Find out about the retailer's strategic priorities, commercial focus areas, channel and country presence.

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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.

SM Retail is the market leading grocery retailer in the Philippines, we review its strategic priorities and growth prospects over the next five years.

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SM Retail has announced Q1 results for the period ending 31 March 2019, with total revenue up 13% to PHP79.0bn.

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SM Retail has announced Q1 results for the period ending 31 March 2019, with total revenue up 13% to PHP79.0bn.

Food revenue up 17% to PHP41.8bn

The food side of the business continued to see strong growth during the period, driven by positive like-for like sales in existing stores, as well as the opening of 1 SM Supermarket, 1 Savemore and 52 Alfamart stores. Although the retailer didn't open as many new stores in the quarter as it has done historically, it still plans to open 2 SM Supermarkets, 13 Savemore stores, 1 SM Hypermarket, 8 WalterMart stores and approximately 150 additional Alfamart stores throughout the rest of 2019.

Alfamart expansion an area of focus

The food side of the business at the end of Q1 operated 57 SM Supermarkets, 194 Savemore stores, 53 SM Hypermarkets, 52 WalterMart stores and 578 Alfamart's. Alfamart's rapidly expanding footprint is of particular interest, with sales from the format resulting in PHP2.8bn of revenue during Q1. The retailer is actively searching for new sights around the perimeter of Metro Manila, looking to build scale and market concentration in this area as a priority.

SM Retail and A.S. Watson’s joint venture, Watsons, will open 100 new stores in the Philippines this year.

Opening community-based stores

Of the 100 planned new stores, 80% will be community-based stores. The aim is to provide greater accessibility to shoppers as it recognises that not all shoppers go to malls. These stores will be approx. 200 sq m, with three quarters of the space used as a selling area.

Health and wellness growing alongside beauty

Watsons has been investing in growing its store network and training its pharmacists to grow its health and wellness segments alongside beauty. With shoppers beginning to follow beauty and health care trends more closely, the Philippines is a key market for further growth.

Watsons Philippines ended 2018 with 750 stores, and its network has seen a CAGR increase of 18.3% since 2015.

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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Alfamart minimart continues its rapid network expansion in the Philippines with 120 new stores expected in 2017.

Alfamart eyes 10 new minimarts each month

Alfamart Philippines will continue to expand its existing network of 262 stores in the next two years to around 500. Alfamart's partner, SM Retail, operates larger retail formats, and so the addition of smaller formats placed in urban areas have helped establish retailer identity. New stores have also led to greater accessibility for consumers as the retailer strives to serve more unique shopper missions, and compete with the major convenience chains and neighbourhood stores.

SM Investments Corporation, Philippines’ leading conglomerate, has registered a 9% growth in consolidated revenues in FY2016. Its retail arm SM Retail has also grown by 8% in revenue to PHP 276.5bn (US$5.5bn).

Expansion continues

The food group, which includes SM Markets (SM Supermarket, SM Hypermarket and Savemore) and WalterMart, continued to expand mostly in provincial areas last year. It added 33 new stores, most of which are stand-alone Savemore stores. SM’s food group continues to expand in various regions with a multichannel growth strategy to address the lack of organised retail.

At the end of December in 2016, SM Retail had a total of 2,110 outlets, comprising 57 SM Stores, 1,556 specialty retail outlets, 48 SM Supermarkets, 44 SM Hypermarkets, and 156 Savemore, 39 WalterMart and 210 Alfamart stores.

Consolidating retail businesses creates positive outcome

In 2016, SM Retail merged several leading specialty retail stores, creating an entity with more than 1,400 outlets. “Following the retail merger last year, the performance of our specialty retail has been boosted by discretionary spending, especially in areas such as home furnishings and do-it-yourself goods, tracking the strong consumption and overall growth of the economy,” SM president Harley Sy said.

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