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Central Group plans $500 mn expansion

Released at: 10:46, 23/08/2018

Central Group plans $500 mn expansion

Photo from nationmultimedia.com

Thai retail conglomerate plans to outlay $500 million on its Vietnamese operations over the next five years, according to Nikkei Asian Review.

by Minh Do

Central Group plans to its Vietnamese operations in next five years.

“We are very strong in Vietnam in the food business, which is a primary need of consumers, but we are also preparing for the future, for the needs consumers are going to have after food,” Central Group Vietnam Chief Executive Philippe Broianigo told local media in Bangkok.

According to Nikkei Asian Review, the company will add new retail formats to existing brands such as the Big C hypermarket and shopping mall it acquired in 2016 to capture growing consumer demand in non-food items.

Central Group Vietnam recently launched a series of new branded retail initiatives, such as Look Cool, Hello Beauty and HomeMart DIY. One of them is the LookKool gift shop, which was launched in late 2017 and already has 26 stores. Targeting young people, the shop offers a range of goods from homeware to stationary, some of which are imported from Japan, starting from a price of less than $1. The company is also testing the viability of other brands, such as the cosmetics shop Hello Beauty and the DIY store Home Mart.

Central Group is the largest foreign retailer in Vietnam, with five core business units: Big C Shopping Mall, Food Store, Fashion Store, Hardline Store, and Online Platform providing omnichannel and e-commerce services.

The group has already invested $1.5 billion in Vietnam since 2012. Store penetration year-to-date in total is 250 stores nationwide and it plans to reach 720 stores by 2022.

While Central’s portfolio of 240 stores covers a variety of sectors, from supermarkets to fashion brands, sports and electronics, half of its sales comes from food. But Vietnam’s emerging middle class is starting to spend more on non-food items and Central needs to prepare for the future.

The three new specialized stores, which Mr. Broianigo calls “category killers”, were built specifically to cater to the Vietnamese consumer. Stores will open within Big C malls to draw in grocery shoppers and will soon expand to other venues.

According to the World Bank, Vietnam’s middle class currently accounts for 13 per cent of the population but is expected to rise to 36 per cent by 2026. Its population is also increasing and is set to reach 120 million by 2050, up from 95 million in 2017. In comparison, Thailand has an aging population of around 68 million, of which the middle class accounts for around 35 per cent.

Vietnam’s retail sector has been expanding rapidly since it opened up to 100 per cent foreign ownership in 2009 and companies from Thailand, South Korea and Japan have entered the market.

Central Group Vietnam was established in July 2011 and has made several investments since, including picking up a stake in electronics retailer Nguyen Kim and acquiring Big C. Sales have been growing in the double digits, reaching $1.3 billion in 2017.

“We are very happy to have entered in the early stages,” Mr. Broianigo said. “In the next five years, it could be a bit more difficult to enter this market because of the [growing competition from] local companies.”

On August 22, the Thai group and the Ministry of Industry and Trade kicked off the Vietnamese Goods and Tourism Week in Thailand 2018, with cooperation from the Vietnam National Administration of Tourism (VNAT). It will run until August 26 at Central World Plaza - one of the largest lifestyle shopping destinations in Bangkok. The opening ceremony was attended by Deputy Minister of Industry and Trade Do Thang Hai and Thailand’s Minister of Commerce Sontirat Sontijirawong.

This is the third consecutive year the event has taken place in Bangkok. In 2016 and 2017, “Vietnamese Goods Week in Thailand” focused on promoting goods from Vietnamese enterprises. This year, there are new features and more activities to promote Vietnamese tourism with the cooperation of VNAT.

Within the framework of the event, the Ministry of Industry and Trade in collaboration with the Central Group organized the Trade Connection Conference, to help Vietnamese enterprises directly meet the Purchasing Department of the Central Group’s retail system. Through this, Vietnamese enterprises and manufacturers have the opportunity to introduce products, learn about new requirements and standards on quality and design, and exchange business methods with representatives from Central Group Thailand.

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