Transformation of a century old retail franchise

Dairy Farm, a leading pan-Asian retailing group, is an example of a dominant consumer franchise. We have been shareholders of Dairy Farm in our Asia Pacific portfolios for many years and believe it is a high quality business with a long history of family ownership and long-term stewardship (130 years).

Part of the Jardine Group, Dairy Farm has around 10,000 stores across 11 countries, with a collection of broad retail franchises across much of Asia, including drug stores, supermarkets, 7-11 convenience stores, IKEA and Maxim’s (a joint venture catering and restaurants business). Four of these businesses have performed quite strongly and consistently. However, the supermarkets business and Southeast Asia as a region has been struggling.

CEO, Ian McLeod, joined Dairy Farm almost five years ago to turn the supermarket business around, with a strategic plan, leadership changes and the introduction of centralised multi-brand buying, property negotiation and processing. McLeod has experienced such a turnaround plan before. In 2008, Wesfarmers (in Australia) brought him in to revive Coles supermarkets, which had suffered from years of under-investment and a lack of attention to the basic retail details. With the introduction of new management, new systems and proven retail discipline, the business subsequently recovered and has grown sharply since.

Sales (USD million)

Source: Factset, Company reports and FSSA Investment Managers, as at 31 December 2020.

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