This article first appeared in The Edge Malaysia Weekly on April 12, 2021 - April 18, 2021

AFTER undergoing a three-year transformation that included shutting stores by the dozen and selling some assets, GCH Retail (M) Sdn Bhd, which ope­rates grocery stores under the Giant brand, is now ready to expand and grow its business by focusing on smaller stores, in line with changes in consumer behaviour globally.

With this refocus, coupled with changes made at its retail store from its logo to product offering and pricing to its check-out facility service — made following consumer feedback — GCH believes that, in time, it will be able regain the market share it has lost over the past few years as a result of store closures and a shift in consumer preference to smaller stores.

Today, GCH, the grocery unit of Hong Kong-based Dairy Farm International Holdings Ltd (DFI), operates a total of 57 stores, 35 hypermarkets and 11 supermarkets under the Giant brand and 11 upscale supermarkets under the Mercato, Cold Storage and TMC brands. In 2018, the retailer had 122 stores.

Chris Bush, Dairy Farm CEO for Southeast Asia Food, says GCH’s transformation, which commenced in 2018, is now two-thirds completed. Apart from store closures, the transformation involved resizing and repositioning its stores as well as the revamping of its logo to better reflect current trends.

“Over the last two to three years, we were not looking to grow our business because we were working on our transformation, including consolidation such as closing stores. We have also exited Sabah and Sarawak,” Bush tells The Edge in an interview.

He explains that some stores were shut because they were in the wrong location and unprofitable, while others were shuttered when their leases expired.

Bush was in town last week to launch Giant’s new green, mango-shaped logo to reflect a contemporary and modern brand and refreshed look and feel. He also shared major in-store improvements that have been made based on customer feedback.

“We are now looking forward. And the most important thing is, we are looking to start growing the business.

“We will no longer be opening hypermarkets,” he says, adding that it will stick to the 35 hypermarkets that GCH operates. “We are now starting to look at growing the Giant business through smaller formats and the mini market format, which is the Giant Mini brand.”

In Malaysia, domestic rules require foreign hypermarket operators to have a bumiputera investor as its 30% equity partner and, if they want to open smaller stores such as convenience stores or mini markets, the bumiputera shareholding requirement is higher, at 70%.

GCH’s partner for the local hypermarket and supermarket business is Negeri Sembilan royalty-linked Syarikat Pesaka Antah Sdn Bhd, which holds its 30% stake via Circular Assets Sdn Bhd. The Giant Mini chain, meanwhile, is operated by Jutaria Gemilang Sdn Bhd, in which Syarikat Pesaka Antah has a 70% shareholding but a 30% economic interest. DFI ultimately holds a 70% economic interest in the business and manages the day-to-day operations. A bigger economic interest would allow DFI to have a larger share in the profits.

According to Bush, the Giant Mini stores will be located in suburban areas to provide the “same convenience and value available at its larger stores but much closer to home”.

He points out that an important difference between Giant Mini and other existing mini markets is that the latter does not usually provide a fresh food selection.

The Edge reported in October 2019 that the retailer had been quietly expanding its ShopSmart brand by converting the old G-Ekspres stores. Now, both ShopSmart and G-Ekspres are being rebranded as Giant Mini. Today, there are 11 Giant Mini stores and 10 more are scheduled to open this year. Jutaria Gemilang was also reported to have obtained the government’s approval to expand the business to 500 stores over 10 years.

GCH has been posting losses and losing market share since 2014, but it has started to see improvements in performance and managed to narrow losses after commencing its transformation programme and consolidating its business. In the financial year ended Dec 31, 2019 (FY2019), net loss narrowed to RM5,550 compared with RM2.14 billion in FY2018. Results for FY2020 are not yet available on the Companies Commission of Malaysia website.

“Last year was a very solid year for us. We made good progress. Not only did we see some benefit in sales because of the Covid-19 situation, with people shopping and eating more at home, but the underlying business performance also improved dramatically,” Bush says.

Still, he expects 2021 to be challenging because, according to recent research, Giant customers say they are still worried about their job security, personal financial situation and the Malaysian economy. He believes, however, that the changes made at its stores will help improve shopper traffic and, eventually, its market share. In FY2013, GCH’s revenue was a staggering RM5.71 billion but, by FY2019, it had fallen to RM3.74 billion.

On regaining market share that GCH has lost, Bush says: “It is not the KPI (key performance indicator) that I am looking at. The KPIs are: How are customers behaving in our stores? Are we gaining more customers? Are they buying more of the exclusive products that Giant offers? Are we winning back customers? If we can continue to do that and make progress, the market share will look after itself.”

As for challenges as a result of competition, Bush says: “The market is even more competitive now than it was when I was last here in 2010 [Bush was CEO of Tesco Malaysia from June 2006 to June 2010].

“There are many more retail brands. Online is obviously growing. The market is not [becoming] easier, but has become more competitive.

“I am not here to fight the competitors, but to win customers. Customers will make a choice where they choose to shop and we encourage customers to shop by listening to them, responding and improving our proposition.”

As the Covid-19 pandemic has led to a surge in the number of people shopping online, GCH is also seriously looking at offering its products through its own online platform. “Currently, we are very small [in online sales]. I see this as an opportunity for growth. We are today fulfilling our online orders through third-party operators like Happy Fresh. We are taking a strategic review of our online sales to understand whether we should continue with that [third-party operator], develop the capabilities ourselves to run online or do a blend of both. We are doing a very serious review of it,” he says.

One of the things GCH has been doing after shutting many of its stores is to sell off assets that were tenanted by a store. GCH has already sold three of its assets located in Petra Jaya (Sarawak), Lukut (Negeri Sembilan) and Jalan Kebun (Klang, Selangor), and has identified three properties located in Melaka, Rawang (Selangor) and Cheras (Kuala Lumpur) for sale.

Apart from Giant and Giant Mini, GCH also operates upscale supermarkets under the Mercato and Cold Storage names. Bush says GCH will implement changes to these stores as well. He declines to say whether the Cold Storage brand will be phased out but shares that “some changes are coming”.

Bush also dismissed market talk that DFI plans to exit Malaysia, saying the company is completely committed to the local market. “We enjoy doing business in Malaysia. It is a very competitive market and we are two-thirds of the way through the transformation. We now feel that our position has improved. We are looking at putting down some new growth roots for the future.”

He also points to the company’s recent RM25 million investment to rebrand Giant in the country.

Apart from the logo, other changes that can be seen at Giant outlets are the introduction of a store-within-a-store. GCH will have a Guardian store within the Giant hypermarket so that consumers can find everything within one store instead of making two different stops. Guardian is also a DFI member company.

Giant stores will also have a RM3 zone that will offer products across all categories ranging from snacks to personal care items; and a World of Food section offering a wide selection of imported food selection from around the world.

In addition, Giant has introduced its exclusive brand called Meadows that is available across all Dairy Farm brands and geographic locations. Meadows is the fastest-growing brand for both DFI and Giant.

Bush says there are 237 Meadows products and 200 to 300 will be added in the coming months. Giant too has its own house brand, which is sold at an entry price point.

As part of the transformation, he hopes to offer shoppers a different experience at Giant. “One of the things I keep telling the team is that ‘it is the little things that can make a giant difference’ in the mind of customers. For example, if a customer gets to the check-out counter and there is a long queue, you open up another counter immediately for the customer. That is the little things that can make a giant difference,” he says.

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