Introduction

• The retail sector in Thailand is undergoing major changes as European investment pours into this sector.
• Emerging as a dominant player are modern supermarkets and hypermarkets.
• Responding to the threat posed by the super-hyper markets, small - medium sized retailers are having to reassess their operating strategies.
• Villa supermarket, a high-end operator, has formed an alliance with the US based International grocery Alliance (IGA).
• Others are setting-up market research and development systems in an effort to better profile their customers and enhance or reposition their service.
• The changes will be good for the Thai consumers who can expect lower prices, wider choice, improved shopping environment and better service.

Supermarkets, superstores, hypermarkets & cash – and- carry

• There are approximately 500 hundred supermarkets in Thailand.
• The industry is undergoing huge change as European retailers enter the market, such as Tesco (UK), Carrefour (France) and CRC Ahold (Netherlands).
• Consumers are moving away from traditional retail outlets as they realize that they can get value, and similar or better quality produce from supermarkets, superstores, hypermarkets, and cash and carry stores.
• About 15-30% of imported foodstuffs are sold through this segment.
• An estimated 21% of overall retail food sales are made through this sector.
• This sector has shown the strongest annual growth over the last few years, despite the economic crisis.
• The main supermarket chains are: TOPS, Siam Juscso, The Mall, Foodland, Sunny's, Villa and Food Lion.
• Supermarkets developed as an integral part of the department store which primarily targeting the middle class.
• Only a small proportion of supermarkets are stand-alone  - this sector has been slow to develop, but is expected to be the source of development in the future.
• Superstores are the fastest growing sector - major players are Big C, Carrefour, Lotus Supercentre, and Makro.
• The supercentres target the masses with food produce 15-20% lower than supermarkets.
• Large supermarkets, superstores and hypermarkets are opening their own logistic companies to serve   nationwide delivery needs.
• Many supermarkets, superstores, and hypermarkets have their own brands for ready to eat food, ready to cook prepared food, homemade bakery items, TV dinners, sausages, water, cooking oil, rice, sauces, cereals, dairy products and fruit juice.  However, a significant number of own-label products have yet to be introduced.

Supermarkets, superstores, hypermarkets and cash and carry

• In dollar food, sales the following are leaders of their respective segment:
• Makro is the leading wholesaler
• TOPS is the leading supermarket chain
• Big C is the leading super center
• Thirty of the TOPS supermarkets are located in prime areas of Bangkok; a further 13 are located in major cities.
• A further 5 outlets will be added in 2000.
• TOPS uses excel logistics (a related company) to handle its logistics and warehousing.
• Operating capacity of TOPS distribution center is 68,000 cases of product annually.  It stores between 5,500 and 6,000 product lines from 140 suppliers.  Average stock turnaround is 10 days – fastest moving items clear in 3 days, slowest in 20 days.  500 suppliers deliver products to the center in which 300 supply fresh fruits, vegetables, live seafood, meat, poultry and other food categories.  TOPS process its own fresh and ready to cook products in order to reduce cost, speed delivery and minimize labour inventory costs.
• Competition to TOPS in the supermarket segment will be from Delhaize Le Lion (Lion and Sunny's supermarkets) with their expansion plans of an additional 100 supermarkets in Thailand by 2002.
• Big C, of the 20 stores it presently operates, 8 are located in Bangkok.  The remainder is up-country.
• Five additional outlets will be added in 2000.
• The average floor space for a Big C is 10,000 M².
• Lotus are attempting to catch-up with Big C, 17 stores at present and plans for 40 by 2003.

Convenience stores, gas marts, kiosks

• Convenience stores, gas marts and kiosks are very popular with the young Thais (18-35 years). The largest convenience store (in dollar sales) is CP 7-Eleven.
• Target customers for convenience stores are middle to lower income groups.
• Purchasing decision is based on convenience factor and low price.
• Traditionally few imported products are sold in this sector, except those produced in neighboring countries.
• C-stores occupying prime sites at recently opened "skytrain' stations may have to re-define their image by moving up-market and providing a wider range of premium products.
• Locally produced domestic and foreign brands are sold in this sector
• About 4% of overall food, retail sales are made through this sector.
• The number of outlets is expected to increase due to recent changes that will convert CP 7-Eleven into a franchiser of its 7-11 stores.
• The company currently operates 70% of the stores; this number will be reduced to 20% over the 3 years.
• Currently there are 1,200 7-eleven stores; by 2003, there will be 2003 outlets.
• There are 114 am-pm stores, the number should increase 673 outlets by 2007.

 Wet markets

• Popular for local people in major cities.
• Remain a major and essential part of the Thai retail food sector for staple foods.
• Urban wet markets are presently finding it difficult to compete with the supermarket – store segment because the bigger stores offer a price advantage providing goods at a lower price.
• Thai FDA is monitoring closely the wet markets, especially in urban areas, for adherence to food safety and sanitary standards.
• Price sensitivity of consumers and preference for Thai diet remain a barrier to exporters to this segment.
• Together Mom and Pop stores and wet markets command 75% of overall food retail sales.
• Slowest annual growth registered by this sector.
• Food sales (1998) $4378 million; number of stores 300,000; location Bangkok, all cities, provincial and district capitals, and villages.

 Mom and Pop stores

• Price sensitivity of consumers and preference for Thai diet remain a barrier to exporters to this segment.
• Food sales (1998) $6591 million; number of stores 600,000; location as Mom and Pop, distribution as mom and pop.

Trends

• The growing retail industry is looking for new imported products.
• Niche markets exist with high profit and super premium price.
• Problem of third country suppliers.
• Domestic products, perceived as cheaper, play a major role in the Thai market,.
• Imported products do well, especially at locations near higher income families, expats and tourists.
• Ratio of imported food versus domestic food is 30:70  (USA holds 10-15% of the overall imported food market).
• Imports of US branded products have decreased over time because of the relocation to local production or neighboring countries such as Australia, Indonesia, and Malaysia. (i.e. AFTA and lower transport costs are key determinants).
• Local manufacturers understand local customers needs and can improve or change the quality of the product.

Return page top?

©Copyright 2003 Agro Food Resources Ltd. For more information, contact Agro Food Resources