Singaporeans are getting hot under the collar these days.
But it’s not Credit Suisse (NYSE: CS) or Silicon Valley Bank that’s gotten under their skin.
It’s chicken rice. It’s iced Milo. It’s sliced fish soup.
The kind of daily staple that warms our hearts.
Yes, I am talking about the research by the Institute of Policy Studies (IPS) comparing hawker food prices from over 800 food establishments islandwide.
It’s the study that has the nation up in arms.
[There’s an investing lesson here, I promise.]
The curious case of chicken rice
Chicken rice sellers in Bishan were surprised to learn they have the unfortunate distinction of having the priciest dish in the country.
For comparison, the IPS study found the average price for a plate of chicken rice is S$3.80.
Bishan’s average price is S$4.26, or 12% more.
Here’s the thing: if you think hawker food is all about price, you’re wrong.
Margaret Drive Sin Kee Chicken Rice, a store close to my home, regularly sells out whenever the store is open (that’s six days a week).
The price of its chicken rice?
At least S$4.50, or almost 6% more than Bishan’s average price.
Here’s another thing: there is plenty of competition around.
Until recently, another store located less than 300 meters away, Leong Wei Roasted Delights, was selling chicken rice for S$2 per plate — almost half of the national average.
Were there long queues? You betcha.
Long lines of 10 to 20 people start forming before the store is even open. Be ready to wait between 30 and 45 minutes if you want to get your hands on this dish.
[Foodie note: The Holland Drive Market and Food Centre, where Leong Wei Roasted Delights is located, is under renovation until 1 May 2023; The store stopped selling chicken rice after the Malaysia chicken export ban.]
As it turns out, both stores were doing well despite the wildly-different pricing.
Befuddling, isn’t it?
It’s not about price alone
In case you haven’t noticed, I have placed these two examples side-by-side for a BIG reason.
Here’s my question …
Why is it that two stores, selling the same dish (chicken rice) around the same area (less than 300 meters from each other) are successful at the same time?
It’s not the price, that’s for sure. It’s more than that.
Here’s a hint: if you are looking for quality, Margaret Drive Sin Kee’s chicken rice is what you want.
The Michelin-Bib Gourmand rated store serves aromatic rice with tender steamed chicken paired with spicy chilli and tangy ginger.
That is exactly what discerning foodies are paying for.
In investing circles, we call this trait intangible assets: a hard-to-replicate recipe coupled with brand recognition that is hard to copy.
How do you know a brand’s worth?
Think coffee, and Starbucks (NASDAQ: SBUX) will be in the picture. Think sports and Nike (NYSE: NKE) comes to mind. Think smartphones and Apple (NASDAQ: AAPL) is not far behind.
Much like Sin Kee’s chicken rice, customers are willing to pay above-average prices for this trio of brands.
But what about Leong Wei’s ultra-affordable chicken rice?
In my eyes, the store exhibits efficient scale.
In investing parlance, it’s the ability to dominate a niche market where competitors are discouraged from entering a low-margin market.
Singapore has a good example.
VICOM (SGX: V01) owns a three-quarter market share for vehicle inspection.
In simple terms, there hasn’t been any major competitor willing to replicate its testing facilities for a market which the company already dominates.
Get Smart: Look beyond price
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Disclosure: Chin Hui Leong owns shares of Apple, Nike, Starbucks, and VICOM.