EMKE Group (Lulu ) - Q1 2013


SWOT Analysis

Strengths

  • EMKE is Qatar's joint largest hypermarket operator by store count.

  • Lulu benefits from considerable domestic brand equity.

  • EMKE has announced plans to strengthen its hypermarket footprint regionally.

  • As a regional chain, Lulu is a strong position to bene fit from anti-Western sentiment .

  • The company has continued to invest in logistics in order to improve operating efficiencies and profit margins.

Weaknesses

  • EMKE will have to invest heavily to maintain its position and take advantage of strong forecast hypermarket segment growth.

  • Qatar's small population means it will probably remain a supplementary rather than growth market for regional retailers.

  • Competition in the sector has grown significantly in recent years, as more international mass grocery retailers have entered the market.

Opportunities

  • Qatar's mass grocery retail industry remains some way off maturing, with significant room for organic growth remaining.

  • Demand for Lulu's private label range is set to continue strengthening, a process that is likely to be accelerated by the ongoing downturn, particularly in Dubai.

Threats

  • Lulu is likely to face greater competition over the long term, with more international retailers, such as Monoprix, eyeing the premiumised Qatari market.

  • The limited availability of land together with the expansion plans of rivals will increase expansion costs.

  • The ongoing political instability throughout the region could slow down EMKE's ambitious expansion plans.

Company Overview

Abu Dhabi-based food and retail group EMKE operates the Lulu hypermarket chain in the Middle East - the region's largest Indian-owned chain - as well as a number of supermarkets. The company has interests in shopping mall development and management and is also the UAE's largest retailer. It currently has three stores in Qatar.

Strategy

EMKE's strategy for its LuLu hypermarkets and supermarkets is simple. It intends to use the network to bring modern, organised retailing within reach of the entire Gulf population and beyond. It intends to pursue this aim through an ambitious and expansive store-opening programme. The group recently opened five new stores in Abu Dhabi, Ghayati, Bahrain and Oman to take its total store tally to 99, with plans for a 100th store in Ras Al Khaimah, UAE. This is a part of the AED1.5bn investment the EMKE Group has earmarked for UAE-specific projects in the near term. Expansions are also planned across the wider region, including outlets in Bahrain, Oman, Yemen and Kuwait, before eventually investing in expansion to Africa and India. Despite being expensive, the profitability and inevitable level of competition in the region in the coming years makes EMKE's rapid growth strategy for the LuLu brand a sensible one.

EMKE operates three stores in Qatar and is likely to continue building up its footprint as part of its wider Gulf region strategy. With non-organic targets lacking, organic store growth is expected to remain at the centre of its growth plans. With Qatari consumers as attracted to in-store value added offerings as their Gulf peers, in-store innovations are likely to remain a focus as competition within the hypermarket sector gradually stiffens. EMKE will also continue to stress their focus on hygiene, food safety, waste disposal and quality control as a means of drawing customers away from traditional markets. Larger outlets will also have a hot food section as well as ready-to-eat foods as the company looks to take advantage of the rising demand for convenience foods along with increasingly busy lifestyles, more women entering the workforce and rise in single-person households.

EMKE is currently constructing a new hypermarket in the city of Al Khor in northern Qatar, which will open sometime in 2013. The company has stated that it also plans to open two more outlets in Qatar in the near future, although no specific details have been provided

Recently, the company has also been focusing its expansions on its Express format, with three new stores recently opened. EMKE plans to use this smaller Express format as a means of penetrating more residential communities.

In 2011 the company launched the Lulu Doha Bank Credit Card in partnership with Doha Bank, the first credit card of its kind in the country, which offers card holders a 5% discount on every purchase. In 2011 the EMKE group earned revenues of US$4.5bn and forecasts 20% growth for 2012.

Financial Data

Estimated annual sales in Qatar: US$135mn

This article is tagged to:
Sector: Food & Drink
Geography: Qatar