Supermarts in the express lane

The retail grocery and convenience store sector may appear simple at first glance, with its organised aisles, recognisable brands and steady customer flow.

However, it is a fiercely competitive industry, offering substantial rewards to successful entrepreneurs.

Malaysia’s supermarket sector is also a crowded space. While major chains in the Klang Valley have become household names, numerous smaller and far-reaching stores thrive in the country’s outskirts.

The industry also garners significant investor attention, whether through capital markets or private equity deals, due to its cash-generating business model.

However, managing a successful supermarket chain is no easy feat. It demands meticulous oversight of inventory, supply chain, and staffing, alongside adapting to evolving consumer preferences and the growing shift towards online shopping.

The few standout players who have achieved remarkable success have done so by adhering strictly to a disciplined approach in perfecting every aspect of their operations.

That takes years of experience and refinement. For instance, two of the most prominent and successful premium supermarket chains in the Klang Valley – Village Grocer and Jaya Grocer – started as family-run convenience stores decades ago, gradually climbing the value chain to become the household names they are today.

Both eventually secured major private equity deals (see Table).

Their founders are part of the superstars of the industry who have been able to scale their businesses in unparalleled ways.

Then there is 99 Speed Mart Retail Holdings Bhd in the mini-market segment. Led by its iconic founder Lee Thiam Wah, the company has grown from a sundry shop in Klang in 1987 to nearly 3,000 stores – one of the most aggressive expansions in Malaysia’s retail history.

One factor behind its success is its tightly engineered logistics backbone. The group operates 20 distribution centres (DCs) nationwide and every store is strategically located within a manageable radius of its assigned DC.

To ensure seamless operations, 99 Speed Mart maintains a fleet of delivery trucks for transferring inventory from distribution centres to outlets.

The group achieves lower product pricing by leveraging long-standing supplier relationships and bulk purchasing to secure discounts.

Additionally, the company generates income through supplier incentives, such as volume rebates and promotional support.

“Its ability to maintain low prices and steady profits has positioned 99 Speed Mart as a strong competitor to hypermarkets that once dominated bulk buying,” notes an industry player.

This success has attracted significant investor interest, as reflected in its initial public offering (IPO) a year ago.

Today, the market values the company with a price-to-earnings ratio (PER) of 50.4 times, surpassing the 34.7 times it held at its listing and exceeding most global peers.

In Jaya Grocer’s case, the late Teng Yew Huat spearheaded its entry into a major private equity deal in 2016. The Asean Industrial Growth Fund (AIGF) – a PE firm established by CIMB Group and two Japanese institutions – acquired a 45% stake for a reported RM300mil.

In November 2021, the Teng family regained the 45% stake from AIGF, only to sell a majority interest in the supermarket chain to Grab Holdings Ltd, a Nasdaq-listed company, weeks later.

While the financial terms of both transactions were not officially disclosed, media reports put the buyback at RM411mil and pegged the sale to Grab at between RM1.5bil and RM1.8bil, suggesting that the Teng family walked away with a tidy gain.

Jaya Grocer has over 50 stores, mostly in the Klang Valley.

One of Grab’s first moves was to digitise the outlets and bring them onto the GrabMart platform. This resulted in its online sales as a proportion of total sales growing.

The Teng family is also behind the HeroMarket and Hero Save Mart chains, which collectively operate 36 outlets.

Two years ago, the family reportedly approached private equity firms with an offer to sell the Hero chains for around US$100mil, though no deal materialised.

Village Grocer, on the other hand, is driven by the Ong family, spearheaded by Ong Kim Too.

Starting from a modest neighbourhood sundry shop in the 1950s, the family established the Pasaraya OTK supermarket chain in 1997, which continues to operate today.

The family subsequently ventured into the premium supermarket retail with the launch of Village Grocer in 2004.

