China's Sun Art beats Wal-Mart with political savvy

TAIPEI Mon Jan 28, 2013 12:30pm GMT

Samuel Yin, chairman of Taiwan conglomerate Ruentex, which is a major Sun Art shareholder, attends a news conference in Taipei January 28, 2013. Sun Art Retail Group Ltd., China's biggest hypermarket operator, is looking at expanding into Indonesia, Malaysia and Vietnam, said Yin. REUTERS/Pichi Chuang

Samuel Yin, chairman of Taiwan conglomerate Ruentex, which is a major Sun Art shareholder, attends a news conference in Taipei January 28, 2013. Sun Art Retail Group Ltd., China's biggest hypermarket operator, is looking at expanding into Indonesia, Malaysia and Vietnam, said Yin.

Credit: Reuters/Pichi Chuang

Related Topics

Quotes

   

TAIPEI (Reuters) - Sun Art Retail Group Ltd (6808.HK) overtook rivals such as Wal-Mart Stores Inc (WMT.N) to become the No.1 hypermarket operator in China by supporting the local economy and counting on consumer loyalty to Chinese brands, said a major shareholder.

By contrast, foreign competitors in China lack the same political savvy, the cachet that comes with being seen as a Chinese firm as well as knowledge of the local market, Samuel Yin, chairman of Taiwan's Ruentex Group, one of Sun Art's two main owners, told Reuters in his first interview with overseas media on Monday.

"We're like an arm of local governments," said Yin. "We represent what benefits Chinese customers, so all local governments are very supportive of us. We help them stabilise consumer prices and add jobs."

Hong Kong-listed Sun Art, a joint venture between Ruentex and privately held Groupe Auchan SA AUCH.UL of France, entered the China market in 1998, three years after Wal-Mart, but overtook the U.S. behemoth in 2010, extending its lead in 2011.

It operates 240 hypermarkets in China and commanded 12 percent of that market by revenue in 2010, ahead of Wal-Mart which had 11.2 percent and Carrefour SA (CARR.PA) which had 8.1 percent, according to research firm Euromonitor.

By contrast, foreign rivals have it harder, just by virtue of being foreign.

"There have been many occasions when local governments invite business to invest and our competitors have been asked to leave during those meetings," said Yin.

Anti-French sentiment emerged in China in 2008 after rumours grew that Carrefour and LVMH (LVMH.PA) shareholder Groupe Arnault backed the Dalai Lama. Carrefour's then-CEO denied the rumours. Yin said belief of Carrefour-linked support for the Dalai Lama had hurt the French supermarket operator.

Nationalism plays a big part not just with politicians but also with the ordinary consumer, he added.

"The biggest mistake that Carrefour has made is that they think as long as their prices are low, customers will come. That's not necessarily true. Chinese customers are quite patriotic."

Two calls to a Carrefour representative in China seeking comment on Monday were not answered. Representatives for Wal-Mart were not immediately available for comment during Asian business hours.

Wal-Mart, which has 370 stores in China, said last October that it planned to open 100 more stores and create 18,000 jobs there over the next three years. Sun Art said last August that it aimed to open 42 to 49 stores in 2012 in China, compared with an initial plan of 50 per year.

Yin argues that Sun Art has also outdone Carrefour and Wal-Mart by offering cheaper goods and forging better relationships with suppliers.

"We are smaller, making us more careful about every move we make. We localise and we cut the number of our suppliers, making our products cheaper."

Wal-Mart's procurement was done at too high a level within the company, he said, adding that the U.S. retailer had also misstepped by starting off selling general merchandise and not putting enough effort into fresh vegetables and fruit.

"Its top people procure stuff, but they don't know if it will sell well in the China market. They forget that they are doing business in China."

Yin, who is attempting to burnish his profile by launching the Tang Prizes -- recognising achievements in areas as biotech and law -- was also bullish about Sun Art's prospects both in China and abroad.

Chinese growth will be propelled by the country's rapid urbanisation, he said.

But Sun Art is also looking abroad to other Asian countries that are showing strong economic growth, and is currently thinking about expanding into Indonesia, Malaysia and Vietnam, he added.

Yin is also a major investor in Taiwan's Nan Shan Life Insurance, which he and other investors bought from American International Group (AIG) (AIG.N) for $2.2 billion (1.4 billion pounds).

(Additional reporting by Jeanny Kao, and Donny Kwok in Hong Kong; Editing by Edwina Gibbs)

FILED UNDER: