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A feud threatens to destroy
FamilyMart partnership
Th e Japanese convenience chain says Chinese partner Ting Hsin withheld payments
BY CINDY WANG & RACHEL CHANG
BY JULIE JOHNSSON
BY TA K A S H I U M E K AWA
TAIPEI/SHANGHAI: FamilyMart,
the most successful Japanese con-
venience store chain in China, is
embroiled in a royalty payment
spat between its joint-venture (JV)
parents that threatens to destroy
the partnership.
FamilyMart UNY Holdings Co
Ltd is suing to end its Chinese Fam-
ilyMart partnership with Ting Hsin
International Group, saying the
Taipei-based conglomerate has
not fairly shared the gains from
the chain’s rapid expansion, ac-
cording to people familiar with the
matter and legal documents seen
by Bloomberg.
Under the terms of the partner-
ship, Ting Hsin eff ectively operates
more than 2,500 FamilyMart stores
in China, sharing profi ts and paying
royalties to the Japanese company.
Although Ting Hsin’s founders are
Taiwanese, the company has had
a presence in China since the late
1980s before the country’s economy
opened up, and is considered a local
entity. It also controls other food and
beverage brands including China’s
leading instant noodle maker.
FamilyMart has fi led a petition
with a court in the Cayman Islands
— where Ting Hsin and the JV are
registered — to force its partner
to relinquish its 60% stake, said
the people.
Th e tussle comes as China’s con-
venience-store market is set to grow
by more than 60% in the next fi ve
years to US$27 billion (RM112.59
billion), according to Euromonitor
International. As China rapidly ur-
banises, demand for around-the-
clock food, snacks and beverages
is surging. FamilyMart is the latest
foreign brand seeking for a way
to alter a local partnership as the
government eases restrictions on
non-critical industries such as con-
sumer goods and retail.
Ting Hsin argues that the royal-
ty fees are three times higher than
the average charged by rivals such
as 7-Eleven, the people said. “We
cannot comment on matters of
litigation,” said Shinsuke Otsuki, a
spokesman for Tokyo-based Fam-
ilyMart, which is 50.1%-owned by
trading house Itochu Corp. Ting
Hsin is not commenting due to con-
tractual confi dentiality agreements,
the company said in an emailed
statement.
Although 7-Eleven operates
more stores in China, FamilyMart
has had the most success among
Japanese rivals, making up 8.4% of
US$17 billion in sales, according to
Euromonitor. FamilyMart is second
only to local chain Dongguan Sugar
& Wine Group Co Ltd, which sells
low-cost goods in less-developed
parts of the country.
FamilyMart is alleging that Ting
Hsin sought to reduce the royalty
fee it pays for use of the brand to
0.3% or less from 1%, and withheld
royalty payments for seven months,
according to the documents. Th e
payments were subsequently paid,
one person said.
Th e Japanese company also al-
leged that Ting Hsin did not provide
adequate disclosure of transactions
related to the JV that would give
FamilyMart Japan a full picture of
the venture’s profi tability, accord-
ing to the documents.
The spat over FamilyMart in
China is the latest in a long line of
tussles involving JVs in China be-
cause of government restrictions
on foreign companies seeking ac-
cess to its vast consumer market.
In 2004, when the FamilyMart JV
was formed, non-Chinese busi-
nesses were mostly not allowed
to set up shop in China without a
local partner.
In the years since, under pres-
sure from the global business com-
munity over an uneven playing
fi eld, Beijing has eased access and
now requires JVs only in certain
protected sectors such as agricul-
ture and scientifi c research.
Caught up in a trade war with the
US, China is preparing to open up
sectors such as banking and auto
manufacturing in 2020 to full for-
eign ownership, and curtail forced
technology transfers. Th e shift of
critical know-how to local partners
is how European conglomerates
Siemens AG and Alstom SA ulti-
mately saw themselves outcom-
peted globally in high-speed rail
contracts by Chinese state-owned
companies.
