Anyone see a 7-Eleven around?

I’m here in Bangkok for my annual supervision of the Global Consulting Project.

And again, I have been struck by the ubiquity of 7-Elevens in this city.  On the relatively quiet street of our hotel there are four branches of said store within a stretch of about 250 metres, including two pretty much directly across the (narrow) road from each other.  Just 400m in the other direction there are another three stores in a 60m stretch.

This obviously generates lots of discussion. One student said he’d seen similar density in Taiwan.  That got me searching for some data to check out which locations in the world have the most of these stores per person.

And here’s what I found.  In terms of population per 7-Eleven store (i.e. national population/number of stores), Thailand is in the top five globally (with ‘top’ meaning not many folks per store, or, put differently, the most stores per person):

I included Australia, simply for illustrative purposes.  We’re a fair way down the ranks (see here for the lengthier store count list – the US (c6,500 is missing)). The table identifies what appears to be the ‘natural home’ of the convenience store – densely populated urban centres around Asia.

For those who have missed the back story, 7-Eleven originated from the US, but was bought out globally by the firm’s Japanese master franchisee almost 25 years ago.

Japan had a pretty big head start on Thailand (opening in 1974, versus 1989 for Thailand), but Thailand is catching up fast.  I saw an estimate that there are over 3,000 stores in Bangkok, which equates to about one store for every 4,000 residents in this megacity (and comfortably defeating city state Singapore).

The Thai franchisee is doing something right, with profits reportedly up fivefold in three years. No wonder there’s talk said firm is chasing the franchise rights for Laos, Cambodia, Vietnam, Myanmar (and also some regions of China!).

I do start to wonder how far such expansion within a given city can go.  Could we eventually see a Bangkok headline like this one (mocking Starbucks’ rapid growth)?

These two stores are within 50 metres of each other in Silom, Bangkok

More from me on e-commerce and retailers

My piece on the Conversation has generated a bit of interest from business reporters.  Here’s a piece from the Brisbane Times that resulted from a phone interview. I got to bandy around terms like “disruptive technology” and delve deeper into the scope for bricks and clicks to coexist (for some).

I bet Bernie would like to work for Apple instead

The boss of Aussie department store Myer, Mr Bernie Brookes, was asked yesterday about increasing harmonisation of product prices across countries (presumed to be a response by suppliers and retailers to the exodus of customers to online commerce).

He said (with a delightfully Aussie oratory flourish):

“If you don’t do it the customer leaves you en masse. It is Darwinian shit: if you don’t do it you are not going to sell it.”

Damn the perils of actual international competition.  I bet he wishes he was in Apple’s big boots on this, as they seem very capable of selling the exact same song/app etc on iTunes for considerably different prices from market-to-market. See this link for a nice bit of comparative work – Aussies really get screwed.  I guess we’re the Easter Island of Darwinian natural selection.

Bluing about brewing: Will SABMiller bring on an Aussie apocalypse?

I’m not sure which is less surprising: (a) the announcement that the Foster’s Board are now supporting SABMiller’s takeover offer; or (b) the ill-informed hysteria in the tabloid press about the ‘loss of an Aussie icon’.

But let’s have a look at The Hysteria.  The grounds for concern are shaky at best.  The three main complaints are: (i) jobs may be lost; (ii) iconic brands might be neglected, and (iii) profits will head offshore.

Let’s take each complaint. First, will jobs be lost?

I can’t see massive changes to the location of manufacturing . Beer is one of the least international-trade-worthy products due to its high weight-to-value ratio and perishability.  That’s why we see so much licensing of brands across borders, contract brewing, and takeovers just like this one. So brewing jobs won’t be heading offshore (nor packaging, labelling, distribution, engineering). Likewise, technology-wise there are no real gains or innovations that are likely to change labour-capital ratios in this extremely mature industry. So, the brewery jobs should stay.  In anything, if SABMiller can successfully launch and market their deep suite of brands (which will inevitably be brewed locally), then we could actually see some upswing in manufacturing.  Any job losses that might occur are most likely to be in the (old) head-office, with some scope to reduce duplication of tasks.  Even then, I’d predict more turnover than simple shedding of positions, as SABMiller attempts to rejuvenate a pretty moribund mob.

So, will these Anglo-South African-Yankee newcomers tear down long-adored Aussie beer brands?

This is a really curious set of concerns, and based on a number of falsehoods.  Foster’s (and it’s various previous incarnations) has itself been pretty free-willing and cannibalistic in its stewardship of brands for decades. One time icons like Abbotsford Lager/Stout have been demoted, labels have been dramatically altered, sleepy bit-players have been promoted (including VB and Crown Lager) and pushed beyond their Victorian homeland, and even the headline ‘brand’ of Fosters’ holds little-to-no local market relevance (as every Aussie traveller finds themselves having to explain to befuddled foreigners).  Indeed, Foster’s has been making much higher margins on licensed foreign brands such as Corona in recent years than on these supposed national treasures. Yet local ‘Aussie battlers’ haven’t been hitting the airwaves to protest that ‘treachery’.

