Tokyo | Japan’s Seven & i Holdings says fuel will remain a “crucial part” of its Australian convenience operations, but it expected larger growth opportunities from merchandising as it expands the store network.

The Japanese conglomerate also said on Wednesday it expected to expand the Australian store network faster than in other countries where it operates, including the United States, as Australia’s population was growing faster than in many countries.

In the Japanese company’s first public comments since announcing the $1.71 billion acquisition of the 751 Australian store network two weeks ago, executives outlined their plans for the country’s largest convenience store network.

“There is tremendous growth potential in the Australian convenience store market because the population there is forecasted to grow at a faster pace than many other countries, including the United States, for the next 20 to 30 years,” 7-Eleven International Co-CEOs, Ken Wakabayashi and Shinji Abe, said in written responses to questions from The Australian Financial Review.

Fuel will remain a “crucial part of the business, but we see larger growth opportunities in merchandising”.

They said the company would expand its focus on ready-to-eat fresh food products under plans to accelerate growth.

Declining fuel sales was a key factor in the bidding war for the business with buyers told than 60 per cent of 7-Eleven customers did not purchase fuel. Petrol sales are expected to decline in coming years as drivers transition to electric vehicles.

Mr Wakabayashi and Mr Abe said the Japanese firm planned to expand its footprint in Australia.

“Currently, we have one 7-Eleven store per 5,780 people in Japan, 26,588 people in the US, and 35,409 people in Australia, so there is a lot of room for growth in the Australian market,” they said.

Seven & i Holdings, which owns the 7-Eleven global licence, won a bidding war against Australian-listed fuel distributor Ampol and US private equity firm Platinum Equity, when it offered $1.71 billion to own the Australian business in full. The business is forecast to earn $220 million EBITDA for the 2023 financial year.

7-Eleven’s shareholders, the Withers and Barlow families, have exited the convenience and petrol retailer after acquiring the Australian licence in 1977.

Tokyo-based Seven & i controls more than 80,000 7-Eleven convenience stores around the world. Its retail empire also includes Ito-Yokado supermarkets in Japan and Speedway petrol stations in the United States.

The company made the acquisition despite pressure from some investors to restructure and sell assets. Japanese media reports said it resisted a board challenge from US-based activist fund ValueAct Capital which wanted the company to spin off the 7-Eleven business.

The Japanese group was offered an early look at the Australian 7-Eleven as part of its licensing agreement last year but initially turned it down, according to the AFR’s Street Talk column.

Asked why the company had a change of heart, the executives declined to comment. They said convenience store businesses typically performed well during tough economic times.

The Japanese group said it was not concerned about declining fuel sales, which they said would remain a key part of the Australian business.

“We recognise fuel sales are down globally, but we have other crucial parts to our business including fresh foods, proprietary beverages, and 7-Eleven branded products. Fuel is important to the Australian business as it is an opportunity to access more customers and drive loyalty across all categories,” they said.

The Australian business will be folded into the Japanese group’s global arm called 7-Eleven International, a joint venture between 7-Eleven, and
Seven-Eleven Japan, which was established two years ago.

7-Eleven Australia was 7-Eleven International’s first acquisition. The company traditionally uses a licensing model and rarely makes direct investments.

The company said Australians should not necessarily expect the store offerings to resemble those in Japan. “7-Eleven is very successful in Japan, but we recognise the differences between the two markets,” they said.

The sale is expected to be completed in 2024.

The deal was the latest in a number of Japanese acquisitions and investments in Australia.

Extracted in full from:  https://www.afr.com/world/asia/7-11-petrol-to-stay-as-japanese-retail-giant-eyes-aussie-growth-20231213-p5era4

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