Sheng Siong Case PDF

BUS489 Strategy for Business
BUS489
Strategy for Business
Group-Based Assignment
July 2019 Presentation
SINGAPORE UNIVERSITY OF SOCIAL SCIENCES Page 1 of 50

Case Analysis Report
SHENG SIONG GROUP LIMITED.

6 Mandai Link
Singapore 728652

Table of Contents
Executive Summary ............................................................................................................... 4

Introduction .......................................................................................................................... 5
Company Background ...................................................................................................................... 5
Organisation Structure ..................................................................................................................... 6
Vision, Mission & Values.................................................................................................................. 6
Products ............................................................................................................................................. 6
Current Strategies ............................................................................................................................. 7
Financial Information ..................................................................................................................... 10
External Analysis ................................................................................................................ 12
Market Analysis .............................................................................................................................. 12
Consumer Analysis ......................................................................................................................... 13
Competitor Analysis ....................................................................................................................... 15
PESTEL Analysis ................................................................................................................ 19
Internal Analysis ................................................................................................................. 25
Financial Performance Analysis .................................................................................................... 25
Capabilities Analysis ....................................................................................................................... 27
Operational Performance Analysis ............................................................................................... 28
SWOT Analysis ................................................................................................................... 29
Key Findings ....................................................................................................................... 34
Recommendations ............................................................................................................... 35
Conclusion .......................................................................................................................... 39
References........................................................................................................................... 40

Executive Summary
Sheng Siong Group is the parent company of Sheng Siong Supermarket Pte Ltd who is the
third-largest chain of supermarkets in Singapore. Since its establishment by the Mr Lim Hock
Chee and his two brothers in 1985, the group has grown by leaps and bounds in the past 26
years to its current 54 retail outlets today.
Through its well-established business model, the company has recorded year-on-year growth
in 2018 for revenue at S$890,934 million and gross profit at S$238,380 million, as well as
maintaining debt-free and a favourable cash flow of S$87 million.
While its current business model continues to reap rewards from its current operations,
opportunities to diverse and expand its business operations should not be neglected. Sheng
Siong should not be resting on its laurels but to continue exploring avenues to increase profits
and minimise economic risks.
In order to scale revenues to the next level of profits, we recommend Sheng Siong Group to:
(a) Incorporate partnership with Singapore Petroleum Corporation to run convenience

stores at petrol stations;
(b) Initiate joint venture with Food Junction to supply fresh produce to hawkers;
(c) Introduce a new concept of a premium Sheng Siong supermarket; and
(d) Implement exclusive membership program to retain brand loyalty.

Introduction
I. Company Background
Sheng Siong Group is the parent company of Sheng Siong Supermarket Pte. Ltd., commonly
known as Sheng Siong, the third-largest chain of supermarkets in Singapore.
Sheng Siong Group was listed on the SGX mainboard in August 2011 and has been awarded
the “Superbrand” status by Superbrands Singapore since 2008. In 2014, Sheng Siong embarked
on an omni-channel retail journey to become not just a brick-and-mortar supermarket, but also
an online supermarket by launching its “AllForYou.sg” online shopping platform for groceries,
which offers e-commerce services in almost all postal districts in Singapore. Additionally,
Sheng Siong has an international presence with its first overseas store in Kunming, China,
which began its operation in November 2017.
A Brief History of the Company
Sheng Siong was founded in 1985 by Mr Lim Hock Chee and his two brothers, Mr Lim Hock
Eng and Mr Lim Hock Leng, with the seed capital given by the Government who phased out
the pig farms belong to their parents.
The very first Sheng Siong store was set up in Ang Mo Kio, and this was shortly followed by
openings in Bedok and Woodlands within the first ten years of operations. In the subsequent
ten years, Sheng Siong grew rapidly and has seen the opening of 14 new stores island-wide.
Despite the bad times during the financial crisis and the Severe Acute Respiratory Syndrome
(SARS) outbreak, Sheng Siong persevered through the nature of its business, its low cost of
operation, and the hard work and dedication of family members and staff.
C M M Marketing Management (CMM), the sister company, was incorporated in 2000, to

serve as the warehousing and logistics arm of Sheng Siong Supermarket. Over the years, CMM
gradually became the corporate headquarters of all the related companies and provided backend
support to Sheng Siong Supermarket. Functions carried out at CMM include purchasing,
marketing, administration, finance, information technology and human resource management.

To support its retail operations, Sheng Siong built a customised central distribution centre in
Mandai Link in 2011. Construction of this corporate headquarters-cum-warehousing and
distribution centre has since allowed Sheng Siong to leverage on an extensive distribution
network, food processing capabilities and warehousing facilities thereon.
Today, Sheng Siong Group has become one of Singapore’s largest retailers by sales volume
with a total of 54 retail outlets in Singapore.
II. Organisation Structure
Sheng Siong Group is led by an experienced management team comprising of the three Lim
brothers, Executive Chairman Lim Hock Eng, CEO Lim Hock Chee, Managing Director Lim
Hock Leng, Vice Chairman Tan Ling San and Executive Director Lin Ruiwen. To date, Sheng
Siong has a local staff strength of 2,850 employees with a healthy 50:50 gender distribution.
Its China subsidiary, Sheng Siong (China) Supermarket Co., Ltd., started in mid-November
2017, spanning a retail space area of 50,000 square feet, and its staff strength has grown to 82,
as of 31 December 2018.
III. Vision, Mission & Values
Sheng Siong Group has a vision of “being the preferred retailer in the market, starting from
Singapore and then further ashore” and aims to do so with its mission of “offering communities
in which it operates quality products at reasonable prices together with good service in order
to create value to its customers”. The values that apply by Sheng Siong employees are to be
reasonable, harmonious, responsible, dedicated, earnest and efficient at work with no empty
promises and excuses.
IV. Products
Currently, Sheng Siong operates 54 retail outlets across the island as well as its “AllForYou.sg”
online shopping platform, offering various selections of food products including live, fresh and
chilled seafood, meat and vegetables as well as packaged, processed, frozen and preserved food.
Other than food provisions, Sheng Siong also offers the sale of general merchandise such as
toiletries and household products. Sheng Siong offers substantial savings to its customers by
providing an extensive selection of 1,200 products sold under 18 different house brands.

V. Current Strategies
Sheng Siong Group strategises its business growth in five different ways. These are through
business excellence, care for its customers, care for its employees, care for the community, and
care for the environment.
(a) Business Excellence
As a responsible business, Sheng Siong observes good corporate governance and business
ethics to achieve its business objectives, build trust among stakeholders, and drive performance
improvements. This is done so by providing training and education on anti-corruption and anti-
competition among its staff and ensuring that its suppliers are equally informed.
On the issue of risk management, Sheng Siong has adopted ISO9001 Quality Management
framework and Enterprise Risk Management framework, targeted to complete by 2020.
In order to better manage productivity and efficiency, Sheng Siong works closely with its key
partners to develop and adopt new processes and technology to improve business capabilities.
It has also become a first mover in adoption of innovative technological solutions to improve
the shelf life of products and reduce food wastage.
(b) Care for its Customers
Customers are the foundation of Sheng Siong’s business. Therefore, Sheng Siong takes extra
steps to ensure the evolving needs and concerns of its customers are properly managed as well
as keeping its prices competitive and affordable.
Sheng Siong constantly monitors feedback from consumers across its various channels
including email, in-store feedback forms, service hotline and social media platforms, and
strives to address the issues raised within seven working days. The contact details of its senior
management are also made available on the notice board of every store to facilitate the ease of
reach to address concerns directly.
With the increasing awareness and concern on leading a healthy lifestyle in Singapore, Sheng
Siong supports its customers by paying close attention to market trends and working closely
with suppliers to provide healthier and more nutritional options.

