Year 10 - Issue # 398 - So Paulo, August, 08h, 2011 Phone: (5511) 3405-6666

Brazilian Retail News

Starbucks to open 1,000 shops in Brazil US coffeehouse chain Starbucks said Brazil has potential to host at least 1,000 stores and, so, the company will increase its investments in the country. Today, Starbucks has only 26 stores in Brazil, in So Paulo, Rio de Janeiro and Campinas cities. Recently, CEO Howard Schultz said Brazil will be a signicant engine for the companys worldwide growth.

Rio de Janeiro will host rst Ferrari Store in Latin America Via Italia group will open later this year in Rio de Janeiro the rst Ferrari Store in Latin America. The shop will present the entire portfolio of the brands licensed goods, mainly clothing and accessories. Today, Ferrari Store chain has 45 shops worldwide, in South Africa, Germany, Andorra, Saudi Arabia, China, UAE, Spain, the USA, Greece, Italy, the UK, Romania, Singapore and Ukraine.

Car sales goes over 2 million on year The automotive industry has gone beyond 2 million cars sold this year, about 8% more than in the rst seven months last year. The sales, however, have been driven by special sales to eets and car rental companies, while retail sales have been lagging behind. Po de Acar changes drugstore mix and sales soar more than 50% Grupo Po de Acar, Brazils top retailer, started a broad restructuring of its drugstore business. The company has increased the sales area of the shops and strengthened the assortment of perfumery and beauty care categories. In a pilot project in ve stores of the chain, sales rose more than 50%. The changes will be rolled-out to the companys 152 shops in the next two years.

BRAZILIAN RETAIL NEWS

08/08/2011

Year 10 - Issue # 398 - So Paulo, August, 08h, 2011 Phone: (5511) 3405-6666

Brazilian Retail News

Carrefour changes stores to Atacado brand

To attract lower income consumers, Carrefour, Brazils second-largest retailer, started changing hypermarkets to Atacado cash & carry format. Cities as Novo Hamburgo, Porto Alegre, Niteri and Franca have already opened refurbished stores. Carrefour has not informed how many store will be revamped, but analysts say the move will double Atacado stores today, there are 72 shops in 21 states. Gucci prepares expansion in Brazil Almost three years after opening its rst store in Brazil, Italian luxury brand Gucci prepares its expansion. The company had only one shop in the country, at Iguatemi So Paulo mall, but recently opened another one, at Iguatemi Brasilia mall. Until December, Shopping Cidade Jardim, in So Paulo, will receive a store, and in March, 2012, JK Iguatemi mall, also in So Paulo, will present the rst male Gucci shop in the world.

Raia Drogasil will keep its two brands running The Drogasil / Droga Raia merger, who created the countrys largest drugstore chain, with more than 700 stores and an 8.3% market share, shall not lead to the death of one of the brands. Much on the opposite: the two brands will remain active, with clearly dened identities. The two chains already had complementary proles, Drogasil focusing a more senior consumer prole and Droga Raia on women. Geographically, Droga Raia has been expanding to the South, while Drogasil has been growing in the Midwest.

BRAZILIAN RETAIL NEWS

08/08/2011

Year 10 - Issue # 398 - So Paulo, August, 08h, 2011 Phone: (5511) 3405-6666

Brazilian Retail News

Momentum
Market consolidation: growing and irreversible
Marcos Gouva de Souza (mgsouza@gsmd.com.br), CEO, GS&MD Gouva de Souza

The merger of Drogasil and Droga Raia drugstore chains is just another chapter in a growing and irreversible market consolidation process, driven by the increasing competition. And mirrors a global process that relates the maturity of countries and consumers to the market consolidation. The drugstore segment, with more than 65,000 stores, is one of the most fragmented in Brazil. Its consolidation only started recently, when some players, including Drogasil, decided to use acquisitions to grow faster. At the same time, nancial groups, as BTG Pactual, understanding the Market fragmentation didnt make sense in the long term, also started investing in acquisitions and market consolidation. The new company formed by Drogasil / Droga Raia will own around 8.3% of the Brazilian market and the example will surely be followed by others, becoming logical in ten years the scenario will be completely different from today, with the top ve chains accounting for 40% to 50% of the market, as already happens in other segments, as supermarkets and electronics. As it happens in the most developed markets, where consolidation meets maturity. In Germany, France, Spain and the United Kingdom, the share of the top ve supermarketers in the total sales of the segment ranges from 57% to 61%. But this process is not present in the distribution and is even stronger in the industry. And Brazil is a great example of this. From 2005 to 2010, the share of the top ve toothpaste brands rose from 89% to 95%. In the roasted coffee market, from 27% to 32%. In the soft drink segment, the top ve share rose from 51% to 56% and in the lled wafer category, from 35% to 42%. Its a no-return path, that needs to be followed, monitored and managed, but cant be avoided. The recent antitrust authority decision regarding BRFoods, imposing restrictions and forcing the sale of brands and businesses so the Sadia/Perdigo merger could be approved will not, in the long term, hinder a signicant growth of the companys brands, due to strategic, operating and management efciency resulting from the business integration. It happened in the past and will continue to be. One of the few exception cases in Brazil come from the automotive sector, in which the market share of the top ve companies has dropped, as these companies in the past, taking advantage of a closed market, for many years were sovereign, imposing prices and conditions. With the market opening and global offer, a new reality has created, with more brands, models, products and services. Competition is wise to create innovation. In the most developed and mature markets, in the most important industry and distribution segments, the top ve players usually own more than 40% of the market, threshold of consolidation level. In the emerging countries, as China, India, Russia, Turkey and South Africa, as in the industry as in brands and distribution, the consolidation level is low and the mature of these markets will bring, as a logical consequence, increasing consolidation. And this is the main reason for the foreign investments already being made. In the Brazilian case, a country that can be considered as develoging, as is already developed in many sectors and still emerging in many others, the consolidation of markets and segments will be increasing and irreversible, as a natural result of the more efcient action of some groups; broader view and ambition; more disposition to assume risks; better access to nancial resources; and more commitment and belief in the long term.

Brazilian Retail News (BRN) is a weekly newsletter published by GS&MD - Gouva de Souza with the most important news on the Brazilian retailing. The content can be freely used, once the source is quoted. If you want any information on BRN or our services, please send an email to publicacoes@gsmd.com.br or access GS&MD - Gouva de Souza at www.gsmd.com.br. Gouva de Souza & MD Desenvolvimento Empresarial Ltda. Av. Paulista, 171 - 10 oor Paraso So Paulo Brazil Zip Code: 01311-904 Phone: (5511) 3405-6666 Fax: (5511) 3263-0066

BRAZILIAN RETAIL NEWS

08/08/2011