PHILIPPINE Seven Corp., the company that holds the master franchise of 7-Eleven convenience stores in the country, said it will try to retain its leadership position in the coming years as it plans to populate the Philippines with 10,000 stores in eight years.
CEO Jose Victor Paterno said the company will try to grow its store network by an annual average of 25 percent during that eight- to 10-year period, as the company tries to fend off new entrants in the market.
Paterno, son of former Senator and Philippine Seven Chairman Vicente Paterno, said the company’s revenues will have to grow at the same rate.
“We are responding to the competition. We maintained our market share in Metro Manila,” Paterno told reporters at the sidelines of the company’s stockholders’ meeting.
“The rest of the country is relatively uncontested in comparison. We are virtually the only competitor with the critical mass to build out proper supply chains in areas logistically unreachable from GMA [Greater Manila Area]. Such supply chains come at a medium-term cost in terms of underutilized warehouses, and 2015 will be our base: we will be operating 10 warehouses by year-end [throughout Luzon, Mindanao, and three islands in the Visayas], versus four in mid-2014,” he said.
Philippine Seven will end the year at about 1,600 stores, some 25 percent higher than last year’s 1,282 stores. Most of this year’s expansion—and capital expenditures—were in the Visayas and Mindanao, as it opens branches at breakneck speed.
In Mindanao, for instance, the company only has four branches in Davao and Cagayan de Oro, but by the end of the year, it will have a total of 60 in the two areas alone. “We have distribution facilities in all islands. We have no choice now but to expand to these areas,” Paterno said.
It took the company 12 years to open the first 100 stores in the Philippines, and another 14 years to reach the 500th-store milestone by 2010.
When its competitors entered the local scene, the company opened another 500 stores in a span of only three years, surpassing the 1,000th-store milestone in 2013.
“The company plans to further accelerate the rate of new store openings, to take advantage of improving economic conditions and to protect our market share in light of increased competition. We believe that this sector will remain crowded, and we intend to capitalize on our first-mover advantage and economies of scale, to maintain our dominant position in the market,” Jose Pardo, the company’s newly appointed chairman, said.
“This involves not only an increased pace of expansion in areas contested by competition, but strategic entry into new territories. It may not be profitable for the first few years due to the high fixed costs of logistics, but the company will later be rewarded,” Pardo said.
The company ventured into the Visayas in 2012 with the opening of 7-Eleven stores in Cebu, followed by Negros in 2013, and last year established 7-Eleven presence in the Panay region.
The company’s closest competition is Mini Stop, operated by the Gokongwei family that has about 550 branches. Competition also comes from FamilyMart with 100 stores, the SM group’s own franchise of Alfamart and Minimart stores that have around 50 branches and the Villar family also has its own brand called All Day that has about 100 stores.