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This in-depth guide to the Philippines explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

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

New stores opening

The group is to open 25 more stores and four S&R membership warehouse stores this year. The four S&R membership warehouse stores to be opened this year will be located in Metro Manila, Southern Luzon and outside Metro Manila. This wholesale membership format specialises in imported brands from the US and has over 600K active members. It is modelled on the Costco operation system.

In the past few years, Puregold Price Club Inc. has been opening 25 Puregold stores annually. As of end September 2018, the group has a total of 397 stores nationwide, including 345 Puregold stores, 16 S&R membership shopping warehouses and 36 S&R New York style outlets.

Active acquisition

Meanwhile, Puregold has been aggressively acquiring grocery chains. The recent acquisitions include NE Bodega supermarket in Nueva Ecija (nine stores), Budgetlane supermarket (eight stores) and B&W (5 stores) in Roxas City, Capiz.

Puregold last week successfully raised P4.69 billion through an overnight placement from 104 million shareholders at P45 per share. The company said it would use the proceeds for general corporate purposes, capital expenditure and potential acquisitions.

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Puregold, which operates Lawson convenience stores in the Philippines, has agreed to return its 70% stake in the business back to its Japan-based partner, Lawson.

Uncertainty at Lawson in the Philippines

In 2014, Puregold partnered with Lawson to setup PG Lawson, which in turn operated Lawson convenience stores across the the Philippines. It had originally targeted 500 stores by 2020, but ended its most recent fiscal year (February 2018) with 33 Lawson stores. The divestment means that Puregold will rebalance its focus and resources on strengthening the Puregold brand. While financial details of the agreement have not been disclosed.

Our view

With Lawson focusing its attention on testing self-checkouts in Japan and accelerating its expansion in China (opening 420 stores in Shanghai, Chongqing, Dalian, Beijing and Wuhan in 2017), it will be interesting to see if it commits to further resources in the Philippines or pulls-out altogether.

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The Securities and Exchange Commission (SEC) has approved a deal that will lead to the merger of Puregold Price Club (Puregold) and three acquired grocery chains in the Philippines.

The deal...

Under the deal, Puregold will issue paid-in capital of up to PHP922.7m (US$10.9m), and also pay for PHP14.5m (US$287,855) common shares. The merger will see the three Estenso Equities supermarket companies, Daily Commodities, First Lane Super Traders and Goldtempo Company, consolidated and their stores converted and rebranded into Puregold banners. This will add 17 grocery stores to Puregold's existing portfolio, in Cabanatuan City and in the provinces of Rizal, Bulacan and Aurora.

The approved merger follows Puregold’s acquisition of five B&W (Black & White) stores in Roxas City, Capiz, which has expanded its store presence in the Western Visayas region. At the end of September 2017, Puregold group had 352 stores nationwide: 291 Puregold stores, 13 S&R membership shopping warehouse, and 31 S&R New York Style quick service restaurants, nine NE Bodega supermarkets and eight Budgetlane supermarkets.

Our view

It will be interesting to see how quickly Puregold can fully convert and integrate the 17 BudgetLane stores. The merger may slow down other expansion projects in the short term, but Puregold's stronger consistency across its network and an ability to cover a wider market with increased presence will help support overall growth of the company.

We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Datacentre the most reliable and robust source available for data of this type. 

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