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 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
CPL Group’s Mahesh Patel
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.
At City Pharmacy outlets nationwide, there are plans to strengthen healthcare services by recruiting more in-store nurses.
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.
Its next move will be into fashion, with the opening of a Jacks of PNG apparel outlet at Waigani Central imminent.
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.
‘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.’
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.
‘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.’
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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At the Central Waigani, I see there is very big and spacious car park area, which is good but looking at place to relax like a good restaurant, there is none. Why not build a food court above the entire car park area where, people going there would relax etc and then go shopping down at the Mall. Also the food court could be rented out to other vendors thus boosting business environment in the area. I understand there is Cinema there too but I was just suggesting if there is some place there for relaxation like what you see at Vision City. thanks.
Comparably Hardware Haus would still have a hard time competing with other hardware on quality and price. You can get a better product for a same price in other hardwares.
Workers reward, attire, training and outlook needs to be worked work.
I do not know what City Pharmacy shops in other provinces outside of NCD are like, but in New Ireland province both in Kavieng town and on Lihir Island are operating in very hot conditions! Medical products need to be stored at specific minimum temperatures. This is not happening yet we are consuming these products and paying good money. The shops are equivalent to a furnace. You walk in and the heat is overwhelming. At least in Kavieng there are a couple of fans. The workers look fertige and there is hardly enough room to move around in the Lihir shop! There must be laws about how wide the isle should be. Another safety hazard is having only one entry/exit point. So in an emergency customers only know one way out! I prefer to shop at City Pharmacy but I would rather pay K3.00 extra for an item then to give money to a company that seems to only take, take, take! Please do something.
Recruitment of nurses for the pharmacies can only do so much. The in-store clinics exposes the children, primarily served, to others who may be sick and seeking medication as well. Patel may want to consider isolating these clinics from the pharmacies themselves.
I would suggest that CPL implement a business development program for doctors, where the doctors are taught the basics of running their own clinic while working as interns at City Pharmacy. The program should be designed to get Doctors to go from working in City Pharmacy to setting up their own clinics with the specific clause that City Pharmacy can set-up small micro-pharmacies within the same building. Just a thought.
CPL has done well so far. It’s a story of success.
The new development at Waigani Central with its Cinema complex is a welcome sight.
With its good open car park, there is,however, no good restaurant there.Ideally a variety to address and capture the market there unlike what’s presented at Vision City. The Eagle Boys there still needs to up its product attractiveness. Hope some restaurants are in the making there.
If this was an oversight, then the prime space is clearly a wasted opportunity.
Secondly, the CPL Group needs to be mindful of their origin and the opportunity that was presented to them where they began their pharmacy operations within Steamship properties.
It’s about time they start to give other budding small-to-medium business owners floor spaces to start their one or two men/women ventures
What about construction? Is CPL diversifying in this direction as well? It would be a good way to ensure the survival of the Hardware Haus Chain and would give CPL a upper hand in terms of Project Pricing. I’m sure this is in the pipeline…