Brazilian Retail News

Year 10 - Issue # 384 - São Paulo, April, 25th, 2011

Phone: (5511) 3405-6666

Máquina de Vendas wants to double size in

three years
One year ago, Ricardo Nunes, owner of Minas Gerais-
state electronics chain Ricardo Eletro, and Luiz Carlos
Batista, owner of Bahia-state rival Insinuante, became widely
known nationwide by merging the two companies, creating
Máquina de Vendas. Less than three months later, Erivelto
Gasquez’s City Lar chain, from Mato Grosso state, joined
Máquina, forming a R$ 5 billion (US$ 3 billion), 750 stores
chain. Today, the three executives are dedicated to expand
business way beyond retailing: besides a financial company
partnered with HSBC bank, who will become operational
in August, there are negotiations to build an insurance
company, a travel agency and a private label motorbike
distributor in the North region, among others. At the same
time, there will be opened almost 250 stores, mostly in the
South and Southeast (where the company has almost zero

Gasquez, Nunes and Batista: expansion to make Máquina de

presence). Máquina de Vendas intends to be, in three years
Vendas a R$ 10 billion, 1,000-stores company by 2014 only, a R$ 10 billion (US$ 6 billion), 1,000 stores chain.

Office supplies chain Kalunga increases presence in Rio

As part of an aggressive expansion plan that will lead the chain from today’s 60 stores to 100 until late 2012, Kalunga,
Brazil’s largest office supplies chain, has opened two shops in Rio de Janeiro, where the company had only seven stores.
There was invested R$ 1 million (US$ 625,000) per store. Present today in five states, the company increased its sales
by 17.5% last year, to R$ 1 billion (US$ 625 million), and the goal is to double its size by 2015.

More consumers to use the internet for shopping in Mother’s Day

More Brazilians want to purchase gofts online for Mother’s Day (in May) and Valentine’s Day (June), according to a
FIA/USP research. The study said 85% of e-shoppers plan to use the internet for puchasing goods, over 80.7% last year.
Mobile phones may lead purchases, with 12.8% of citations.

Retailers forecast 9.6% sales rise on Mother’s Day

For 59% of retailers, Mother’s Day sales must be better than in 2010, according to a Serasa Experian survey. For 31%
of the interviewed executives, sales will remain stable, while 10% forecast sales to drop year-on-year. Average sales will
rise by 9.6%. Last year, 60% of all retailers interviewed expected sales to rise and 33% said sales would be stable over
2009. Clothing, footwear and accessories may lead sales, accounting for 30% of gifts, followed by flowers (16%), mobile
phones (14%), electronics and home appliances (13%), and perfumery and cosmetics (11%).

Brazilian Retail News 1 25/04/2011

Brazilian Retail News
Year 10 - Issue # 384 - São Paulo, April, 25th, 2011
Phone: (5511) 3405-6666

Mundo Verde changes strategy to speed up

expansion
Controlled since 2009 by Axxon Group, Mundo Verde,
Brazil’s largest natural and organic goods retailer, opened
17 stores last year and increased its sales by 21%, to R$
181 million (US$ 109.03 million). This year, there will be
opened another 45 and sales are expected to reach R$ 210
million (US$ 126.5 million). The main expansion target is
São Paulo state: until 2015, there will be 140 stores in the
region, and 120 in Rio de Janeiro, where the company was
born. To double its size until 2015 and reach R$ 550 million
(US$ 329.3 million) sales, Mundo Verde bets on a three-part
strategy. The first is the acquisition or association with some
suppliers, including the creation of a private label for premium
food, and, after that, clothing, accessories and cosmetics.
The other vector is entering the healthy food market.

Otto Group plans expansion in Brazil

German retailer Otto Group, one of the world’s largest non-store retailers, plans to expand in the Brazilian market by
purchasing a major share in a local company, according to German newspaper WirtschaftsWoche. The deal would be
already in the legal details. Otto’s goal is to reach a leading position in the Brazilian e-commerce in the short term.

