Dairy Farm re-brands 57 Shop n Save outlets

Here's how competitor Sheng Siong Goup will keep up.

According to CIMB, all 57 Shop n Save stores will be re-branded as Giant stores from today. However, the West Mall store will be converted into a Cold Storage store. Shop n Save, Giant and Cold Storage are all Dairy Farm brands. 

Here's more:

This development highlights Sheng Siong’s strength in the budget segment. It is a tacit admission by Shop n Save of the difficulty of competing in this space. We suspect its troubles lie with the pre-dominantly Mandarin-speaking budget consumers identifying better with Sheng Siong’s brand.

Re-branding as the more popular Giant brand seems a desperate attempt to gain consumer acceptance. Further, Sheng Siong’s low-margin strategy makes it difficult for any competitor to compete without an efficient cost structure.

Shop n Save’s re-brand may also be motivated by the need to mitigate cost pressures by consolidating overheads. We are unclear if Dairy Farm still intends to compete in the budget segment as Shop n Save was its flagship brand in that space.

Giant is a hypermarket, competing more on the breadth of offerings, rather than price. We are now more positive on Sheng Siong given evidence of its dominance in the budget segment. 

The beauty of a low-margin strategy is that it is improbable a new entrant can muscle in by undercutting price.