Asia’s leading large format food retailers to grow 3.3% a year to 2022: New data

By Lester Wan

- Last updated on GMT

Many large format retailers in Asia are still enjoying steady growth through expansion, though they are facing pressures from increased competition in more developed markets. ©GettyImages
Many large format retailers in Asia are still enjoying steady growth through expansion, though they are facing pressures from increased competition in more developed markets. ©GettyImages

Related tags Supermarket Hypermarket China Vietnam India Philippines large format Asia

Asia’s large format retailers — supermarkets and hypermarkets — are set to grow 3.3% a year to 2022, with firms in Vietnam, India and the Philippines forecast to see double-digit growth over the next five years.

Most of this growth is predicted to be driven by domestic retailers except for Vietnam, where foreign retailers have been investing to gain a foothold in the fast-growing market, said global research organisation IGD.

Indonesia will have steady growth also driven mainly by domestic players, with China coming through as another market with significant growth opportunities due to its vast geography.

“Both local and international retailers have seen success in recent years in large formats, through strategies such as repurposing store space, leasing space to third-party retailers, refreshing stores to create stronger destinations, improved fresh food and integrated online operations,” ​Nick Miles, head of Asia-Pacific at IGD, told FoodNavigator-Asia​.

“Across Asia, large format domestic and Asian-headquartered retailers have generally seen the fastest growth in recent years, due to strong shopper understanding, a concentrated geographic approach and strong multichannel development.”

Large format in Asia

Many large format retailers in Asia are still enjoying steady growth through expansion, although they are facing pressures from increased competition in more developed markets. More convenience stores are opening in close proximity to offices and homes, offering a good range at reasonable prices.

Meanwhile, online retailers continue to invest heavily to gain new customers.

“Large formats have come under pressure in recent years due to changing shopping habits in Asia and globally. People are tending to shop little and often, while factors such as increasing congestion in Asia’s largest cities, as well as increasing spending power, means that shoppers are turning more attention to both the convenience and online grocery channels,” ​Miles elaborated.

“On top of this, in certain markets legislation has slowed growth, for example store opening hour restrictions in South Korea or caps on FDI in grocery retail in India.

“Large formats still have an important role to play, particularly in less-developed markets or regions where modern retail is expanding — hypermarkets often are the foundation of modern trade growth.”

Apart from expansion to new regions, retailers are also digitising physical stores — as part of the ‘new retail’ described by Alibaba​ — to create a seamless shopping experience in more mature markets.

Large format retailers therefore need to balance their investments in existing stores, as well as network expansion in order to stay relevant to shoppers.     

Impact on food firms

Miles stressed that manufacturers and suppliers in the food industry should not lose sight of the opportunity large formats possess.

“Growth might be slower than other channels, but in value and volume terms large formats are vitally important,”​ he told us.

“Retailers are working hard to maintain growth in these stores, and suppliers have a vital role to play in experimenting and influencing retailers in terms of how they bring theatre to their categories, as well as flex space and layouts to suit shopper needs.”

Situations in Asian markets

Miles highlighted a few country markets in the Asia-Pacific region that share a similar vein, yet have unique challenges and characteristics.

According to him, Vietnam is dominated by traditional trade but modern retail is picking up pace. Saigon Co.op, a local retailer, is growing steadily and will foreseeably retain its top position until 2022.

Additionally, foreign retailers like Central Group and Lotte Shopping are investing in large malls and building hypermarkets and supermarkets in the country as anchors to draw shoppers, focusing on big cities such as Ho Chi Minh City, Hanoi, Danang and Can Tho. Shoppers are attracted by the comfortable shopping environment and the variety of goods available at large format stores.

India’s modern grocery retail landscape, meanwhile, is highly fragmented. Indian companies Future Retail and Reliance Retail have established stores throughout the country but strong regional players exist, such as D-Mart.

“New entrants to the market usually focus on building their distribution within a tight geography to focus their investment and create efficiency in the supply chain. It is also easier to build a presence within a smaller region and win shoppers’ trust as they get familiar with the banner and its offerings,” ​he explained.

On the Philippines, Miles said there were great opportunities for modern retail growth. Local retailers are well established, with large format stores maintaining strong growth through network expansion.

Retailers are adding stores in major urban cities and new regions like the Visayas and Mindanao. SM Retail, a domestic firm, is expected to grow faster than its competitors to 2022, extending its leadership over the other players in the market.

China: diverse and dynamic

As for China, Miles said the Asian dragon was a large and fragmented market.

“It is very challenging for retailers to build scale at a national level,”​ he said.

Nonetheless, Yonghui Superstores has been driving growth aggressively and has successfully grown from a regional player to having national presence.

“Yonghui has seen strong growth in recent years due to rapid store expansion, a strong vertically-integrated supply chain for fresh food that helps to ensure food safety, as well as low prices and high quality, plus its experimentation with new formats, such as its Super Species stores that integrate both online and offline operations,” ​Miles told us.

He said Yonghui’s strategic partnerships with businesses such as Dairy Farm International, and Tencent have also helped to develop its strategy, particularly in supply chain and online capability.

Earlier this year, hypermarket chain Carrefour announced it was in collaborative talks with China tech giant Tencent​, which would see Tencent join forces with Yonghui for a stake in Carrefour China.

“We expect it (Yonghui) to rise up the ranking to second position by 2022, from fourth in 2017,” ​Miles predicted.

Miles said the Auchan Group had also become very successful in China through its partnership with local retailer Sun Art — in which Alibaba has a more than one-third stake. He said Alibaba’s move was to help drive its digital strategy.

“Despite slower growth, it will retain its leadership spot,”​ he said.

Not long ago, IGD Asia’s programme director, Shirley Zhu, also revealed why China’s leading grocery retailers will pull ahead of the competition​.

Meanwhile, in Australia, a recent Bankwest analysis, Focus on Supermarkets 2018​, reported that falling prices are hitting smaller supermarkets and grocery stores​ especially hard.

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