China Resources Enterprise (CRE), which operates China’s second largest supermarket chain CR Vanguard, announced full year 2014 retail sales growth of 15.1% to HK$109.5bn, whilst reporting a loss of HK$1.4bn, down -285% on the previous year in a tougher trading environment. While the result was impacted by start-up costs for a venture with Tesco Plc that will seek to turn around the British firm’s stores in China, its Vanguard chain was judged by manufacturers as closing the gap between it and RT-Mart and Wal-mart in Kantar Retail’s ‘Best of the Best’ 2014 Retailer PowerRankings in China.
According to IGD research, the main challenge for CRE in the last year has been two-fold: firstly, slowing economic growth in the Chinese market, which has affected both CRE and its key competitors including RT Mart (both retailers saw like-for-like sales turn from positive in FY 2013 to negative in FY 2014). In addition, the retailer cited more intense competition, in particular through the fast-growing online channel. CRE had flagged the full-year loss, also citing the financial impact from its joint venture with Tesco and China’s anti-extravagance crackdown. Secondly, CRE has absorbed the impact of its joint venture with Tesco and rationalising the combined store network has led to store closures in Beijing, Tianjin and Hong Kong. The partners have also sought to establish a joint management team, and have much work ahead to further integrate the businesses. Tesco will inject HK$4.325m towards funding this restructure. The Government-backed CRE, which has interests ranging from Vanguard supermarkets to beverages and meat, also owns China’s top beer brand ‘Snow’. Improving internal efficiency will be the main aim for CRE in the year ahead, maximising business synergies, and leveraging the strengths of its multichannel network, strong distribution network and the advanced management system inherited from Tesco.
While CR Vanguard was ranked by Kantar Retailer as the Number Three Chinese retailer in its 2014 PowerRankings, CRE was also ranked by Euromonitor as the 7th top grocery retailer in Asia for 2014-2020. Wal-mart, which plans a major expansion of its store network, has the biggest branded presence of the multinationals, with more than 400 stores, while Carrefour has around 220 outlets. The leading Chinese supermarket chains operate across multiple formats, led by Lianhua Supermarket Holdings, the biggest grocery chain on the mainland with 4290 stores. Lianhua’s 2014 turnover amounted to RMB29.152mn (US$4.731bn), a fall of 4.1% on 2013′s figure. The Group said like-for-like sales decreased by 5.52% compared to 2013. It was followed by CRE’s CR Vanguard supermarket division with over 3,000 stores; Wal-mart (400 stores); Carrefour (over 200 stores); and the Sun Art Group (RT-Mart/Auchan) with 370 stores combined; while Dairy Farm’s 20% stake in Yonghui (340 stores) this year makes the two groups a growing force. Yonghui, one of China’s fastest growing retailers, posted 2014 revenue of RMB36.77bn (US$6.0bn) and net profit of RMB851mn (US$138mn), up by 22.38% and 18.05% year-on-year respectively, in its annual results for 2014.
During the year, Yonghui opened 54 new stores, 31 of which were opened in Q4. Yonghui, primarily a hypermarket retailer, also operates supermarkets under the Bravo and Yonghui banners. Originating from Fujian province, and specialising in fresh produce, the retailer is now focused on expanding into new regions to develop a national footprint.