Asean grocery retailers gain as Covid-19 shifts dining to the home: DBS

APRIL 16, 2020 - 7:52 PM

SOCIAL distancing measures and lockdowns arising from the Covid-19 pandemic bode well for supermarkets across Asean, helping to boost sales albeit at the expense of F&B retailers, DBS Group Research said in a report.

"Broad datapoints on food items, particularly groceries across our key Asean markets are bucking the general consumption trend with growing sales, contrary to declining sales in discretionary and general items," DBS said in a report published on Wednesday.

"We overweight Asean grocery retailers as Covid-19 triggers a regional shift of food consumption to homes," the bank said, citing its top picks to be Singapore and Thailand-listed supermarkets and hypermarkets.

This strong demand at supermarkets is likely to last for a few more weeks, the bank said, as authorities in the region have discouraged people from going out.

However, sales at convenience stores are expected to be weak with fewer people out and more people expected to stay in and cook. At the same time, there has been a reduction in spending on discretionary items.

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While online sales is picking up, DBS noted that this is small compared to the sheer size of Asean's grocery retail market. It estimates that online sales comprise 5 per cent of the modern grocery retail market, which is worth over US$60 billion.

In Singapore, while February's retail sales declined 8.6 per cent year on year, supermarkets bucked the trend with a strong 15.5 per cent year-on-year growth, DBS noted. However, food and beverage foodservice - a segment that includes fast food, restaurants and caterers - saw its steepest decline since 2018.

As Singapore is on a circuit breaker from April 7 to May 4, DBS analysts said brisk sales at grocery retailers, F&B food service outlets near residential areas and online channels. Restaurant operators however will not ride on this wave as a significant portion of Singapore's workforce stay away from their workplaces.

It is a similar case for Malaysia, which has seen its movement control order extended to April 28. In addition, the selective closure of wet markets are driving sales to supermarkets, DBS notes, while online channels and delivery services are seeing booming business. Malaysians are also stocking up essentials and fast-moving consumer goods.

However, convenience store operators are not likely to benefit, with people staying in, the bank said, given that many of them operate at high-traffic areas such as high street and office areas, which have now become ghost towns.

In Thailand, which is under lockdown until April 30, people have started shifting their grocery spending from supermarkets to hypermarkets, the bank said, since the former are normally located in malls.

While online sales have grown at double digits in the past few years, store-based still account for more than 90 per cent of retail sales as locals are not as familiar with online sales, DBS said.

As for Indonesia, DBS noted that most people still love shopping for groceries at traditional stores like wet markets, compared to supermarkets or minimarkets. However, the large-scale social restrictions unti April 23 have resulted in the closure of most wet markets, thus shifting consumption to supermarkets, minimarkets and online.

The bank believes traditional stores will still dominate Indonesia's grocery sector in future, but higher growth will be booked by minimarkets and online grocery platforms. It noted also that supermarket players are downsizing due to competition from minimarkets.