Focusing on its mission of keeping products affordable for its customers, Sheng Siong conducts
regular market research to ensure its products are competitively priced in the retail industry. It
does not conduct or encourage profiteering or anti-competitive practices.
With the increasing use of technology, Sheng Siong ensures that its employees are aware of
and understand the personal data protection policy (PDPC). It ensures that its information
technology systems are safeguarded against cyber threats through regular risk assessments and
an establishment of a business continuity plan which focuses on the recovery of technology
facilities and platforms.
Sheng Siong recognises its responsibility to safeguard the health, safety and interests of its
customers. It works closely with Agri-Food and Veterinary Authority of Singapore (AVA) and
National Environment Agency (NEA) to ensure that its food products and handling processes
are compliant with Singapore’s stringent food safety and hygiene standards respectively.
Additionally, Sheng Siong requests its suppliers to comply with the Singapore Sale of Food
Act which includes providing accurate and sufficient product and marketing information for
consumers to make informed choices.
(c) Care for its Employees
Sheng Siong strives to keep employee monthly turnover rate at below 4% by continuously
benchmark its remuneration and benefits package against the industry’s standards to ensure
competitive remuneration. Formal trainings and on-the-job trainings are conducted where
immediate feedback can be provided by the leadership. Sheng Siong is working on setting up
a training centre by 2021 to formalise some of these trainings and have had its first batch of
potential in-house trainers identified for training and designing of its training curriculum.
Employees are also trained on work health and safety related matters to enable safe behaviours
and environments.
(d) Care for the Community
To ensure the success of its business, Sheng Siong is committed on building strong and lasting
relationships by treating its suppliers in a fair and ethical manner. Together with its suppliers,
Sheng Siong continually improves its house brand products to provide consumers with
healthier and safer choices.

Sheng Siong is supportive of community activities and has made charitable donations and
sponsorships to the local community. Continual work with local town councils to reduce
disruption to the minimum will be regularly monitored and actioned by its operations and
service team.
(e) Care for the Environment
Sheng Siong believes in the conservation of resources and has been constant in monitoring and
measuring the usage of its resources. It continuously engages with suppliers for new
conservation technologies and waste reduction technologies, and actively builds dialogues and
partnerships with government agencies and non-governmental organisations (NGOs) on
advocating the topic of conservation and waste reduction.
In 2018, Sheng Siong became a signatory of the Singapore Packaging Agreement (SPA), a
joint initiative by government, industry and NGOs to reduce packaging waste.

VI. Financial Information
Source: Sheng Siong Group 2018 Annual Report
Sheng Siong Group reported revenue growth of 7.4% in the year 2018 from S$829.9 million
to S$890.9 million, of which 10% of it was contributed by new store openings in the last two
years.
Sheng Siong’s gross profit margin has attained an increase of 26.8% in 2018 as compared to
26.2% recorded in 2017. This increase was achieved through attaining better buying prices,
higher rebates from suppliers, efficient use of volume discounts, improved efficiency in
distribution centre and a higher mix of offerings for the customers.
With the increase in the number of store openings for Sheng Siong, operating expenses
associated with staff costs, rental, depreciation and utilities were expected to increase. This is

as seen in Sheng Siong’s 2018 Annual Report whereby administrative expenses were reported
to have increased by S$16.1 million in 2018 compared with 2017.
However, the improvement in revenue, gross profit and gross profit margin has resulted in a
positive outlook on the net profit which the Group reported a 1.4% year-on-year increase to
S$70.5 million in 2018. This was achieved despite the underlying lower other income source
and higher operating expenses. Meanwhile, operations in China continue and have contributed
to less than 1% of Sheng Siong’s total revenue.

External Analysis
I. Market Analysis
Singapore is an island country with a population of 5.7 million. Although it is small, it has a
high degree of urbanisation and high consumption levels. Food and groceries are daily
consumption for everyone and are inextricably linked to retailers such as supermarkets,
convenience stores, traditional stores and specialty stores.
According to the Singapore Business Review, Singapore’s grocery market is expected to

increase by 14.5% to S$9.9 billion by 2023 and will become the 23rd-largest grocery market
in Asia. It is because there is almost no agricultural production in Singapore, the grocery market
is highly dependent on international trade and imports for over 90% of its demand. In 2017,
Singapore’s total imports of various types of food sources were recorded at S$13 billion.
(a) Threat of New Entrants is Moderate
The retail industry in Singapore is highly competitive. The main supermarket retailers in
Singapore are the NTUC FairPrice Cooperative, Dairy Farm International Holdings and Sheng
Siong Supermarket. Due to the maturity of the industry, there will be minimal effect on the
existing conditions, even with a new retailer entering the trade.
(b) Threat of Substitutes is High
Products sold in Sheng Siong supermarkets are also available at any other major supermarkets.
The key to this high threat of substitutes is the convenience, due to the hectic lifestyle of
Singapore consumers. Sheng Siong Group is constantly reviewing its operations and increasing
its presence in the heartlands bringing its brand closer to the consumers. The Group has also
tapped into e-commerce as an official website has been introduced to allow consumers to order
online and have the items delivered right to their doorsteps.
(c) Bargaining Power of Buyers is Moderate
There are no switching costs for buyers, making it easy for consumers to switch from one
retailer to another as and when they like. Henceforth, applying a low-cost strategy will help to
retain price-sensitive consumers who are constantly looking out for savings and value options.

The implementation of a membership program will help to build brand loyalty as it encourages
consumers to return to the same retailers, in order to accumulate rebate points or receive
freebies.
(d) Bargaining Power of Suppliers is Low
Despite having over 90% of its food supply dependent on imports, there are plenty of suppliers
offering similar food products. However, the management of supplier relationship should be
critical as any change of food product might affect customer satisfaction. With that being said,
constant reviews of suppliers allow retailers to achieve a better purchase price and passing the
cost savings to their consumers.
(e) Extent of Rivalry in the Industry is High
In addition to the traditional rivalry of large-scale supermarkets and hypermarkets, the food
and grocery market in Singapore is expected to usher in new trends soon. Firstly, as the pace
of modern urban life accelerates, consumers tend to choose a more convenient way to shop. As
a result, the demand for online shopping has increased as more retailers adjust their operating
models, such as the inclusion of door-to-door delivery services. Additionally, the widespread
use of social media and smartphones affects the way consumers shop. More retailers are
promoting their brands through social networks to attract more consumers through online
promotions. The development of cross-function and multi-forms partnerships with other brands
has also been rising as companies realise the need to seek win-win cooperation between
retailers and suppliers or technology companies. For example, a local transportation network
company, Grab has partnered with local retailer NTUC FairPrice to co-launch an exclusive
rewards program.
II. Consumer Analysis
Sheng Siong Group’s customer target market can be classified into 6 different segments.
First, the chore shoppers view grocery shopping as a chore when they seek to reduce time,
effort and cost related to grocery shopping. These shoppers favour convenient location, clear
display and easy to find information. The chore shoppers were more likely to develop brand
loyalty to the retailers as they shop due to a habit rather than a rational attitude.

