Central to splurge B10bn a year on overseas shopping [Bangkok Post, Thailand]
(Bangkok Post (Thailand) Via Acquire Media NewsEdge) Oct. 21--Central Group of Companies will set aside at least 10 billion baht a year on overseas acquisitions as part of the strategy to enlarge its investment portfolio.
Group executive chairman Sudhitham Chirathivat said there are numerous retail opportunities worldwide waiting to be tapped.
In any case, the investment is unlikely to exceed 100 billion baht per deal.
"Unlike CP [Charoen Pokphand Group], we're not going to make a bold move," he said, referring to the 188.88-billion-baht deal by CP All Plc, a unit of CP, to buy Siam Makro Plc's cash-and-carry store chain early this year.
The company has also adjusted its investment plan in international markets.
The previous plan called for two retail projects in Europe every year but the number was reduced to one as the economy there has yet to improve. The main targets are tourist destinations.
"Although we focus mainly on tourist spots, we don't ignore local buyers. For every project, we always weigh domestic purchasing power to balance risks," Mr Sudhitham said.
Due to a limited pool of experienced management talent, the group will focus primarily on Europe and Asean in the foreseeable future.
"When the world-famous Saks Fifth Avenue in the US sought a buyer, the offering price was very attractive. But we decided not to take a chance because of this problem. It's difficult to find a proper team to run a business abroad, especially the CEO," said Mr Sudhitham.
In doing business overseas, the group has taken the human resource issue very seriously. The teams will have to deal with differences in culture and consumer behaviours, as well as regulatory issues, which can easily bring the group legal troubles unintentionally.
"Running businesses overseas is not easy because of cultural differences. It's hard to fully understand consumers' demand in another country. Asean is a relatively easy target for us because of similar cultures and climate," he said.
He added the main obstacle is Thai managers are not keen on working far from home, even in neighbouring countries such as Indonesia.
In terms of ownership, the group looks to either acquire a 100% stake in a business or hold 30-40% so long as it is allowed to participate in management.
The main strategy in its foray is to buy brands with ample room for improvements as they could quickly generate revenue once the improvements are done. Its deal in Italy two years ago was fully based on this strategy.
"We acquired La Rinascente, Italy's oldest retailer in 2011. Not only did the deal put us in the limelight, the brand has also strengthened our business portfolio. Only three months after we bought La Rinascente, we received numerous offers from many leading retailers from everywhere such as France, Switzerland and Germany," he said.
But he said the group will make the next move only after La Rinascente is strong enough.
The Italian department-store chain also gives it an edge in terms of connections with international luxury fashion brands.
For future acquisitions in Europe, the group may use La Rinascente or Central brands to replace acquired brands if their value is declining.
Apart from Europe and Asean, it is also eyeing Dubai, Japan and China.
Mr Sudhitham said La Rinascente performed better than expected in the first nine months of this year, with sales growth exceeding the 7-8% target, due to more tourists coming to Italy, branch renovations and pro-active marketing activities.
With its far-reaching network, the company plans to support Thailand's One Tambon One Product (Otop) and goods made by Thai SMEs to be sold at La Rinascente branches.
Last month, Central collaborated with the Commerce Ministry to hold the "Thai Week Festival" to promote Thai products through the global retail chain.
"The collaboration underscores the potential and strengths of our distribution channels and the Central brand. It should also encourage other Thai companies to join forces with the public sector to support the global distribution of Thai products," he said.
Apart from Italy, Central has assets in China, Indonesia, Vietnam, Myanmar, Malaysia and Denmark.
(c)2013 the Bangkok Post (Bangkok, Thailand)
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