fbpx

MANILA, Aug 18:

At lunchtime in Manila, Isha Vida avoids fast-food restaurants and joins thousands of other workers and students buying ready-made meals at minimarts across the Philippine capital.

The 29-year-old recruitment coordinator’s preference for the steaks, fried chicken and salads at convenience stores is typical of an increasing number of Filipinos, who say the outlets are cheaper and faster than McDonald’s Corp or Jollibee Foods Corp.

Annual revenue at Philippine Seven Corp, operator of 7-Eleven shops, has grown an average 22% in the past five years, while Jollibee’s Philippine sales rose 10%.

That outperformance will extend as the appeal of minimarts grows, says Robert Ramos, the chief investment officer at Union Bank of the Philippines.

Euromonitor International estimates sales at the country’s convenience stores will climb at a 12% pace through 2017, while Standard Chartered plc predicts the number of outlets will jump more than 10-fold by 2030.

“They are providing consumers with a substitute,” said Ramos, whose US$70 million (RM220.8 million) UBP Large Cap Philippine Equity Portfolio is the nation’s top-performing equity fund, with an annualised 35% return over the past five years.

“The proliferation of convenience stores could lead to slower growth for fast-food companies.”

Expansion in the Philippine call-centre industry, where employment rose to 900,000 people last year from 240,000 in 2006, has been the “predominant force” spurring demand for minimarts, Robinsons Retail said in its 2013 share-sale prospectus, citing Euromonitor.

Call-centres typically operate 24 hours a day and “convenience stores with 24-hour operations are well-positioned to capture the increasing demand,” it said.

Southeast Asia’s fifth-biggest economy will probably expand 6.4% this year and 6.7% in 2015, according to World Bank forecasts.

Minimarts will be the country’s fastest-growing retail segment over the next 16 years, according to Standard Chartered, with the urban population classified as above the poverty line forecast to double to 64.6 million by 2030.

There could be more than 16,500 convenience stories in the country by then, compared with about 1,600 now, the bank said in a July 15 report.

Annual minimart sales will climb to 31.2 billion pesos (RM2.25 billion) by 2017 from 20 billion pesos in 2013, according to Euromonitor. The industry had 10.5 billion pesos of sales in 2008, it said.

The proliferation of minimarts has led to tougher competition and may curb the industry’s profitability, said Noel Reyes, the Manila-based chief investment officer at Security Bank Corp.

“They might kill each other before affecting Jollibee,” Reyes said.

Philippine Seven, the nation’s biggest convenience-store chain with 1,121 7-Eleven outlets, is doubling spending this year to add 300 new stores and upgrade 100 existing ones. The company said second-quarter profit jumped 23% from a year earlier to 224 million pesos.

Robinsons Retail, which has more than 400 Ministops, plans to open as many as 360 stores by 2016. FamilyMart, a venture of Philippine builder Ayala Land Inc, targets 700 stores by 2018, up from about 54 now.

Billionaire Henry Sy, the nation’s richest businessman, is bringing in Indonesia’s Alfamart. Lucio Co, owner of Puregold, the nation’s biggest publicly traded food retailer, has entered into a joint venture with Lawson Inc, the Japanese minimart operator. Puregold will open its first Lawson store this year and plans to have 500 outlets by 2020.

Minimarts and fast-food companies may increasingly supplant the traditional mom-and-pop cooked-food providers known as carinderias, according to April Lee-Tan, the head of research at COL Financial Group Inc.

“The competition hasn’t yet reached a point that it’s bigger than what they can tap through expansion,” Lee-Tan said. “The untapped market is still big enough for all of them.”

Uncle John’s Fried Chicken is the top-selling item at Robinsons Retail’s Ministop, according to Robina Gokongwei-Pe, the company’s president. Ready-to-eat meals now account for about a quarter of sales, she said by phone on July 24.

Ready-made rice meals at 7-Eleven, which opened its first Philippine store in 1984, sell for as little as 29 pesos. That compares with about 47 pesos for a chicken fillet rice meal at McDonald’s and 49 pesos at Jollibee’s Mang Inasal chicken- barbecue house.

Minimarts “offer a wider variety of food and you don’t have to spend as much on meals to get full,” said Vida, who works as an administrator at Talent2, a human resources outsourcing company in Manila.

The threat from minimarts isn’t lost on Ernesto Tanmantiong, the chief executive officer of Jollibee. They pose a greater challenge than more expensive restaurant chains such as Bon Chon Chicken and Ramen Nagi, he said in an interview on July 28.

To maintain growth, Jollibee is expanding outside the Philippines in markets including China and the US, while adding more outlets at home.

An assistant for Kenneth Yang, the president at Golden Arches Development Corp., which owns the Philippine franchise of McDonald’s, said he wasn’t available to comment. Calls to spokeswoman Adi Timbol went unanswered.

At one Ministop in Makati, the nation’s main financial district, cashier Mark Arpon says the biggest lure for his customers is the ready-made meals.

“Food sells faster than soap or shampoo,” he said. “Our customers only go to McDonald’s when our queue is too long.”

Related Posts

Related Posts

Related Posts

Next Post