Brazilian Retail News 399, August 9th

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Brazilian Retail NewsYear 10 - Issue # 398 - So Paulo, August, 08h, 2011

Phone: (5511) 3405-6666

BRAZILIAN RETAIL NEWS 108/08/2011

US coffeehouse chain Starbucks said Brazilhas 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 significant engine for the companys

worldwide growth.

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

first seven months last year. The sales, however, have been driven by special sales to fleets 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 five 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.

Starbucks to open 1,000 shops in Brazil

Rio de Janeiro will host first Ferrari Store in Latin America

Via Italia group will open later this year in Rio

de Janeiro the first 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, theUSA, Greece, Italy, the UK, Romania, Singapore

and Ukraine.


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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 first 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

first 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 defined identities. The two chains already

had complementary profiles, Drogasil focusing a more senior consumer profile and Droga Raia on

women. Geographically, Droga Raia has been expanding to the South, while Drogasil has been growing

in the Midwest.


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Market consolidation: growing and irreversible

Marcos Gouva de Souza ([email protected]), CEO, GS&MD Gouva de Souza

Momentum

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, financial 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 five 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 five 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 five toothpaste brands rose from 89% to 95%. In the roasted coffee market, from 27%

to 32%. In the soft drink segment, the top five share rose from 51% to 56% and in the filled 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 significant growth of the companys brands,

due to strategic, operating and management efficiency 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 five 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 five 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 efficient action of some groups; broader view and ambition; more disposition to assume risks; better access to

financial 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 ourservices, please send an email to [email protected] or access GS&MD - Gouva de Souza at www.gsmd.com.br.

Gouva de Souza & MD Desenvolvimento Empresarial Ltda.

Av. Paulista, 171 - 10 floor

Paraso So Paulo Brazil Zip Code: 01311-904

Phone: (5511) 3405-6666 Fax: (5511) 3263-0066

Brazilian Retail News 399, August 9th

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