FamilyMart to Add 600 Southeast Asia Stores to Tap Young Markets

FamilyMart Co. (8028), Japan’s largest convenience store operator in Southeast Asia, plans to open 600 stores in Indonesia and the Philippines, tapping demand from young people as an aging population saps growth at home.

The retailer intends to have 300 stores in each country by 2015, expanding on a network that includes more than 10,700 shops outside Japan, Masaaki Kosaka, director of overseas operations, said in an interview. He declined to say how much the expansion would cost.

FamilyMart joins larger Japanese competitors Lawson Inc. (2651) and Seven & I Holdings Co. in planning to open more stores in faster-growing Asian countries. The International Monetary Fund forecasts 5.6 percent economic growth this year in Southeast Asia, double Japan’s 2.3 percent target, as relatively young populations drive consumption.

Younger people “will definitely want the convenience of a convenience store, and there is trust in things from Japan, especially in Indonesia,” Kosaka said Jan. 13 in Tokyo.

FamilyMart has targeted an increase in the portion of profit from overseas to 20 percent by 2015 and forecasts an 10 percent gain in operating income to 42.1 billion yen ($549 million) for the fiscal year ending Feb. 28.

The retailer got about 3.2 billion yen, 7.3 percent of total operating income, from stores it operates in Asia outside Japan and under ventures in Thailand and Taiwan last year.

The chain had 8,697 stores in Japan and 10,782 franchisers in Taiwan, South Korea, Thailand, China, the United States, and Vietnam as of the three months ended Nov. 30, Junji Ueda, chief executive officer, said on the company’s website.

‘Right Strategy’

Expanding to Indonesia and the Philippines “is the right strategy for them,” Mikihiko Yamato, an analyst at JI Asia, said by telephone. “They are taking a long-term view and will only see the results of the decision now reflected in their bottom lines in about eight years.”

The population of Indonesia, the Philippines, Vietnam, Thailand and Malaysia will expand by about 6.6 percent, or 14 million people, from this year to 553 million by 2016, according to International Monetary Fund estimates. Japan’s will probably contract 1.1 percent to 127 million in the same period, the data show.

The growth has already attracted FamilyMart rivals including Seven & I Holdings’ 7-Eleven franchise, which operates in the Philippines and Indonesia and the Ministop Co. chain, 47 percent owned by Japan’s largest general retailer Aeon Co., which has stores in the Philippines.

Lawson, 7 Eleven

FamilyMart has gained 2.1 percent in Tokyo trading in the past 12 months, lagging behind Lawson’s 14 percent advance and compared with a 1.9 percent decline at Seven & I, which also operates the Ito-Yokado supermarket chain. Japan’s benchmark Nikkei 225 Stock Average dropped 19 percent in the period.

Lawson Chief Executive Officer Takeshi Niinami aims to open almost 10,000 stores in China by 2020, a 30-fold increase from 2010, while Aeon President Motoya Okada said last year he expects half of the company’s profit to come from China by 2020.

In Japan, Familymart estimates it controls 17 percent of Japan’s 8.3 trillion yen convenience store market. The retailer has said it plans to increase the proportion of customers between 50 and 65 years old to 22 percent from the 18 percent 2010 target, matching the level in the overall population, according to the 2010 annual report.

The company aims to have about 70 percent of its stores overseas by 2020 by almost tripling outlets outside Japan to 29,000, compared with 11,000 in its home market.

“The average age of people in the Philippines is 22 or 23 and 27 in Indonesia, compared with 45 in Japan,” Kosaka said. “There is no reason not to enter those markets.”

To contact the reporters on this story: Cheng Herng Shinn in Tokyo at sozasa@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net.

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.
Tap for Slideshow
Photographer: Qilai Shen/Bloomberg

Commuters walk past a FamilyMart Co. convenience store at a subway station in Shanghai.

Close
Photographer: Qilai Shen/Bloomberg

Commuters walk past a FamilyMart Co. convenience store at a subway station in Shanghai. Close

Commuters walk past a FamilyMart Co. convenience store at a subway station in Shanghai.

Photographer: Qilai Shen/Bloomberg

A man shops at a FamilyMart Co. convenience store in Shanghai. The company is concentrating on China where it plans to open 1,000 new stores yearly till 2015 and plans to hit a target of 8,000 stores in China by 2020. Close

A man shops at a FamilyMart Co. convenience store in Shanghai. The company is concentrating on China where it plans... Read More

Photographer: Qilai Shen/Bloomberg

FamilyMart is expanding overseas amid a strong yen and a shrinking Japanese population that’s crimping domestic demand growth. Close

FamilyMart is expanding overseas amid a strong yen and a shrinking Japanese population that’s crimping domestic demand growth.

Source: FamilyMart Co. via Bloomberg

Masaaki Kosaka, director of overseas operations for FamilyMart Co. Close

Masaaki Kosaka, director of overseas operations for FamilyMart Co.

Photographer: Takafumi Shinno/FamilyMart Co. via Bloomberg

A FamilyMart Co. convenience store in Ho Chi Minh City. Close

A FamilyMart Co. convenience store in Ho Chi Minh City.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.