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.
Source: Factset, Company reports and FSSA Investment Managers, as at 31 December 2020.
Disclaimer: Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of FSSA Investment Managers’ portfolios at a certain point in time, and the holdings may change over time.