'I expect Big C's sales growth to average 75% annually over the next five years'. Suthichart Chirathivat, chief executive officer of Central Retail Corporation.
'DCR has revolutionised the wholesale, warehousing and distribution of grocery goods and merchandise in Thailand.' Suthichart Chirathivat, chief executive officer of Central Retail Corporation.
Thailand's economic slowdown has the retail industry facing a gut-wrenching shake-out that may well mean the end of some players. While most retailers concentrate on surviving in a climate where consumer buying power is down 10% to 20%, Central Retail Corporation (CRC) is confidently predicting that sales in its mid-market stores will rocket, and that the group's sales this year will approach US$3 billion.
CRC's operations comprise the most extensive retailing network in Thailand, including Central Department Store -- the largest department store chain in Southeast Asia - and Big C Supercentres, one of the fastest growing supercentre chains in the region.
It's the Big C stores that CRC's chief executive officer, Suthichart Chirathivat, is pinning his hopes on. The chain's sales last year exceeded US$400 million from a total selling area of just over 150,000 square metres, and grew 40% in the first nine months of this year.
Suthichart aims to bring Big C to every corner of Thailand, serving all of the country's 60 million people, 40% of whom are under the age of 25.
'I expect Big C's sales growth to average 75% annually over the next five years,' he says.
Some analysts think Suthichart's growth projections are unrealistic, however. 'I really doubt he can achieve that,' says Pruittiporn Nakornchai, an analyst at HG Asia Investment Research. 'If the economy was still OK, there might be a possibility, but with the climate like this, the expansion of lots of retail sales growth will have to be slowed down.
'Suthichart himself came out to say that Central had run short of cash. They admit they can't get loans from either financial institutions in the country or from foreign bankers. I doubt if they can expand in a big way this year or next.'
Suthichart says he will finance CRC's expansion by selling its slow-moving inventory at a discount over the next three or four months. He expects to raise about 400 million baht (about US$11.4 million) from the sales and says he will use the money to finish construction projects, especially for Big C. He believes this will help CRC open more projects more quickly, improving the company's liquidity.
Pruittiporn believes he is being overly optimistic. 'Four hundred million baht is nothing - one store needs at least 500 or 600 million,' she says.
Whether Suthichart achieves his growth predictions or not, CRC under his leadership stands an excellent chance of surviving Thailand's economic slowdown. The CEO has been quick to read trends in Thailand's retail sector, and during the past five years has overseen an enormous evolution in the company's market position.
Small beginnings
Suthichart is one of 25 children of CRC's late legendary founder, Tiang Chirathivat, who began the family's retailing empire with a small merchandise store in Bangkok's Chinatown in 1947.
In a classic rags-to-riches tale, Tiang's children and grandchildren have worked together to create an empire. According to the Chinese edition of Forbes magazine, the Chirathivat family ranks among the wealthiest Hainanese families in the world.
Suthichart's late brother, Samrit, established the family's first Central Department Store in 1957. Under his guidance, Central became Thailand's undisputed retail leader.
For decades Central Department Store was the dominant department store retailer in Thailand, but its marketing concept of selling high-quality imported merchandise came under attack by competitors in the 1980s. These new competitors began carving market niches from the country's fast-growing middle class.
Suthichart realised that CRC's market share was in danger from the new upstarts, especially new local mid-market rival Robinson and several Japanese-owned chains such as Isetan and Daimaru.
CRC had already begun diversifying into the supercentre sector with the opening of the first Big C Supercentre in 1993. Its next step was a merger with Robinson in 1995, which was a major factor in cementing the group's dominant position as the country's leading retailer.
With Robinson's 30 middle-market stores joining the company's 12 Central Department Stores, CRC had captured Thailand's fast-growing middle-class shoppers.
Although Suthichart expects Central Department Stores and Robinson to continue expanding in the future, it is Thailand's supercentre segment that he believes will be the fastest-growing retail segment over the next decade.
At present, CRC has twelve Big C Supercentres throughout Thailand. 'We plan 30 new superstores in the next five years,' says Suthichart.
Fighting the competition
The Chirathivat family also controls Central Plaza Hotel Plc, which began in the early 1980s with the opening of the Central Plaza Hotel, located between Bangkok's busy Don Muang Airport and downtown Bangkok.
Central Plaza also built and operates the Bangkok Convention Centre and Bangkok International Exposition Centre.
