… it is not uncommon for businesses to struggle after they are initially launched.
It’s normal for start-ups to struggle in their initial operations. They are newbies compared with more established companies that have dominated the competition so far.
The promise of striking gold in the near-term period keeps these start-ups persevering despite the odds. But just like any business, the taps may run dry sooner or later and potential partners may balk at joining the venture. For the potential business partner, it is simply a huge gamble that could cost huge losses.
One such enterprise is the discount convenience store chain, Dali Everyday Grocery. Hard Discount Philippines Inc., (HDPI), the owner and operator of the Dali grocery chain, is facing financial challenges after three years of operations in the Philippines.
The company booked a P1.88-billion net loss in 2023, up 110 percent from a similar loss of P894.68 million in 2022, according to the latest financial report it filed with the Securities and Exchange Commission (SEC).
HDPI seems unperturbed, reassuring stakeholders that the parent company remains committed to providing the necessary financial support to ensure business continuity and meet obligations as they arise. It sees improving profit margins over the next five years through what it calls enhanced cost-efficiency measures and increased equity.
Dali is pioneering hard discount retailing in the Philippines by strategically locating in rural and peri-urban areas, rather than in upscale urban centers.
And it is not uncommon for businesses to struggle after they are initially launched. Dali’s losses, however, are disturbing. These are red flags that may indicate a significant indicator of serious, underlying problems. They raise critical questions about the company’s ability to sustain its operations and to turn a profit.
The financial stability of a company should serve as a guide for any investment decision. Dali’s losses could be symptomatic of deeper issues, such as poor management, inefficient cost structures, or poor sales performances. For anyone hoping to earn a profit off their investments, these are warning signs that Dali might not be on the path to recovery anytime soon.
Compounding Dali’s financial woes are the legal disputes faced by the grocery chain. It is involved in legal controversies with the Intellectual Property Office of the Philippines (IPOPHL).
The agency slapped an injunction against Dali and ordered it to pull out three products from its stores that were obviously cheap knockoffs of popular brands.
In addition, it is facing cases involving violation of copyright laws. It is a substantial legal liability that could have far-reaching consequences. Dali’s sales are propped up by selling cheaper versions of established brands but the store chain is now legally constrained to dump them and sell the latter. Thus, it stands to lose its competitive advantage over other grocery chains.
Dali’s woes are piling up. The Food and Drug Administration (FDA) found out that the grocery sells products that have not yet been registered with the agency. Some are even sold beyond their expiration date, while others allegedly do not conform to Philippine labeling laws.
Investing in Dali Everyday Grocery appears risky for the moment. One has to find out if it has a credible plan to turn around its financial fortunes, resolve its legal disputes and properly comply with government regulatory policies.
Brewing garbage crisis
The garbage problem in Central Luzon is far from being resolved.
Rumors are circling around that the Bases Conversion and Development Authority (BCDA) and Clark Development Corp. (CDC) are abandoning plans to close the Kalangitan Landfill in Capas, Tarlac, a facility managed by Metro Clark Waste Management Corp. (MCWM/Metro Clark).
This is a complete turnaround from earlier reports that the two agencies were determined to close the operations of the landfill in October, despite a lease agreement with Metro Clark to operate it until 2049.
Metro Clark executive vice president Vicky Gaetos has argued that the BCDA and CDC could not simply evict the landfill operator, whose shareholder includes a German group. Ms. Gaetos says the garbage contract is protected by Republic Act 7652, or the Foreign Investor Long-Term Lease Act, which allows foreign investors to lease land in the country for up to 75 years.
Discarding the law will prematurely eject Metro Clark and send the wrong signal to foreign investors about the business climate in the Philippines.
Closing down the Kalangitan Landfill, moreover, will constitute a violation of the law. Worse, it would trigger a major garbage crisis and bear the makings of a case ripe for filing before the Office of the Ombudsman
The BCDA and CDC are, perhaps, aware of the legal implications of the landfill’s immediate closure.
Metro Clark has been successful in managing the Kalangitan landfill for the past 20 years. It has efficiently served its purpose, keeping the cleanliness in over 150 local government units and facilities of over 1,000 industrial clients across Metro Manila, Central Luzon, Pangasinan, and the Cordilleras, including Baguio City.
Metro Clark’s management of Kalangitan has outlived many Presidents, from President Joseph Estrada and Gloria Macaqpagal-Arroyo to Noynoy Aquino and Rodrigo Duterte. Now, President Ferdinand Marcos Jr. wants to improve the country’s waste management system.
The BCDA and CDC should leave Kalangitan alone if they want to contribute to enforcing the Chief Executive’s marching orders.
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