Lucio and Susan Co : The Next Big Thing in Retailing

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LUCIO and Susan Co—a husband and wife entrepreneurial team—has literally struck gold with their Puregold Price Club, a chain of over 150 “hypermarkets” across the Philippines. Starting with one store in 1998, the Cos have expanded at a rapid pace, lately through acquisitions, to build Puregold into the country’s second largest retailer, after Henry Sy’s SM Group.

‘Sari-Sari’ Concept

Contrary to what the name suggests, a Puregold outlet stocks not fancy goods but a range of cheap merchandise aimed at a rising population of middle-class shoppers and owners of neighborhood convenience stores, or the ubiquitous sari-sari stores.


Since 2010 the retailer’s revenues have doubled to US$1.3 billion with net profits increasing fivefold to US$65 million—making the couple one of the richest Filipino entrepreneurs today. The Cos transferred most of their stake in Puregold, to listed holding company Cosco. Subsequently, Cosco did US$400 million offering at a 30 percent discount to fund expansion, driving share price down. They pocketed US$100 million as part of that deal. Lucio’s retailing background is linked to running duty-free airport shops, including Clark International Airport, a former American air force base northwest of Manila.

With Puregold, the Cos have earned both respectability and fabulous riches. Since 2011, when they took the company public, its shares have soared threefold. “Puregold is the country’s only pure play retail company, and it’s on an aggressive growth trajectory. Investors like that,” says Lauro Baja, country head of  Philippines UBS Investment Philippines, which was a lead manager in its IPO. Puregold’s meteoric rise is linked to a domestic consumption boom that has been the mainstay of the Philippines’ growth story. If consumer confidence remains upbeat, the retail market is expected to grow to US$75 billion by 2017.

New Subsidiary

In July, Puregold Price Club announced it is setting up a new subsidiary to hold investments in the food retailing business. In a disclosure to the Philippine Stock Exchange, Puregold said its new subsidiary Estenso Equities will house investments in other food retail outlets.

“Estenso Equities would hold interests in other grocery chains that would not necessarily be consolidated into Puregold, in cases where the existing owners would like to get a strategic or financial partner but maintain controlling interest,” Puregold president Leonardo Dayao said in an interview.

“There may be food retail businesses in which we may be acquiring certain equity position but are not going to be part of Puregold,” Dayao said. “It’s a vehicle to give us flexibility to go into something that is not on a full ownership basis, in case there are investment opportunities.”

The new subsidiary will thus represent Puregold’s portfolio investments in allied businesses. While earlier acquisitions were mostly businesses and brands that were consolidated into Puregold—such as S&R, Parco, Eunilane and 11GrocerE—this move signified Puregold’s willingness to take a non-controlling interest in prospective acquisitions.
On “non-food” specialty retail, those eyed by Cosco are pharmacy and construction/hardware materials retailing. Earlier, a privately owned Co company has acquired Visayan pharmaceutical chain ThreeSixty.

Energy Interests

A month earlier, Lucio’s newly acquired publicly listed company Mariwasa Siam Holdings, Inc. was officially transformed to Da Vinci Capital Holdings Inc.

This has thus become Co’s third publicly listed company after successfully taking retailing business Puregold Price Club Inc. public and creating a new holding firm Cosco Capital out of mining/oil arm Alcorn Gold Resources Corp. (APM).
In a disclosure to the Philippine Stock Exchange on Thursday, Mariwasa said the Securities and Exchange Commission had approved amendments to its articles of incorporation to change its name to “Da Vinci Capital” and extend its corporate term for another 50 years from Nov. 5, 2013.

Co has yet to officially announce his plans for Da Vinci but stock pundits expect Co to infuse energy-related businesses. His group’s privately held Union Energy Corp. earlier announced a partnership with renewable energy developer Sta. Clara Power Corp for an 8-megawatt mini-hyropower project in Oriental Mindoro costing about P1.9 billion. Union Energy is likewise undertaking a P1-billion investment in a 9.9-megawatt rice husk biomass power plant in San Jose City, Nueva

Mall Strategy

Last month, Cosco Capital Inc. bared plans to acquire shopping centers to fast-track its foray into community malls. Teofilo A. Henson, company director in charge of Cosco’s real estate business, said the firm is looking to build its first community mall in the province of Cagayan.“Right now, we are looking at Tuguegarao. That is a possible site. We have studies now ongoing,” Henson said in an interview during the company’s stockholders’ held in Muntinlupa City.He also said the firm may also acquire existing malls to move “faster” in this foray.“There are also existing malls that were offered to us. So we are evaluating [the offers],” Henson said while declining to name the malls, which according to him are located in Luzon.

Meanwhile, Cosco President Leonardo B. Dayao, in his report to stockholders that day, said the company plans to open its first community mall “in 2014.”Dayao said the company was looking to spend P400 million for each of the eight community malls it plans to build in the next three years. These malls will add to 192 supermarkets of Cosco subsidiary Puregold Price Club, Inc. as of end-June.Liquor Distribution.

At the same time, Dayao said the company has begun the “mass market” distribution of its imported liquor product, Excelente brandy.“We began the mass market [distribution] of Excelente in June,” he said.Dayao also said the company hopes to seal distribution agreements with other supermarkets aside from Puregold and S&R.The company targets to sell 500,000 to one million cases of Excelente brandy in the next two to three years, Jose Paulino L. Santamarina, president of Cosco unit Premiere Wine and Spirits, Inc., said on the sidelines of the meeting.“We just hope we can take 5% of the local market in two to three year,” said Dayao, who noted that the local market is dominated by Emperador Distillers, Inc.Cosco’s net income surged to Php488.30 million in the first half from Php1.42 million a year ago after absorbing various assets of the Co family early this year.

Cosco announced that it is expanding the distribution network for its liquor business in Visayas and Mindanao. The company said that it is looking to develop commercial retail establishments in the provinces. It has identified 8 sites for retail malls, each with a P450 million budget for construction and land acquisition.


Cosco said it requires P12 billion to fund the expansion of its liquor, property, and oil storage businesses, as well as its diversification into non-food ventures. Cosco said that it plans on spending P6 billion to expand its real estate business. The company also earmarked P3 billion for debt financing, P1 billion for liquor distribution and P2 billion for its diversification into noon-food specialty retail.

Cosco earlier announced it would conduct a share sale to increase its public float to the level required Philippine Stock Exchange. The announcement also came after it got regulatory approvals to reorganize its business interests.
The Securities and Exchange Commission (SEC) approved an increase in the company’s authorized capital stock to P10 billion and infusion of over P70 billion worth of Co’s assets in the company, including supermarket chain Puregold Price Club Inc.

The infusion gave Co a 93.4% stake in Cosco.