CONVENIENCE STORES IN THE PHILIPPINES - ANALYSIS

Country Report | Jan 2019

HEADLINES Market Sizes

In 2018 convenience stores records current value growth of 21% to reach sales of Sales of Convenience Stores
PHP53.6 billion Retail Value RSP excl Sales Tax - PHP million - Current - 2004-2023
Hot meals and beverages drive growth, making convenience stores an emerging
competitor to foodservice providers 53,610 Forecast
140,000
Alfamart remains the fastest growing chain in terms of number of outlets but 7-
Eleven continues to dominate the channel in terms of value sales
120,000
Over the forecast period convenience stores is expected to post a current value
CAGR of 20% (16% at constant 2018 prices) to reach sales of PHP131.3 billion in 2023 100,000

PROSPECTS 80,000

Convenience store operators continue to improve their hot meal and 60,000
beverage offerings
40,000
In 2018, convenience stores continued to focus on improving their offer of fresh food,
hot meals and beverages. Indeed, convenience stores are now a popular option for 20,000
dining in or taking out food, especially among workers in high traffic business districts.
7-Eleven has reported that fresh foods and cup drinks now account for 25% of its overall 0
sales. These include rice meals, sandwiches and its own Slurpee beverages and City 2004 2018 2023
Blends coffee. 7-Eleven will continue to roll out more dining options, such as its best-
selling Chef Creations gourmet meals. Ministop’s in-store kitchen facilities,
meanwhile, enable the chain to continue to offer new ready-to-eat dishes as well as its Sales Performance of Convenience Stores
best-selling Uncle John’s Fried Chicken, such as new Toppers (rice toppings) variants % Y-O-Y Retail Value RSP excl Sales Tax Growth 2004-2023
and also other food products like its My Sundae and Chillz desserts lines. In 2018,
Ministop also partnered Max’s Restaurants to carry Max’s Corner Bakery products in its
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outlets. Under new management, Family Mart opened a new flagship store in Clark
Global City featuring a huge space dedicated to café-style dining. Family Mart aims to
add such spaces to its other stores so as to provide its customers with a wider range of
21.2% Forecast
services. 40%

Ownership and management issues

30%
The potential of existing convenience store operators to expand their footprint has still
not yet been fully realised as some players are facing ownership issues and changes. In
2018, Puregold decided to exit the channel as it is selling its stake in Japan’s Lawson
convenience store banner. Lawson’s expansion in the Philippines was not as quick as 20%
expected as store management is handled by the foreign company. Puregold has also
decided to focus on its existing supermarket and hypermarket operations and has no
immediate plans to explore other formats. Family Mart, which is considered a
potentially strong player thanks to its premium merchandise and food offerings, also 10%
underwent corporate changes as well as a change in ownership, which put its
expansion on hold. Ayala Land and SSI have decided to sell their stake in Family Mart’s
Philippine operations to Phoenix Petroleum Philippines. Family Mart is expected to
recover due to the potential to grow the brand as a forecourt retailer given the fact that 0%
2004 2018 2023
its new owner runs a petroleum business.
Competition in the channel has also become tougher in recent years due to the entry of
aggressive new players such as All Day Convenience Store and SM Group’s Alfamart.

Convenience stores will continue to be the fastest growing grocery

channel
Convenience stores will continue to post strong growth over the forecast period.
Ongoing urbanisation and the emergence of new business districts will continue to
create demand for 24-hour retail services. The channel will also benefit from the ideas
of new owners and the expansion of certain players, as well as a consumer shift
towards more frequent shopping, albeit with smaller basket sizes. The challenge now
for convenience stores is to overtake traditional grocery retailers, particularly sari-sari
stores (neighbourhood small groceries), which still dominate the retail industry in the
Philippines.
Like other retail channels, convenience stores will also be affected by economic
uncertainty, particularly rising inflation. This has the potential to limit the growth of
convenience stores as this format charges a price premium of around 5-15% in return
for greater convenience and accessibility. As such, convenience store operators will
need to remain cautious with their pricing.

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COMPETITIVE LANDSCAPE Competitive Landscape
Alfamart leads the way in terms of new store openings Company Shares of Convenience Stores
% Share (NBO) - Retail Value RSP excl Sales Tax - 2018
Alfamart continues to open an average of 110 stores every year in the Philippines since
having opened its first outlet in the country in 2014. Filipinos consider Alfamart as a sort Philippine Seven Corp 72.4%
of mix between a convenience store, sari-sari store and a supermarket. The company is
posting double-digit same-store sales growth, which has encouraged it to pursue Robinsons Retail Holding... 11.3%
aggressive expansion in other parts of the country. Consumers seem to welcome the SM Retail Inc 10.1%
idea of a mini-supermarket within their neighbourhood, where they can buy grocery
products like frozen meat, vegetables and even infant formula. This sets Alfamart apart All Value Holdings Corp 2.6%
from other traditional convenience stores. To keep up with current trends, Alfamart has Phoenix Petroleum Philip... 1.8%
also started to accept cashless payments through its GCash mobile payment partner.
Puregold Price Club Inc 1.0%
7-Eleven enhances its digital services Franchise 8 Inc 0.2%
The channel’s leading chain, 7-Eleven, is focusing on digital aspects such as digital San Miguel Foodshop Corp 0.0%
payment systems and e-commerce. According to 7-Eleven, it noticed that its e-money
Others 0.7%
services, which include the CLiQQ app, GCash, PayMaya, Alipay and Coins.ph, are
driving commission income. CLiQQ app has the potential to extend financial services
even to far reaching communities through 7-Eleven’s extensive network. Moreover,
most of the 7-Eleven stores in Greater Manila now offer free Wi-Fi to further attract
more customers. 7-Eleven invested PHP50 million in the first half of 2018 in enhancing
Brand Shares of Convenience Stores
its digital services, enabling it to offer greater convenience to its customers. 7-Eleven
% Share (LBN) - Retail Value RSP excl Sales Tax - 2018
has started to re-invent its CLiQQ e-money services to offer more features. There is
now a CLiQQ mobile app which features a wide array of digital services, such as CLiQQ 7-Eleven 72.4%
pay, a mobile wallet which stores reward points which can be used to pay for items
purchased, and CLiQQ shop, an e-commerce venture where products bought online are Ministop 11.3%
available for collection in 7-Eleven outlets. 7-Eleven has witnessed a positive response Alfamart 10.1%
to this as it has become one of the most downloaded mobile applications and has
contributed to the chain’s growth. AllDay 2.6%

Family Mart 1.8%

Robinsons Retail increases its stake in Ministop
Lawson 1.0%
According to Robinsons Retail Holdings (RRHI), Ministop is one of its fastest growing
Circle K 0.2%
retail formats, with the company thus increasing its stake in Ministop in 2018. RRHI
made this announcement after Mitsubishi Corp divested from the venture, selling the San Miguel Foodshop 0.0%
equivalent of an 8% stake to RRHI. This raised RRHI’s effective ownership in the venture
Others 0.7%
to 59.1%, while Japan’s Ministop Co Ltd owns 40.9%. Ministop has almost 500 outlets
nationwide and has plans to add around a further 20-30 stores in 2019. This suggests
that operators still see opportunities for growth in the convenience store channel. Increasing share Decreasing share No change

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