While technology transfers may
not be as important in the mar-
ket for convenience stores, other
consumer giants have been wrig-
gling out of their JVs in order to
reap the benefi ts of their marquee
brand names for themselves. In
2017, Starbucks Corp paid US$1.3
billion to buy out its East China JV
partners in its then-biggest deal
ever. — Bloomberg
FamilyMart partnership
Th e Japanese convenience chain says Chinese partner Ting Hsin withheld payments
BY CINDY WANG & RACHEL CHANG
BY JULIE JOHNSSON
BY TA K A S H I U M E K AWA
TAIPEI/SHANGHAI: FamilyMart,
the most successful Japanese con-
venience store chain in China, is
embroiled in a royalty payment
spat between its joint-venture (JV)
parents that threatens to destroy
the partnership.
FamilyMart UNY Holdings Co
Ltd is suing to end its Chinese Fam-
ilyMart partnership with Ting Hsin
International Group, saying the
Taipei-based conglomerate has
not fairly shared the gains from
the chain’s rapid expansion, ac-
cording to people familiar with the
matter and legal documents seen
by Bloomberg.
Under the terms of the partner-
ship, Ting Hsin eff ectively operates
more than 2,500 FamilyMart stores
in China, sharing profi ts and paying
royalties to the Japanese company.
Although Ting Hsin’s founders are
Taiwanese, the company has had
a presence in China since the late
1980s before the country’s economy
opened up, and is considered a local
entity. It also controls other food and
beverage brands including China’s
leading instant noodle maker.
FamilyMart has fi led a petition
with a court in the Cayman Islands
— where Ting Hsin and the JV are
registered — to force its partner
to relinquish its 60% stake, said
the people.
Th e tussle comes as China’s con-
venience-store market is set to grow
by more than 60% in the next fi ve
years to US$27 billion (RM112.59
billion), according to Euromonitor
International. As China rapidly ur-
banises, demand for around-the-
clock food, snacks and beverages
is surging. FamilyMart is the latest
foreign brand seeking for a way
to alter a local partnership as the
government eases restrictions on
non-critical industries such as con-
sumer goods and retail.
Ting Hsin argues that the royal-
ty fees are three times higher than
the average charged by rivals such
as 7-Eleven, the people said. “We
cannot comment on matters of
litigation,” said Shinsuke Otsuki, a
spokesman for Tokyo-based Fam-
ilyMart, which is 50.1%-owned by
trading house Itochu Corp. Ting
Hsin is not commenting due to con-
tractual confi dentiality agreements,
the company said in an emailed
statement.
Although 7-Eleven operates
more stores in China, FamilyMart
has had the most success among
Japanese rivals, making up 8.4% of
US$17 billion in sales, according to
Euromonitor. FamilyMart is second
only to local chain Dongguan Sugar
& Wine Group Co Ltd, which sells
low-cost goods in less-developed
parts of the country.
FamilyMart is alleging that Ting
Hsin sought to reduce the royalty
fee it pays for use of the brand to
0.3% or less from 1%, and withheld
royalty payments for seven months,
according to the documents. Th e
payments were subsequently paid,
one person said.
Th e Japanese company also al-
leged that Ting Hsin did not provide
adequate disclosure of transactions
related to the JV that would give
FamilyMart Japan a full picture of
the venture’s profi tability, accord-
ing to the documents.
The spat over FamilyMart in
China is the latest in a long line of
tussles involving JVs in China be-
cause of government restrictions
on foreign companies seeking ac-
cess to its vast consumer market.
In 2004, when the FamilyMart JV
was formed, non-Chinese busi-
nesses were mostly not allowed
to set up shop in China without a
local partner.
In the years since, under pres-
sure from the global business com-
munity over an uneven playing
fi eld, Beijing has eased access and
now requires JVs only in certain
protected sectors such as agricul-
ture and scientifi c research.
Caught up in a trade war with the
US, China is preparing to open up
sectors such as banking and auto
manufacturing in 2020 to full for-
eign ownership, and curtail forced
technology transfers. Th e shift of
critical know-how to local partners
is how European conglomerates
Siemens AG and Alstom SA ulti-
mately saw themselves outcom-
peted globally in high-speed rail
contracts by Chinese state-owned
companies.
While technology transfers may
not be as important in the mar-
ket for convenience stores, other
consumer giants have been wrig-
gling out of their JVs in order to
reap the benefi ts of their marquee
brand names for themselves. In
2017, Starbucks Corp paid US$1.3
billion to buy out its East China JV
partners in its then-biggest deal
ever. — Bloomberg
