Wed, Jul 02, 2003 - Page 10 News List

Taisugar is focusing on hypermarts

BIGGER IS BETTER The lack of success with its convenience stores has not stopped the company from planning to open nine more superstores

By Annabel Lue  /  STAFF REPORTER

Taiwan Sugar Corp (Taisugar, 台糖) plans to continue to shift its retail business focus to hypermarkets, despite having failed dismally in the convenience-store market.

"Taisugar already set up three hypermarkets since 2001 and plans to open another two outlets by year end," said Yeh Hung-Chan (葉鴻展), general manager of the state-run company.

The three existing hypermarkets, called Taisugar Hypermarket (台糖量販), are locate in Yunlin County, Kaohsiung County and Pingtung City.

In the last quarter of this year, Taisugar plans to expand to more populated areas such as Tainan City and Taipei County's Panchiao.

"We hope to reach a large scale by setting up nine stores within the next couple of years," Yeh said.

Market watchers yesterday expressed skepticism about the company's hypermarket plan.

"It would be very challenging for Taisugar to profit in the sector," said Peter Tseng (曾耀德), an retail industry analyst at Polaris Securities Co (寶來證券).

Taisugar has proven it lacks retail experience, so it should not continue in this area, he said

Tseng, who visited Taisugar's hypermarket in Yunlin County once, said the company's prices are not as competitive as other private hypermarkets and its product selection is limited.

"Many Taisugar store employees are older and may not fit into the fast-changing retail business," he said.

A Taiwan Ratings Corp (中華 信評) analyst said personnel problem have always been a burden for Taisugar.

"The company has made some efforts to cut its workforce ? in addition to early-retirement plans, Taisugar sent some redundant staffers to run its retail business," said Daniel Hsiao (蕭黎明), an analyst at Taiwan Ratings, a local arm of Standard & Poor's.

The expansion plan comes as Taisugar slims its convenience-store chain.

Yesterday, the company announced it had subleased 43 of its 124 "Million" convenience stores (蜜鄰超市) to FamilyMart Co (全家便利), the nation's second-largest convenience-store chain with 1,361 outlets. Beginning early next month, 43 Million stores will become FamilyMarts.

Taisugar will continue to run its remaining outlets and reduce its total number of stores to 60 by closing 20 that are losing money.

The two rivals also signed a strategic alliance agreement yesterday which will put FamilyMart in charge of logistics and procurement for Taisugar.

The move aims to offset the NT$200 million in annual losses Taisugar reported from its convenience-store business over the last seven years, Yeh said.

Taisugar's low margin is mainly attributed to its high personnel costs, which represented about 32 percent of its total revenue in 2001, Taiwan Ratings statistics showed.

Taisugar currently employs 5,599 people, down from a peak of 20,000 in early 1990s.

Personnel cost have been cut to 20 percent of the company's annual revenue, according to Yeh.

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