European grocery retailers have struggled with the realities of the scope and scale of operations in Asia Pacific, with British retailer Tesco became the latest to depart the region, selling off its Thailand and Malaysia businesses to CP Group in a deal that valued the business at US$10.6 billion in March 2020.
The trend began in 2018 when French grocery giant Carrefour, German supermarket operator Metro and Spanish’s chain Dia started selling off or taking lesser control of their China operations to their joint venture partners.
Another British retailer Marks & Spencer also sold its retail business in Hong Kong and Macau to its franchise partner Al-Futtaim of the UAE after exiting China in 2016.
Tesco had previously sold its remaining stake in its Chinese joint venture to its state-run partner China Resources Holdings for £275 million (US$355 million) in February 2020 and withdrew from South Korea in 2015.
Chris Zhou, the general manager for Mindshare’s MPower team in China explains this is happening because, with Chinese consumers’ disposable income upgrading, so too have their consumption trends. This means the Chinese no longer see price as the primary concern while shopping.
Instead, high-quality products, produce, innovation and sensorial experiences lead the way. As a result, a number of local premium grocery chains – both online and offline – have witnessed explosive growth around China.
“Take Hema, China’s leading online grocer owned by Alibaba as an example, they have built a rich offline-to-online experience, combining digital solutions in-store, allowing consumers to shop and pay seamlessly while providing a mobile-rich app alternative with incredibly fast and flexible delivery options,” he tells The Drum.
“In addition, China has witnessed an uptick in the number of small-scale grocers specializing in imported products in its first-tier cities, tapping not only into these cities’ thriving ex-pat communities but also China’s high-end consumers.”
He adds: “While local brands have been pumping millions of money into creating these unique, seamless digital shopping experiences, foreign grocery brands in Asia have kept their focus on pricing. As a result, they’ve failed to create the services and experiences Chinese consumers have come to expect, struggling to compete.”
This article first appeared in THE DRUM