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SCMP Reporter

DAIRY Farm is moving into the Japanese supermarket sector, setting up 70 discount food stores over the next five years.

  The Jardine Group's international retailing chain yesterday announced a US$100 million joint venture with Japan's fourth largest supermarket operator, Seiyu Group, to be named DFI Seiyu.

  The new company will be 60 per cent held by Dairy Farm and 40 per cent by Seiyu.

  Together they hope to open a string of new stores of 7,000 sq ft to 14,000 sq ft, starting in the Kanto region.

 Dairy Farm managing director Graeme Seabrook said: 'The Japanese market represents a significant opportunity for Dairy Farm and fits well into our Asia-Pacific and international development programmes.

  'We view this as a long-term investment and potentially the largest and most exciting business opportunity for Dairy Farm in the Pacific region.'   The $100 million estimated investment required to set up the chain would be spread over five years. Dairy Farm and Seiyu would each provide $35 million.

   The balance would be raised through bank finance.

  Dairy Farm said its contribution would be financed from existing cash resources.

  While the start-up would incur losses, Mr Seabrook said these were not expected to have a material effect on the company's overall results.

  Dairy Farm is due to announce its annual results for 1994 on March 29, shortly before de-listing from the Hong Kong Stock Exchange.

  Over the years, Dairy Farm - which also owns Wellcome, Mannings, 7-Eleven and Ice Cream Express - has started numerous overseas ventures that have enjoyed varying success.

  The company's discount supermarkets in Australia have a significant share of the grocery market.

  Originally based in New South Wales, the Franklins chain has actively expanded into other Australian states with now more than 215 outlets to its name.

  Its expansion in Britain began in 1987 with the acquisition of a 25 per cent stake in Kwik-Save, a listed discount food retailer.

  There are now more than 745 Kwik-Save stores and about 70 Late Shoppers scattered around the country.

  In Spain, it ran into difficulties after acquiring the grocery and household goods chain Simago in 1990. Simago laid off 25 per cent of its employees in 1991 and analysts predicted it would take four years to turn the company around.

  A month after the Spanish acquisition, Dairy Farm acquired Woolworth's in New Zealand, adding another 61 stores.

  Dairy Farm is also active in Taiwan, where it now has more than 40 supermarkets.

  Of this latest venture, Chris Nelson, chief executive of Dairy Farm Asia, said:    'The recent difficult economic climate in Japan has created a growing consumer demand for value, particularly in every-day grocery purchases.

    'We believe we can bring significant benefits to Japanese shoppers through Dairy Farm's specialist expertise in discount marketing.' 



Dairy Farm going into Japan stores