Brazilian Retail News

Year 10 - Issue # 381 - São Paulo, April, 11th, 2011

Phone: (5511) 3405-6666

Sonae Sierra awards stores for best

environmental practices
Sonae Sierra, one of Brazil’s most important shopping
center companies, delivered last week the Planet Sierra
Tenant Award, that acknowledges best practices to reduce
environmental impacts and sustainable initiatives adopted
by tenants of its ten malls in the country. C&A, Brazil’s top
department store chain, was awarded in the “A” category
(stores over 1,000 sq.m. area and belonging to a +10-store
chain) for its shop at Penha shopping center, in São Paulo,
while Giovanetti restaurant, at Parque D. Pedro mall in
Campinas was the winner in the “B” category (less than
1,000 sq.m., independent or small chain). The stores had
to comply with issues as energy and water consumption,
quality of the air, noise emission level, correct recycling and
adequate management of hazardous materials.

Consumer demand for credit rises 12.9% in Q1

Data released by Serasa Experian shows the number of people looking for loans in March rose 5.7% month-on-month,
leading year-to-date figures to a 12.9% year-on-year expansion. Although solid, figures were below the 16.4% growth
reported in 2010 and the 18.3% in Q1 last year. This slowdown in the consumers demand comes, mainly, from the country’s
Central Bank’s initiatives to hinder a stronger growth of the economy.

Building supplies sales up in March

The sales of building supplies went up 1% in March
year-on-year, leveraged by pipes and connections (+4.8%).
Year-on-year, sales were stable, the same happening in the
year-to-date performance. Figures were released by retail
association Anamaco, who expected a solid growth. The
trade group, however, remains optimistic this year sales will
rise 8.5% over 2010.

Retail sales up 8.5% in Q1

Figures reported by Serasa Experian show the Brazilian retail sales had in the first quarter of the year na 8.5% expansion
over the same period in 2010. Although strong, sales have slowed down from the 10.3% rise reported last year. In March,
sales rose 5.5% year-on-year, the lowest figure since July, 2009. The best-performing segment in the quarter was building
supplies, with a 14.1% growth.

Brazilian Retail News 1 11/04/2011

Brazilian Retail News
Year 10 - Issue # 381 - São Paulo, April, 11th, 2011
Phone: (5511) 3405-6666

Wizard starts operations in Panama

Wizard, the world’s largest language teaching franchising chain, announced it will open its first three schools in Panama.
The company is already present in other Spanish language countries, as Colombia, Guatemala, Costa Rica and Mexico.
The first Panamanian unit will be opened in H2, in Panama City. The location of the other two has not yet been defined,
but they will be running until the end of 2012. Wizard considers Panama as a strategic country in Latin America, as it hosts
several large contact center groups serving the global market as hosts several air and sea transport companies. Wizard
is present in 12 countries, with around 50 international units and more than 1,200 in Brazil.

Pizza Hut increases sales by 19% in São

Paulo
The 17 restaurants BFFC group run in São Paulo under
the Pizza Hut brand increased their sales by 19% last year,
over 2009. The growth is due to the company’s strategy,
that includes investments to retain and qualify employees;
new recipes; new restaurants and refurbishment of the older
ones; and consumer loyalty initiatives.

MVNO can get to 15 million users in 2015

The business model known as MVNO, in which companies from various market segments partner with traditional mobile
phone operators, may be used by 10 million to 15 million people in Brazil until 2015, according to a Europraxis study, who
forecasts an annual revenue of R$ 3.5 billion (US$ 2.12 billion) for the MVNOs. Today, these companies account for less
than 1% of the total mobile phone user base, against almost 20% in Europe and the United States.

Renner to buy homeware chain Camicado

Lojas Renner, one of Brazil’s top department store
chains, announced it agreed to buy homeware goods retailer
Camicado, for about R$ 165 million (US$ 102.5 million).
Camicado runs 27 stores in seven Brazilian states and is
the country’s largest company in the segment. Camicado, a
family-owned company, reported a net revenue of R$ 127.6
million last year, up from R$ 109.8 million in 2009. The deal
must be approved by Renner’s shareholders in the next
general assembly and by Brazilian antitrust authorities.

