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Business

Thai retailer Central to splash $500m on Vietnam expansion

Focus of growth will be on nonfood items

Central Group Vietnam launches Hello Beauty.

BANGKOK -- Thai retail conglomerate Central Group will be spending $500 million on its Vietnamese operations over the next five years with plans to triple the number of its stores and shopping malls to as many as 750.

Adding to existing brands such as the Big C hypermarket and shopping mall it acquired in 2016, the company will add new retail formats to capture growing consumer demand for non-food items.

One of them is the LookKool gift shop which was launched in late 2017 but already has 26 stores. Targeting young people, the shop offers homeware to stationary, some of which are imported from Japan, starting from a selling price of under $1.

The company is also testing the viability of other brands such as cosmetics shop Hello Beauty and DIY store Home Mart.

"We are very strong in Vietnam in food business which is the primary need of consumers but we are also preparing for the future, for the needs the consumers are going to have after food," Central Group Vietnam Chief Executive Philippe Broianigo told reporters in Bangkok on Wednesday.

While Central's portfolio of 240 stores covers a variety of sectors from supermarkets to fashion brands, sports and electronics, half of its sales comes from food. But the emerging middle class is starting to spend more on nonfood items and Central needs to prepare for the future, Broianigo said.

The three new specialized stores, which he calls "category killers," were built specifically to cater to the Vietnamese consumer. Stores will open within Big C malls to draw in grocery shoppers and will soon expand to other venues.

According to the World Bank, Vietnam's middle income class currently accounts for 13% of the population but is expected to rise to 36% by 2026. Its population is also increasing and set to reach 120 million by 2050, up from 95 million in 2017. In comparison, Thailand has an aging population of around 68 million, of which the middle class accounts for around 35%.

"Vietnam's market potential is much bigger than Thailand," Broianigo said.

Vietnam's retail sector has been expanding rapidly since it opened up to 100% foreign ownership in 2009 and companies from Thailand, South Korea and Japan have all made their entrance.

Central Group Vietnam was established in July 2011. It has made several investments since then, including a stake in electronics retailer Nguyen Kim and the acquisition of Big C. Sales have been growing by double digits to reach 44.8 billion baht ($1.3 billion) in 2017.

"We are very happy to have entered in the early stage," Broianigo said. "In the next five years, it could be a bit more difficult to enter this market because of the [growing competition from] local companies."

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