This article first appeared in The Edge Malaysia Weekly on February 3, 2020 - February 9, 2020

AS part of the reorganisation of its operations, GCH Retail (M) Sdn Bhd will exit Sabah and Sarawak within the next couple of months. GCH operates Giant, Cold Storage, Mercato and Jason’s branded hypermarkets and supermarkets. Its departure will add to the dozens of stores shuttered in Peninsular Malaysia over the past couple of years. It is understood that plans are already underway for a smooth exit and the entire process is likely to be completed over the next two months.

The retailer’s exit strategy for Sabah and Sarawak, where it opened its first Giant store in 2006, is different from that in the peninsula as it will be transitioning its outlets to established local players.

The Edge has learnt that the retailer had 16 stores in the area prior to Chinese New Year. On Jan 23 its website showed that there were 11 stores in Sabah, four in Sarawak and one in Labuan. A week later, Giant’s website only listed the Sarawak and Labuan stores.

The retailer’s store count today stands at 62, fewer than half of its peak of 147 in 2014. Many of the stores have shut due to the challenging operating environment.

GCH, which is part of Hong Kong’s Dairy Farm International Holdings Ltd (DFI), is in the process of transferring the business in Sabah/Sarawak to new owners, rather than shutting them down.

When contacted to confirm the talk about Giant leaving Sabah and Sarawak, a GCH Retail spokesman tells The Edge, “In Sabah and Sarawak, we are in the process of transitioning all our stores to well-established local retailers who will preserve these stores for the good of our customers in the long term. This change has also presented new opportunities for team members, with many being hired by the new owners.

“We have consulted with the appropriate officials and ministries to ensure we have proceeded with this transition in the most efficient way possible, with the least impact to our customers and team members, whom we will take care of as these changes take place.”

It is learnt that one of the local players identified to take over the Giant stores is Bataras Sdn Bhd.

The spokesman adds that health and beauty stores, which operate under the Guardian name, will continue to operate. “This transition of our food stores [supermarkets and hypermarkets] to local ownerships does not affect our health and beauty business. Guardian stores are performing well in Sabah and Sarawak and we continue to invest in them in serving the people there.

“We firmly believe this is the right transition for our food stores. We have every confidence that the business, and the people in it, will thrive under the new ownership. We are deeply grateful to local community, our customers and all our team members for their years of hard work and service.”

GCH is the only foreign hypermarket operator that has ventured into Sabah and Sarawak.

“As part of our transformation plan, we have been working hard to reset and reshape our Giant supermarket and hypermarket operations to better respond to our customers’ needs and the changing retail environment. In some locations in Malaysia, that has meant a contraction of space and store network and, in others, we have been reinvesting and expanding. Like all good retailers, we continually examine and adapt our portfolio to be in line with the rapidly evolving customer preferences.

“We remain committed to Malaysia and growing our business — investing in improving our offering to customers and where we see encouraging growth prospects for the future,” the spokesman says.

Giant’s history goes back to 1944, with the opening of a sundry shop in Sentul. In 1974, it opened the Teng Minimarket Centre, popularly known as TMC, in Bangsar.

In 1999, the Teng family decided to cash out and liquidate a 90% stake in the company to DFI Mauritius Ltd. By 2001, they had divested the remaining 10% to Dairy Farm. It was reported that a five-year moratorium was placed on the Teng family that barred them from opening a competing store. The family returned to the retail scene in 2005, with the opening of Hero Supermarket.

Over the years, Dairy Farm had bought several retail chains, including Tops Supermarket from Royal Ahold and Xtra from the Lion Group. It purchased Bestmarket, Anda and Likas to gain entry into Sabah and Sarawak. It subsequently bought Bintang Retail — which operated Bintang Hypermarket and Mercato Supermarket in Peninsular Malaysia — in 2010.

GCH, which had no local partner between 2001 and 2014, sold a 30% stake in the operation in 2015 to Syarikat Pesaka Antah Sdn Bhd, which is controlled by the Negeri Sembilan royal family.

Last year, the retailer’s consolidation exercise moved into high gear as it resized, repositioned and shut many stores. If DFI’s annual report for the financial year ended Feb 28, 2019, is anything to go by, the retailer’s Malaysian store count stood at 122. This compares with the 62 it has listed on the websites of its local stores.

It is worth noting that in Malaysia, DFI has also ventured into the convenience stores segment with ShopSmart. The business has the government’s approval to open 500 stores over a 10-year period.

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