Hope underwear to double franchising chain

Brazilian underwear chain Hope, with 55 stores in the country, intends to increase its sales by 40% in 2011 and to
open 60 franchised shop, more than doubling its presence.

Brazilian Retail News 2 11/04/2011

Brazilian Retail News
Year 10 - Issue # 381 - São Paulo, April, 11th, 2011
Phone: (5511) 3405-6666

Momentum
Direct growth
Marcos Gouvêa de Souza - CEO, GS&MD - Gouvêa de Souza

The global direct, or door-to-door, market, is estimated in US$ 117.6 billion and Brazil is the world’s fourth-largest market,
only behind the United States, Japan and China. The difference is that, while sales in Brazil rose 18.4% in 2010, in an ongoing
evolution, the global market rose slightly in the last three years, going from US$ 114 billion in 2007 to today’s US$ 117.6 billion,
growing exclusively in emerging markets, specially Brazil, China, India, Russia and South Korea.
In a scenario of expansion of the multichannel alternatives to serve empowered consumers, the non-store channels are
the ones with stronger growth. In Brazil, internet sales rose 40% in 2010 year-on-year and direct sales went up 18.4%.
if there were reliable estimates for TV or mobile sales, surely we would confirm these segments rose faster than overall
retail sales (7.9%, according to official statistics agency IBGE).
This behavior is related to the changes in the business scenario, more and more competitive and with a broader range
of choice alternatives, and also to changes in the consumer behavior, with more focus on convenience and demanding
more information and easiness in the shopping process.
In Brazil, the direct sales segment, driven by the structural changes that have been shaping the emerging economies,
is also favoured by the deep structural changes in the local market, where lower-income population has become richer
and in the process has changed the reality of the domestic market.
The direct sales segment in Brazil reached an all-time high revenue of R$ 26 billion (US$ 15.29 billion) last year in an
absolutely consistent growth process. There are around 2.74 million salespeople working in the sector in Brazil, less than
in countries with smaller sales, pointing out average sales per person in Brazil have been way above the global average.
Opportunities have been identified and several companies have been trying to grab a share of this market. In the last
two years, many consumer goods companies have discovered and measured this market and have been creating new
businesses or distribution strategies to cope with the new possibilities. Boticário group, with its recently-launched (and
very ambitious) Eudora multichannel project, is one of them, positioning the brand to serve emerging consumers in the
personal care and cosmetics segments, with a sexier appeal. The same has happened with Vitaderm, also in the beauty
care market, who added another channel with its direct sales force.
The traditional players, as Avon (1.1 million resellers) and Natura (over 1 million salespeople), have been facing the
competition of new brands and concepts who have not only been disputing the same traditional consumer, but also the
same salespeople or representatives, who form their sales mix based on their consumers’ values and demands. These
brand representatives create their own product mix based on the needs of their consumer base, blending brands, products,
catalogs and services according to the consumer’s profile.
In spite 88% of the segment’s sales in Brazil have been focused on the personal care market (what explains the expansion
of companies as Boticário, Vitaderm, Avon and Natura), new products and brands have been brought to this market, as
Polishop has been doing with a strong range of imported goods. Or as Unilever has been doing in a project of direct sales
of water purifying systems. Equally as Nestlé, Batavo, Yakult or even JBS, the latter selling meat at home and advancing
in the food segment, apparently the last segment to be conquered by the direct sales model.
Undoubtedly, the segment’s potential in Brazil will make the number and importance of the players of the sector grow. In
the next years, the direct sales will continue to rise above the retail average, at the same time there will be more products
and brands being offered to this consumer, who has been more and more loyal to this channel.

Brazilian Retail News (BRN) is a weekly newsletter published by GS&MD - Gouvêa 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
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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

Brazilian Retail News 3 11/04/2011