FamilyMart fracas reheats Chinese corner-store war

Lawson

23/05/2019 02:20

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Alec Macfarlane
    HONG KONG, May 23 (Reuters Breakingviews) - FamilyMart’s
 8028.T  fracas is reheating China’s convenience store war. The
$13 billion chain is suing to end its joint venture on the
mainland. It already ranks second in the country, ahead of
Japanese rivals Lawson  2651.T  and 7-Eleven, owned by Seven & I
Holdings  3382.T . Untethered, it could expand faster, find a
tech-savvier partner, and take the lead. 
    Japan’s so-called konbinis have been steadily migrating onto
street corners in the People’s Republic, peddling everything
from milk tea to blueberry potato chips to umbrellas,
supplemented with bill payment and other services. FamilyMart
opened its first shop in Shanghai in 2004 and now runs over
2,500 in China with the help of Taiwanese food giant Ting Hsin,
which supplies pre-cooked meals and drinks, plus advice on
consumption trends and locations. Euromonitor estimates
FamilyMart sold $1.4 billion of goods in 2018, giving it an 8.4%
share of the market. Local rival Meiyijia has 11.8% but is less
efficient, generating just $2 billion from over 13,000 outlets.
    Now the relationship with Ting Hsin is in court. FamilyMart
wants out, complaining its partner stopped disclosing relevant
transaction data around 2012 and withheld payments for using its
brand, Nikkei reported. It’s probably a good time to break up.
FamilyMart has been in China for 15 years; it should be able to
handle itself at this point. It needs to find a new supplier of
ready-to-eat products, which account for roughly half of
Japanese convenience-store sales in China, according to
consultancy Bain & Co. But that is doable, and it is already
working with Ele.me, the food-delivery arm of e-commerce giant
Alibaba  BABA.N , whose insight into consumption trends could
help it manage inventory. A real estate private equity fund
could support an accelerated rollout into lower-tier cities. 
    Shareholders will hope that the lawsuit doesn’t distract.
Rival Lawson wants to open 900 new stores in China by 2020, and
e-commerce is chipping away at the edges of the konbini value
proposition. Even so, the market is set to grow from around $16
billion last year to roughly $41 billion by 2024, Bain reckons,
77% of which is expected to come from China’s top 30 cities.
FamilyMart is in only 10. The battle for Chinese pedestrians’
wallets is just heating up.
    On Twitter https://twitter.com/AlecMac11

    CONTEXT NEWS
    - Japanese convenience-store chain FamilyMart is looking to
end a 15-year tie-up with its joint-venture partner in China,
Japanese newspaper Nikkei reported on May 21.
    - Parent company FamilyMart UNY Holdings is suing to end its
partnership with Ting Hsin International, alleging that the
Taipei-based conglomerate stopped disclosing pertinent
transaction data around 2012, and that for several months
withheld fee payments. 
    - The company originally filed the lawsuit in October in the
Cayman Islands, where the joint venture is registered, the
report said. 
    - Ting Hsin owns a 60% stake in the venture. FamilyMart owns
the remaining interest. 
    - For previous columns by the author, Reuters customers can
click on  MAC/ 
    - SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS: http://bit.ly/BVsubscribe

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Bloomberg article    https://www.bloomberg.com/news/articles/2019-05-13/familymart-s-china-business-threatened-by-feud-among-partners
BREAKINGVIEWS - Japan’s foreign invaders could use domestic
allies     urn:newsml:reuters.com:*:nL3N1ZZ1SL
BREAKINGVIEWS - Jardines can benefit from a spot of retail
therapy     urn:newsml:reuters.com:*:nL4N1QR1EZ
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Pete Sweeney, Katrina Hamlin and Sharon Lam)
 ((alec.macfarlane@thomsonreuters.com; Reuters Messaging:
alec.macfarlane.thomsonreuters.com@reuters.net))