Singapore’s food and beverage manufacturing sector is shifting its mass production to neighboring countries, while keeping research, product development, and quality control in Singapore. This move is driven by the need to lower costs and improve supply chain resilience.
Ben Charoenwong, an associate professor of finance at INSEAD, says this change is a reorganisation of the value chain, rather than a decline in Singapore’s manufacturing base. He describes it as “value-chain fragmentation,” which has led to significant economic gains from trade in the globalisation era.
Labor- and space-intensive production is being moved overseas, while headquarters, branding, research and development, and quality control remain in Singapore. Recent examples include Asia Pacific Breweries, which is transferring production to facilities in Malaysia and Vietnam, and Yeo Hiap Seng Ltd., which has consolidated can manufacturing in Malaysia.
QAF Ltd. has also announced that its Gardenia bakery business will move production to Johor Bahru, with its Pandan Loop factory closing on 30 June. Le Jia Chong, CEO at FoodPlant Pte. Ltd., states that manufacturers are responding to structural cost differences, market proximity, and the need for more resilient supply chains.
Hugo Texier, a partner at Roland Berger Pte. Ltd., notes that Malaysia offers lower labor costs and more affordable industrial land, making it easier for manufacturers to expand production. Singapore faces structural challenges, including shorter industrial lease terms, which can discourage companies from making long-term automation investments due to uncertainty over future rental costs.
Labor costs also widen the gap, with median monthly manufacturing wages in Singapore reaching $5,850 in 2024, compared to RM2,490 in Malaysia. Texier expects more manufacturers to adopt dual-hub models over the next five years, keeping research, quality control, and commercial functions in Singapore while locating large-scale production elsewhere in the region.
Chong states that Singapore’s competitive advantage will increasingly lie in innovation, advanced food manufacturing, and technical expertise, rather than mass production. Companies that manage to balance control of capability with optimized production will be best positioned for the next phase of growth, she says.
