Brazilian Retail News 403, September, 5th

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Brazilian Retail NewsYear 11 - Issue # 403 - So Paulo, September, 05th, 2011

Phone: (5511) 3405-6666

Brazilian retail news 129/08/2011

Brazil Pharma, arm of BTG Pactual private

equity group, is looking for midsize drugstore

chains in the North and Midwest regions, in citiesas Belm, Braslia and Campo Grande. The

company wants to purchase major or minor shares

in these companies, but always maintaining the

owners running the businesses. Market sources

have been speculating on several deals, but Brazil

Pharma has not conrmed any of them.

H&M postpones arrival in Brazil

Swedish apparel retailer H&M has been

studying the Brazilian market in the last months,

even contacting some of the countrys largest mall

owners, as Iguatemi, BR Malls and Aliansce, to

gather more info. According to market sources, it

even asked Iguatemi for more information on the

high-end mall the company is building in So Paulo

(to be opened this November). A deal, however,

was not reached, as H&M is prioritizing its Chinese

operations before going to other countries.

Carrefour rules out partnership in Brazil

French retail group Carrefour said it doesnt need a partner in Brazil. The companys CEO LarsOlofsson, visiting the country last week, afrmed the Brazilian ops are not for sale and the group is not

studying any partnership or merger in the country. Olofsson said Brazil is a pivotal piece in Carrefours

global strategy and so it will keep developing its position in the South American country.

BR Pharma wants to purchase midsize drugstore chains

Supermarket sales up 6.24% in July

Brazilian supermarket sales had in July a 6.24% growth in real terms over June, according to trade

group Abras. Year-on-year, sales rose 4.32%, also in ination-adjusted terms.

Drogaria So Paulo and Pacheco chains speed up market consolidation

Last month, Drogasil and DrogaRaia merged and created Brazils largest drugstore group. For ashort time. Last week, Pacheco and Drogaria So Paulo stroke back merging their operations and

creating an almost 700 stores, R$ 4.4 billion (US$ 2.59 billion) group that leads the drugstore segment.

Pacheco will own a majority position, but the new company board will be evenly shared. Both brands

will continue to be in the market.


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The consolidation in the Brazilian drugstore retailing shall continue in the near future, as British

Boots has shown it intends to invest in the country. Company representatives were in Brazil recently

asking for market information and also evaluating possible partnerships or acquisitions, said Folha

de S.Paulo newspaper.

Warren Buffett to invest in Brazilian retailing

Warren Buffetts Berkshire Hathaway has been purchasing stocks of Brasil Foods in So Paulo and

New York stock exchanges, aiming to, in the hort term, become one of the companys top shareholders.

This is only the tip of a much more ambitious plan, as Berkshire wants to purchase expressive shares

in Brazilian companies, not only in the food industry, but also in retailing, healthcare and IT.

Magazine Luiza and Renner interested in Leader chain

Relatrio Reservado news bulletin says

Magazine Luiza, Brazils 3rd largest electronics

chain, is a runner up to purchase R$ 1 billion sales

department store chain Leader. The company,

however, is expected to face tough competition,

as Renner department store chain has renewed

interest in Leader, who it almost purchased in

2008, a deal was cancelled in the wake of the

global nancial crisis.

British Boots mulls Brazilian venture

Dia discount group advancing in master franchising deal

Discount chain Dia, recently spun-off from Carrefour, said a deal with a Brazilian master franchisee

is getting closer and may be reached by the end of the year. Today the chain runs more than 360

stores in So Paulo state and with the franchising deal it plans to grow much faster.

Walmart recycles 20,000 tonnes of waste in Brazil

In the rst half of the year, Walmart, Brazilsnumber three supermarketer, stopped sending

to landlls 56% of the solid waste generate by its

stores, or more than 20,000 tonnes of recycled

waste. The retailer expects to reduce by 60% the

volume of waste sent to landlls, by increasing the

number of stores with over 90% of waste recycled

(today, there are 15 stores in this condition).


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Pets, a rising market

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

Momentum

Good not only for dogs, but also for cats, birds, some reptiles, exotic birds and other pets. In Brazil, the petmarket shall end this year with total sales over R$ 11.3 billion (US$ 6.65 billion), in an ination-adjusted growthof 4.5%, in a conservative forecast. In 2010 this market saw its sales rise by 8.5% over 2009. And it all points tothe fact it will continue to rise above the countrys GDP in the next years.

The main reasons for the growth of this segment, with around 25,000 pet shops in the country, are the countryseconomic growth; the evolution of the families spending patterns; and, mainly, the expansion and professionalismof the product and service offer, in specialized stores, vet clinics, supermarkets, hypermarkets, cash & carry and

internet.

These were some of the gures and issues debated during the 1st Pet Brasil Forum, last week in So Paulo.The seminar presented a deep and broad picture of the segment and was supported by a GS&MD Gouva deSouza research with all the agents working in this market, debated by retailers and suppliers.

There was some common ground, as the perception of the continuity of the growth of the segment; the evolutionof the digital channels complementing the brick-and-mortar ones; the inevitable consolidation that will occuralongside the organic expansion; the increasing share of services in the total segment sales; the continuity ofthe sectors professionalization and formalization; the ongoing segmentation of brands and products; the growingpresence of large retailers in the segment, with more and more space in stores dedicated to these goods; andthe broader mix offered to customers.

It all following an also common ground perception that the population to be served has been growing, with anincreasing share of cats, although dogs are still majority.

The big store unconsolidation all over the country and the growth reported in the last years point to a naturalconsolidation process, once the larger chains own an estimated 4%-6% of the total market, way below other retailsegments. In the next years there shall be an acceleration of the consolidation process, due to organic expansionof the larger players and also due to the creation of buying groups and franchising chains.

Another relevant aspect is the likely growth of the internet as a shopping alternative, in a move driven byconsumers, specially in the larger cities, as a complement for the brick-and-mortar stores, as detected in theresearch that stressed the positive perception consumers have about the internet channel.

In the offer side, its worthy to notice the expansion, diversication and segmentation of products offered by

global and national brands, answering to this natural evolution of consumers behavior, looking for goods that tbetter their different realities and shopping moments.

The same way, it stands out the increasing service offer in this segment, in an increasingly sophisticated way:pet insurances, clinics who differentiate in the services provided; and other options aiming to leverage spending.

This is another segment that has been passing through and will continue experiencing deep structural changes,due to the upgrade in the populations spending patterns, as a consequence of the changes the market has beenliving. The constant monitoring of the segment will make possible to identify shopping patterns that will help inthe development and maturement of the segment.

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 oorParaso So Paulo Brazil Zip Code: 01311-904Phone: (5511) 3405-6666 Fax: (5511) 3263-0066

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Brazilian Retail News 403, September, 5th