Publicly listed in 1990, the hotel group has six establishments in Thailand, including resort properties in Koh Samui, Hua Hin and Pattaya.
The company also owns and operates the Central Floating Hotel in Yangon, Myanmar.
With the successful completion of the Central Plaza Hotel, the family ventured into the property development business, including building shopping centres that house many CRC retail outlets.
The company's shopping-centre arm, Central Pattana Plc, is listed on the Stock Exchange of Thailand and holds more than 1 million square metres of property throughout Thailand. Its portfolio includes hotels, department stores, shopping centres, condominiums and office buildings.
Central Pattana's shopping centres are considered by many industry experts as among the most beautiful and functional centres in Southeast Asia. In 1995, the International Shopping Centres Association (ISCA) held its annual convention in Bangkok.
The ISCA featured the company's Bangna project as one of the sites to be visited by shopping centre developers and operators from around the world.
To meet the growing supply needs of its retailing operations, the Chirathivat family has also assembled one of Southeast Asia's largest wholesaling and manufacturing operations.
Through Central Trading & Manufacturing, the group imports and is the sole distributor for more than 50 top international brands of clothes, textiles, cosmetics, toiletries, cameras, sporting goods, household electrical appliances, musical instruments and electrical equipment.
All these products are sold through CRC outlets and by other retailers throughout the country.
In addition, the company acts as a local buying agent for overseas department stores, importers and wholesalers.
The Central group is also one of Thailand's leading manufacturers of fashion wear and leisure apparel.
Under licence, the group manufactures clothing for leading international brands such as John Henry, Lee, Maidenform, Renown, Jockey, Perry Ellis, Jantzen and Wrangler. Again, all of these goods are featured prominently throughout the group's retail outlets and are sold in competitors' outlets throughout the country.
With so many family members available to pitch in, the Central group also set up a fast-food division that first introduced Kentucky Fried Chicken to Thailand in 1978. Today, in addition to Kentucky Fried Chicken franchises, the company operates Mister Donut, Burger King and Baskin Robbins franchises throughout the country.
In-store electronics outlets
Another retailing segment which Suthichart is revamping is retail electronics sales. With the knowledge that his group sells more than $US200 million worth of electronic goods annually, Suthichart formed a new management team in 1996 to consolidate and operate the group's electronics business.
Beginning with separate in-store outlets in Central and Robinson department stores, the group's electronics outlets will be known as Power Buy stores. Suthichart, who modelled the Power Buy outlets after the Circuit City chain in the US, plans to develop free-standing Power Buy shops throughout the country, each averaging 2,000 square metres.
Power Buy units aim to capitalise on the increasing demands of Thai consumers and will offer in-house services such as repair facilities and the installation of major electrical items.
To achieve CRC's continuing dominance in the Thai retail market, the Chirathivat family has not been reluctant to bring in overseas joint-venture partners with experience and expertise in areas where the group is lacking.
To further tighten its grip on the supermarket sector, CRC last year formed a partnership with Royal Ahold, a major Dutch international retailer with extensive worldwide operations distributing and selling food products.
The joint venture, of which CRC owns 51%, plans to build 200 outlets known as Top's supermarkets over the next five years.
In an attempt to overcome Bangkok's world-renowned traffic problems, Suthichart also entered into an agreement in 1995 with Davids Limited of Australia, a leading wholesale food distributor with operations throughout Asia.
The new joint venture, DCR, is charged with managing the distribution and logistics requirements of CRC's supermarkets. 'DCR has revolutionised the wholesale, warehousing and distribution of grocery goods and merchandise in Thailand,' says Suthichart.
CRC also has a joint venture with Hong Kong-based Watson's personal care product stores. Ten free-standing stores are planned in the next five years.
In addition to its many joint ventures, CRC also operates franchise outlets from the UK-based firms of Marks & Spencer, Mothercare and Body Shop.
Marks and Spencer performed exceptionally well last year, with sales of US$26 million. But the franchise operation has been badly hit by the drop in consumer purchasing, with a 30% decline in sales in the past few months.
To ensure that CRC has a handle on its vast merchandising operations, Suthichart recently invested in a computerised inventory control system. He says system the should give CRC up-to-the-minute inventory control and more influence over its supply chain - important factors in the struggle to stay healthy.
With the company investing in new technology, and Suthichart's strategic repositioning of its retailing empire, CRC is likely to continue its dominance of Thailand's retail sector well into the next century.