Cover Story

CITY MART: SUPPLY AND DEMAND

From humble beginnings at her father’s retail space in Aung San Stadium, Daw Win Win Tint has grown Myanmar’s first modern supermarket, City Mart, into Myanmar’s preeminent retail and distribution group, City Holdings.

Taking the reins of the company at just twenty-one years of age, Daw Win Win Tint is now regarded as one of Myanmar’s foremost business figures. In 2014 she became the first Burmese woman to make Forbes’ Asia’s 50 Power Businesswomen list. City Holdings now operates over 200 different retail channels across the country.

MYANMORE sat down with the CEO to discuss the history of City Holdings, the group’s closely monitored reaction to the Covid-19 crisis, the value of market knowledge in an emerging economy, and doing business over twenty five years of rapid change and growth within Myanmar.

TEXT: SAM D. FOOT PHOTOS: ZWE WINT HTET

Q Tell us about your background?

City Mart started in 1996. The supermarket was a new type of business in the post-socialist era and people were unfamiliar with such shopping behaviours. At the time, my father owned five small retail units in the Aung San Stadium complex. My Aunt in Singapore - where I was studying at the time - suggested that we create a modern supermarket. I was so excited by this idea that I returned to Myanmar and persuaded my parents to let me run this business.

Since then, a lot has changed. Originally, we mainly served a small group of foreigners - in general, local consumers were intimidated by our modern presentation as people habitually shopped at places like wet markets. I even got advised by friends to remove the glass doors and switch off the air-conditioners as people’s unfamiliarity was driving an impression that we must be very expensive!

It took us at least 20 years to become a routine destination for shoppers. We have seen a tremendous lifestyle change in Myanmar’s larger cities - I am very pleased that we have been part of that consumer journey.

Q How has the make-up of your product offering changed from then to now?

Before City Mart started trading, dayto-day products in Myanmar were not packaged in a form that we could shelve. Early on we had to establish a processing centre as we could not find suppliers who could clean and wrap products according to the way we sold. We mainly sold imported fresh goods, which became increasingly available after 1992 when Myanmar began trading with regional countries. We now have a large number of local suppliers, our own small processing centres, and a significant range of imported goods.

Q How have the costs of doing business changed in that time?

The costs of operating the business have changed so much - in a negative way. Early on, overheads were low. Now overheads are up - the biggest are rent and human resources. HR costs have overtaken others: from 2011 to 2018 salary inflation was 20-25pc per annum! I’d say so, because we have seen a proportional rise in disposable incomes. The human resources costs are higher in the larger cities because of opportunities driven by growth across all sectors.

Q Has the rise of individual spending power been a driver of City Holdings’ expansion?

Yes, absolutely. We started in 1996 and soon saw many lifestyle changes - creating business possibilities outside the supermarket. We were pioneers in introducing different shopping formats - a pharmacy, baby stores, book stores, and bakeries - and later expanding into the hypermarket format with Ocean Supercenter. Even later, as urban population density increased, we added our convenience store City Express. Our vision was to be Myanmar’s benchmark of excellence in supply chain delivery - we are a consumer facing business so our vision has always been to fulfill customer’s retail expectations.

Q Whenyouwereexpanding,which f oreign companies influenced y our business model?

At the time, Walmart, Tesco, and Carrefour were the three largest, so we closely monitored them. Tesco was very impressive because they were leading with their Clubcard and digital interface systems. Regional retailers like Central Group in Thailand and SM in the Philippines are very strong family businesses, run very professionally, so we look up to them. After 2011, what we call the ‘second opening up’ gave us a real opportunity to connect with these global players.

Q Was there anythingin particular that you learned from this opening up?

We saw more opportunities, but then more challenges. The challenge of the open economy is different to that of the closed economy. When Myanmar’s economy opened, a totally new set of challenges emerged - most notably, more intense competition.

Q What were the challenges in a more closed economy?

2011 was very interesting - there was a 360 degree change. Before then, we were under both the military government and sanctions and we were being squeezed to the corner. The economy was slowing and the government tried to tighten trade deficits, so imports became very difficult - just surviving one day to the next without imports was a challenge.

Then, suddenly, we went from this very tight situation to a very open playing field! We had to really adapt to this new environment.

Q With regardstoadaptingtonew environments - how are you dealing with the current Covid-19 situation,especiallyfromalogistics and supply-chain perspective?

When the first Covid-19 patient was declared, the first challenge was panic buying. Panic buying creates a lot of abnormalities in the supply chain. The second challenge - water festival - came at the same time. Usually, during Thingyan, there is disruption as trade flows stop when we close our stores.

The third disruption came due to curfew regulations set up by different regions - sometimes these were not that coordinated. Some authorities would allow trucks to move, whereas another city might block them. Finally, because of the unfortunate happenings overseas, the supply of overseas products was disrupted.

Overall, the past three months were an unprecedented challenge to our supply chain. However, two weeks after Thingyan we were able to restock around 80pc of our products.

Q Would you say demand for your products increased as households were locked down and restaurants closed?