Second, the family feeders are the main grocery buyer that purchase on behalf of the entire
family. Their purchase tends to be regular with significant varieties from time to time impacted
by the end-users’ preference. While these shoppers are not as price sensitive, a good value of
products is still crucial, hence these shoppers will lean towards well-known brands that run
sales and promotions frequently.
Third, the on-the-go shoppers tend to have a busy and hectic lifestyle due to work, travel and
studies. As a result, these consumers are usually high purchasers for ready-to-consume food
products, snacks and other convenience foods. It is also because they are always on the move,
they are less likely to have brand loyalty and will frequent a larger set of retailers. With
consideration of their hectic lifestyle, these shoppers are more likely to engage in online
retailing activities including grocery shopping.
Fourth, the variety seekers have little brand loyalty as they seek to enjoy variety in retail
experiences, tastes and food choices. These shoppers will be more responsive to sales,
promotions and new product launches. These shoppers are easier to attract but also harder to
retain, hence they will likely contribute to short-term sales results through sales promotions.
Fifth, the health and nature shoppers are particularly concerned about the health and
environmental impact of their purchases and will likely to prefer environmentally-friendly
establishment. In terms of grocery products, products that are natural, fat-free, low-
carbohydrate, vegetarian, gluten-free, or with some other health attributes will be high on their
shopping list. These consumers are also likely to purchase brands that they trust and they know
that are ethical.
Lastly, the gourmet lovers are attracted to quality in both retail environments and brands they
purchase. They seek high-quality food products and are less price sensitive. They are also more
likely to invest time in food preparation than going for convenience food or snack options.
These consumers would prefer brands that builds a high-quality image, higher quality products
or higher priced products. Sales promotion and discounts will have little impact on their
purchase decision.

III. Competitor Analysis
Sheng Siong’s competitors can be broken down into three different segments: the big chains,
the neighbourhood supermarkets, and the online grocers.
(a) The Big Chains
NTUC Fairprice is the leading giant in the grocery retail industry, offering competitive prices
in a wide range of household essentials, from fresh produce to dried foods, toiletries to personal
care products. Targeting the low- and middle-income consumers, keeping prices low and
affordable is their priority. NTUC procures its food products from consolidators, distributors
and local importers. Since 1985, the company has embarked on extensive house branding of
essentials such as confectionery, rice, bread, sauces, cooking oil, canned fruits, vegetables and
toiletries, which are priced 10 to 15 cents lower than the comparable products in the market.
Partnering with Tesco in 2017, NTUC Fairprice was the first to implement a “store-in-store”
concept, whereby it carries Tesco’s products in dedicated shelf space at selected stores. Also,
NTUC Fairprice has added “Pasar Organic” to its range, offering organic produce at affordable
prices since July 2018.
Being the leading grocery retailer, NTUC Fairprice has a network comprising 112 Fairprice
supermarkets, 16 Finest stores and 8 Xtra hypermarkets. In addition, the Group has 160 Cheers
convenience stores and 23 Xpress stores, which are mainly located in Esso-Mobil petrol
stations. The Warehouse Club was launched in 2015 as the first membership-only retail
warehouse, offering bulk purchase for groceries and consumable with further discounts.
Dairy Farm International Holdings (DFI) is the largest supermarket chain in terms of numbers
of supermarket retail stores and operates under its brand names, Cold Storage and Giant.
Cold Storage offers a broader selection of international brands and a large percentage of
western-style products from the European Union, Australia, New Zealand and the United
States, making it a very popular supermarket among the expats. The essential products tend to
be pricier than other locations as it is known to carry a higher quality for fresh produce, meat
and seafood. Along with the higher price tag, Cold Storage offers 30% to 50% off deals on
their ready-to-consume food such as roasted chicken, salads and sushi after peak hours.
Catering to the middle- and upper-income group, Cold Storage has 52 supermarket retail stores,

9 Market Place premium outlets and 5 Jasons The Gourmet Grocer specialty stores.
Also operating under the umbrella of DFI, Giant started off in Malaysia as a provision shop
backed in 1944 and entered Singapore as a hypermarket at IMM. Giant has 27 Giant Express,
25 Giant supermarkets and 8 hypermarkets located across the island from the neighbourhoods
to the CBD areas. These include all 56 Shop ‘n Save outlets which Giant acquired in 2010 and
rebranded in April 2013. The Giant hypermarkets have the largest floor space compared to
other retail stores, carrying an extensive range of household products, electronics and apparel
with the largest assortment of fresh, grocery and general merchandise items. On the other hand,
Giant supermarkets are slightly smaller in size and carry a wide variety of fresh and grocery
products, along with the essential range of general merchandise and household essentials. Giant
targets the lower-income segment and budget-conscious consumers as its pricing is relatively
competitive with their senior citizen promotion, offering an additional 3% storewide discount
for consumers who are aged 60 and above on every Tuesday. Giant collaborates with DineInn
to create a series of cooking videos, which involved the partnership of an established
nutritionist to develop kids’ recipes for parents and parents-to-be. However, going the extra
mile did not help Giant to win the heart of consumers, as it closed its supermarkets located at
Bukit Panjang and Whampoa, followed by its VivoCity hypermarket in 2019, primarily due to
the poor performance in the supermarket and hypermarket businesses in Singapore.
(b) Neighbourhood Supermarkets
Operating 24 hours around the clock, U Stars Supermarket has 21 outlets located in the
heartlands, offering great value on daily essentials. From dry food and snacks to drinks and
breakfast items with generally affordable pricing creates a stiff competition to the
neighbourhood-focused Sheng Siong. U Stars has been ranked the cheapest in fresh food, daily
necessities, toiletries by MoneySmart, an online financial portal that did a price comparison
analysis of U Stars, NTUC and RedMart.
Targeting primarily the traditional Asians, predominantly Chinese, Ang Mo Supermarket is a

small heartland business with complete handwritten labels in 6 outlets, holding its own stand
against the retail giants like NTUC and Sheng Siong. Ang Mo Supermarket operates in a typical
size of neighbourhood NTUC, with squeezy aisles due to the packing of bulky food products
in a small area. Ang Mo Supermarket carries dry noodles, fresh vegetables and snacks, and

does not carry much of the fresh produce or fancy stuff like cheese. Ang Mo Supermarket was
ranked by MoneySmart for the cheapest pantry staples, canned food, chilled items, frozen
ingredients, breakfast items and soft drinks.
Prime Supermarket entered Singapore since 1991, and today it has a total of 19 chain outlets -
5 in the North, 3 in the East, 6 in the West and 5 in the Central area, making it very convenient
for consumers. Most of its outlets open as late as 12 midnight, while some operate for 24 hours
around the clock, catering to the needs of working adults. Similar to Giant, Prime Supermarket
offers an additional storewide 3% discount off all items except liquor and cigarettes on every
Monday and Friday for senior citizens.
(c) Online Grocers
RedMart was founded in August 2011 as a Singapore-based online supermarket chain that
operates its own transportation fleet for door-to-door delivery across Singapore. It carries all
the ordinary household items, from milk to fresh produce, with an emphasis on competitive
prices and local products. RedMart allows consumers to nominate the two-hour delivery
window, offering convenience that is underpinned by RedMart’s careful supply-chain
management. RedMart is only available through Lazada now after its acquisition by Lazada.
Although online shopping in Singapore is now quite popular, the proportion of online grocery
stores is quite low, accounting for only 0.6% of the market. The low probability of buying fresh
food online is mainly since local consumers prefer to pick their own food before buying fresh
food. RedMart’s online revenue has continued to grow in recent years, and RedMart’s product
scale has been expanding for a long time. RedMart will take reference from the local consumer
tastes and preferences during product selection, which will help the company’s sales
performance. RedMart has been well received in the field of fresh food, expanding the number
of fresh fruits and vegetables from dozens to hundreds in three years. Imports of fresh produce
will also be selected based on seasonal regions.
honestbee is an online grocery retailer and the first tech-enabled, multi-sensory grocery and
dining experience provider in Singapore with its physical store, habitat by honestbee, located
at Pasir Panjang, with over 15 food and beverage vendors that consumers could spend a whole
day there with families or friends, and over 20,000 unique grocery items, including imports

from all over the world which consumers can also purchase through its mobile application. The
unique dining themes and styles create unique and memorable moments for consumers,
enhancing their shopping experience and building brand loyalty by catching their attention and
heart. habitat by honestbee carries fresh grocery supplies directly from farmers and producers,
ensuring the freshness from its sources to the hand of consumers. The introduction of cashless
payment with the “scan and go” feature on honestbee’s mobile application has greatly reduced
the waiting time, creating a more chill and relaxing experience.

PESTEL Analysis
I. Political
According to former diplomat Bilahari Kausikan during a public lecture at the National
University of Singapore, the current political instability amongst the members of the ruling
Pakatan Harapan (PH) coalition in Malaysia and the coalition’s lack of success in garnering
support from the Malays, are starting to strain relations between Malaysia and Singapore.
The old bilateral issues between both nations have resurfaced in recent years, and these were
disputes concerning territorial issues as Malaysia pushes to regain control of its airspace and
territorial waters along its southern border, as well as the price of water that is sold by Malaysia
to Singapore since 1962.
To add on, Malaysia announced last year that it would restrict certain seafood exports and limit
or end egg exports to Singapore. With over 90% of its food supply dependent on imports,
Singapore is exposed to the volatility of the global food market, including export bans and
sudden disruptions to transport routes. As one of Singapore’s top import sources, Malaysia
supplies more than 35% of Singapore’s supply of chicken, 17% of fish, 93% of duck and 76%
of eggs.
Should the relations between both nations intensify, food security will become a major issue
for Singapore in an increasingly uncertain and volatile external environment. Singapore will
have to step up in safeguarding its food supply by diversifying its sources from countries further
away, such as Australia, Denmark, Japan, Sweden, and the most recent addition, Ukraine.
II. Economic
Firstly, as grocery retail is Sheng Siong Group’s core business, its operations see a need for
large manpower support. Sheng Siong has a local staff strength of 2,850 employees with a
healthy 50:50 gender distribution. Apart from local Singaporeans, Sheng Siong hires a fair
number of foreign workers to manage operations in its retail outlets.
Earlier this year, the Government announced that it is tightening the dependency ratio ceiling
(DRC) for the services sector from the current 40% to 38% by January 2020 and to 35% in

January 2021. This will result in the foreign workers in Singapore’s services sector facing
heightened risk of losing their jobs, and in turn lead to rising labour cost for labour-intensive
service companies like Sheng Siong where labour cost is a major expense, as the cost to hire
local workers is around 20% more than foreign workers to manage its retail operations. Hence,
the rapid expansion of Sheng Siong coupled with the tightened foreign workers policy has
resulted in a manpower strain for the Group.
Secondly, according to the Urban Redevelopment Authority (URA), the prices of retail space
have been fluctuating in the past few quarters, especially in the central region of Singapore
which saw an increase of 1.5% in the last quarter of 2018, followed by a drop of 1.9% in the
first quarter of 2019, and then a rise of 0.4% in the second quarter. Such inconsistency in retail
rental costs pose challenges for Sheng Siong as it continually moves forwards with its long-
term plans.
Thirdly, there have been growing signs that the deteriorating relations between the United
States and China is having an impact on Singapore’s external relations and economy. The size
and scale of U.S. investments in Singapore far outpaces many other countries, and this has
created many quality jobs for Singaporeans. In addition, Singapore has many collaborative
endeavours with U.S. institutions, companies and experts, in the fields of innovation, research,
and development. China, on the other hand, is Singapore’s largest export market. Singapore
has extensive economic cooperation with China, including three government-to-government
initiatives in Suzhou, Tianjin and Chongqing, as well as sizeable investments in both countries.
Henceforth, the Singapore dollar is poised to weaken further as the escalating trade war
between the world’s two largest economies weighs down growth in the export-dependent city-
state. This will in turn affect Sheng Siong’s engagement in the supermarket operations, and
trading of general and wholesale importers and exports.
III. Social
Amid rapid urbanisation and rising income, Singapore consumers are becoming more receptive
to the notion of optimising their current wellness and preventing declining health. Thus, they
are paying more attention to their food consumption, becoming committed to organic food and
are willing to pay more for premium products.

Consumer buying trends have shown that more people are buying healthier food today.
According to the Health Promotion Board (HPB), sales of food products with the Healthier
Choice symbol are growing at 9 per cent annually. The number of such products has also grown
steadily from an initial 300 in 2001 to 2,500 across 70 food categories in 2016. These include
staple food items such as rice, bread and noodles, and others including sauces and beverages.
This trend is not expected to slow down anytime soon, as emerging vegan, vegetarian and
vegetarian-friendly restaurants start opening in Singapore, and even airlines like Singapore
Airlines has been adopting the “farm-to-plane” concept by serving specialty salads made from
hyper-local organic produce grown at indoor vertical farms. The HPB predicts that the market
share of healthier-choice products will continue to grow and is expected to hit 25% by 2020,
which indicates a window of opportunity Sheng Siong could tap into.
IV. Technological
The Internet plays a huge role in Singapore’s advancement, easing communication and
increasing connectivity. According to Infocomm Media Development Authority (IMDA), the
penetration rate for household internet access has gone over 90%, with about 4.83 million of
Singapore individuals being active on the Internet. The technological advancement has been
shaping how Singapore consumers are being influenced and gathered information, resulting in
significant changes in lifestyle and quality of life.
Online and social shopping, plus health and freshness, are amongst the top five trends set to
influence Singapore’s grocery retail market. According to Euromonitor International, the
offline grocery market in Singapore is worth $8 billion, while online grocery retailing is worth
at least $120 million taking the combined sales of major players like Fairprice Online, Cold
Storage Online and RedMart. Despite the online sales making up to only 2% of the entire
grocery market in Singapore, there is plenty of room for growth in the online grocery market,
as the Millennials who are fast adopters of technology, begin entering their peak earning and
spending years. New operational models focusing on service excellence and delivery, coupled
with the convenience of being able to shop anywhere, anytime and anyhow they like, have
allowed online grocery gain traction amongst the young Gen-Z and Millennial segments.

According to global measurement company Nielsen, online grocery shopping among

Singapore consumers has grown by 10% from 2017 to 2018, with an increase in confidence
within the online buying ecosystem leading to purchasing in a broader range of categories.
In addition, technology transformation has been helping supermarkets to differentiate their

offerings, raise service levels, develop stores that are set up for an online future, and deliver
more efficient operations in the face of rising costs. For instance, Cold Storage has installed a
digital weighing scale that identifies the fruit type automatically, without shoppers having to
scroll through a product list. Meanwhile honestbee, an online grocery and food delivery service
in eight Asian countries, opened its first physical retail store in Singapore—habitat by
honestbee, which uses advanced technologies to enhance the in-store experience for shoppers
through a blend of supermarket, specialty grocer, in-store entertainment and dining concepts.
V. Environmental
Packaging waste constitutes about one-third by weight of Singapore’s domestic waste.

According to the National Environment Agency (NEA), Singapore’s population and economy
growths have contributed to a significant increase in the amount of solid waste disposed of by
seven times from 1,260 tonnes daily in 1970. Along with the growing affluence and population
in Singapore, waste quantities are expected to rise even further, resulting in Singapore facing
land shortage woes for waste disposal, considering the limited land stock we have.
In order to address this issue, NEA launched the first Singapore Packaging Agreement (SPA)
in 2007, which provides a platform and structure for industries to reduce packaging waste from
product packaging, and to raise awareness and educate consumers on the benefits of reducing
packaging waste. Sheng Siong Group became a signatory of the SPA in 2018, and even
clinched the Excellence Award in 2019 under the MNC category, for its commendable work
done in waste reduction, along with Coca-Cola Singapore Beverages Pte. Ltd. and Nestlé
Singapore Ltd.
Apart from packaging waste, the amount of food waste generated in Singapore has also been
increasing over the past ten years by about 30% and is expected to increase with its growing
population and economic activity. Food waste accounts for one-tenth of the total waste

generated in Singapore, but only 17% of it is recycled. The rest of it is disposed of at the waste-
to-energy (WTE) plants for incineration.
As part of Sheng Siong’s efforts to address this issue, the Group has started to reduce food
wastage, by packaging food into smaller and more wallet-friendly portions such as selling its
fresh vegetables packed in portions of 200g to 300g and pre-packed fish and meat in 200g to
400g, which has allowed more flexibility to small families. On top of that, Sheng Siong helped
the anti-food waste effort by supporting the Food Unfiltered campaign launched by students
from Nanyang Technological University. The campaign encouraged consumers to embrace
“ugly food” as a simple way to reduce food waste in Singapore and featured educational posters
across Sheng Siong supermarkets. On Sheng Siong’s part, it also helped minimise food waste
by selling fruits and vegetables with blemishes and bruises at a discount.
Additionally, the Group continuously engages with suppliers for new conservation
technologies and waste reduction technologies, and actively builds dialogues and partnerships
with government agencies and non-governmental organisations (NGOs) on advocating the
topic of conservation and waste reduction.
VI. Legal
Founded in April 2019, Singapore Food Agency (SFA) is a new agency formed under the
Ministry of the Environment and Water Resources to oversee food safety and security. It is
established to dissolve the Agri-Food and Veterinary Authority (AVA) and to absorb the duties
of National Environment Agency (NEA) and Health Sciences Authority (HSA). All non-food
plant and animal-related functions of the AVA were transferred to the National Parks Board
(NParks) under Animal and Veterinary Service (AVS).
Today, the Singapore’s food retail industry is regulated by SFA, which ensures that food sold
at retail outlets are safe for consumption. This is particularly important for Singapore as the
nation is known to be a food paradise.
In 2014, SFA introduced the Food Safety Management System (FSMS) to raise hygiene
standards in the food catering industry. The Grading System for Eating Establishments is a
structured system of appraisal for food retail outlets and encourages licensees to practise good
personal and food hygiene, and housekeeping of their premises.

Going forward in 2020, a new Food Hygiene Recognition Scheme (FHRS) will be
implemented for licensed food retail establishments to recognise and affirm consistent efforts
in upholding high hygiene standards. Food retail establishments will attain a Bronze, Silver or
Gold award based on at least two, five or ten years of good hygiene track records respectively.
Similarly, each of Sheng Siong’s retail outlets in Singapore will be faced with such evaluations
and awarded accordingly.

Internal Analysis
I. Financial Performance Analysis
Overview of Key Financial Highlights

Sheng Siong FY2017 FY2018 YOY Favourable
Revenue 829,877 890,934 7% Yes
COGS 612,472 652,554 7% Neutral
Gross Profit 217,405 238,380 10% Yes
Gross Profit Margin 26.2% 26.8% 0.6% Yes
Net Profit 69.5 70.5 1% Yes
Other Income 10,344 7,607 (26%) No
Selling and
5,509 5,824 6% No
Distributing Expenses
Administrative
137,936 154,044 12% No
Expenses
Other Expenses 2,449 2,333 (5%) Yes
Tax 12,559 14,149 13% No
Foreign Currency
Translation Differences 100 204 104% No
for Foreign Entity
Sheng Siong has reported a year-on-year growth of 7% in revenue of S$890 million in 2018,
with a 10% year-on-year growth in gross profit to S$238 million and a 7% increase in the cost
of goods sold (COGS) to S$652 million. The increase in COGS is proportionate to the increase
in revenue and gross profit. There is a 5% decrease in other expenses in the Financial Highlight,
which is favourable to Sheng Siong as lowering its expenses would result in a better net profit.
However, Sheng Siong has reported a 1% increase in net profit despite the 7% and 10% year-
on-year growth in revenue and gross profit respectively and the gross profit margin has
experienced a slight increase of 0.6% to 26.8%. The lagging in the net profit is contributed by
the significant increase selling and distributing expenses by 6% and administrative expenses
by 12% to S$0.3 million and S$16.1 million respectively. Sheng Siong has reported a 26%
decrease in other income to S$7.6 million. There is a 13% hike in tax expenses to S$14 million

and an unfavourable foreign currency translation differences from Sheng Siong’s outlet in
China due to the fluctuation in foreign exchange risk as the Chinese yuan has weakened
significantly, dropping from 1 Chinese yuan to 0.21 Singapore dollar (SGD) in 2018 to 0.19
SGD in 2019, a nearly 10% drop in exchange rate has further worsen the foreign currency
translation together with the initial time and capital required for brand building in China to
achieve a fruitful operation.
Cash Flow
Sheng Siong FY2017 FY2018 YOY Favourable
Cash Flows from
$78,534 $92,225 17.43% Yes
Operating Activities
Cash Flows from
($17,348) ($26,983) 55.54% Yes
Investing Activities
Cash Flows from
($51,120) ($51,120) 0.00% Yes
Financing Activities
Net Increase in Cash
$10,066 $14,122 40.29% Yes
and Equivalent
Cash and Equivalents
$73,438 $87,234 18.79% Yes
at End of the Year
The overall cash flow of Sheng Siong is healthy with a 18.79% year-on-year growth of cash
and equivalent inflow at the end of FY2018 and a 40% increment in net cash to S$14 million.
The healthy cash flow in FY2018 has been contributed by the positive cash inflow from
operating activities from day to day business operations; a 55.5% increment of cash outflow in
investing activities for long term assets, property, plant and equipment has increased from
S$254 million in FY2017 to S$266 million in 2018, as long term investments for operations
and future growth; and cash outflow for financing activities remains at S$51 million to the
entities investors and shareholders, thanking and rewarding them for putting their faith and
trust of their investment with Sheng Siong despite the slowdown of the world economy.

II. Capabilities Analysis
Improvement in operational efficiency and effectiveness becomes the next focus as labour
remain scarce and costly as the current ongoing implementing projects of Hybrid Self-
Checkout system (HSCO) to create flexibility of manpower and labour. HSCO has been
successfully implemented in 47 stores since 2015 and Sheng Siong is aiming for the full
implementation of HSCO by first half of 2019. HSCO is helpful in reducing the time spent on
queueing for checkouts and payment, directly enhance the consumers’ shopping experience
and satisfaction by shortening the time spent, offering time flexibility.
Also, Sheng Siong has launched “$tm” machine at ITE College Central and Fernvale outlet.
“$tm” machine is the first “recycling” cash withdrawal machine in Singapore where Sheng
Siong would top up the machines with cash received from its sales operations and consumers
could withdraw money from their bank account using their DBS, POSB, OCBC OR UOB ATM
cards. This initiative has greatly improved Sheng Siong’s operating efficiency by reducing the
daily cash deposits from the sales and saving on the cash handling charges from the banks and
reducing the operating cost.
Riding the tide of going cashless, Sheng Siong is planning to launch the NETS QR code as an
additional cashless payment option to enhance the consumers’ shopping experience by
reducing the time spent on cash transactions for consumers, enhancing the consumers’
shopping experience and increase consumer retention rate. In turn, profitability will improve.
With the introduction of automation of the warehouse extension and $tm machines are expected
to improve the overall operational efficiency effectiveness and lowering of the operating cost.

III. Operational Performance Analysis
Sheng Siong has a total store count to 54 in Singapore, excluding the store in Kunming, China.
Together with the 10 new stores were opened in 2018, hitting a record high since 2012. These
new stores are widely and well spread in different HDB estates and most of them in the newly
built or redeveloped neighbourhood, bringing fresh supplies of food to the heartland
Singaporeans. Sheng Siong has reported a growth of 22.8% in operating area which is further
expanded from 404,000 square feet in 2017 to 496,000 square feet in 2018. The new stores
continued to be the major source of revenue growth of 0.7% despite the softening consumers’
sentiment. However, the growth of revenue was hindered by the permanent closure of The
Verge and Woodland Block 6A stores in 2017.
High staff costs, rent, depreciation and utilities arising from the opening of new stores and
higher provision for bonus has resulted an S$16.1 million. Ans Sheng Siong remains positive
in its cash generative and cash generated from operating activities before working capital
changes and tax payment amounted to S$100.3 million in 2018. After factoring in the S$28.2
million for capital expenditures, S$15.9 million on upgrading supermarkets’ equipment,
S$10.2 million on warehouse extension, S$0.9 million on equipment upgrades at the central
distribution centre and S$1.2 million on purchases by the Chinese subsidiary, Sheng Siong has
generated a free cash flow of S$65.2 million. And Sheng Siong’s balance sheet remained
healthy with cash of S$87.2 million as at 31 December 2018 after paying dividends of S$51.1
million.

SWOT Analysis
I. Strengths
Based on our research findings, we have identified the strengths of Sheng Siong Group, and
these include its resilient business, strong financial capabilities, and debt-free with positive
cash flow.
(a) Resilient Business
Sheng Siong belongs to a class of resilient business regardless of the economic cycle as Sheng
Siong runs its chain supermarkets to provide food and groceries. Public consumption remains
even when financial crisis hits or market crashes. In fact, Sheng Siong has rooted well in
Singapore despite the downturn of economic cycle in 2014/15, as Sheng Siong has expanded
from 39 stores in 2015 to 54 stores in 2018. With its current upgrading works in the Singapore
stores, Sheng Siong is very likely to replace the traditional wet markets with its wet market
department to provide a cleaner and more comfortable shopping environment for the
consumers, creating a positive shopping experience, to attract and retain consumers.
(b) Strong Financial Capabilities
Sheng Siong benefits by leveraging on the economies scale as a big chain of supermarkets.
Sheng Siong can boost its gross profit margins from 22.1% in 2011 to 26.8% in 2018. As Sheng
Siong continues to grow and expand, economies of scale will continue to work in its favour as
Sheng Siong has further expanded its presence in the neighbourhood, providing affordable food
and groceries at heartland area, bringing convenience to the public.
(c) Debt-Free with Positive Cash Flow
Sheng Siong is achieving great in self-sustainability and growing without the need of debt.
Zero debt allows substantial financial flexibility for a small-cap company like Sheng Siong as
Sheng Siong does not require to adhere to any strict debt covenants. Sheng Siong has reported
an 18% growth in net cash and equivalent to S$87 million at the year end of 2018, providing
the management with more options to grow and expand the retailing business by pursuing
growth projects with higher internal rate of return to improve earnings, continuous upgrade for

the current facilities and to develop a more consumer friendly system (“$tm” machine, NETS
QR for cashless payment); to build a stronger and confident relationship with investors by
paying more dividend; to conduct share buyback if the management determines their share is
undervalued. Have a debt free business model with strong and positive cashflow is a total
beneficial to both Sheng Siong and the shareholders.
II. Weaknesses
Detracting from its strengths, below are weaknesses identified of Sheng Siong Group, and these
include the lack of product differentiation and lack of brand loyalty.
(a) Lack of Product Differentiation
There is not much product differentiation between products from Sheng Siong and its
competitors as the range of groceries and food are similar and it is just the fight of who sell it
cheaper and who offer convenience to the consumers as consumers are price sensitive and their
unwillingness to travel far just to make simple purchases.
(b) Lack of Brand Loyalty
Since Sheng Siong, Fairprice and Giant are all about low price, consumers would choose to
shop at the supermarket which is located at the neighbourhood which is more accessible and
convenient to them as the marginal difference in price is not significant and motivational
enough for the consumers to travel far to shop at a specific supermarket if there is one nearby.
This indicates that location and convenience play an important role in attracting sales as
consumers are less cost sensitive when convenience is available as they are less likely to travel
a distance to get the needed goods.
III. Opportunities
Below identify opportunities which Sheng Siong Group could tap into for the upcoming years,
and these include the changes in consumer behaviour and lifestyle, increasing presence in the
neighbourhoods, and room for margin improvement.
(a) Changes in Consumer Behaviour and Lifestyle

Mobile device proliferation, lightning paced lifestyle and challenging working hours have been
contributing greatly to the complexity to every Singaporeans’ lives. Singaporeans are feeling
more stretched than ever before and are increasingly eager to strive for solutions to simplify
their busy lives. Eating out is no longer reserved just for special occasions and it is becoming
a part of many Singaporeans’ lives. Due to the availability of a diverse plethora of food around,
the eating out option has become more prominent, convenient and attractive.
According to Nielsen’s Out-of-Home Dining Survey conducted in August 2018, 24% of the
respondents have indicated that they eat out daily, while more than 55% do so on a weekly
basis. Of the typical three meals a day, Singaporeans are opting to dine out for dinner,
comparing to lunch and breakfast. 72% of the respondents consume their dinner out of home,
while 66% dine out for lunch and only 15% for breakfast. 81% of the respondents have
highlighted that they have stopped by a casual dining outlet while 76% prefer to patronise fast
food restaurants for their quick service and 64% chose to dine out at a café.
(b) Increasing Presence in the Neighbourhoods
With the continuous development of Built-to-Order (BTO) from the Housing Development
Board (HDB), various estates in different towns are increasing at a consistent rate while
Punggol is experiencing a rapid growth in the number of flats developed in the recent decade.

The expansion of the new BTOs around is a good indication of opportunity availability for
Sheng Siong because where there is a population, there is a need for a supermarket to meet the
needs of consumers for grocery shopping. Sheng Siong was the highest bidder for a HDB shop
at Fernvale in 2015 and Sheng Siong has bidded for the supermarket operation at the Alkaff
Vista estate at the recent Bidadari project. New opportunities will arise for Sheng Siong so long
as there are new areas opening up for residency.
(c) Room for Margin Improvement
Sheng Siong’s management has been quick to take action to introduce Hybrid Self-Checkout
System (HSCO) in 47 stores since 2015, with an aim to achieve a full implementation at all the
stores by 2019 to reduce the need of hiring numerous employees at the cashier lines, which in
turn reduces cost per sale and increasing profit. In addition, various government agencies have
been providing grants to Sheng Siong in the partial support of productivity improvement
programmes as well as grants under the Wage Credit and Special Employment Credit schemes,
which are aiding Sheng Siong to buffer against the rising cost of labour.
IV. Threats
Below are some external factors that would pose challenges for Sheng Siong Group, and these
include strong competition from other players and food security under the unforeseen tension
arising from the neighbouring countries.
(a) Strong Competition from Other Players
Sheng Siong ranks third place in terms of market share, after NTUC Fairprice and Dairy Farm
which have been ranked first and second with their aggressive retailing location, especially in
shopping malls. However, Sheng Siong does not seem to be motivated on competing with
NTUC Fairprice and Dairy Farm in shopping locations, as it strategically places its focus deep
within the heart of housing estates, bringing affordable groceries to residents within a stone
throw distance, offering convenience and availability of goods to consumers.
(b) Food Security from Neighbouring Countries
Food security is a constant work in progress for Singapore. With over 90% of the food supply
dependent on imports, Singapore is exposed to the volatility of the global food market,

including export bans and sudden disruptions to transport routes. One example would be the
global food crisis in 2007 leading to a 12% increase in prices of Singapore’s food imports.
Presently, Singapore also faces possible disruption to its food imports due to Malaysia’s
announcement last year that it would restrict certain seafood exports and limit or end egg
exports to Singapore. Prices of eggs has also risen since 2014 when Malaysian farms were
suspended from exporting eggs to Singapore after their eggs had been found to contain
Salmonella Enteritidis, a bacterium that causes food poisoning.
Malaysia, being one of the top food sources of Singapore, accounts for more than 35% of
Singapore’s supply of chicken, 17% of fish, 93% of duck and 76% of egg. Therefore, any
unpredictable geo-politic and international relations will gravely impact the stability of the food
security of Singapore.

Key Findings
With reference to our analysis of Sheng Siong Group, below are some notable findings.
1. Strong Financial Positioning with a Resilient Business Model
In 2018, Sheng Siong recorded a year-on-year revenue increase of 7% to over S$890 million
and gross profit increase of 10% to over S$238 million. The company maintained a debt-free
status with positive cash flow which suggest that it is capable of new investments with minimal
constraints on its finances. The revenue and gross profit margin have seen a steady growth over
the past five years despite it having undergone an economic downturn from 2014 to 2015. This
means that Sheng Siong’s business model is resilient and strong as it continues to grow despite
adversity in the economy with their concept of business operations well received by consumers.
2. Lack of Diversification in Sheng Siong’s Business Model
Even though Sheng Siong Group has been performing well and recorded a constant growth
throughout the recent years, it is exposed to threats from the lack of entry barriers in the industry
and faces strong competition from existing and new competitors due to the nature of the
industry where substitutes are readily available. The products sold in Sheng Siong, when
unavailable, can be easily substituted by those sold at their competitors, and consumers’ brand
loyalty is reduced to the lowest, as they are quick to compare and put their money wherever
offer them items at the lowest price. Hence, the current lack of diversity in Sheng Siong means
that the supermarket can only continue to increase its presence by opening more stores, offering
low prices and improving its existing business processes, as this is their sole source of revenue.
3. Changing Consumer Behaviours and Evolving Lifestyle Trends
Along with the development of social economy, Singapore consumers’ education and income
levels have also been increasing. They are becoming more receptive to the notion of optimising
their current wellness and preventing declining health and hence, are willing to pursue higher
quality and pay more for premium products. On top of that, consumption habits are seen
gradually changing as more people are opting to dine out for time efficiency. This could be bad
news for supermarkets like Sheng Siong, for when more people choose to dine out, the sales
for groceries will slowly begin to dip.

Recommendations
To address Sheng Siong Group’s shortcomings and scale revenues to the next level of profits,
we have come up with four growth strategies as below.
1. Incorporate Partnership with Singapore Petroleum Corporation to Run

Convenience Stores
This is a horizontal integration strategy to increase the presence and market share of Sheng
Siong by introducing Sheng Siong Express, a convenience store-concept to replace the existing
Choices convenience stores at Singapore Petroleum Corporation (SPC), which owns the third
largest motoring retail network in Singapore, after Shell and Esso, with 40 service stations
island-wide.
Presently, Esso has an existing partnership with Fairprice Xpress, whereas Shell just ended its
decade-long partnership with 7-Eleven to focus on its own retail operations despite seeing
positive increases in sales, profitability and customer count since its establishment. Throughout
Shell’s partnership with 7-Eleven, the convenience store recorded double-digit growth in
profitability, and this represents the potential returns of such partnership. Hence, the
partnership between Sheng Siong and SPC is seen to be highly viable.
Even though the existing Choices at SPC offers reasonably-priced products, it does not appeal
to motorists who are keen to shop while having their petrol tank refilled. Hence, these motorists
would often look out for petrol stations with more established convenience stores such as
Cheers, 7-Eleven and NTUC Express that could potentially offer them a wider product range
and more attractive deals due to economies of scale achieved through their parent companies,
NTUC Fairprice and Dairy Farm Group.
Sheng Siong Group, as one of the largest supermarket operators in Singapore could offer its
established sourcing network and economies of scale achieved through their 54 supermarkets
island-wide, a better product assortment at more competitive prices for the motorists. The
partnership can also potentially draw more motorists to SPC as their preferred petrol station for
petrol refuel and grocery refills.

Beside the operations of a traditional convenience store, Sheng Siong can also set up a drive-
through station at SPC that allows item pickups for customers who have pre-ordered online
earlier. Customers can simply place their order online, drive to the station en-route to their
destination and wait for a SPC employee to wheel their order out to their vehicles. This offers
customers convenience and efficiency, as the key advantage of a drive-through includes
customers not requiring to leave their vehicles nor look for parking lots.
2. Initiate Joint Venture with Food Junction to Supply Produce to Hawkers
This is a corporate renewal strategy to address the lack of diversification of Sheng Siong Group.
While Sheng Siong has been performing well over the past few years where it achieved
considerably stable growth in terms of revenue and gross profit, its sole focus has been on its
supermarket retailing. Despite the continuous improvement in business processes and its
presence expansion island-wide, Sheng Siong faces strong competition from other major
players like NTUC Fairprice, Cold Storage, Giant, as well as neighbourhood specific
competitors such as U-Stars and Prime Supermarket. The recent disruption by online grocery
start-ups like RedMart and honestbee, has also became a game changer in the grocery industry
as these start-ups vie for market share in the domestic market.
In the face of this saturated market, Sheng Siong should look into viable avenues to diverse its
business without compromising or abandoning its roots in the grocery industry. Henceforth,
we recommend Sheng Siong Group to establish joint venture with major food court operator
Food Junction to supply produce to the hawkers.
Food Junction is an established operator in the food hall industry, operating at 11 locations
island-wide. As rental cost in Singapore has been increasing year on year, Food Junction will
soon be facing rental woes from mall management and in turn transferring the increasing rental
rates to its hawkers. These moves will possibly drive hawkers to suffer a loss and consider
changing locations or even closed down permanently.
Through joint venture with Food Junction, Sheng Siong can offer to supply produce to all Food
Junction food malls which in turn centralised their purchasing avenue, as well as ensure food
safety and quality standard in the supplied produces. In return, Sheng Siong will provide
rebates for hawkers who makes continuous ordering and for those who are keen to build and

