Brazilian Retail News

Year 10 - Issue # 379 - São Paulo, March, 21h, 2011

Phone: (5511) 3405-6666

Supermarkets to reduce plastic bags use by 50%

The Brazilian Supermarket Association (Abras) signed last week a document formalizing the Abras’ Sustainable Initiative
Plan in the Environmental Ministry. One of the main goals is to reduce by 40% the use of plastic bags in the country’s
supermarkets until 2015. By 2013, the goal is to reduce consumption by 30%. According to Abras, the use of plastic bags
has fallen by 22% between 2007 and 2010, to 14 billion, even with a 32.5% rise in the segment’s sales in the period.

Brazilian retail sales up 8.3% in January

Brazilian retail sales wen tup 8.3% in January year-on-year, according to the country’s statistics agency IBGE. In
the last 12 months, sales have gone up 10.7%, very close to the 10.9% growth reported in 2010. Even with the recent
measures the country’s Central Bank adopted to slowdown consumption, the credit-driven segments continue to perform
above overall figures. Furniture and electronics sales jumped 19.1% year-on-year; car sales rose 16.4%; and DIY sales
went up 16.5%.

Consumer credit demand falls from second time in a row

According to Serasa Experian, the number of people looking for loans in the market fell 1.2% in February month-
on-month, following a 6.7% drop in January. Year-on-year, on the other hand, there was a 19.9% rise in the demand,
impacted by the Carnival holiday. Year-to-date, demand rose 16.3% over the first two months in 2010. Serasa Experian
said consumers’ demand for credit is slowing down steadily, due to macroeconomic measures and by the interest rate rise.

Brazilian Retail News 1 21/03/2011

Brazilian Retail News
Year 10 - Issue # 379 - São Paulo, March, 21h, 2011
Phone: (5511) 3405-6666

Habib’s prepares IPO

Habib’s, specialized in Arab food and the country’s third-largest fast food chain, is preparing its IPO, that will happen
in the second half this year. São Paulo Stock Exchange (Bovespa) believes this year will be the one with the highest
number of IPOs in the history of the country.

Trade group lowers FY DIY sales forecast

According to the National DIY Retailers Association (Anamaco), sales remained stable in February year-on-year.
Considering the 5.3% drop reported in January year-on-year, Anamaco lowered its sales growth forecast for 2011, from
11% to 8.5%. Figures may be boosted by the current tax cut on some products until 2011, by the federal government’s
building projects and by the World Cup and Olympic Games.

Franchising segment soars 20.4% on year

In Brazil, the franchising segment reported a 20.4% growth last year, above expectations of a 14% / 19% rise, according
to a Brazilian Franchising Association (ABF) survey with 1,855 companies. Franchising segment’s sales reached R$
75.99 billion (US$ 44.7 billion), and 777,000 people are employed in franchised stores. ABF forecasts this year sales will
rise by 15%.

Visa increases volume of transactions by

24.6%
Visa said its transactions in Brazil rose 24.6% last year,
above overall performance of 23.2%, to US$ 270 billion.
In Mexico the expansion reached 16.8% and in the rest of
Latin America rose 22.8%. The performance was driven
by the growth in the payment volume and in the number of
transactions.

Brazilian Retail News 2 21/03/2011

Brazilian Retail News
Year 10 - Issue # 379 - São Paulo, March, 21h, 2011
Phone: (5511) 3405-6666

Momentum
The world’s next largest retail market
Marcos Gouvêa de Souza - CEO, GS&MD - Gouvêa de Souza

Chinese GDP reached in 2010 US$ 6.1 trillion, 10.3% more than in 2009, and accounted for aproximately 45% of
the US GDP. However, considering the Purchase Power Parity (PPP) criteria, it is already the world’s second largest
economy and, keeping the current growth rate, it will not take long to become the number one and, in the process,
will also be the world’s largest retail market. It is only a matter of time.

In a market scenario in which the emerging countries, specially China, India and Brazil, have been presenting much
higher growth rates than the most mature economies, expanding their domestic markets and, as a consequence,
their retail markets, monitoring the segment’s growth in these countries become a constant concern to the world’s
largest retailers.

But it was in another Ebeltoft Group meeting, this time in Shanghai, that we could touch the reality of this incredible
market. Ebeltoft Group is an alliance of retail consulting firms, of which GS&MD – Gouvêa de Souza is part of, and
that gathers representatives of 16 countries.