Village Grocer’s rapid growth caught the eye of private equity firm Navis Capital Partners, which in 2014 acquired a majority stake in its holding company, Village Grocer Holdings Sdn Bhd (later rebranded as TFP Retail Sdn Bhd, or The Food Purveyor), while the Ong family remained as substantial minority shareholders.

Navis reportedly invested US$68mil for the Village Grocer stake. TFP went on to acquire Ben’s Independent Grocer (B.I.G.) supermarket chain in 2017 for a reported US$14mil.

In 2021, TFP partnered with Tan Sri Desmond Lim Siew Choon to launch The Food Merchant, a premium supermarket concept positioned for rollout across Lim’s mall network.

The Food Purveyor is majority-owned by Navis, holding 67%, with the remaining shares distributed among the Ong family, Lim, and smaller stakeholders such as the Tseng family, co-founders of the BIG supermarket chain.

In its financial year ending Oct 31, 2023 (FY23), The Food Purveyor achieved a net profit of RM40.6mil on revenue of RM1.16bil, distributing RM67.7mil in net dividends to shareholders.

Navis previously sought to divest this investment in 2021, with reports suggesting the deal could have been worth about RM1bil.

A new interest is said to have emerged.

The buyout of TFP by a new group is reportedly in advanced negotiations.

A deal like this could lead to a new level of pricing for premium supermarkets in Malaysia.

It may be a foreign operator looking for a big presence in the local supermarket space.

Macrovalue Sdn Bhd, founded in 2022 by Datuk Andrew Lim Tatt Keong and Datuk Gary Yap Keng Fatt, is making its mark on Malaysia’s food and groceries supermarket sector.

Lim is known for his buyout and turnaround of Sogo Kuala Lumpur from its Japanese owners, 25 years ago, while Yap is a veteran in the local retail and supermarket sector.

Two years ago in 2023, Macrovalue acquired GCH Retail (M) Sdn Bhd, the owner and operator of Cold Storage, Giant, and Mercato, and they have managed to transform these loss making businesses.

Additionally, Macrovalue this year also purchased the Singapore outlets of Cold Storage and Giant from DFI.

Together with its Malaysian and Singaporeans operations, Macrovalue’s supermarket and retail business now generates more than RM5bil in annual revenue.

They now have seven Cold Storage outlets in Malaysia and 48 Cold Storage in Singapore. The group also has 100 Giant and Mercato stores and 34 Giant Minis in Malaysia and Singapore.

Despite entering into a competitive space, dominated by incumbents such as Village Grocer and Jaya Supermarkets, Yap reckons that they have a good chance to succeed.

“We recognise that the industry remains challenging, with tight margins and a fast-paced environment requiring quick decisions,” Yap says, adding that he regularly walks the shop floors and stays hands-on with daily operations.

Elaborating Lim says adaptability is the key.

“The name of the game is adaptation. You have to be very flexible and adjust quickly to shifting consumer behaviors. And we put a lot of effort and money into the refurbishment of our stores. Depending on their location, the look and feel of the outlets are curated to align with the preferences and expectations of the surrounding community,” Lim tells StarBiz 7.

Foreign ownership rules

An issue of discussion about the supermarket sector is whether it remains protected.

Previously, mini markets and supermarkets had to be fully owned by local players, as a means to protect the small “kedai runcit”.

However, these regulations have been relaxed for large operations. For example, hypermarkets or superstores with a sales floor area of 5,000 sq m or more, can be operated by foreign parties provided they have a 30% bumiputra equity partner.

The regulation on supermarkets is evident in Grab’s purchase of Jaya Grocer. It was subject to the Guidelines on Foreign Participation in Distributive Trade Services in Malaysia (2022).

These guidelines, issued by the Domestic Trade and Cost of Living Ministry, set a maximum foreign voting cap of 50% for smaller retail formats, excluding superstores.

In Grab’s case, 50% of Jaya Grocer is owned by a Malaysian entity, which Grab says is owned by one of Jaya Grocer’s employees, probably a Teng family member.

