CP All, the Thai operator of 7-Eleven convenience stores, has frozen its planned expansion into China and Vietnam and now intends to promote its outlets in the domestic market strongly to drive annual gross margin by at least 0.3 per cent.
Managing director Piyawat Titasat-tavorakul said the company had earlier proposed a licensing deal for the operation of outlets in China and Vietnam to the licensor of 7-Eleven stores in the United States, but it had not received any response to the proposal.
“We have tried to get a licence for the past two years, but as the licensor remained silent, we have decided to freeze the plan and go ahead with the expansion of domestic outlets instead,” he said.
Piyawat said the local market continued to grow and, even with the company’s plan to open 500 branches per year, the convenience-food-store strategy would help maintain growth in same-store sales and drive the expansion of new-store sales.
CP All previously announced a plan to have 7,000 stores nationwide by the end of 2013, against the current 6,100 outlets.
He said that to prepare for this expansion, the company would have to put additional innovative food products on to its shelves to cater to people’s changing lifestyles and reduce the gap in growth between same-store and new-store sales.
In the first half of the year, same-store sales grew by 6 per cent and new-store sales by 9 per cent.
The company recorded net profit of Bt4.25 billion in the period, up by 23.5 per cent year on year, and revenue of Bt79.64 billion, which was 17.3 per cent higher.
Piyawat said the company would increase the amount of chilled and health-food products available in its stores, with food overall accounting for 75 per cent in 2013 from the current 73 per cent in terms of product mix.
“The margin on food is higher than on non-food products. Customers can buy non-food products from other stores, because if we want to grow with an annual gross margin of 0.3 per cent, revenue at more than 10 per cent and profit of 20 per cent, the convenience food store will be our key driver,” he said.
He added that franchised stores were another major supporter for an expanded gross margin. Of the new outlets being opened, franchised stores will account for 65 per cent by the end of 2013, from 58 per cent at present. The remainder will be CP All-owned outlets.
He said it was very likely that the number of 7-Eleven stores in Thailand in 2013 would surpass the number in the United States, because the Thai economy was in continuous growth mode and would benefit from the government’s policy to promote domestic consumption. The US economy, however, will need more time to recover.
“If we are well prepared in terms of the supply chain, distribution centres and food-product mix, we can be sure that the number of 7-Eleven stores can reach 10,000 in the near future,” the managing director said.
Source: The Nation