Dairy Farm's new big boss insists on 'business reorganisation'

It will be evaluated in 4-5 months.

According to CIMB, new CEO Graham Allen (previously President of US-based Yum! Restaurants International) replaced Michael Kok as CEO at the start of the year. 

During the analyst briefing, he outlined the group’s mission and strategy. To recap, Diary Farm aims to be a leader in all its market sectors as it strives to bring to Asian consumers the benefits of modern retailing through an efficient, low-cost supply chain.

Its mature cash generating operations in Hong Kong and Singapore will underpin developments in the fast-growing Southeast Asian market.

Tactical steps to strengthen its core businesses include i) brand campaigns, ii) revamp of store layout to maintain a contemporary feel, iii) loyalty cards which
encourage loyal patronage and also help to collect data on consumers’ habits, iv) exclusive brand activity (e.g. Mannings has an exclusive tie-up to carry the UK
Boots brand), and lastly, v) new store additions.

The new CEO also elaborated on management’s focus on individual store-level profitability. He believes that store-level profitability hinges on getting right the product assortment (category leading sales volume), the layout and presentation, the flow of the store and lastly, the economics.

Once this is achieved, economies of scale can be readily achieved with store expansion, which can then offset overheads.

An interesting point was his retail philosophy of focusing on consumers. He feels that bad retailers are those which are led and dictated by suppliers, which have an agenda on how store layout should be and how their products should be placed.

Instead, he thinks that good retailers are those which focus on consumers’ needs and in turn, ask the suppliers to conform to the market.

To achieve these goals and vision, Dairy Farm is initiating a reorganisation where operations will be managed on a country and business line basis rather than via a regional approach.

Hence, business lines such as health & beauty and IKEA will now be vertically managed. This allows for cohesion between the same banner in different countries in terms of shopping experience, product category, pricing mechanism, etc.

In addition, the new organisation allows for a flatter management structure and offers more leadership opportunities for the group’s up-and-coming employees. The new structure was put in place at the start of the year, after evaluation during the preceding 4-5 months.

Graham Allen revealed that the ex-CEO Michael Kok was also strongly in favour of the change, sensing that this structure is most appropriate for the group at its current stage of evolution.