C-stores abroad: The new foreign legion

You might not associate the humble British c-store with such far-flung destinations as Dubai or Namibia, but emerging markets are ripe for expansion. Virginia Matthews reports

If dreams of worldwide domination were once restricted to the biggest grocery retailing players, the decisive footprint being stamped by the likes of Spar, Costcutter and Booker on key developing markets suggests that for ambitious convenience store brands, too, expansionism is in vogue.

But what’s the driving force behind this overseas push and where are these companies focusing their energies?

Spar International is the fastest-growing retail format in new and emerging markets, with an established presence in 34 countries across four continents. Now the company is setting its sights on expansion into the Middle East.

Spar MD Dr Gordon Campbell says the company’s approach to overseas expansion is “extremely focused” and that the Middle East offers a “major opportunity for growth alongside selected local partners”. While details about Spar’s plans for the region are scant at the moment, the company’s inaugural store opening will take place in the United Arab Emirates this autumn, heralding a three-year push into the area.

Costcutter also has serious ambitions for the region. The company’s recent expansion into Morocco and Pakistan is being underwritten by a group comprising Sunstar Group, Thothaal Group and Payless Group. The Middle East could be next on the list, with Ishrat Husain, operations manager at Sunstar Group, concurring with Campbell’s assessment that it looks promising. However, he takes a different view of the right entry point.

“Dubai, for example, is far too reliant on massive shopping malls to give c-stores a chance,” explains Husain. “But as long as we can obtain guarantees that our investments will be safe, we are happy to look at the more stable parts of the region.”

In the main, retailers are setting up outposts in countries considered more of a safe bet. Unsurprisingly, China remains the ultimate target for serious internationalists, with the nation set to overtake the US to become the largest grocery market in the world within three years, reaching a whopping 761bn, according to IGD.

Yet for Spar, conquering the Dragon Economy is all about the long game. In the past year the retailer has dramatically increased its total sales area in China and opened its first Chinese hypermarket in Beijing, to notch up a record 405m in sales. But that’s just the beginning, says Dr Campbell.

“I’d estimate that our Chinese market share is no more than between 1% and 2% at present; a similar figure to that of Spar India, but given that China is a hugely fragmented market, no individual retailer has anything much more than that at present,” he says. “Our long-term ambition for China is to become a top 10 retailer and although I don’t want to commit to a timeframe, I’m confident that this is achievable.”

Booker faces similar circumstances in India. The company opened its first business centre in Mumbai in September 2009 and already has more than 7,000 customers. A second centre in the city is due to open shortly and a third will open its doors in Pune, near Mumbai, later this year. With 31 Happy Shopper symbol stores already running in India, Booker sees scope for more than 200 there.

Analysts believe India will prove a long-term driver of growth for the cash and carry wholesaler, and argue that by being an ‘early adopter’, the company has given the business an advantage in terms of property deals and local connections. “While others have talked about India, Booker has made it happen,” says one. “This could mark the start of a major expansion for them.”

If India and China are already figuring high on the expansion plans of UK c-stores, Africa, too, is proving attractive. Earlier this year, Spar International opened its first store in Malawi and has plans for up to 10 more supermarkets and Express convenience stores within the next five years.

While the retailer’s presence in Zimbabwe, Namibia, Botswana, Zambia and Nigeria runs to fewer than 150 stores in total compared with 803 in South Africa Dr Campbell notes that behind the scenes, gradual expansion is now bearing fruit.

Now Costcutter which to date has restricted its operations to the UK, Ireland and Poland is eyeing Africa. By the end of the month the brand will have made its North African debut in Marrakech. Negotiations for a second store in the city are already well advanced. Sunstar’s Ishrat Husain says that while c-stores are virtually unknown in Morocco the market is currently carved up between large stores and tiny corner shops the format is established in his second target, Pakistan. “Pakistani consumers love c-stores, but I believe Costcutter could have a great future in bigger cities where the name alone will be enough to attract customers,” he says.

But not all of the kings of convenience are pushing into new markets. So far, Ireland’s Musgrave has shown no interest in emerging markets and is even withdrawing from the mature market of Spain to concentrate on matters closer to home. “For Musgrave, which is exposed to weakened economies in Ireland and Spain, reserving firepower for your most lucrative markets is sensible,” explains Trefor Griffiths, head of food and beverage at Grant Thornton.

But with the pressure on at home, the attractions of developing markets might soon be too great to ignore, adds Griffiths. “There are more opportunities for c-store fascias in emerging markets than there are in the UK, particularly now the multiples have identified online and c-store retailing as their biggest areas of growth.”

It looks as if the great c-stores’ overseas adventure could be just beginning. n