The Cargills chain of supermarkets currently has a market share of about 40-45 per cent in the local organised food retail sector and slightly less than 7 per cent of the estimated total grocery spend, according to a research report by the Colombo Stock xchange in association with Amba Research. It says that the rapid [...]

The Sundaytimes Sri Lanka

Cargills has 45% share in food retail sector

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The Cargills chain of supermarkets currently has a market share of about 40-45 per cent in the local organised food retail sector and slightly less than 7 per cent of the estimated total grocery spend, according to a research report by the Colombo Stock xchange in association with Amba Research.

It says that the rapid growth of Cargills’ store network should help the retailer position itself to capture an increase in shopping at supermarkets, with the increasing presence of Cargills’ own-brand goods strengthening its position further.

CT Holdings PLC (CTHR) retail and wholesale distribution activities account for approximately 84 per cent of its total revenue from continuous operations (as of financial year 2013), while retail operations alone contribute 79 per cent, the report says, adding that the company’s food retail operation is the largest amongst private supermarket retailers in Sri Lanka by both revenue and total store count.

“CTHR’s main retail strategy is to reach as many regional areas in the country as possible, where no private supermarket chains have ventured yet. Just over 50 per cent of Sri Lanka’s total fast-moving consumer goods (FMCG) market is in rural areas, according to a Nielsen report, and these regions are generally underserved by modern-format retailers,” the report says.

Cargills launched an ambitious expansion programme in December 2009 to open 100 new outlets by FY14, a 74 per cent increase in its store count, which stood at 136 as of March 2009. “The company remains on track to achieve this target – net additions were 75 new outlets between March 2009 and March 2013, including 29 in FY13 alone. As of June 2013, the company had 219 outlets in all 25 districts of the island. CARG is far more aggressive in its expansion plans than its competitors Keells Super and Arpico, which had net openings of only four and minus one stores, respectively, in FY13 and seven and six over FY09-FY13. This allows Cargills to enjoy the first-mover advantage and establish a strong local market position before its competitors enter a particular region. Keells Super and Arpico focus more on opening larger stores in cities with higher levels of disposable income,” the report elaborates.

CTHR has built direct relationships with farmers from whom the supermarket retailer buys agricultural and dairy produce, which it distributes to its retail outlets. By directly sourcing from the farmers in a typical produce supply chain, the company is able to sell the products at highly competitive prices in its supermarkets, which is a key feature of its marketing strategy.

The report says that as part of its strategy of buying produce directly from farmers, Cargills ensures a price 20 per cent per cent above the farmers’ production cost, thereby firmly securing the supply of goods, according to the company’s management. Due to the efficiency of its supply chain and its efforts to minimize post-harvest wastage, the supermarket chain is typically able to price its products lower than modern trade competitors. “This has made per cent popular with price-conscious customers, who want to keep their food expenses low.”

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