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Philippines' Family Mart says mulling options amid reported sale plan

Possible divestment highlights rising competition in convenience store sector

Family Mart has only around 70 branches in the Philippines.

MANILA -- Local owners of Family Mart are not ruling out a possible sale of the chain of convenience stores as the market remains crowded and competitive. Family Mart's entry into the Philippine market in 2013 was met with intense competition with established players like 7-Eleven and newcomers like Indonesia's Alfamart. 

SIAL CVS Retailers, a joint venture between Ayala Land and high-end retailer SSI Group, "is currently exploring various options intended to strengthen and grow the business of Philippine FamilyMart CVS," the real estate giant told the Philippine Stock Exchange on Oct. 9.

The statement was released to clarify a report by local media Philippine Daily Inquirer that Family Mart was up for sale.

"No definite course of action has been finalized and appropriate disclosures will be submitted to the PSE in a timely manner," it added. Listed SSI released a similar statement and a spokesperson from Itochu in Tokyo, its Japanese partner, on Tuesday said that nothing had been decided yet.

SIAL CVS teamed up with Itochu, the owner of Family Mart, to open the first Philippine branch in 2013. The following year, they offered it as a franchise to accelerate expansion, initially targeting 500 stores by 2018. However, Family Mart only had around 70 branches in the Philippines in June, according to the website of Japan's FamilyMart UNY Holdings, which has over 20,000 branches in East Asia.

Last year, Ayala Land sold another a retail asset it held in partnership with SSI, Wellworth department stores, to focus on its core businesses.

A potential sale also underscores rising competition in the convenience store sector in the Philippines, where informal, mom-and-pop shops still dominate. Family Mart, as well as Ministop, operated by Robinsons Retail Holdings, had to close down nonperforming outlets as more players entered the market in recent years. 

Against this backdrop, established convenience stores are moving toward transferring day-to-day operations to franchisees to focus their resources on growing their brands. Ministop, which had nearly 500 shops in June, said it would offer company-owned shops to franchisees while Philippine Seven, the company behind the over 2,000 7-Eleven branches in the Philippines, plans to do the same by offering a cash out requirement of as low as 300,000 pesos ($5,800). 

Sales growth at established branches have also shown weakness in the first half. Same-store sales growth of 7-Eleven dropped by 1% while that of Ministop rose only 1.3%. 7-Eleven said election spending boosted sales last year. Nonetheless, 7-Elevens's net income dropped by 5.5% to 288.3 million pesos while Ministop's earnings before interest, tax, depreciation and amortization fell 37.7% to 119 million pesos. 

Newer entrants, meanwhile, are determined to expand market share. Alfamart, a joint venture of SM Investments and Indonesia's Sumber Alfaria Trijaya, is opening 10 branches every month, while Lawson, another Japanese convenience store, is also launching more outlets.

Nikkei staff writer Shotaro Tani in Tokyo contributed to this report.

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