S.Korean convenience stores extend rivalry to Malaysia

South Korea’s two largest convenience store chains GS25 and CU are branching out into Malaysia in search of new growth markets.

GS Retail Co., the operator of GS25, signed an agreement with Malaysia’s food retailer KK Group on July 9 to open its outlets in the Southeast Asian country, GS said on Monday.

Under the master franchise agreement, GS25 will open its first store in Malaysia next year, which KK Group will operate on GS’ behalf. The Korean convenience store chain plans to launch as many as 550 stores there within the next five years.

KK Group runs Malaysia’s convenience store brand KK Mart, hotels and resorts.

GS25’s archrival CU made its foray into Malaysia one year ahead of GS. In April 2021, CU opened its first store in the country in a partnership with myNews Holdings, a Malaysia-based supermarket chain.

CU, a unit of BGF Retail, has brought the number of its stores in Malaysia to 100. CU aims for a fivefold increase in its convenience store number there to 500 within the next five years.

In Malaysia, the US-based 7-Eleven is the dominant leader in the convenience store market with 2,400 outlets across the country.

Another South Korean supermarket brand E-Mart 24 is lagging behind GS25 and CU in Malaysia. The unit of retail giant Shinsegae Corp. runs only 20 stores in the Southeast Asian country since it entered the market in June 2021.

MONGOLIA

Both CU and GS25 are also competing head on in Mongolia. CU’s stores in the central Asian country exceeded 200, four years after its entry into the country in 2018.

Earlier this year, CU acquired Circle K, a US-based convenience store chain, and expanded its market share in Mongolia to 70%.

By comparison, GS25 is operating 70 outlets in Mongolia since it ventured into the country in May 2021.

The saturated domestic market has been pushing them to look abroad. In South Korea, GS25 and CU operate about 15,000 stores each as of end-2021.

As the growing popularity of Korean content fanned interest in Korean cuisine, or K-food, Korean convenience stores were courted as franchise partners in Southeast Asia.

Korean retailers bet on the larger working-age population in Southeast Asia. But they have been shifting to master franchise-based expansion in the region, rather than having direct ownership, due to regulatory uncertainty there. 

Meanwhile, 7-Eleven, the No. 3 convenience store brand in South Korea, is operated by Lotte Group in Korea under a franchise agreement and pays tens of millions of dollars in royalties to its US headquarters.

Write to Jong-Kwan Park at pjk@hankyung.com
Yeonhee Kim edited this article