Cargills to focus more on convenience stores as company upends retail strategy

Cargills (Ceylon) PLC says the company will focus more on the convenience store-style outlets going forward and spend more money in expanding its store footprint in that format, which the management thinks would provide more convenience to its customers while reducing per store capital expenditure. 

Cargills operates its retail outlets in four store formats: Cargills Food City Supermarkets, Cargills Express convenience stores, Cargills Food Hall gourmet flagship store and its newest e-commerce platform, Cargills Online. 

The group being the largest privately-owned retailer in the country operates over 450 physical stores islandwide. 

The management is of the belief that by expanding its convenience store-style outlets, it could penetrate the grocery market more effectively and thereby increase its market share.

“Through this approach, the management is confident of increasing convenience for the consumer while lowering the capital expenditure per store. The management is optimistic about increasing the market share and further penetrating the grocery market, which is currently estimated to be Rs.1,400 billion and growing,” the company said. 

Convenience stores, compared to other larger formats, offer limited parking space and a range of daily merchandise for relatively quick purchase by the consumer who doesn’t like to spend much time for shopping. 
This strategy allows retailers to become more price competitive, compared to similar or smaller grocery retailers, as they spend relatively lower capital expenditure per store and lower overheads, due to already established distribution network and bulk purchases made directly from farmers.  

Cargills Ceylon, which also has interests in food and beverage manufacturing and restaurant trade through franchises, generated revenues of Rs.112.6 billion and earnings of Rs.3.5 billion for the financial year ended on March 31, 2021, up 5.19 percent and 29 percent, respectively. 

However, its retail business was seen languishing in the final three months, despite the consumer spending boom seen in the first three months of 2021.