Although what we could experience in Shanghai, with its 22 million people, can’t be simply expanded to the whole
1.3 billion Chinese people, it is for sure an excellent sample of what has been happening and will continue to happen
in this country. And whoever is involved with retail and spending can’t afford not knowing and following what goes
on there.

Today there are in China 160 cities over one million people, number that will rise to 221 in 2025. Just as a comparison,
it is interesting to remind that in Europe there are only 35 cities as large as this.

And here things start to be different when compared to Brazil, as in China any analysis or forecast always considers
the next ten or 20 years, considering the present and the near future only as steps to reach the long term and that
one needs to consider this approach to think about the future. A mindset we should adopt.

The large transformation the Chinese market has been living, the same way as in Brazil, is the rise and expansion of
the Middle Affluent Class (MAC), with forecasts of rising from 152 million to 190 million households in 2020. Even with
today’s restrictions to refrain the demographic growth, that include close control of the number of children per family,
it has been created an impressive spending population, with broader and better access to income and urbanization,
shaping an amazing market for the next years. A country that will become the world’s largest retail market.

Of this scenario the world’s largest conglomerates have been aware, concentrating resources and expansion in
the country. Zara has already 34 stores in the country. H&M has 27; Sephora, 40; Uniqlo, 64; and Mango more than
100, with 120 more to come this year alone.

Walmart runs around 200 supercenters, Carrefour more than 580 stores (hypermarkets and discount stores,
private-owned and franchised); Metro is present with cash & carry shops; Auchan has hypermarkets and Tesco has
been building hypermarkets and shopping centers. Usually, the expansion has been organic, with some acquisitions
stimulated by the Chinese government.

To attract and make consumers loyal, hypermarkets have been offering exclusive shuttles, with pre-defined routes
and schedule to ease customers’ lives, as they’re more used to travel by bike or motorbike, what would hinder larger
sales.

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Brazilian Retail News
Year 10 - Issue # 379 - São Paulo, March, 21h, 2011
Phone: (5511) 3405-6666

Momentum

There are no other market in the world where so many global retailers compete directly. Side by side there are
chains as Gap, Kihel’s and Timberland, as well as private-owned or franchised exclusive stores of companies as Nike,
Puma, Adidas, Reebok, Asics and Kappa, competing with impressive local players, just like apparel chain Meters &
Bonwer, with more than 4,000 stores in China alone, 40% of them franchised.

In the food segment, the world’s largest global brands, as McDonald’s, Subway, KFC, Pizza Hut, Carl’s Jr, Friday’s,
Starbucks and Costa Café, have been having people standing in lines in the busiest times and have accelerated the
adoption of new behaviors, specially in the young and urban population.

There are in China more than 2,500 shopping centers planned with over 10,000 sq.m. of Gross Leasable Area
(GLA). New malls usually are of mixed use, with retail stores, offices, houses and services. A visit to this market
impresses for the virtuous combination of modernity, reconstruction, urbanization, innovation, design and deep
changes in attitudes and behaviors.

In the largest stores in Shanghai there are a lot of megascreens and neon lights projecting images and promotions,
with Western music, creating a new cultural reference mixed to the traditional local culture of street vendors shouting
the virtues of the goods they sell.

It all put together in traffic- and people-jammed streets close to modern and futuristic shopping centers with
astounding lighting and design effects, creating the set for an amazing range of luxury brands. As happens with
Plaza 66 mall, in downtown Shanghai, that gathers in a single place brands as Chopard, Boucheron, Hublot, D&G,
pRada, Kenzo, Zegna, Dunhill, Balenciaga, Tag Heuer, Dior, Piaget, Tiffany, Bulgari, Chanel, Giorgio Armani, Hermes,
Cartier, Louis Vuitton, Boss, Cavalli, Todd’s, Diesel, Lagerfeld, Diane von FUstenberg, Bang & OLufsen and Vertu,
just to name some.

But is important to remind that, in any case, in this shopping center exclusive monobrand stores are present, with
other retailers waiting for vacancies or expansions. A dream for shoppings as Iguatemi and CIdade Jardim, in São
Paulo.

In the next weeks, we’ll continue detailing the present and the future of the world’s next largest retail market.

Gouvêa de Souza & MD Desenvolvimento Empresarial Ltda.

Av. Paulista, 171 - 10º floor
Paraíso – São Paulo – Brazil – Zip Code: 01311-904
Phone: (5511) 3405-6666 – Fax: (5511) 3263-0066
E-mail: gsmd-de@gsmd.com.br
Home-page: www.gsmd.com.br

Brazilian Retail News 4 21/03/2011