Japan’s FamilyMart may limit investment in Vietnam following losses

‘We cannot continue to pour in resources,’ its president says of business in the Southeast Asian market.

Japan’s second largest convenience store chain FamilyMart plans to stay focused on domestic market as it reported losses in several Southeast Asian economies including Vietnam.

Koji Takayanagi, the chain president, said the firm is reviewing loss-making businesses in Indonesia, Thailand and Vietnam. “If we can get them to rally we will, but we cannot continue to pour in resources,” he was quoted by Reuters as saying Tuesday.

The Japanese franchise has forecast operating profit to grow by more than twice to 1,000 billion yen ($8.79 billion) in four years from 412 billion yen in the current fiscal year. But as the business is profitable in China and Taiwan, it is not doing well elsewhere.

FamilyMart came to Vietnam in 2010 and had expected to open 300 stores in collaboration with local distributor Phu Thai Group.

But the partnership ended in 2013, with the distributor taking over 42 FamilyMart stores and turning them into B’s Mart in collaboration with Thailand’s Beri Jucker Plc.

The brand made a comeback in July 2013 and is now operating 130 stores in Ho Chi Minh City, the nearby resort town of Vung Tau and in Binh Duong Province, aiming to expand to 150 by the end of this year. 

Takayanagi said he finds it easier to achieve results at home, where worsening labor shortage is leaving convenience stores scrambling to find workers. “We know what to do,” he told Reuters, adding that the chain is ready to offer items with added value to serve its aging population.

He also said his company is considering starting a new business with Hong Kong-based investment holding company CITIC Ltd. and Thailand’s largest private conglomerate Charoen Pokphand.

Details are not revealed, but he said the companies are looking at a range of opportunities beyond convenience stores.

The chain’s diversion comes as its rival Seven & i Holdings, which owns Japan’s largest convenience store chain 7-Eleven, keeps expanding overseas, most recently in the U.S.

Nikkei last August said the first 7-Eleven store will open in Vietnam in February 2018, adding heat to the convenience store boom with entry and expansion from many local and foreign retailers in recent years.

Vietnam’s retail market is listed in the top five in Southeast Asia and ranked 11th globally in terms of growth rate, based on the A.T. Kearny 2016 Global Retail Development Index. 

Vietnam’s trade ministry has projected the country’s retail market to hit $179 billion by 2020, a jump of 52 percent from last year, with foreign convenience store operators already holding a 70-percent market share.

The sector has a lot room to grow in Vietnam, where more than half of a population of nearly 92 million are young and the annual average income expected to increase very fast, the ministry said.