7-Eleven operator DFI Retail wants a big bite of ready-to-eat food

WITH DFI Retail Group ’s top line stubbed by declining cigarette sales, group chief executive Scott Price is eyeing a growing appetite for ready-to-eat food – which he believes can transform the company’s chain of convenience stores into “quick-service restaurants”.

DFI Retail Group, which operates the 7-Eleven brand in Singapore, Hong Kong, Macau and Southern China, is moving towards driving traffic to its stores for cooked food – which Price says would put the convenience-store chain among players in the quick-service restaurants market.

“We are seeing, in essence, the opportunity for our 7-Eleven (stores) to become convenient quick-service restaurants,” he said on Friday (Aug 2), after the group posted robust first-half underlying profit driven by its food and convenience segments.

He added that this was a “different strategy for growth” that would become attractive.

He estimates that the quick-service restaurants segment in Hong Kong, which includes fast-food players such as McDonald’s and KFC, is valued at around US$4 billion. DFI Retail Group already has a finger in the quick-service restaurants pie, operating food brands in Hong Kong such as Maxim’s MX and Hong Kong Day.

His estimate is in line with data from analytics company GlobalData, which showed that the food service market size for quick-service restaurants and fast food in 2022 stood at US$3.3 billion. The figure is projected to reach US$3.9 billion by 2024, said Anuran Dhar, GlobalData practice head for food service.

With around 1,000 7-Eleven stores in Hong Kong, DFI Retail Group has “an enormous footprint” to offer “a pretty exciting, convenient proposition of both cold and hot foods”, said Price.

He noted that 7-Eleven is “powerfully known” across Asia, and that consumers in Japan were also likely familiar with it.

Japan’s 7-Eleven stores are considered subject-matter experts in the ready-to-eat arena, he said, adding that DFI’s collaborations with the chain have even put onigiri, a Japanese rice ball, on the menu.

DFI Retail Group’s pivot to ready-to-eat comes as cigarette sales in the stores have fallen. In the group’s results, it noted that like-for-like sales performance in Hong Kong was hit by reduced cigarette sale volumes following tax increases that kicked in at the end of February.

In comparison, 7-Eleven in Singapore and Southern China had robust like-for-like sales growth, driven by increased foot traffic and strong performance in non-cigarette categories – led by ready-to-eat.

The trend of the ready-to-eat segment gaining while the cigarettes segment declines may be better in the long term. Price said: “Ready-to-eat is obviously a huge driver of margin expansion, and significantly better than cigarette margins.”

The growth in its ready-to-eat food portfolio would shore up a decline in cigarette sales, he added.

“As cigarettes play less in our portfolio from a revenue base, we have an enormous opportunity to replace that with ready-to-eat,” he said.

On Thursday, the group reported that its underlying profit more than doubled on-year to US$75.6 million for the first half ended Jun 30, from US$33.3 million in the year-ago period.

This is despite its revenue dipping 4 per cent to US$4.4 billion year on year, from US$4.6 billion.

In the convenience division, which includes ready-to-eat foods, profit rose 73 per cent in H1 FY2023. Sales for ready-to-eat grew 13 per cent over the period, the group noted.

Shares of DFI Retail Group gained 2.3 per cent, or US$0.04, to close at US$1.78 on Friday.