can differentiate their offerings from mass-market ones by offering experiential retail strategies, says Prof Lau. For example, FairPrice Finest has food kiosks and a bar in its Clarke Quay outlet for customers to wine and dine in.

These strategies will help higher-end supermarkets differentiate themselves from their competitors, the professor says.

Gwee, the supermarket shopper, is one of those who attended a gin tasting event held by FairPrice Finest at Woodleigh Mall.

“It appealed to me as I like gin-based cocktails,” says Gwee. She attended the event as it was near her home, and conducted by a well-known cocktail mixologist.

Prof Lau also notes Macrovalue’s aim to set Cold Storage and Giant in Singapore apart from their competitors by providing “superior” customer service and elevated offerings.

Andrew Lim, one of the company’s co-owners, also adds that Cold Storage, in particular, will make a customer feel like they are boarding Singapore Airlines, the national carrier that is known for its exemplary service.

The professor says that it will take time for the new owners to roll out their new business strategies.

“As such, this will give them the opportunity to assess the receptiveness for their curated offerings before a major implementation,” says Prof Lau.