7-Eleven says China joint venture OK'd

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Last updated at: (Beijing Time) Wednesday, January 07, 2004

7-Eleven says China joint venture OK'd

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Convenience store king 7-Eleven Inc. said it won approval from China to develop outlets in Beijing and surrounding provinces in a move that boosts its access to China's increasingly wealthy consumers.

Dallas, Texas-based 7-Eleven, which owns or franchises 25,200 stores worldwide, said late on Monday that China's Ministry of Commerce approved a venture between Seven-Eleven Japan Co. Ltd., Beijing ShouLian Commercial Group Co. and China National Sugar & Alcohol Group Corp.

The first stores are expected to open in the spring of 2004 and 7-Eleven has said that it could open as many as 500 stores in the Chinese capital.

"Everyone wants a piece of the Chinese market. There's lots of players, both local and foreign," said Amelia Mehta, a Singapore-based analyst with ING Financial Markets.

Taiwan's President Chain Store Corp., which runs over 3,000 7-Elevens on the island, has also been chosen by 7-Eleven to open stores in Beijing and it said on Tuesday it was in talks with Seven-Eleven Japan over the size of a stake in the Beijing venture.

A spokeswoman told Reuters that President Chain was initially offered a 14 percent stake in the venture but wanted more exposure to one of the world's fastest growing retail market.

Its shareholding will be part of Seven-Eleven Japan's 55 percent stake, she added.

Hong Kong-based Diary Farm International, a unit of Jardine Strategic Holdings (JSH.SI), owns a 65 percent stake in a joint venture with Sinogiant that owns 100 7-Elevens in China's southern Guangdong province.

As sales growth slackens in mature home markets, many foreign retailers such as Wal-Mart Stores Inc. and France's Carrefour SA are piling into China's retail market, attracted by a sector growing at 10 percent a year as the country's economy booms.

China is Asia's second largest retail market behind Japan with sales of US$495 billion a year and many firms are willing to suffer losses to grab market share, analysts say.

"Any retailer entering a new market needs to reach a critical mass of convenience stores before it can turn a profit," said Mehta.

All of China's existing 7-Eleven stories are in Guangdong province. Shanghai's retail landscape is much more competitive than Beijing with at least 3,500 convenience stores, including local names such as Kedi and All Days.

Thailand's Charoen Pokphand Group, 70 percent owner of the 7-Eleven chain in Thailand, has also vied for rights to open stores in mainland China.

7-Eleven has said Dairy Farm and Charoen Pokphand would be considered for future expansion in China.

7-Eleven has said that it hopes to build its presence in Beijing, home to roughly 14 million people, before the capital city holds the 2008 Olympics.

Rules cap foreign ownership of chains at 65 percent but under pledges made to the World Trade Organization, China will eventually lift joint venture restrictions on most chain stores.

Source: agencies

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