Brazil is Carrefour’s second most important branch

Brazil has become the world’s second most important Carrefour branch. In Q1, the country’s operations overcame the
Spanish by 35 million euros and is now trailing only France (whose operations are three times as large as the Brazilian
ones). About three years ago, the then-president of the company, Jean Marc Pueyo, said the plan was that the country
could reach this position by 2015.

Brazilian Retail News 2 25/04/2011

Brazilian Retail News
Year 10 - Issue # 384 - São Paulo, April, 25th, 2011
Phone: (5511) 3405-6666

Momentum
Brazil: growing global relevance
Marcos Gouvêa de Souza - CEO, GS&MD - Gouvêa de Souza

Recently, it was announced Carrefour’s operation in Brazil became the company’s second-largest in the world. The company
is present in 40 countries worldwide and is the most global food retailer. In Brazil, it arrived in the ‘70s, bringing to the country the
hypermarket format. Since then, it has been the number one or two in the Brazilian supermarket ranking, but in the last years
Grupo Pão de Açúcar, that in the last years increased its gap from the rival, due to the speed of its organic expansion and by
the important purchase of Ponto Frio and the merger with Casas Bahia.

The rise of Carrefour’s Brazilian branch, taking the second spot from the company’s Spanish arm, is a consequence of the
chain’s organic expansion in the country; of the purchase of Atacadão cash & carry operations; and, mainly and very particularly,
of the downfall in the European markets, due to the less buoyant economic and spending scenario. The four largest Carrefour
markets in Europe (France, Spain, Italy and Belgium) were all very affected by the economic crisis.

Considering the forecasts for the next years, the distance between the Brazilian branch and French (Carrefour’s largest)
one will only be reduced, as in South America the chain will continue to expand and in France the performance will be, at best,
sluggish. But it is still very far away the moment the Brazilian operation will be as big as the French.

The growing importance of the Brazilian branch is not a privilege of Carrefour, as this situation has been repeated in a number
of global retailers, of all segments, being particularly true for Walmart in the food segment, for C&A in apparel, for Leroy Merlin
and Saint-Gobain in the DIY retailing, for McDonald’s, Pizza Hut, KFC and Subway in the food service, in the shopping center
segment and also in the luxury market, in which brands as Louis Vuitton, Prada, Tiffany and others have Brazil as one of their
most relevant markets worldwide.

It is all a simple consequence of the retail business expansion, due to the economic growth, with increasing income and
employment leading to expanding consumption, that, associated to the market formalization, reshape the market structure and
geography. In this scenario, the largest retailers can increase sales faster in a consistent way, taking advantage of the competitive
edge they have built in IT, logistics, distribution, operations and people.

As a result, the Brazilian retail had a quantic leap in its maturity, as management has become more professional and more
focus has been given to strategic areas, particularly in Human Resources, sales channels, stores and IT. And, due to the political
and economic stability and the falling informality, retailers can plan in the long term, making feasible for businesses to grow and
allowing the share of the Brazilian operations in the companies’ revenues to rise.

Only in the drugstore and traditional department stores this scenario is not valid. In the former, due to the low consolidation
and the market characteristics, as it is ruled by independent players and with no international brand with a relevant presence,
the top five players own a small, but growing, market share. And the traditional department stores, with large surface and selling
almost everything, have almost no relevance in the Brazilian market, as the segment was reinvented in the last decade by Renner,
Riachuelo and Marisa, with more compact, fashion oriented stores.

In the next five to ten years, we will still watch the importance of Brazil in the most different segments rise, with an increase
of the foreign presence in the domestic market, an irreversible consequence of the market growth and the forecast retailing will
continue to mature. It’s not far the moment when Brazilian retailers will start investing stronger in the global market, specially in
Latin America, reverting the trend. An almost natural fact in the near future.

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
services, please send an email to publicacoes@gsmd.com.br or access GS&MD - Gouvêa de Souza at www.gsmd.com.br.

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 25/04/2011