Is Lotte's acquisition of Ministop worth 300 billion won?

The biggest issue in the convenience store industry is by far the acquisition of Ministop by Lotte.

In fact, there is nothing special about the inside of the industry.

Anyone was predicting that either Lotte or Shinsegae would acquire Ministop, and the only thing that mattered was 'how much to spend'.

Ministop had already been on the market for several years, and negotiations were underway to sell it.

However, there seem to be two things that ordinary readers are puzzled about.

① Lotte (7-Eleven) took over Ministop, why can't the acquired Ministop stores be converted to 7-Eleven at once?

 

First of all, answering ①, even if a franchise merges another franchise, the franchisees cannot be rebranded all at once. It's just a merger and acquisition at the headquarters level, not a merger and acquisition where all the franchisees participated in the sale negotiations.

The franchisee is guaranteed the right to use the brand according to the franchise contract with the head office, and the remaining contract period is also guaranteed. Of course, the situation is different if the franchisee cheers the 'new owner'.

② It is said that the sale amount is 300 billion won, so there are only 2600 Ministop stores nationwide (which are also concentrated in a specific area), is it really worth it?

When the brand is near bankruptcy, you want to get rid of the old brand, and a new owner comes in.

Even if you tell me not to change the brand, they will change it saying it's cool.

However, in such a situation, the sale negotiations at the headquarters level would not have been advantageous, and the franchisee would not easily change the brand, even if they were happy with the outcome of the negotiations.

There are two main reasons.
① If you do not change the brand easily, you can negotiate a new contract with the 'new owner' on better terms,

② This is because, in the convenience store industry, there is no significant difference in sales even if the brand is switched.

The 'location' of a store is an important industry. Therefore, the owners who can survive will endure to the end.

 

To give an example, GS25 was originally LG25, but the name was changed (in 2005), but there were owners who persisted until the end without changing it.

They did not demand appropriate compensation, saying that the LG brand value is higher than that of GS, or insist on maintaining the existing brand.

 

(After a court action, I received a penalty and converted.)

Since the typical franchise contract period for convenience stores is 5 years, the most recently signed franchisees can last for 5 years, and sometimes it may take a while because some franchisees sign long-term contracts of 7 to 8 years.

Moreover, just because the contract period with ministop korea has expired does not mean that franchisees will unconditionally switch to 7-Eleven.

Naturally, you choose a brand of your own free will.

It means that you can change to GS25, CU, Emart 24, etc.

In a nutshell, 7-Eleven has poured 300 billion won into opaque mergers and acquisitions with no clear future.

So, they gave 100 million won to each store, and took over the stores where the extension of the franchise was not clear... … But is ministop korea a convenience store with a good brand recognition? Is the company worth it?

Nor is it. Because it is a Japanese company, it has been included in the boycott in recent years, and many youths do not even know that such a convenience store brand exists.

Still, why did Lotte acquire ministop korea?

Of course, it must have been 'because I thought it was worth it'.

It is solely up to Lotte's management to decide.

We can only estimate the reason at the level of common sense.

The biggest reason is probably 'merchant expansion'.

As you know, the current convenience store market is divided into two major companies.

GS25 and CU each have 15,000 stores.

There, 7-Eleven ranked third with about 11,000 stores.

With the three companies combined, there are over 40,000 convenience stores in Korea.

 

In addition, E-Mart 24 is the fourth-largest brand and has about 6,000 stores.

Thus, the '50,000 convenience store world' is being maintained in Korea.

Recently, in the convenience store industry, I think the competition for 1st and 2nd places is already over. Money, people, technology, products, future strategies… … In every respect, it has become overkill. There is no room for new players to intervene.

In addition, 7-Eleven was ranked 3rd, and in fact, it seemed that they were quite satisfied with the 3rd place.

Because there was no convenience store worthy of being ranked fourth.

But, as you know, the situation changed when E-Mart 24 appeared.

Shinsegae E-Mart 24 absorbed the existing small and medium-sized convenience store brands and aggressively expanded its stores, leaping to fourth place at once.

In addition, it eventually starts to climb to the 3rd place. Whether you get into the Big 3 or fall into the 4th place is a big difference.

In such a situation, the 5th minimal (?) company with 2600 affiliated stores came out for sale.

When it comes to managing a company, it is something that you would not see as it was in the past, but the value judgment is completely different depending on the situation.

From 7-Eleven's point of view, ministop korea would have been like that.

When E-Mart 24 takes over Ministop, it will immediately go up to 10,000 stores.

It's going to hit 7-Eleven right before your eyes. On the other hand, if 7-Eleven takes over Ministop, it will immediately open about 14,000 stores and rank shoulder to shoulder with the first and second place in the franchise.
① Will you remain in third place?
② Is it possible to fall to 4th place?
③ Are you chasing 1st or 2nd place closely?

At such a crossroads, it can be said that 7-Eleven threw the 'ministop korea    M&A' game to 'stop' the crash.

Still, questions will remain. Anyway, was it worth spending 300 billion on it?

Of course, this can only be estimated at the level of common sense.

Above all, it has become very difficult to open new convenience stores.

As I have explained several times in the past series, it is now almost impossible to open a new store in the downtown area of ​​the metropolitan area according to the government's policy of limiting the distance of 50 to 100 meters for new convenience stores.

Whether it is taking over competing brand stores with huge incentives or aggressively opening new stores in areas where new commercial districts are expected, either way, the cost and manpower are prohibitive.

Now, it has become almost impossible for a third-party brand to appear in the convenience store market.

There is no choice but to continue the battle of the bites and bites between existing operators.

It is difficult to expand the market any more, and the one who rips more pie in the existing market is the winner.

So, from the perspective of 7-Eleven, you might think, 'It's about 300 billion won'.

Logistics must have been completed, and R&D for unmanned convenience stores or on-off integration must have progressed to some extent.

After all, convenience store franchises these days don't have much money to spend on anything other than 'new openings'.
(For reference, recently, CU and GS25 are focusing their investments on 'advanced' convenience stores and 'diversification' in business fields along with the opening of new stores.)

Now, will 7-Eleven's ministop absorption proceed smoothly? And what kind of history and characteristics does Ministop have as a convenience store brand?

How can such characteristics and advantages of Ministop become opportunities and threats to 7-Eleven?

This is the part many people are curious about.

In the next part, we will look at that part.

mini stop in front
It was expressed as “a minimal (?) 5th-largest company with 2600 franchise stores”, but it is good to start by examining whether that is the correct expression.

Was Ministop a 'mini'?