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CPL Groups next phase of retail growth

Papua New Guinea’s largest retailer, the CPL Group, does not plan to allow a slowdown in the marketplace to get in the way of its strategy for growth, Chairman Mahesh Patel tells Business Advantage PNG.

Despite a challenging retail environment, CPL Group Chairman Mahesh Patel explains says the diversified retail group is not just aiming to consolidate its position, but is seeking further expansion.

‘Since 2008 and 2009, we’ve just been busy growing, and we’ve grown from a middle-sized PNG company to a large PNG company.

But we’ve not really set up what I call the basic foundations in a strong manner, and it’s starting to show now in some of the inefficiencies,’ Patel tells Business Advantage PNG.

Improving efficiencies
Several factors, including the early completion of the PNG LNG project, led to lower than expected profits for CPL Group in the 2014 financial year. The company has also faced teething problems with a couple of its newer retail brands.As CPL Group has adjusted to a changing marketplace, Patel said the company would approach improving efficiencies on a number of levels.

He said there would be elements of both consolidation and expansion, with the recruitment of experienced leadership being a major component of each.‘Internally, we’re going into this transformation of creating efficiencies now,’ Patel said.

‘We’ve got three or four very high quality expats actually recruited, which is against the market, but these are guys who are people with vast experience, not only in Australia, but right across Asia as well.’

Brand expansion
CPL Group’s core businesses, City Pharmacy and Stop N Shop, have continued to experience ‘single digit growth’, a pace Patel is confident will continue.

The company has development plans for both brands. At City Pharmacy outlets nationwide, there are plans to strengthen healthcare services by recruiting more in-store nurses.

Work on two new Shop N Stop outlets is expected to start in 2015, adding to last year’s opening of the massive K100 million 5,000-square-metre store at Waigani Central.

Having introduced PNG consumers to barista-made coffee (Bon Café,) pizza (Eagle Boys) and multiplex cinemas (Paradise Cinemas), CPL has shown itself keen to launch new businesses in PNG.

Fashionable move
Its next move will be into fashion, with the opening of a Jacks of PNG apparel outlet at Waigani Central due in April.

Jacks, which originated in Fiji, offers casual wear to consumers and may represent an opportunity for clothing manufacturers in PNG once it is established.

‘What we want to do is bring that in, but then start rejigging PNG designers to do PNG custom-made clothing,’ says Patel.

Meanwhile, Boncafé, another profitable business for CPL Group, grew to seven outlets in 2014 after the latest store opened at Waigani Central.

Business challenges
Some of CPL Group’s other brands have proved more challenging, but Patel is confident of improvement as they become more efficient and effective.Eagle Boys Pizza, for example, has required a change of approach since CPL launched the Australian brand in 2013.

‘What we didn’t realise was we had the wrong demographics, because people who eat pizzas here could only afford to eat it at hotels. Our pizza was for the mass market, but the pricing is not quite mass market pricing,’ Patel said.

He said Eagle Boys management also found that Papua New Guineans preferred thin-based pizza instead of the thick base that was initially offered.

‘It really comes down to smarter market research,’ Patel added.Of all of its brands, Hardware Haus has caused the most difficulty and was the only CPL Group business to record a loss in 2014.

Viewing this as an opportunity, Patel said new management had been appointed and an efficiency improvement process was being implemented for the business.

CPL: a history of growth
Historically, the CPL Group, which started with a single City Pharmacy store in 1987, has diversified both through acquisition and by launching new retail ventures.

It now has 59 retail outlets across Papua New Guinea. In 2005, it acquired the Stop N Shop supermarket chain from Steamships Trading Company and in 2009 also acquired the Steamships Hardware chain, rebranding it as Hardware Haus.

Between 2011 and 2013, it launched three completely new brands into the PNG market: Bon Café, Eagle Boys Pizza and Paradise Cinema, PNG’s first multiplex.

In its most ambitious move to date, CPL opened the Waigani Central shopping complex in 2014. The complex is the site not only of PNG’s largest Shop N Stop outlet, but also Bon Café and City Pharmacy outlets, Port Moresby’s second Paradise Cinema and a new DIY concept store, Haus Depot.

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