Dairy Farm looks for further growth in 2005
announced strong sales growth for 2004 helped by the recovery of
many local economies and a raft of recent acquisitions. But
increasing competition from European and US retailers looking to
exploit growth opportunities there will keep the Hong Kong-based
group on its toes in 2005, writes Chris Jones.
Turnover for 2004 was up 14 per cent at US$5.1 billion, including revenues from associate companies, while net profits were nearly double the previous year at US$251, helped by gains from the sale of non-retail operations in Hong Kong.
The company operates in two regions - north Asia, which is Hong Kong, mainland China, Taiawan and South Korea and south Asia, which consists of Singapore, Malaysia, Indonesa and India.
In the southern region, sales were up 27 per cent, helped in part by the acquisition of Singapore's Stop N Save from Belgian group Delhaize, and from expansion in both Malaysia and Indonesia, where the company operates through a minority stake in retailer Hero.
In the north, sales growth was a more modest 8 per cent, with strong performances in Hong Kong offset by problems in Taiwan and South Korea, caused by the weak economic situation there.
Dairy Farm remains one of the few major players in the Asian market to be based there, and has largely profited from the failed attempts of western players to gain a foothold there (the Shop N Save acquisition is one example, but Dairy Farm had previously snapped up stores owned by Casino, Ahold and even IKEA).
But while some groups have been forced to withdraw from Asia, there are still plenty of rivals to keep Dairy Farm busy, not least Wal-Mart, Carrefour and Tesco which are all keen to expand their presence in China in particular.
Not surprisingly, then, Dairy Farm has made growing its own mainland Chinese business a priority for 2005, and although it currently operates in the convenience store sector there (through 7-Eleven) it has also prioritised growing its hypermarket business - which would take into ever more direct competition with its western counterparts.
But the company is also looking for further bolt-on acquisitions - as many western firms are - and to enter new Asian markets, preferably by acquisition, which suggest that competition for strong local chains is likely to become fiercer than ever.
Having increased its stake in Hero in 2004, the Indonesian firm looks likely to be one of Dairy Farm's chief targets this year.
