Ei Myo Thwe

Executive Director

Beauty Palace Co. Ltd.

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RETAIL DISTRIBUTION IN FRONTIER MARKET

Presentation Outline

• Beauty Palace Company & its distribution network

• Myanmar market Overview

• Retail Market Landscape

• Nationwide Distribution & its challenges

• Modern Retail Trade & its challenges

• Retail Market Trend in the next decade

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Company Overview

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• 45,000 POS outlets covered nationwide

• Founded in 2001, manufactures, distributes, markets and sells branded

products across Myanmar

• Previously a distribution partner with Unilever

• Portfolio consists of skin care, oral care and hair care products with

significant market share positions

• The most extensive distribution network coverage nationwide

• Staff strength of more than 650 employees in Myanmar

• Factory located in Hlaing Tharyar Industrial Zone

Beauty Palace Co., Ltd

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• Total Reach > 45,000 Outlets

o 25,000 directly covered

o 20,000 via Wholesale

• Reach via nationwide sales

routes:

o 2 metropolitan cities

o 74 urban towns

o 384 rural towns / villages

• Includes remote and

inaccessible areas, in some

instances via water ways

• Employs around 260 sales

personnel

BP’s distribution reach

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Direct Distribution

(DD)

Sub-Distributors

(SD)

• One of the most extensive direct distribution networks in the country

• Full logistics and warehousing capabilities

• 2 central locations (Yangon and Mandalay) and a further 5 regional

branches, with warehouse sales & distribution capabilities

• 260 sales employees

• Strong nationwide long term network of 70+ Sub-Distributors

o 30 in Upper Myanmar

o 43 in Lower Myanmar

• Sub-Distributor management on a regional level from the branches to

ensure proactive sales, follow up and quality control

• Majority of Sub-Distributors is dedicated / exclusive to Beauty Palace

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BP’s distribution channel

BP’s Regional Branches

Headquarter

• Yangon

Main Branches

1. Mandalay

2. Taunggyi

3. Mawlamyine

4. Lashio

5. Magway

6. Naypyidaw

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BP’s Regional Branches

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BP’s Sales Fleet

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BP’s Sub-distributors

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Upper Myanmar SD = 17 Towns Lower Myanmar SD = 25 Towns

BP’s Physical Distribution

MDY Branch

YGN Factory

Warehouse

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Sub Distr

Sub Distr

Sub Distr

Sub Distr

Sub Distr

Sub Distr

Sub Distr

Sub Distr

Sub Distr

Sub Distr

Sub Distr

Sub Distr

Lashio Branch Taungyi Branch Magway Branch NPT Branch MLM Branch

MYANMAR MARKET AT A GLANCE

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Overview on Myanmar

• Population: 54 millions

– Young population (34% under age 17 and 46% under age 24)

– Future consumers & workforce are “ripening” at the right time in Myanmar’s economic development

• Expected yearly GDP growth 7% - 8%

• Current per capita income = $ 1,300 (2011)

– Expected to raise its per capita income to $2,000 - $3,000 by 2030

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Overview on Myanmar

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2/3 of Population

MYANMAR RETAIL LANDSCAPE

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Retail Market Value Estimates 13.2 Billion USD

10%

90%

Myanmar Retail Market

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Traditional vs Modern Trade

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•Mostly sell the categories for immediate needs/ consumption

oSnacks & Confectionaries oBeverages oFMCGs

•Purely family run business •Near to consumers, in residential areas •Extended opening hours, often 12 – 16 hours a day

Traditional Convenience Store

Modern Convenient Stores Facilitate a nice shopping experience

•Price tag •Air conditioning •Computerized checkout counters •Self-Service •Freezer •Shopping space

Urban vs Rural Market

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1. More developed market 2. Less barrier to entry 3. Higher purchasing power 4. Infrastructure

1. Less developed 2. Smaller households counts 3. High barrier to entry 4. Lower household income 5. Poor or no infrastructure 6. Inaccessibility 7. Cultural differences

RURAL Villages

URBAN TOWNS

Urban retail outlets distribution

19%

17% 17%

8%

3%

1%

20%

14%

0%

5%

10%

15%

20%

25%

Wet Market TraditionalConvenience

Store

Grocery Store Kiosk/ Hawker General Store Modern Trade Tea Shop HoReCa

Channel importance – by no. of stores

Traditional Trade 65% Modern Food & Drinks 34%

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Rural retail outlets distribution

15%

19% 20%

9%

7%

15% 15%

0%

5%

10%

15%

20%

25%

Wet Market TraditionalConvenience

Store

Grocery Store Kiosk/ Hawker General Store Tea Shop HoReCa

Channel importance – by no. of stores

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Traditional Trade 70% Food & Drinks 30%

Wet Markets

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Convenience Stores

22

Grocery Stores

23

General Stores

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Kiosk/Stalls

25

Betelnuts kiosk

Tea Shop

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Challenges on Nationwide Distribution

• Affordability – right pricing, quality

• Accessibility in different geographical regions

• Availability – strong extensive distribution network

• Speed to market

• Distribution & Logistic problem

• Lack of good 3rd party logistic provider

• Cash collection system

• Consumer Insights

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OUTLOOK ON MODERN TRADE

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History of Modern Retail

Socialist Period

• From 1962 to 1988

• State involvement in Retail

• Cooperatives, ration systems

• Traditional Trade Dominant

1990s

• Private Sector startups in modern retail formats

• Emergence of Supermarkets, Department Stores

2000s

• Continued development of Modern Retail

• Emergence of Retail Chain Stores

• Emergence of New formats: Hypermarkets, Convenience Stores, Specialty Stores

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Modern Retail Market

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• Market Share between 5% and 10%

• Growth rate of 20% or more every year

• High potential – emerging markets

• Total estimated no of outlets 500 end year 2015

Growth Drivers

• Growing consumer acceptance

• Emergence of retail space

• Expansion from chain stores and emergence of new retail formats

• Driven FDI – Global brand entry

• Increase in expats population

• Ease of import regulation

• Increase in modern consumers due to increase in disposable income

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Current Modern Retail Landscape

Type of Modern Trade

Brands No of Outlets

Hypermarket Ocean 5

Capital 2

Supermarket Citymart 15

Orange 7

Departmental Store Sein Gay Har 7

Gamone Pwint 4

Convenience Stores

ABC 40

City Express 26

Grab & Go 20

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Challenges on Modern Trade

• Local consumer insights

• Shortage of readily available commercial property

• High prevailing real estate price

• FDI Law restriction on foreign participation in retail sector until 2015

• Importation difficulties – need a local partner

• Fragmented distribution

• Lack of Supply Chain Management outside Yangon

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The Retailing Revolution is about to begin

• Next 10 years:

– Massive growth in Modern & Traditional Trade, especially in supermarkets, convenience stores

– Introduction of international retailers, brands, modern retailing techniques, technology, scan data, credit cards, more secure banking, ATMs will revolutionize the retail landscape

– Daily shopping at small “Mum & Pop” shops will still be strong especially upcountry, these will gradually give way to more weekly shopping at major suburban shopping complexes in the larger urban centers

– Retailers will grow rapidly in tandem with international manufacturers & suppliers

– Improved distribution systems & the introduction of scanning for the major retailers

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Thank you

Ei Myo Thwe

Executive Director

Beauty Palace Co. Ltd.

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