All under one roof
Demand for a more convenient way to buy home and building materials spurs brisk growth for SCG’s Pro1 stores in Myanmar.
The rapid growth of the Myanmar economy has been a boon for providers of building materials for everything from big-ticket infrastructure to DIY home repair and renovation.
Pro1 Home Center, which pioneered the retail building material business in Myanmar in 2014, has enjoyed substantial growth with six megastores now operating in the country. Its latest branch, in Myanmar’s fourth largest city Mawlamyine, has been in operation for 15 months and is its largest to date.
Pro1 Home Center Co Ltd was founded in 2013 through a partnership between
SCG, Thailand’s top industrial conglomerate and its Myanmar partner Pro1. SCG’s joint-venture company, Global House International (GBI), holds a 30% stake in Pro1 Global Co Ltd, a leading distributor of building materials and home decoration products in Myanmar.
GBI was formed by SCG and SET-listed Siam Global House Plc, a building materials and home improvement retailer in which SCG owns 30% share. Pro1, a family-owned import-export business, has been a partner of SCG in Myanmar for 17 years.
“We chose to do business in Myanmar due to the market potential,” said Paramate
Nisagornsen, vice-president for regional business of SCG Cement-Building Materials Co.
“Myanmar is like the Thai market 30-40 years ago. When people wanted to buy building materials, they had to go to many shops which sold only one or two types of building material each, whether it’s steel or cement. Those who wanted to build a new toilet, for example, have to drive from one shop to another to get all the materials they need.”
Now that growth in the residential segment has stabilised, demand for building materials in Myanmar is being driven mainly by the industrial sector, as foreign direct investment is leading to the construction of new factories. Leading Thai manufacturing companies, for example the paint maker TOA and the consumer goods group Osotspa, are among those that have started to invest in Myanmar.
Among the recently relaxed investment regulations in Myanmar is one that allows 100% foreign ownership in a retail building material business, but with a minimum investment of US$5 million, said Mr Paramate.
“There is relatively no direct competition in the retail market where Pro1 is operating now, but we have heard that foreign players have started to explore market opportunities here now that the government has opened the segment to foreigners,” he told a group of Thai journalists visiting the Pro1 store in Mawlamyine recently.
“To make sure that family-run shops won’t be affected [by foreign retailers], the government says that if they want to come, it has to be a big investment. Potentially,
that kind of investment is going to compete with us directly,” he said.
The first Pro1 Home Center opened in Yangon in 2014. There are now three such stores in the country’s largest city and two others in second-ranked Mandalay, plus the one in Mawlamyine. The seventh branch is being built in Taunggyi, the capital of
Shan state in the north of the country. It is expected to open early next year.
“We have been able to open many branches (in just four years) because of the success story we have created,” said Mr Paramate. With same-store growth growing by double digits each year, Pro1 expects sales this year of around 3.6 billion baht.
Pro1 Home Center contributes around 30% of SCG’s annual turnover in Myanmar. The conglomerate’s other businesses include cement, downstream products such as ready-mixed concrete, and trading. It started to ship cement to Myanmar from Thailand more than two decades ago and its products available there now include Cotto sanitaryware, cement and other building materials such as fibre-cement boards.
SCG also operates a cement plant under Mawlamyine Cement Limited (MCL), but it also imports some cement from the SCG plant in Thung Song, Nakhon Si Thammarat, in southern Thailand, to serve demand in southern Myanmar where the Dawei special economic zone (SEZ) is taking shape. MLM, a joint venture between SGC and Pacific Link Cement Industries, opened a $400-million plant in the capital and largest city of Mon State in mid-2016 and has annual turnover of 3 billion baht.
While cement imported from Thailand costs slightly more in Myanmar because of logistics costs, buyers are willing to pay a premium based on their perception of Thai product quality, Mr Paramate said.
At Pro1 Home Center, products are sourced from China, Thailand, Malaysia and Singapore as well as locally. Best-selling products are mainly for decoration led by ceramics, sanitaryware and home appliances.
Creating a more convenient way to shop has been the key to the company’s success, he said.
“If we look at the customer journey in Myanmar, they have plenty of pain points. So if we build a store that has everything the customer wants, we will serve the customer better.
“The idea of doing retail business is to respond to customer demand more effectively. In the past, we only sold what we produced. When we do [retail], we are able to think of service solutions and have to build a network to source more products to serve customer demand better.”
Mr Paramate said Pro1 was now considering a few more potential locations in Myanmar, based on site suitability, traffic, population, and the purchasing power of the local people.
“We have plans but how to execute them is the other thing, depending on what we find. For retail business, the location is very important.”
In addition to more store coverage, the partners are looking to integrate future supply chain management and to use IT to support omni-channel sales, online and offline.
In Indonesia, meanwhile, SCG has acquired a 29% stake in PT Catur Sentosa Adiprana Tbk (CSA), a l eading modern trade retailer of home products and building materials under the Mitra10 name. It leads the local market with 27 stores nationwide.
The Indonesian joint venture aims to have as many as 50 Mitra10 stores by 2021 to meet soaring demand in the country. CSA also has a sophisticated distribution business that serves more than 30,000 retail shops nationwide.
“The common theme for expanding the business to foreign countries is to have a local partner,” said Mr Paramate. “When we enter a country where laws and regulations have yet to stabilise, a local partner is the key to pave the way for the project to move ahead more smoothly.
“Indonesia is an example of a successful business because of the local partner there.”
“Myanmar is like the Thai market 30-40 years ago. When people wanted to buy building materials, they had to go to many shops which sold only one or two types of bu ilding material each” PARAMATE NISAGORNSEN Vice-president for regional business, SCG Cement-Building Materials Co