Ayala, Puregold to invest P2B in new grocery chain

Local property giant Ayala Land Inc. and leading grocery chain operator Puregold Price Club expect to jointly invest as much as P2 billion to roll out in the next four to five years a new grocery chain under the brand “Merkado Supermarket,” aiming to ride on the country’s increasing consumer affluence.

The first Merkado Supermarket is set to open its doors at UP Town Center on Friday. The new supermarket chain will be operated by AyaGold Retailers Inc., a 50-50 percent joint venture between ALI Capital Corp. and Puregold unit Entenso Equities Inc.

In a briefing Monday, AyaGold general manager Cesar Cudala said the plan would be to put up eight to 10 stores, mostly in Metro Manila, in about four to five years. Investment is estimated at P200 million per store, each of which is expected to have a footprint of 2,000 to 2,500 square meters in selling area. This implies that capital outlays could reach P2 billion once 10 stores had been built.

Each store is expected to break even in three to four years after opening. Overall, the Ayala-Puregold partnership aims to unlock 14 percent in gross margins from the upcoming retail chain.

Although this is an equal venture between the two big business groups, the Puregold group of retailer Lucio Co, specifically people from the S&R Membership Shopping unit, will have control of operations in order to benefit from the group’s expertise in operating a grocery chain.

“The name of the game is scale. Although we enjoy the relationship we have between us and the vendors and these relationships benefit the Merkado brand, we’ll come into the market to have a very competitive pricing,” said AyaGold president Anthony Sy.

“With the mall-based Merkado Supermarket, this will enable us to tap a broader market. In the case of UP Town Center, this could range from students to young professionals and young families,” Sy said.

Sy said the next Merkado stores would not be built on existing Ayala Malls but would instead seek and create new consumer markets. Despite perception of stiff competition in modern retail trade, Sy said the group was still seeing some gaps that could be served by the new venture. Ayagold is open to putting up stand-alone stores or in other developments outside shopping malls.

Cudala said Merkado’s main market would be working mothers in the 25-40 age group from the broad C economic segment with an AB mix who would be the primary shoppers and household managers.  They would be digitally savvy, well-educated, well-rounded and more discerning, he said.

The new grocery chain will have an extensive line of local and imported goods, with 5 percent of merchandise expected to be sourced outside the country. It will also feature product lines from its own bakery and rotisserie.