Ayala-Rustan retail venture eyes 300 stores

Japanese retailing chain FamilyMart, a retail store chain brought to the Philippines by the Ayala and Rustans groups, plans to scale up its operations to hit 300 stores over the next five years.

For this first year of operations, the target would be to roll out 30 FamilyMart stores in Metro Manila, according to Ayala Land Inc. chief finance officer Jaime Ysmael.

Ysmael said the group would be open to franchising the brand to accelerate growth. At the same time, he said the group would put up stores in various formats.

Capital spending for each convenience store is estimated at P2 million. Since the retail space would mostly be rented, Ysmael said the cost would be for store fit-out and inventory.

ALI is debuting into the convenience store business under the FamilyMart brand, the world’s second-biggest convenience store operator, in partnership with the Rustans group and Japanese conglomerate Itochu.

ALI and the Rustans group, through their equally owned joint-venture firm SIAL CVS Retailers Inc., signed last November a deal with FamilyMart Co. Ltd. and Itochu Corp. for the development and operation of FamilyMart convenience stores in the Philippines.

The deal is seen heating up competition in the 24-hour retailing format, which has 7-Eleven and Mini-Stop chains as the leading players. Philippine Seven Corp., the local licensee and operator of the 7-Eleven stores, has 781 stores as of end-September while Mini-Stop, which is controlled by the Gokongwei group, operates more than 300 stores.

“The partnership, which combines ALI’s expertise in developing mixed-use developments and its retail partners’ proven track record in the business, will enable ALI to provide a retail format that will support its mixed-use communities and, at the same time, grow its recurring income portfolio,” ALI said in an earlier disclosure to the Philippine Stock Exchange.

On the equity structure of the business, SIAL will get the controlling 60-percent stake while FamilyMart and parent company Itochu will own 37 percent and 3 percent, respectively. Both FamilyMart and Itochu are listed on the Tokyo Stock Exchange.

FamilyMart has more than 20,000 stores in Japan, Taiwan, South Korea, Thailand, China, United States, Vietnam and Indonesia. Its biggest shareholder, Itochu, is one of the largest Japanese trading conglomerates whose businesses include food, logistics services, textile, machinery, and information and communications technology.

SIAL is 50-percent owned by ALI’s subsidiary Varejo Corp. and 50-percent by Specialty Investments Inc., a unit of upscale retailer Stores Specialists Inc. (SSI), one of the biggest specialty retail companies in the Philippines, with the exclusive rights to sell, distribute and market in the country a variety of brands from around the world.

Analysts said it would make sense for ALI to have a direct stake in retailing because this would make it easier to fill up the requirements of its retail and other property developments.

Two of the country’s largest conglomerates and shopping mall developers—SM and JG Summit—both own retailing operations that usually become anchor tenants in their projects. The Ayala group, for its part, was previously into retailing (through Ayala Corp.) as operator of the Burger King franchise in the Philippines, but sold out of the business in early 2006.