FairPrice maintains role as co-op, solidifies supply chain focus and invests in Trust Bank

FPG’s role to help defray the rise in GST was highlighted by the PM on Aug 21: “The government has been stabilising prices through various policies. In 1973, NTUC established NTUC Welcome, the predecessor of today’s NTUC FairPrice. Its social mission was to ensure that Singaporeans could purchase necessities at affordable prices. Fifty years later, FairPrice is now the largest local supermarket chain. It plays a leading role maintaining costs at a reasonable level, so Singaporeans can continue to buy affordable and good-quality goods. As a result, other supermarkets have no choice but to emulate FairPrice by offering their own house brands and promotions.”

According to the PM, Singaporeans “know how to compare prices. They know which supermarket has the lowest price on which day for which item”, alluding to other supermarket chains like SGX-listed Sheng Siong Group, Cold Storage and Giant. The latter two are part of Singapore-listed but Hongkong-based DFI Retail Group.

Sheng Siong is viewed as FPG’s nearest competitor. For instance, FPG’s gross profit margins of around 27% are a tad lower than Sheng Siong’s at 29%. Notably, from January to March 2023, Sheng Siong also provided a 1% discount on almost all in-store purchases to help customers offset the GST hike.

There are two key differences between Sheng Siong and FPG. First, according to Sheng Siong’s latest results statement for 1HFY2023 ended June 30, it has only 67 stores. The chairman and CEO of Sheng Siong have said that it aims to open at least three stores each year.

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“To achieve this, the group proactively bids for new stores in residential areas, primarily HDB estates, and is actively seeking untapped regions for retail space. With the expected pipeline of HDB flats to be built in the coming years, the group expects a stable growth trajectory,” the company told investors earlier this year.

Meanwhile, FPG has the largest supermarket chain in Singapore with 570 "touchpoints” including Kopitiam and Foodfare. The group was formed in 2019, bringing together NTUC FairPrice, Kopitiam, NTUC Foodfare and NTUC Link.

Other brands owned by FPG include Golden Chef, Harvest Fields, Delicato, Origins, Life, Chef’s Pork, Ocean Fresh Delite, Chef Delights, and Just Wine.

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In a recent interview with The Edge Singapore, Vipul Chawla, FPG group CEO, says: “We are a co-op with a very clear social mission. To fulfil this, we have to run it efficiently. On a daily basis, we run the group like a commercial exercise so far as productivity and efficiency are concerned. As a co-op, returns are distributed back to members and shareholders. In some ways, it’s profit with purpose.”

FPG is also a key player in Singapore’s supply chains. The group owns subsidiaries such as FairPrice Group Supply Chain and Grocery Logistics of Singapore (GLS). The latter holds the group’s warehouses.

Controlling the supply chain

FPG’s supply chain plan is to ensure resilience. FPG is in partnership with suppliers and various government agencies to diversify supply sources. It has acquired a new fresh-food distribution centre to meet the projected increase in demand, with throughput forecasted at 45.5 million cartons per year, up from 19.6 million in 2017.

There have been instances when the group had to make trade-offs despite its supply chain resilience, Chawla notes. “Last year, when one of our neighbours stopped the supply of chicken, our shelves did not run out of chicken. We had to source chicken from Brazil and we had to pay spot prices. Our input prices went up but we didn’t raise prices for our customers to help moderate the cost of living,” he recounts.

A more recent example was pork from Indonesia. “There was an issue when swine flu broke out. Because of our supply chain resilience, we own a pork company. We were asked to step up supplies to the whole country. If we were purely for profit, we could have chosen to raise prices but we kept prices stable,” he explains. “Whenever we are faced with [such a situation], we are very clear [on what to do].”

These two episodes and the ability to keep the shelves stacked with essentials during the pandemic demonstrate FPG’s supply chain resilience. Part of the resilience comes from diversification as FPG imports goods from more than 100 countries.

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As Chawla sees it, FPG’s ability to own its supply chain, including the warehouses and cold storage facilities, is similar to banks having their own data centres to ensure security rather than going on the cloud.

“We have diversified our supply chain because we wanted to make sure we don’t run out. It ensures availability. We set up our supply operation centres, SCOPE, which tracks what is happening to our supply chain worldwide in real time. When the Ever Given ship got stuck in the Suez Canal, we started rerouting some products,” Chawla adds.

“We want to make sure we are completely sorted out upstream and we want to take charge of logistics ourselves. We own GLS, which holds our warehouses. We have the most sophisticated software in our warehouses.”

While this business model could raise the cost of goods, FPG has a dominant position in Singapore. “We have the scale so it makes sense to do this ourselves, and because of that, the costs work for us. I’m not sure other supermarkets have that level of scale,” Chawla says.

“We also want to have a sense of control and oversight and that comes back to the trade-off of having a line of sight. We want a complete line of sight, food security and resiliency,” he adds.

Digitally enabled future

What is in the future for Singapore’s biggest supermarket chain?

In 2017, FPG invested $80 million in fast-tracking and updating its digital offerings. All its apps were converged into one FGP ecosystem, which is now used by more than a million customers every month.

According to Chawla, the digitally connected customer can use the FairPrice app in stores to “scan and go” — making payments directly in the app and bypassing the cashier queues — as well as place orders and deliveries.

FPG has also been putting in place new concepts. Two The Grocer Bar outlets have been opened — one at NTUC FairPrice Finest Centrepoint last year, and the other at FairPrice Finest at Sengkang Grand Mall. The Grocer Bar serves drinks.

FPG’s most notable move in the past 12 months was the launch of Trust Bank in September last year. FPG and NTUC Enterprise together own 40% of the bank and Standard Chartered Bank Singapore owns 60%. Chawla declines to discuss plans for Trust Bank, except to say that the Trust Card provides customers with good discounts at FairPrice supermarkets.

“When we looked at the evolution of our strategy, we said we aspire to become an ‘everything food made easy’ ecosystem, similar to a platform company,” Chawla says.

Would FPG ever seek a listing? Chawla states: “FairPrice Group is committed to our founding mission to moderate the cost of living. There are no plans to change from a co-op structure.

“No matter our form, we will stay true to our mission of serving Singaporeans, moderating the cost of living and helping the poor. We believe in profit with purpose and will continue to be laser-focused as a socially responsible retailer, standing by our customers to fulfil our role in benchmarking prices to ensure essentials remain available and within reach for all in Singapore.”