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The Philippines’ second largest retailer is expanding towards new geographic locations by opening stores and acquiring grocery retail chains nationwide.

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After 180 stores opened this year, more are planned in 2019.

Continue to make inroads

Indonesian mini-market operator, Alfamart, proposes to open 200 new stores in the Philippines in 2019. Alfamart currently has more than 500 stores in the country, located mainly in residential areas. The new planned stores will bring Alfamart’s Philippine store network to more than 700 by end of 2019.

Similarities between the two countries

The Philippine and Indonesian markets share similaries, which work to Alfamart’s advantage. Both have young populations and expanding middle classes. In both markets, shopper prefer to buy small packaged goods frequently rather than filling large baskets and weekly grocery carts.

Untapped sector

The mini-mart sector in the Philippines is seen as an untapped sector with little competition. Unlike convenience stores, Alfamart also carries fresh and frozen food. Its product range is more extensive than that of a typical convenience store (see photo below): 

Source: IGD Research

Alfamart’s risk in the Philippines is also mitigated by its majority stakeholder, SM Retail. SM operates 1729 stores nationwide in the Philippines. Alfamart will benefit from its large business network and high brand awareness.

Alfamart sees that it has more potential in the Philippines than other Southeast Asian markets, such as Thailand and Vietnam.

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South Korean discount chain operator Emart signed an agreement with the local retailer Robinsons to launch two of its private labels in the Philippines.

Expand global presence through private labels

Under the agreement, Robinsons will set up and operate 25 Emart “No Brand” and 25 “Scentence” stores by 2020. No Brand sells daily necessities and food items. Scentence is Emart’s beauty brand. Emart will be paid a licencing fee and profit from the export of products to the stores.

This deal sees the Emart business expands from the Central Asia (two Emart stores in Mongolia) and the Middle East (one Scentence store in Saudi Arabia) to South East Asia.

Growing popularity of No Brand

Around 70% of No Brand goods are manufactured by local small enterprises in South Korea. The brand has been so successful that stand-alone No Brand stores have been opened.

The launch of No Brand stores in the Philippines will be its first overseas expansion. According to Emart, outbound shipments of No Brand products jumped by 57.8% year-on-year during January to October this year.

Diversifying global portfolio

Emart says it plans to develop Scentence beauty products that fit well with the climate of the Philippines to in order to boost its competitiveness.

“The deal to launch No Brand and Scentence in the Phillipines is meaningful to us in that it diversifies our global portfolio for specialized stores,” said Lee Joo-ho, who heads Emart’s global business.

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Robinsons, one of the leading grocery retailers in Philippines, reported a 9.8% increase in net income in the third quarter of this year.

Robust like-for-like growth

The growth is attributed to opening of new stores as well as robust like-for-like sales growth, which is up by 6.6% vs. the same period last year.

Good performance across all formats

Good performance can be observed across all Robinsons’ formats, in terms of like-for-like growth:

  • Supermarkets sales up by 8.6%
  • Speciality store sales up by 7.8%
  • Convenience stores sales up by 4.5%
  • Drugstores sales up by 2.9%
  • Department stores up by 2.4%

Supermarkets account for 46.5% of the group’s total turnover and also have the fastest growth rate of all formats. Earlier this year, the acquisition by Robinsons of a 100% stake in Dairy Farm’s Rustan Supercenters has been approved by the Philippine Competition Commission, and the deal is currently being completed.

Up to date, Robinsons has 158 supermarkets, 368 speciality stores, 496 convenience stores, 499 drugstores and 51 department stores. Robinsons’ overall floor area increased by 9% year-on-year.

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Traditional stores go by many names: mom-and-pop stores, kiranas (India); warung (Indonesia); kedai runcit (Malaysia); sari-sari (Philippines). They include markets, street vendors and kiosks, and are a major feature of Asia’s grocery retail landscape. 

They’re also the specialist subject of Johann, one of our Singapore-based senior retail analysts. We asked Johann for his views on the traditional channel and the opportunities it presents for suppliers.

Q: How are traditional stores making themselves stand out? 

A: They’re known for providing the freshest produce. In fact, the traditional channel began when farmers’ markets started selling excess produce directly to consumers. Stores prepare products – like cheese – freshly every day or offer ranges shoppers can’t find elsewhere.

Offering personalised service is another way to be distinctive. Many traditional stores serve a small catchment area, so owners inevitably get to know their shoppers well. They can then offer advice, product recommendations and value-added services like free home delivery.

Q: What do shoppers like about the channel?

A: As well as the above, many shopkeepers are willing to sell loose products in smaller quantities. We’ve seen this flexibility across many product categories – rice, spices, dried goods, vegetables, biscuits, snacks. 

Shoppers can buy what they need, manage their spending and reduce wastage. It can also encourage them to sample a wider range of products. So, if you supply traditional stores, you should consider whether you can help provide this level of choice. 

Q: How does traditional trade compete with the rise of online shopping? 

A: It’s quick to recognise the benefits of modern innovations and adopt them to attract shoppers. In India, banks are giving traditional shopkeepers handheld payment devices that operate on a mobile network. In China, stores and even market vendors are increasingly accepting cashless payments by displaying a QR code. 

Traditional retailers are also improving their in-store environments. In Malaysia, we’ve seen stores with spacious, clutter-free aisles and attractive displays. Some stores in India have upgraded to include air-conditioning, bright lights and electronic tills.

Q: What’s the outlook for traditional trade in Asia?

A: Traditional trade forms 79-98% of the grocery market in Indonesia, India, the Philippines and Vietnam. We forecast that by 2022 it will still dominate these markets. 

However, the growth rate varies greatly across the region. We expect it to decline in Singapore and Japan over the next five years. 

Q: What’s the one thing suppliers need to know about the channel?

A: Traditional trade remains a vital part of Asia’s grocery retail market. You’ll need to continue investing in it, as it’s here to stay. 

Subscribers to IGD Asia can find more examples of best practice in traditional trade here

Asia’s FMCG market is the largest in the world, making it the number one growth opportunity for suppliers and retailers. We can help you trade successfully in Asian markets, and benefit from this growth, with our new IGD Asia service.

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