Brazilian Retail News

Year 10 - Issue # 386 - São Paulo, May, 09th, 2011

Phone: (5511) 3405-6666

Brazil becomes the world leader in perfumery

Leveraged by the increasing consumer demand and by the exchange rate, the perfumery segment saw its sales go
up 33% in Brazil last year, according to Euromonitor, to US$ 6 billion, surpassing the United States, who stood still in the
US$ 5.3 billion range.

Marisa to focus on acquisitions

Marisa department store chain may change its growth
strategy this year and rely not only in organic store opening,
as usual, also acquiring rival chains. The company has been
looking for purchase opportunities in several regions of the
country, but no deal has been reached yet. Even so, organic
expansion will continue, with 33 stores already in the pipeline
and 20 more planned.

DIY sales up 6.5% in April

According to retail trade group Anamaco, the country’s DIY sales rose 6.5% in April over March and 3% year-on-year.
Year-to-date sales rose 2.5% over the same period last year and in the last 12 months sales have gone up 9.5%. Anamaco
forecasts for this year sales to go up by 8.5% over 2010.

Netflix prepares to go to Brazil

Netflix, the world’s largest online movie rental chain,
is dealing with entertainment companies to grant rights to
offer movies and TV shows in Latin America. The company
intends to go to two new markets this year and announced in
the past it is interested in opening offices in Brazil, Australia,
India, Turkey and the UK.

Consumer confidence drops again

Brazilian consumer confidence dropped in April for the sixth consecutive month, said the National Industry Confederation
(CNI). Inec confidence index fell from 112.6 to 112 month-on-month. Year-on-year, the drop (from 114 points) was the
stronger in one year. Since October, consumer confidence has fallen 7.2%, according to CNI, due to lower economy growth.

Supermarket sales with a tepid growth in March

In Brazil, supermarket sales rose 1.94% in March year-on-year, in inflation-adjusted terms, according to data released
by the country’s trade group Abras. Over February, sales rose 9.28% in real terms, leading segment sales to a 2.79%
growth in the first quarter of the year.

Brazilian Retail News 1 09/05/2011

Brazilian Retail News
Year 10 - Issue # 386 - São Paulo, May, 09th, 2011
Phone: (5511) 3405-6666

Avon increases sales by 11%

Cosmetics giant Avon said its sales in Brazil rose 11% in Q1 year-on-year, below the Latin American average of 16%.
Worldwide sales went up 7%, to US$ 2.62 billion, while net profit more than tripled, to US$ 143.6 million.

Carrefour’s Atacadão chain prepares

Indonesian venture
One year after French Carrefour announced it would lead
Brazilian discount chain to Argentina, the first store in the
country was effectively opened. And the group plans now a
new foreign venture, this time in Asia: Atacadão shall open
its first store in Indonesia in 2012. The chain also runs stores
in Brazil and Colombia.

Pão de Açúcar cuts plastic bags in its “green” stores

The two Pão de Açúcar supermarket chain’s green stores in São Paulo state have cut free plastic bags in its stores.
Now, there are available eight types of reusable bags and other kinds of packaging, as plastic boxes, canvas carts,
biodegradable bags and cardboard boxes.

Easter makes retail sales rise 10.9% in April

Easter sales leveraged the performance of the Brazilian
retail sales in April. According to Serasa Experian, sales went
up 1.8% month-on-month and 10.9% over the same period
in 2010. Consumers’ increasing income and lower price of
imported goods (specially seasonal ones as codfish, olive
oil and wine) helped boost figures.

Walmart to invest R$ 1.2 billion and open 80

shops
Walmart, Brazil’s third-largest retailer, will invest R$ 1.2
billion (US$ 722.9 million) in the country this year to open 80
new stores. In the last five years, the retailer has invested R$
6 billion (US$ 3.61 billion) to build 177 stores and generate
25,000 jobs. In 2011, expansion will focus on low income-
targeted chains Todo Dia (neighborhood stores) and Maxxi
(warehouse clubs).

Brazilian Retail News 2 09/05/2011

Brazilian Retail News
Year 10 - Issue # 386 - São Paulo, May, 09th, 2011
Phone: (5511) 3405-6666

Momentum
The store format evolution
Marcos Gouvêa de Souza - CEO, GS&MD - Gouvêa de Souza

The rule is clear. Retail store formats are born, grow, become mature, reach their peak and tend to disappear. In spite of the
attempts to reinvent them in this declining age. What’s new is the evolution cycle has been happening in a much faster way, as
a result of a more dynamic process in which consumers, companies and the society, leveraged by the technological changes,
are structurally transformed. And in retailing it would not be different.
Observing this perspective in a global range, many formats that have disappeated in more mature markets, or were reshaped
in a new configuration, are still present, strongly, in emerging markets. Maybe the most significant case is the department stores.
While in the US market chains as Macy’s, Dillard’s and Bloomingdale’s have been struggling for more than 20 years, losing
market share and reducing sales and profits, and trying to reinvent themselves and consolidate the segment to survive, in
countries as Chile, Mexico, Argentina, China and India these formats are still strong.
In countries with a different structure, as the UK, France, Germany, Spain, Italy and Belgium, in which public transportation
have a strong presence (far from the US, where cars make the difference), the reinvention of the department stores included a
significant expansion of the food areas.
Chains as Printemps, Galleries Lafayette, Kaufhof, Selfridges, Rinascente and El Corte Inglés, at the same time brought in
more food to their traditional department stores, diversified their operations, creating specialized chains as a way to cope with
the challenge of reverting a declining trend.
In Brazil, the traditional department store format, with chains as Mesbla and Mappin (with a few exceptions in the North and
Northeast), was replaced by more modern fashion-oriented chains, as Renner, C&A, Riachuelo and Marisa, who have been
growing fast and increasing their market share. They differentiate themselves by focusing on different consumer profiles and by
bringing in services, specially financial ones, to increased their share of wallet in the consumer’s expenses.
And these brands, when thinking of increasing businesses, have gone to the specialized chains arena, as Marisa has been
doing with an underwear chain (as C&A tried in the past) and Renner did recently purchasing homewear chain Camicado.
A store format struggling to survive, and already dead in the mature markets, is the variety stores, whose best example in Brazil
is Lojas Americanas. This is a format that, in mature markets, did not resist to the evolution of other concepts, as the specialized
stores and the hypermarkets.
In this aspect, the hypermarkets themselves have been facing the reinvention challenge in the modern world (including
Brazil), pressed by warehouse clubs, convenience stores, hard discounters, specialized stores, foodservice, more convenient
supermarkets and even the internet, specially in the electronics and digital goods categories.
It’s worthy to highlight the efforts Carrefour, the world’s largest hypermarketer, have been doing to develop a new generation
of hypermarkets, the Planet project, tested as a pilot in Lyon, France, from August last year on and since then implemented in
several other places, in Italy, Spain, Belgium, Turkey, Romania and Poland.
It is an irreversible cycle. A store format leads another to decline and will be in the downward side sometime in the future,
having to work on its reinvention.
The new components are more dramatic behavior changes, as the strong growth of foodservice and the rise of the digital
channels (internet, mobile and, soon, interactive TV), that will generate even more substantive changes in the market share of
some store formats. Specially for more planned-purchase product categories, to which the convenience, safety and pragmatism
of the digital retailing are more relevant.

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

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