The pan-Asian grocery boom continues

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While many retailers in Western Europe and North America struggle for growth in saturated markets, retailers well situated in higher growth developing markets continue to grow and expand.

Pan-Asian grocery group Dairy Farm, famous for its Giant hypermarket, Wellcome supermarkets and Mannings drugstore brands, recently posted a 15% increase in total sales in 2011 to $10.4bn (£6.7bn). Underlying profit at $474m (£304m) was up 16%.

Aside from the strong results, which Hong Kong-based Dairy Farm described as an “excellent performance”, what was also significant was the news that it was entering Cambodia - its 11th market in Asia. The retailer has acquired a 70% stake in local player Lucky Market, which operates around five Lucky Supermarkets and a small chain of Lucky Burger fast food outlets.

Lucky Market actually has a well-established brand in Cambodia’s embryonic modern grocery sector, having been in operation since 1993.

Initially, Dairy Farm is likely to keep the strong brand and learn about the market, while slowly integrating some of its private-labels. Dairy Farm says it “sees potential for future expansion in a fragmented market, which is expected to see further growth and development in the company years”.

The venture continues Dairy Farm’s strategy of entering emerging Asian markets at an early stage in their development - it was one of the first foreign grocery retailers to enter India and Vietnam for example. The retailer believes that first mover advantage gives it a lead in the market over global rivals which might appear at a later date. It allows it to secure prime sites, develop a strong brand and learn about the tastes and demands of local shoppers.

Dairy Farm may not be alone in Cambodia for long. Vietnam’s largest retailer Saigon Co-op said in 2010 that it was investigating opportunities in Cambodia and Laos. The retailer had planned to open a supermarket in Cambodia by the end of 2011, although that never happened.

The trend is clear - even small and underdeveloped markets are being invested in, or at least investigated, by major retailers. This is perfectly illustrated by the recent reports that Japanese convenience store chain Lawson plans to enter Burma by the end of the year in order to gain a presence in an emerging market over rival global chains.