The Malaysian owner of Grab, however, has an agreement with Grab that allows Grab to control its business and financial strategies, including funding. Jaya Grocer’s preference shares also give Grab 75% economic interest.

As for TFP, it is unclear how Navis, a private equity firm with global limited partners, can hold more than a 50% stake, although preference share arrangements could be used to ensure Malaysians own at least 50% of the company. The ministry’s regulations do not allow foreign ownership of mini markets.

One industry veteran notes: “If the government had not controlled the mini market industry, 99 Speedmart would not be the leading chain today.”

The potential entry of mainland Chinese retailers, armed with deep pockets to grab market share even at a loss, poses a real threat, in the absence of strong safeguards.

“We have already seen this in other sectors like coffee, where Chinese brands have expanded aggressively,” he adds.

Be that as it may, it is a business where only the fittest survive. Over the last decade, a number of hypermarkets and supermarkets have exited Malaysia.

This year, UAE-based Lulu Hypermarket (often called Lulu Mart) closed all its hypermarket operations in Malaysia after almost 10 years, citing underperformance.

The high cost of living combined with fierce competition from local chains such as AEON, Mydin, Jaya Grocer, NSK and Econsave, which dominated with better pricing, promotions and proximity to residential areas, proved challenging for Lulu.

Tesco PLC exited the Malaysia and Thailand markets in 2020 after suffering heavy losses.

Potboy Group entered the Malaysian grocery retail market in 2016, focusing on online groceries and establishing retail stores.

It had 80 outlets at its peak in 2023, with a focus on competitive pricing, convenience, and direct-to-consumer marketing.

Due to competitive pressures from dominant players, such as 99 Speedmart, the retail venture collapsed soon after.

Smaller new-wave grocers

The newer entrants have focused on niches instead of competing with the big boys.

BilaBila Mart, for instance, has grown rapidly with the support of Lim Brothers from EXSIM Group.

The brand positions itself as a community-focused convenience-grocer with a curated product mix tailored to each location’s needs. Most often, it can be found in new upscale condominiums in city centres.

Co-founder Paramjit Singh says nearly half of BilaBila Mart’s products are Malaysian brands.

“We started in a crisis, so discipline and adaptability became part of our DNA. Competition is a given in this space – our job is simply to keep improving and stay genuinely useful to our customers,” Paramjit tells StarBiz 7.

BilaBila Mart, which recently opened its 100th store, was founded during the Covid-19 pandemic.

Paramjit recounts that during the pandemic, the team had to quickly adapt their operations, shifting to home deliveries and ensuring fresh produce remained available.

This nimble approach not only met customer needs but also built a loyal following, helping the brand achieve a RM150mil sales milestone in 2025.

Looking ahead, Paramjit says the goal is to grow the chain nationwide, with initial expansion targeting Penang and Ipoh.

It aims to open an additional 50 stores in 2026, and plans to head down south to Melaka and Johor by end-2026 or early-2027.

Another niche market targeted by homegrown neighbourhood grocer Qra is the wealthy, who are seeking luxurious and exclusive experiences and goods that reflect their values.

With only four stores in the Klang Valley, Qra is a “lifestyle supermarket” focused on health-related consumables and brands created by local entrepreneurs.

Former BIG co-founder David Tseng founded Qra, which is self-funded so far.

Malaysia’s grocery scene is evolving rapidly, with new players like MeMi ZoooZooo making their mark.

Launched by the Kenwingston Group of Companies, this 24/7 chain is part of the little-known developer’s bold expansion strategy.

With newer players like Macrovalue and BilaBila Mart expanding, this has also fuelled talk of potential listings.

Macrovalue’s Lim says the company has been approached by private equity funds but Lim said they have chosen to decline them, and prefer to retain ownership control, avoiding the shorter investment time horizons typically associated with such private equity fund investors.

“We prefer to prioritise building long-term value and will consider an IPO at a later stage. By then, we hope to be among the strongest players still succeeding in this increasingly competitive market,” Lim adds.