maintain a long-term strategic relationship. Through the rebating initiative, Sheng Siong will
be able to reach out and attract new hawkers while retaining the existing ones, hence building
and maintaining the brand loyalty to a great level.
This joint venture will ensure hawkers greatly benefit from the consistency of quality food
supplied at a competitive rate, improving their earning margin as currently the hawkers order
their supplies from various vendors of their source and supply quality might not be assured.
Quality food supplies at competitive rates together with rebate help the hawkers to lower their
operating cost and enhanced their sustainability while Food Junction will benefit from the
continuous renewal of the leases. As for Sheng Siong, this represents a steady source of revenue
as fresh produce commands a higher gross margin and a diversification from its usual source
of revenue, diversifying from retailing to setting a foothold in wholesaling.
As different hawkers commonly use different suppliers to develop their menus, this also
represents an opportunity for Sheng Siong Group to review its present suppliers and increase
the product lines in its offering through inclusion of new suppliers.
3. Introduce New Premium Concept of Sheng Siong Supermarket
While various strategies to integrate and diversify Sheng Siong’s business are being
considered, we should not neglect the core strength of its supermarket operations. Given that
Sheng Siong has a wide network of suppliers and a comprehensive sourcing strategy, the
company should also concentrate on its primary line of business while increasing the product
range and introduce a new concept of an upscale supermarket, Sheng Siong Premium, to attract
new customers as well as serve its current core of customers.
Along with the development of social economy, Singapore consumers are becoming better
educated and earning higher incomes, resulting in changing consumer behaviour and evolving
consumption habits. Consumers are now more likely inclined to purchase items of higher
quality and value as compared to before. Instead of maintaining the current business model of
striving to only provide low-cost option for its customers, the viability of Sheng Siong Premium
presents an attractive option for the high-value consumer market.
Strategically located in residential areas with high density of private housings such as East
Coast and Upper Bukit Timah, Sheng Siong Premium will offer a wide premium selection of

fresh, healthy, exported food products and complementary items to its current products offers
a different option to potential customers.
4. Implement Exclusive Membership Programme to Retain Brand Loyalty
Singapore consumers are deal seekers when it comes to shopping. With the above three
strategies implemented, Sheng Siong Group can introduce an exclusive single membership
programme to strategically link Sheng Siong Supermarket, SPC, Food Junction and Sheng
Siong Premium together, entitling consumers and end-users with benefits and rebates, which
would attract new consumers while retaining the existing ones. Rebates can be used
interchangeably across all participating outlets of Sheng Siong Supermarket, SPC, Food
Junction and Sheng Siong Premium. Additional rebates can also be given as bonuses for
purchases made during members’ birthday month and their membership anniversary month.
A single membership programme linking these three giants from different industries together
will offer consumers a dynamic range of products and services at a competitive price with
loyalty rebates that are usable at all their outlets.
Additionally, personalisation is becoming a key part of customer experience. By having records

of its consumer profiles and purchase histories, Sheng Siong will have a better understanding
of consumer buying behaviours, which allows it to personalise customer experiences through
creations of customised marketing campaigns using behavioural retargeting. Through the
intelligent use of data, Sheng Siong will be able to create relevant promotions that hold
customers’ attention for longer span.
Hence, the implementation of a single membership programme will not only further boost the
growth and profitability of Sheng Siong, SPC and Food Junction, but also generate brand
loyalty for these companies in the long-run.

Conclusion
Generally, the report and findings reflect that Sheng Siong Group is facing both internal and
external challenges despite recording growth of 7% to 10% in both revenue and profit in 2018.
While its current business model continues to reap the rewards from its current operations,
opportunities to diverse and expand its business operations should not be neglected.
Firstly, Sheng Siong can incorporate a partnership with Singapore’s third largest retail network
of petrol stations Singapore Petroleum Corporation (SPC) to replace its existing Choices
convenience stores in its 40 petrol stations island-wide. This partnership allows both companies
to tap on each other’s strengths to provide their customers better deals through Sheng Siong’s
established procurement network and the convenient locations of SPC stations.
Secondly, Sheng Siong can initiate a joint venture with Food Junction to supply produce to the
operating hawkers. Through this joint venture, Sheng Siong helps to cushion the high operating
cost for hawkers by supplying quality food at a competitive price with rebates, at the same time
secure a stable source of revenue for its grocery retail business, allowing it to achieve a further
growth by boosting its sales and improving its profitability. The centralised source of
procurement through Sheng Siong also helps to migrate the risk of poor food safety and quality
standards.
Thirdly, the introduction of a new concept of a premium Sheng Siong Supermarket will allow
Sheng Siong to serve a new range of premium products, which are not available at the existing
outlets as well as a complementary range of products targeting consumers would be willing to
pay more for higher quality and premium food products.
Lastly, Sheng Siong can implement an exclusive membership programme, which will further
strengthen its cooperation with Food Junction and SPC, boosting sales and revenue, building
up brand loyalty for all three organisations.
With the implementation of the recommendations above, Sheng Siong will be able to further
its growth in revenue, profits and sustainability.

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BUS489 Strategy for Business

SINGAPORE UNIVERSITY OF SOCIAL SCIENCES Page 1 of 50

Case Analysis Report

SHENG SIONG GROUP LIMITED.

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Executive Summary ............................................................................................................... 4

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(a) Incorporate partnership with Singapore Petroleum Corporation to run convenience

(c) Introduce a new concept of a premium Sheng Siong supermarket; and

(d) Implement exclusive membership program to retain brand loyalty.

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A Brief History of the Company

C M M Marketing Management (CMM), the sister company, was incorporated in 2000, to

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II. Organisation Structure

III. Vision, Mission & Values

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(a) Business Excellence

(b) Care for its Customers

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(c) Care for its Employees

(d) Care for the Community

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(e) Care for the Environment

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VI. Financial Information

Source: Sheng Siong Group 2018 Annual Report

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According to the Singapore Business Review, Singapore’s grocery market is expected to

(a) Threat of New Entrants is Moderate

(b) Threat of Substitutes is High

(c) Bargaining Power of Buyers is Moderate

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(d) Bargaining Power of Suppliers is Low

(e) Extent of Rivalry in the Industry is High

II. Consumer Analysis

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III. Competitor Analysis

(a) The Big Chains

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(b) Neighbourhood Supermarkets

Targeting primarily the traditional Asians, predominantly Chinese, Ang Mo Supermarket is a

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(c) Online Grocers

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According to global measurement company Nielsen, online grocery shopping among

In addition, technology transformation has been helping supermarkets to differentiate their

Packaging waste constitutes about one-third by weight of Singapore’s domestic waste.

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