Every successful underdog becomes an incumbent that faces challenges from other underdogs. That's certainly the experience of current market leader FairPrice in its rivalry with fellow homegrown supermarket chain Sheng Siong.

The two grocery giants watch each other closely, as each has lessons to learn from the other. Any improvements they make will ultimately benefit customers in Singapore.

FairPrice's experience with its biggest competitor is captured in one of the chapters in a new book, The Price of Being Fair, written following interviews with current and former leaders in FairPrice and the labour movement, complemented by unprecedented access to FairPrice's archives. It tells the story of the co-operative's successes, as well as failures over half a century – from aborted retail concepts to loss-making overseas ventures.

The book was edited by Sue-Ann Chia and Peh Shing Huei, and published by The Nutgraf Books. You can get a copy of it here, or at Books Kinokuniya, Times, and Popular bookstores from Monday, Jul. 10.

The following excerpt is taken from Chapter 7 of the book, titled Supermarket Wars II: FairPrice vs Sheng Siong.

By Sue-Ann Chia, Peh Shing Huei, Samantha Boh, Justin Kor, Derek Wong, Toh Wen Li, and Puah Rui Xian

While FairPrice was the underdog when it battled Carrefour in the 1990s, the roles have reversed this time. “We do actually have market leadership in the heartlands, let’s not forget that,” noted Vipul Chawla, Group Chief Executive Officer (CEO) of FairPrice Group. It is now Goliath, but it refuses to follow the same fate of the giant that fell. Sheng Siong may still be trailing behind in stores and revenue, a distant No. 2, but it is a fellow homegrown rival taken extremely seriously. It has even leapfrogged Cold Storage/CS Fresh as the second-largest supermarket chain in Singapore.

“Sheng Siong is our biggest competitor,” admitted FairPrice Group’s Deputy Group CEO Elaine Heng. “They are a force to be reckoned with.”

The giant needed a fresh strategy to spar with this new contender in the ring.

Just like in boxing matches, the retailer believes in fighting hard, fast, and fair. Almost like a gentle giant, it does not land any dirty blows or hit an opponent when he is down. Instead, it formulated a plan to take on every Sheng Siong store toe to toe and be the last man standing after every bout.

From prices to produce, every FairPrice store is largely the same to the undiscerning customer.

But things are slightly different for those near a Sheng Siong outlet.

Fresh products, for instance, differ. Their shelf lives are shorter, which translate to lower procurement costs. These cost savings will be passed on to the customers. “The customers will get very discounted products – still at good quality,” shared Heng, who is also CEO of Retail Business.

This is FairPrice’s brigade of over 60 “warrior stores” – outlets that have been specially identified to compete with Sheng Siong through prices and personnel.

Even the staff running these stores are handpicked – they relish being in the fray. “Branch managers we put in have to be a lot hungrier,” added Heng. “Warrior stores are measured differently.”

In 2022, it also counterpunched by unveiling stores that resemble wet markets, with 80 per cent of the inventory consisting of fresh produce. The first store is in Ang Mo Kio and there is now one more outlet.

Both stores, however, are in stealth mode, falling under the regular FairPrice banner. But among the staff, they are known as the FairPrice Fresh branches – the retailer’s reply to Sheng Siong’s signature focus on fresh produce.

The competition extends to the location of stores in the heartlands. And when FairPrice hits, it hits with the power of a heavyweight, at times knocking Sheng Siong out of hotly-contested areas with its sheer size.

One instance was a 40,000 sqft site at the former Marine Parade Community Library, where a FairPrice Finest stands today. Sheng Siong had been in contention to secure the space in 2002 – until FairPrice edged its rival out with a bid that was just 1.3 per cent higher.

While the fights may at times become heated, with Sheng Siong winning more than a few rounds, the ranks of FairPrice hold a high regard for its rival as a worthy challenger. “We continue to have a high respect for their ability to deliver to their targeted segments,” said FairPrice Group’s Chairman Kee Teck Koon.

The truth is, FairPrice and Sheng Siong operate very differently, like an orthodox fighting a southpaw.

For instance, FairPrice’s focus on a Singapore core sees its workforce comprising more locals and older employees. Sheng Siong, on the other hand, has opted for more youth and a higher proportion of foreign workers.

And while FairPrice uniformly prices its goods across all stores – even for FairPrice Finest – Sheng Siong picks and chooses. Depending on location and surrounding competition, prices differ at each outlet. With such price differentiations, “that perception of them being value for money is very strong,” noted Kee.

Discerning consumers who compare prices could find Sheng Siong cheaper in certain locations because of such variability in pricing. This is why there is a general misconception that Sheng Siong offers lower prices across all its outlets.

While FairPrice may have the edge in size, Sheng Siong is tops when it comes to cold hard cash. In 2021, it announced S$133.6 million in profits from a revenue of S$1.4 billion. Conversely, FairPrice had just made S$99.8 million from almost S$4.3 billion in turnover the same year.

“You have to give credit to Sheng Siong – they are very good operators,” said Kee, noting that their roots in pig farming have given them an intricate knowledge of the supply chain, something that they have applied to great effect. “They understand what goes into the costs of supply, which they can actually translate into better margins for them,” he said.

This principle of cost-effectiveness also applies to every inch of their stores, as Sheng Siong’s founder Lim once told ST in 2008. “If we can make S$10 instead of S$4 for every square foot of retail space, we can cut costs effectively and offer very reasonable prices to customers,” he said.

So while it is a competitor, Sheng Siong is also a case study in efficiency for FairPrice. “We can be a lot more efficient in how we do things,” admitted Kee, who added that the retailer was constantly looking at ways to be more cost and price efficient. “We’ve got to be realistic and address our gaps in terms of productivity, in terms of process, to see how we can improve on these things to lower our overall costs of delivery and improve our margins.”

While both retailers may be direct rivals in the ring, their business models differ.

As a publicly listed company, profits should be a priority for Sheng Siong. But the cooperative and social enterprise that is FairPrice has a different concern.

“Some of the decisions we take, we keep in mind that we have a role to play in moderating the cost of living for society,” said Vipul. “It is reflected in our financials,” he added, on the difference in profitability.

Like elite sports, competition in the supermarket arena has pushed boundaries of endurance and innovation – resulting in formats like hypermarkets, convenience stores, and upmarket outlets. The clear winner from this tussle between supermarkets: the consumers.

“Singaporeans are better served by having competition to keep us alert – to be more efficient, to be better,” added Ng who presided from 2005 to 2014, a period when Sheng Siong was rapidly expanding, especially after it listed in 2011. This is a view echoed by other FairPrice leaders.

“Sheng Siong, they’ll keep us on our toes, and we’ll keep them on their toes,” said Vipul.

Top image via FairPriceGroup Media Library and More FriendshipFeed on YouTube