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Dairy Farm has reported its 2018 annual results. Performance of its Health and Beauty segment was strong, but its Food business saw further decline.

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Dairy Farm has reported mixed results for Q3, pulled down by challenges in the food division.

Strong growth in health and beauty

The retailer reported strong sales and profit gains in Hong Kong and Macau. The retailer also saw improvement in its Southeast Asian businesses, especially in Malaysia and Indonesia.

Food business profits decline

Both sales and profits were down in several markets including Singapore, Malaysia and Indonesia. In China, Yonghui reported strong sales growth but lowered profits due to higher investments in stores. 

Southeast Asian business being revitalised 

Dairy Farm has been closing loss making stores in Singapore, Malaysia and Indonesia. The retailer has just announced the closing of a Giant hypermarket store in VivoCity in Singapore next year. Three other Giant outlets are under review for lease renewals and store performance.

We understand that plans for product range, space management, pricing strategy and consolidated sourcing are being implemented in the region. This includes sharing suppliers and accessing Yonghui's suppliers for fresh food its stores in other markets. We believe that the focus on operations and its efforts in collaboration of suppliers across its banners will support its growth going forward.  

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Tencent has partnered ParknShop and Yonghui to launch a new grocery chain ParknShop Yonghui. Valued at US$170m, the joint venture aims to help both Yonghui and ParknShop expand their businesses in China further.

A new grocery chain, ParknShop Yonghui 

Yonghui will be the largest stakeholder in the new joint venture, investing US$89.5m for a 50% stake. ParknShop will hold a 40% stake with contributions amounting to US$72.1m, while Tencent will pay US$17.8m for a 10% stake. Yonghui is already in partnership with Tencent, after the tech giant invested US$750m to purchase a 5% stake in Yonghui last December.

More about Yonghui and ParknShop

Based in Fujian, Yonghui was founded in 1995 but has presence in 24 provinces across China. It operates more than 830 stores, including supermarkets, hypermarkets and convenience stores. Yonghui has alliances with Dairy Farm, Tencent Holdings,, Zhongbai Holdings and Daymon Worldwide.

ParknShop is a subsidiary of A.S. Watson and is the second largest supermarket chain in Hong Kong with approx. 270 stores. It also operates 16 supermarkets in Macau. On Mainland China, it has around 54 stores in and around Guangdong province, but its store network has stayed largely the same over the last few years.

Yonghui staying ahead of competition

Despite increasing competition from online giants moving into bricks-and-mortar retailing, Yonghui continues to strong sales growth. In August, it posted 21.5% growth in revenue for the first half and continues to expand its store network quickly.

Yonghui's latest partnership with ParknShop is a surprise, particularly as A.S. Watson's fierce rival Dairy Farm holds a 19.99% stake in Yonghui. Nonetheless, with Tencent also involved in the new joint venture, we expect digital solutions via WeChat and innovation around online fulfilment to play a role in shaping ParknShop Yonghui.


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Yonghui has achieved total revenue of CNY34.3bn (US$5bn), an increase of 21.5% in the first half of 2018.

Store expansion driving growth

Yonghui continues to report robust results despite increasing challenges raised by online rivals. Network expansion and format development are major drivers of growth for the retailer, as it continues to expand its network across China.

Yonghui is mainly focusing on smaller-format stores, opening Yonghui Life convenience stores that operate approx. 100 sq m. However, the retailer has also been expanding its premium supermarket banner, Bravo YH, opening 52 new stores so far this year.

Yonghui Life App to cover all stores

To boost offline and online integration, the retailer will look to make its Yonghui Life App available at all its stores. This will allow more shoppers to purchase online and have their purchases delivered in 30 minutes if they live within a 3km radius from a store.

Aggressive plans to grow further

Earlier in the year, Yonghui announced plans to open 135 Bravo stores, 100 Super Species and 1,000 Yonghui Life stores throughout 2018.


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Dairy Farm has reported a strong set of results for the six months ended 30 June, with consolidated sales up 6%.

Overall performance encouraging

Total sales, including associates and joint ventures, were up 17% to US$12.2bn. This was mainly driven by increased sales from Yonghui supermarket in China. Dairy Farm sales increased 8% to US$5.9bn or up 6% at constant rates of exchange, and underlying net profit increased 2% to US$225m.

Turning around Southeast Asia operations still key

For the Food businesses, the Group reported lower sales and profits in Singapore, Malaysia and Indonesia. In the Philippines, sales were higher but profits lower.

The retailer has already been closing underperforming stores to improve profitability in Southeast Asia, but it recognises that it will take time for its operations to turnaround following the strategic review it conducted last year.

In North Asia, overall sales within the Food businesses were ahead for the same period last year, but profits declined mainly due to higher rental and labour costs in Hong Kong. Supermarket chain Yonghui reported strong sales growth, as it continues to open new stores in China.

Convenience remains robust

The performance of Dairy Farm’s 7-Eleven operations traded in line with last year in Hong Kong and Macau. LFL sales increases and store expansion in Mainland China continued to support growth.

In Singapore, overall sales were slightly lower than last year after ending the partnership with Shell Singapore. However, profitability improved following the closure of some underperforming stores.

Health and beauty operations strong

The Health and Beauty business in Hong Kong and Macau delivered very strong sales and profit growth. This was driven by a significant increase in the number of mainland Chinese tourists. In Malaysia, Indonesia and Vietnam, the retailer reported better underlying results.

Other developments

In March, Dairy Farm agreed a deal to exchange Rustan’s for 18.25% stake in Robinsons in the Philippines. The deal is subject to regulatory approvals but is expected to be completed in the fourth quarter.

There were also some leadship changes during the first half. Dr George Koo stepped down as a Director on 9th May 2018, and the retailer has brought in several new senior executives with a wealth of retail experience, e.g. Simon McDowell, Group Chief Customer Officer and CEO North Asia Health & Beauty.

At the end of June, the Dairy Farm group had more than 7,400 outlets across all formats, compared with 7,181 at the end of last year.

Chairman Ben Keswick has outlined five strategic priorities:

  • Building capability
  • Growing presence in Mainland China
  • Protecting the Group’s Hong Kong business
  • Revitalising the Southeast Asia operations
  • Driving digital innovation

Want to know more?

Subscribers can read more on Dairy Farm Strategic Outlook here.

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