November 27, 2024

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A CU store in Mongolia (BGF Retail)

BGF Retail, the operator of South Korean convenience store chain CU, announced Tuesday that the company will expand its convenience store business into Kazakhstan.

The firm plans to open the first CU store in Kazakhstan during the first half of next year and establish around 500 branches in the country in the next five years.

When opened, Kazakhstan will become the first Central Asian country to have CU stores. BGF Retail says it would also be the first foreign convenience stores in Kazakhstan.

BGF Retail’s business expansion in Kazakhstan comes as BGF Retail and Kazakhstan's Shin-Line, a leading player in the Kazakhstani ice cream market, has signed a master franchise agreement in Seoul, Tuesday.

Under the agreement, BGF Retail will provide Shin-Line with the right to open CU stores, and the Korean firm will receive royalties.

Shin-Line, which has around a 40 percent share in the country's ice cream market, has been trying to expand its business involving other items sold at convenience stores, according to BGF Retail.

Shin-Line CEO Shin Andrey, a third-generation Korean, had visited Korea several times to consult on BGF Retail’s convenience store operation.

BGF Retail also conducted a market survey of the retail market in Kazakhstan, before signing a memorandum of understanding with Shin-Line in November last year.

The two companies have made detailed business plans and conducted a feasibility study in the first half of this year, prior to the latest signing, BGF Retail added.

"Shin-Line has a competitive edge in handling temperature-sensitive products, particularly for its cold chain logistics and broad distribution network throughout Central Asia," an official from BGF Retail said.

BGF Retail anticipated a successful market expansion in Kazakhstan as well. "The Kazakhstani convenience store market has great potential for the country's increasing purchasing power," the company said in its statement.

According to the Korean retailer, Kazakhstan's gross domestic product based on purchasing power parity topped $30,000 last year, the highest among the five countries in Central Asia.

Kazakhstan's high youth and young adult population, who frequent convenience stores more often than the older generations, is expected to help the market grow further, BGF Retail added.

BGF Retail said Kazakhstan’s population under 30 accounts for more than half of the country's total population of some 19 million.

“(BGF Retail) will continue to excel in the global convenience store market based on its 30-year experience in both domestic and international markets,” BGF Retail CEO Lee Keon-jun said.

Outside of Korea, CU operates 320 CU convenience stores in Mongolia and 130 stores in Malaysia.

By Shim Woo-hyun (ws@heraldcorp.com)