This article first appeared in The Edge Malaysia Weekly on March 30, 2020 - April 5, 2020

IN just a year, Hong Kong’s Dairy Farm International Ltd has lost its position as the largest foreign hypermarket and supermarket operator in the country as well as its ranking as the leading grocery-based retailer. This comes after an aggressive store closure exercise that saw its number of stores more than halved to 59.

However, the store closures, coupled with revamp of some stores, are starting to pay off as the business is beginning to turn around.  

Dairy Farm, via GCH Retail (M) Sdn Bhd, now operates 59 hypermarkets and supermarkets under the Giant, Cold Storage and Mercato brands. In 2014, the retailer had 147 stores and, based on its annual reports, it had 122 outlets (52 supermarkets and 70 hypermarkets) in 2018 and 141 (61 supermarkets and 80 hypermarkets) in 2017.

With just 59 stores, GCH now ranks behind Tesco Stores (M) Sdn Bhd, which has 60 stores, in the foreign segment (not including the convenience stores both operate), while AEON BiG has 22 and Lulu hypermarket, two.

Compared with all other grocery retailers and store formats and stores, GCH, with 81 stores (including seven ShopSmart and five G Ekspres), trails behind players such as 7-Eleven (2,400+ stores), 99 Speed Mart Sdn Bhd (1,618), KK Mart (440) and Econsave Cash & Carry Sdn Bhd (90).

But it is ahead of Mydin Mohamed Holdings (70) and Tesco Stores (69, including nine convenience stores). Thailand’s CP Group is in the process of buying Tesco Malaysia.

Asked to comment on the impact of the store closures, a GCH spokesman tells The Edge that the retailer is on the right track to return to the black.  GCH posted five straight years of losses since its financial year ended Dec 31, 2014 (FY2014). Revenue has also declined, from RM5.71 billion in FY2013 to RM4.61 billion in FY2017. DFarm recently announced its FY2019 results, but was mum on its performance in Malaysia.

The spokesman says its food business in Malaysia is undergoing a fundamental shift. “We are rebalancing our offerings to keep pace with and adapt to changing customer preferences. This is constantly evolving as changing trends in consumer habits have spurred retailers globally and locally to adapt store formats and ranges to remain competitive.”  Malaysia in particular has changed its store formats across the country offering consumers more local choices.

“We are part of this landscape and we are adapting to our environment. We have taken decisive action over the last 18 months to reset and re-energise our food business to better meet the needs of our customers.

“In some locations, that has meant a contraction of space while in others, we have been reinvesting and expanding. This is part of our regular retail business practice in examining and rebalancing our store portfolio to ensure our long-term business sustainability.

“We have also recently refreshed many of our stores across the country, including Giant hypermarkets and supermarkets, to ensure that they better serve the communities around us.

“Through these actions, we are creating more value for our customers and strengthening our food proposition,  and the changes we have been making in the last 12 to 18 months are beginning to deliver results. We are now seeing robust and improved profit growth in Malaysia and are encouraged by these trends.”

The spokesman added that GCH remains committed to investing further in the growth of its brands in Malaysia, but cautions that managing the dynamic nature of the market will take time. “There will be few quick fixes and no silver bullets, but we are firmly on track in our multi-year transformation programme to deliver long-term improvements.”

GCH entered the country in 1999, via the purchase of a 90% stake in the Giant business, then operated by the Teng family. At the time, there were seven stores — five supermarkets and two hypermarkets.

Giant’s partner in Malaysia is Negeri Sembilan royalty-linked Syarikat Pesaka Antah Sdn Bhd.  It holds a 30% stake.

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