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Business Trends

Myanmar supermarket challenges local markets with fresh produce

City Mart invests in 'vegetable factory' to cater to emerging middle class

Shoppers browse the produce section at a City Mart supermarket.

YANGON -- Most of Myanmar's middle class still depends on local markets for fresh fruit and vegetables, but the country's biggest retailer is trying to change this.

Since last year, supermarket operator City Mart Holdings has been offering fresh, direct-from-farm produce after beefing up its cold-transport joint venture with Japanese trading house Sojitz. It also announced in July the acquisition of a hydroponic farm from which it had been sourcing some of its produce.

The moves may be just in time, as the government relaxed restrictions on foreign retail investment in May, opening the door to outside competition.

Supermarket produce has traditionally had a poor reputation in Myanmar due to worries over pesticides and freshness, which is often questionable because of long wait times between farms and stores. Higher prices have been another problem.

But the country's logistics network has been improving and City Mart sees an opportunity to change the way people shop. Its acquisition of Uni Vege, a farm that sells packaged vegetables grown at an indoor facility in Yangon, has also helped.

The hydroponic operation does not use pesticides and its capacity of around 60 kg of vegetables per day already lags demand, testament to its growing popularity. About 80% of production goes to City Mart, which began selling lettuce from the farm in 2015, packaged as ready-to-eat Caesar salads.

The retailer is also marketing more aggressively, with upscale City Mart stores touting the health benefits of their produce to justify the higher price while offering cut fruit and fresh salads near store entrances.

City Mart purchased Uni Vege through a joint venture comprised of affiliate Premium Distribution and Trust Venture Partners. The venture plans to invest several hundred millions of yen over the next couple of years to triple the size of the farm.

Vegetables at the Uni Vege hydroponic farm provide City Mart with fresh, direct-from-farm produce.

Meanwhile, City Mart has started procuring additional produce directly from growers outside the Yangon area through Premium Sojitz Logistics, a temperature-controlled supply chain venture between Sojitz and Premium Distribution.

Established in 2015 to handle refrigerated distribution, the venture first focused on delivery of imported items in Yangon, expanding services in January 2017 to include transport of fresh produce and flowers. Since then, the venture has been hitting its daily transport target of 22 tons.

"There is more demand than the trucks can hold," said Premium Sojitz Logistics head Ichiro Uesawa. In five years, the company hopes to be transporting 100 tons per day.

As the country's biggest retailer, City Mart is well-placed to counter any foreign challengers, with its fresh produce strategy set to play an important role.

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