In its early years, Cold Storage was an independent small retail depot selling mainly frozen meat from Australia, and its target customers were mostly Europeans. From 1965, to achieve economies of scale, Cold storage adopted the concept of multiple retailing, where bulk buying activities and distribution of food products to a network of stores throughout Singapore and Malay Peninsula was carried out (Goh 2003). Cold Storage also pioneered the manufacturing of condensed milk and other milk products such as UHT milk, Magnolia soft drinks and soya bean milk to serve the ever changing consumer taste buds (Goh 2003). In 1993, Cold Storage, with 11 stores at that time, was acquired by Dairy Farm International Holdings who had plans on expanding its operations in Singapore. Even after being acquired, Cold Storage’s primary vision (strategy) remains unchanged; always to cater to customers’ unique needs. This case study highlights the background and how Cold Storage attained its current success to-date. It also emphasizes the present environmental factors which led to their strategic decision to sustain its competitiveness. Competitions
Source: EuroMonitor International 2009
Like all other companies, Cold Storage faces intensive competitions. Till date their major competitor in the supermarkets industry is NTUC FairPrice, with a total of 81 outlets islandwide. The co-operative makes much of its efforts to keep prices low on basic products for the benefit of the less well-off. Initially, Cold Storage targeted middle to upper income segments of the consumer market, emphasizing on freshness and quality (Goh, 2003). In contrast NTUC FairPrice focuses on patriotism and low prices to promote sales (Euromonitor, 2004). Recently, NTUC FairPrice Co-operative Pte Ltd launched new concept stores; FairPrice Finest in 2008, to compete with Cold Storage in the upper income segment of the supermarket industry. Coming a distant third in the supermarket segment, domestic player Sheng Siong specifically targets lower income groups. It operates 15 no-frills concept supermarkets in secondary retail locations in the heartlands (MediaCorp Today “Neighbourhood shops still feel gloom”, 10 January 2005). Sheng Siong focuses on cheaper products from China and the Asean region. Reference
In order to maintain its competitive position in the supermarkets industry, Cold Storage was involved in a strategic acquisition of Shop N Save Supermarket in Singapore during November 2003 for a total consideration of US $52 million (EuroMonitor International, 2004). Shop N Save was previously jointly owned by Singapore’s QAF Limited and Delhaize Group and it had a total of 35 stores in Singapore. A leading discount supermarket chain in Singapore, Shop N Save exemplifies simplicity and efficiencies. It is committed to provide convenience and competitive pricing to customers of the lower income segment, without compromising the quality and freshness of the products sold (Cold Storage, 2008). Simon Keswick, Chairman of Dairy Farm International commented that the acquisition of the 35-store Shop N Save chain in Singapore complemented Cold Storage’s operations. This acquisition represents the successful implementation of their strategy to build on leading positions in existing markets (Dairy Farm International, 2003). For the past 3 years since 2006, the market shares of NTUC FairPrice have decreased steadily from 47.0% to 46.3%. Inversely, the market share of Dairy Farm International Holdings increased slightly from 21.7% to 22.0% (Euromonitor, 2009). Financials
Source: EMIS, 2009
Cold Storage contributed a significant amount of earnings to the East Asia of Dairy Farm’s business. Net profit increased 29.3% to SGD 61,367,000 between 2005 and 2007. Return on equity shot up by 10.35% in 2007 as compared to 2005. Activities
Cold Storage recognises the need to increase its flexibility to consistently develop competitive...