No. We saw a period of panic buying for two weeks. But after water festival there was a noticeable drop in demand. We did anticipate that more people would be cooking at home, but we did not really see that. A lot of expats have left the country and, as Covid has affected the broader economy, locals are now more mindful of their spending.

Q Do you have an idea of the split between local and foreign spending in your stores?

At Marketplace, expat spending drives around 30pc of revenue. At Ocean Supercenter and other businesses, expat contribution is much lower - around 5pc. in Myanmar over the last ten years?

Ten years ago, consumers did not necessarily shop but came for novelty and experience. Now shopping is routine, and consumers see a need for both ready to eat and international foods. In the past, if I went to dinner with ten of my colleagues, only two or three would be willing to try new types of food. Now everyone, especially younger consumers, want that experience.

Q How recent is that trend?

The last six or seven years. You also see the take-off of the F&B industry at that time - MYANMORE rode that wave!

Q Whatwas the inspiration behind the new City Value line?

Myanmar is an agricultural country but unfortunately we are still importing a lot of basic finished products from overseas. City Holdings’ Sustainability Initiative keeps track of local goods sold versus imports. According to our latest stats, 52pc of our revenue now comes from Myanmar made products - up from typically 40pc in the past. We want to be a change agent in improving the value-added industry.

Similarly, we launched our Pride of Myanmar program four years back to promote locally made products. This is proving successful - these product’s sales values are increasing 20pc year-on-year through co-marketing programmes, trade incentives, and preferred trade schemes for SME suppliers.

Q What is the best selling product over time in Myanmar, byunit sales?

By quantity it would be instant noodles! The Tom Yum flavoured instant noodle is very popular!

Q Is it still hard to find suppliers for certain items?

I would say fresh meat still has a lot of issues due to regulations. We are hoping that the government will bring reforms. Currently, you need a permit to operate an abattoir, and these are granted by bidding system with five to ten licences going to the highest bidders - not necessarily those that will operate the most hygienic practices or those that have an interest in long term investments.

If this changes, quality will improve and prices will drop significantly. To this end, we know that the government are discussing inviting foreign investment - without bidding.

For fruit and vegetables, availability is now higher and farmers can follow Myanmar’s Good Agricultural Practice And Organic Standards, Global Gap standards, and those set by The Growers Association.

Q This newoffice suggests that

City Holdings is going through organisational change?

Since last year we have operated under a new company structure - we call this ‘The Hub.’ We decided to merge separate entities into one group as we see that market dynamics are changing: there is more competition, consumers are more engaged since the country opened up, and industrial changes are happening due to tech change all around the world. The old top three global retailers are being superseded by Amazon and Alibaba.

We now organise our business in six sectors - retail, two distribution entities, property, F&B, and a new sector called Accelerator which focuses on five growth opportunities related to the consumer space - finance, logistics, manufacturing, agri, and tech. We now have a small stake in Food2U, a joint venture with last mile delivery service, Ninja Van, and equity in digital services company, NearMe. We see these as growth sectors - the idea is to connect the consumer ecosystem using technology.

In terms of consumer facing tech, we have City Mall online. Covid has accelerated the growth of City Mall to the extent that we had trouble meeting demand during the panic buying phase. We are ramping up this presence and adding new services such as click and collect and express delivery. We also have City Rewards which reached 500,000 sign ups last night! We are launching a new City Rewards app from which customers can buy mobile top-up and access City Mall online from the end of July.

Q So the changes are aimed to make the company more responsive and to allow you to benefit from scaling?

Yes, with this group we can synergise more and we can leverage our consumer data set. We have the largest consumer data set in Myanmar - one of our largest assets. Also, our

distribution network is the largest in the country: with these we believe we understand local consumer behaviours.

Q What are the challenges of the retail industry in Myanmar compared to the rest of the world?

Disposable income is low. We receive the same number of store transactions as regional players, but basket size is far smaller. Compared to Thailand, it is around one fourth. Also, Myanmar has become a very expensive place to rent - basket size is one fourth of our neighbours, but rent is on a par!

Q What future challenges are you gearing up for?

Increased competition from nonconventional competitors and tech change. We have Shop.com.mm - owned by Alibaba, who also invested in Wave Money - in the market, so you do not know now who you are competing with in the future. Also, you can see since Covid that the whole of Myanmar are selling things on Facebook. In a way it is good that digital is enabling these kinds of opportunities. As businesses we have to be really aware of these changes and think about how to compete and survive in this fragmented market structure.

Q Do you think Myanmar’s markets will fragment further, or revert back to more conventional big players?

I think it will go both ways - this is what we are seeing globally and Myanmar is following this trend.

Q How can Myanmar keep improving the quality and varietyofproducts it produces, and how can City Holdings get behind this?

That is a landscape change that we really want to happen. Covid emphasises that many supply chains need to be local. Agriculture and agri-based value-added industries hold the highest opportunity for Myanmar’s economic recovery, and we hope that the government will pay attention to their growth. New regulations relating to farmlands are necessary and more financing must be available within the industry. Importantly, Myanmar’s FDA will have to reform - the current process is too complicated, too tedious, and takes too much time. These reforms will need to happen!