Piyawat Titasattavorakul, managing director of CP Seven Eleven Plc, still keeps his head up, although his enterprise is coming under mounting pressure from other giant retailers.

"The expansion of Tesco Lotus Express into districts and villages has really affected our convenience-store business and forced us to withdraw about 500 products, which are similar to theirs but cannot compete in terms of price, from our store shelves," said Piyawat Titasattavorakul, managing director of CP Seven Eleven, a subsidiary of the Charoen Pokphand Group.

Piyawat said 7-Eleven stores had existed in many districts and villages for almost 10 years with no conflicts with small retailers.

The company expects to achieve total sales of Bt90 billion this year.

"All grocery products available at 7-Eleven stores are in small-size portions and sell at higher unit prices compared with general stores," said Piyawat.

The ratio of franchised stores has increased continuously from only 10 per cent about 10 years ago to 37 per cent today. Franchises are expected to exceed 50 per cent in the next three years.

The number of 7-Eleven outlets will be increased from 3,600 to 3,750 this year, with a target of 5,000 outlets in the next three years.

Piyawat said 7-Eleven had gradually converted from selling grocery products to food, particularly chilled items, to avoid competition with hypermarkets and small retailers.

"The proportion of grocery products has dropped continuously, from 50 per cent 10 years ago to about 30 per cent today. We believe the proportion will be diluted to only 20 per cent next year," he added.

Piyawat said 7-Eleven had been able to increase its profit margin from 19 per cent on average 15 years ago to about 25 per cent today by concentrating on food sales, which had a higher margin than did grocery goods.

While grocery products had contributed 12-13 per cent of profits on average, food products could contribute a higher margin of 30-50 per cent.

The 500 products withdrawn from shelves have been replaced with different merchandise, such as books and catalogue products.

Piyawat said the company had also created the new Kudsan outlets, to sell drinks and blended beverages, bakery items and catalogue products. The move will help its strategy in converting itself to food retailing.

He said CP Retailing and Marketing Co Ltd (CP Ram), a subsidiary of the CP Group specialising in frozen foods, would supply all food merchandise, including dim sum and chilled food, to 7-Eleven stores.

CP Ram recently signed an advisory agreement with Warabeya Co Ltd, which supplies ready-to-eat and prepared foods to more than 7,000 7-Eleven stores in Japan. Under the deal, Warabeya will advise CP Ram about developing food products.

"We are negotiating with Warabeya about the possibility of setting up a joint venture in Thailand to manufacture and supply all forms of ready-to-eat and frozen foods to our 7-Eleven stores," said Piyawat.

Kwanchai Rungfapaisarn

The Nation