When American fast-food chain A&W opened its doors to visitors for the very first time on 11 April, Singaporeans flocked to Jewel Changi Airport to get their root beer and burger fix.
At Jewel, a root beer float costs S$3.50. In Malaysia, the same drink costs less than S$1.50. A&W Malaysia also often hold promotions where the price of a root beer float can go as low as RM$1.
Similarly, an a la carte marina fish sandwich costs $3.90 in Jewel, while in Malaysia, the same item costs around $2.
Here are the reasons why A&W costs more in Singapore than our Malaysian counterparts.
#1 High Operating Costs
This cost includes ingredients, rental, and hiring costs. Jewel Changi Airport is a newly-built piece of architecture, and like most major airports, experience high human traffic. This means that A&W, along with other establishments located within the building, are possibly subjected to high rental costs. A&W is also open for 24 hours, which means more money is spent on labour and electricity as well.
In case you didn’t know, A&W’s signature root beer is made fresh daily, and certain sides are only cooked and prepared upon the customer’s order. According to IBISWorld industry analyst Andrew Alvarez, A&W incorporates higher quality ingredients in its food. This could result in higher ingredient costs, which are then passed on to the customer.
In May 2018, A&W also opened vacancies for the positions of restaurant manager, assistant restaurant manager, and training manager, all of which are leadership positions. It is possibly a move by A&W to strengthen the core team so that eventual hires such as crew members can be managed more effectively. The high initial and subsequent manpower costs could have contributed to the higher food prices.
Unlike a MacBook Pro laptop from America or clothes from China, it is impossible to ship an A&W coney dog or waffles with ice cream from overseas as these food items are perishable. Not to say that by the time it reaches your doorstep, the ice cream would have melted into the waffles.
With only one A&W location in Singapore so far and demand so high, it is not surprising that Singaporeans are so willing to queue — even if it means paying higher prices.
A&W could also be playing on Singaporeans’ nostalgia. After all, it has been 16 years since this beloved fast food chain departed the shores of Singapore. They know that Singaporeans’ won’t mind paying a price for their food — and we do, evident from the snaking queues since A&W’s opening.
#3 Big Mac Theory
The Big Mac Index was created by The Economist based on the theory of purchasing power parity (PPP) between nations. PPP states that any changes in exchange rate between countries would be visible in the change in price of a basket of goods, which remains constant.
Hence, the big max index suggests that changes in exchange rates between currencies will affect the price that consumers pay for a Big Mac burger in a nation compared to another nation. The hamburger is an example for the “basket of goods”.
Hypothetically, the price of food at A&W should be the same around the world. But this is not the case, which explains why a root beer float costs almost three times more compared to Malaysia. This is a list of prices of Big Mac in various countries.
It’s Still Worth Your Money
Despite the higher prices in Singapore, A&W remains one of the most loved fast food chains of Singaporeans. Their coney dogs, waffles with ice cream, and root beer floats are unique items which other fast food chains in Singapore do not have on their permanent menus. Hence, product differentiation beyond the usual french fries and burgers — makes A&W extremely special.
Besides, there are opportunity costs involved if you were to take a trip to Malaysia (or Batam) to savour food from A&W. This includes transport costs, your time, and a possible difference in taste.
The good news is, A&W announced that they will be opening a second outlet in June, and there are plans to open a third outlet in 2020. Hopefully by then, there will be more promotions and discounts for customers.
(Top Image Credit: A&W Singapore Facebook Page)
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