It is in SABMiller’s interests to maintain and perhaps even revitalise the fortunes of many/all of the aforementioned product lines.  Given Foster’s retreat from foreign beer markets in the past decade, SABMiller taking ownership of these Aussie brands might indeed be the best chance of seeing more than a token blue and white can of Australian ale on overseas shelves.  My personal hope: that SABMiller promotes the much tastier Fat Yak as a higher end export (and maybe also Blue Tongue which I’m guessing comes with the suite of CCAmatil/Pacific Beverages assets that appear to be part of this deal).  That would be doing a lot more to improve Australia’s beer reputation than the currently bland product licensing.

Of course, SABMiller will presumably also increase the availability of its broader range of international brands.  That will test the ‘loyalty’ of died-in-the-wool Aussie drinkers.  But that isn’t SABMiller’s problem or fault.

Finally, won’t profits head offshore?

Firstly, it’s not clear how the average Australia benefitted from Foster’s profits up to now.  Sure, the firm paid taxes, but so will SABMiller.  Shareholders got returns (although pretty paltry ones in recent years given the wine debacle), but they are also getting a decent premium in the takeover.  And if they want to keep getting a piece of the action, SABMiller is listed on the London stock exchange (and in Johannesburg). Again, SABMiller is likely to be making more generous investments in revitalising the Foster’s business in the coming years than the incumbent management have been, so it remains unclear that this is a case where the business is going to be ‘taken offshore’.

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So, in conclusion, I’m arguing that this particular foreign takeover is likely to be one the least harmful we see in Australia in the near future. The nature of the industry is one that doesn’t lend itself to offshoring of key functions, and we should be more interested in what it might do to resurrect a dull duopoly market.

 

Westfield gets a Brazilian… and goes Italiano

It is rare to see an Australian multinational announce two international expansion moves in the same week. And it’s even rarer when said moves are to two different continents.

Shopping centre giant Westfield made two such announcements this week, with joint ventures signed in firstly, Brazil, and today, Italy.

As I wrote about in a book chapter on Westfield a few years ago, the firm has typically been reluctant to seek opportunities beyond the English-speaking world.  The firm entered the US way back in 1977, with a portfolio of properties slowly emerging over the coming two decades.

Westfield succeeded in the US by buying run-down malls that no one visited anymore and turning them around through innovative redevelopment projects.  Most competitors in the industry preferred building new malls.

By the late 1990s Westfield had emerged as the dominant player on the US scene, and continued to grow right through to the global financial crisis.

In the broader world, they have been more cautious.  As we argued in the chapter:

“Westfield’s internationalisation was never a story of extreme risk-taking.  Frank Lowy saw little value in acting as the pioneer in environments where the payoffs were too low.  As long as there were opportunities to be had in the US, then Europe, Asia and New Zealand could wait. Eventually in 1997 the group took over the management of ten St Luke shopping centres in New Zealand. In 2000 Westfield Trust and St Lukes Group merged and the New Zealand centres were re-branded as Westfield centres. Attempts to enter the UK market in the 1970s and 1980s were unsuccessful. Lowy expressed considerable frustration with the lack of dynamism in the UK investment houses and lack of planning enthusiasm (Margo, 2000). Not until early 2000 did Westfield finally obtain access with a 75 per cent stake in a centre at Broadmarsh, Nottingham. The firm has made considerable headway since, with seven centres on the books, and is set to open the largest centre in Greater London in early 2008. Westfield briefly entered Asia in 1998 with a ten per cent share of Suria Kuala Lumpur City Centre in Malaysia.  This investment was short-lived, however, with the company withdrawing in 2000 after the Asian currency crisis.”

So why has the firm moved now?

On the Brazil front, the firm is tapping into one of the most exciting and fast-growing large economies in the world.  The firm may see some useful urban similarities to Australia and tthe US (i.e. more ‘wide, open spaces’ in the ‘burbs), and Brazil may also be seen as far less challenging than China and India for example (with much less government intrusion likely).

At the same time the firm may see far fewer prospects in the moribund US economy and its close-to-saturated Aussie home.

Bringing a local, experienced joint venture partner is a very sensible move for a multinational with no experience in the market. While Westfield hasn’t typically hooked up with shopping centre management firms before (preferring instead to court construction firm and funds management partners – i.e. in essence, supply partners), local adaptation is clearly front of mind here. There should also be an appetite for knowledge acquisition on both sides of this equation.

The Italian move looks a little riskier, with patchier economic conditions and a reputation for bureaucratic randomness.  There may be an argument for very localised attractiveness here, as the firm is targeting one of the wealthier and more retail-savvy parts of the nation – Milan (also home to some of the oldest shopping arcades in the world). Indeed, this could also be a brand-building exercise in a city/region with no shortage of brand champions, especially in the luxury and masstige segments Westfield is keen to attract across its empire.

The final piece of this strategic puzzle might well rest on the role of individuals in both constraining and driving choices.

Firm founder Frank Lowy finally handed over the reins to his baby about five months ago (stepping down as Executive Chairman).  His sons appear to stamping their mark on the firm’s future with these two bold (but tentative) moves.