Hongcheol Kim's Seven Eleven, Approaching the 'Top 3 Convenience Stores'

Narrowing Gap with CU and GS25 through Ministop Acquisition
Synergy from Expanding Private Brand (PB) Products
Losses Due to Integration Costs... Profitability Expected to Improve Next Year

After four years, the captain of Seven-Eleven has changed, drawing attention to whether it will enter the 'convenience store big three.' Since the appointment of the new CEO Kim Hong-cheol earlier this month, the company is expected to complete the integration with Ministop, its biggest immediate challenge, and narrow the gap with CU and GS25, the current two leading competitors. Due to profitability deterioration caused by costs incurred during the integration process, Seven-Eleven plans to find a breakthrough through private brand (PB) products.

According to Seven-Eleven on the 20th, as of this month, the PMI (post-merger integration) conversion rate of Ministop is around 95%. Three months ago, the conversion rate was maintained at the 80% level, but with the expiration of Ministop's usage rights scheduled for March next year, the conversion process is accelerating.

A Seven-Eleven official said, “Although it took more time and cost than expected, we will quickly complete the integration work,” adding, “We are also organizing low-efficiency stores and locations overlapping with existing Seven-Eleven stores.” At the time of the Ministop acquisition contract, 2,620 stores were acquired, giving Seven-Eleven about 14,000 stores. About 18% of these were unprofitable and were either closed or converted to other convenience store brands.

The acquisition of Ministop provides Seven-Eleven with the driving force to narrow the gap with CU and GS25. In terms of store numbers, CU has 16,787 stores, GS25 has 16,448 stores (as of the end of last year), and after acquiring Ministop, the gap with Seven-Eleven’s stores will shrink to about 2,000. The number of stores directly correlates with company performance; as the number of stores increases, sales rise and costs decrease. Increased logistics volume reduces logistics costs, and greater buying power lowers purchasing costs. As of the cumulative third quarter, Seven-Eleven’s operating loss was 22.4 billion KRW. Although it remains in the red due to integration costs reflected this year, profitability is expected next year.

The synergy is emerging as Ministop’s strength in ready-to-eat foods combines with Seven-Eleven’s convenience foods and PB products. Ministop has many large stores of about 30 pyeong (approximately 99 square meters) compared to other convenience stores. Leveraging this strength, these stores were converted into ‘Food Dream’ stores specializing in convenience foods (lunch boxes, rice balls) and ready-to-eat foods (chicken, sausages, etc.), resulting in profits increasing by 50% compared to before, according to the company.

To strengthen profitability, next year the company will accelerate sourcing and sales of global PB products. The plan is to maximize customer attraction by selling competitive PB products. Initial responses have been positive. Two months ago, the company imported and sold five types of Japanese Seven-Eleven snacks, with the Seven Premium dessert cookies ‘Langue de Chat White Choco’ and ‘Langue de Chat Choco’ ranking first and second among all snack products, achieving sold-out records.

Overseas expansion is also active. The company is pursuing a strategy to sell domestic Seven-Eleven PB products to Seven-Eleven stores in the U.S., Thailand, and Taiwan. Introducing half-price parcel delivery is also part of the strategy to attract more consumers. Starting next year, in addition to the existing Lotte parcel service, a half-price parcel service will be added, but the exact timing has not been finalized.

This content was produced with the assistance of AI translation services.