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Brazil-based drugstore operator, RaiaDrogasil, reports 15.3% revenue growth to BRL4.2bn (US$1.1bn) in the quarter from 1st January 2019 to March 31st 2019.

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In the first quarter Grupo Éxito reported net sales of COP2.64tn (US$788.9m) in Colombia, a growth of 2.5%. Same-store sales (SSS) grew by 2%, which was mainly due to strong like-for-like performance of stores under its Éxito banner, as well as higher volume and traffic.

At a group level Grupo Éxito reported a consolidated net revenue of COP14.3tn (US$4.19bn) in Q1, which represents a 3.9% increase on Q1 2018. This was predominantly driven by strong net sales performance in Colombia (+2.7%) and Brazil (+12%).

This article will focus on Grupo Éxito’s Q1 performance in Colombia. We have written a separate article on the business’s Q1 performance in Brazil, under the GPA banner, which can be found here.

A mixed performance across banners…

Éxito stores are the business’s highest performing banner in Colombia, representing c. 70% of total sales. In Q1 Éxito stores delivered a 4% sales increase and a 3.4% growth in SSS.

Éxito store, Bogotá
Éxito store, Bogotá
Source: IGD Research

Stores under the Carulla banner saw a slight 1.2% sales increase (0.6% SSS). However, the business’s low-cost banners Super Inter and Surtimax, which represent c. 11% of combined sales, saw a 11% decrease in net sales in the quarter.

Cash and carry delivering encouraging results…

In Q1 Grupo Éxito’s Surtimayorista cash and carry banner grew sales by 23.1% and SSS by 27.7%.

In the last 12 months the business has opened 20 stores in Colombia, of which 12 openings were Surtimayorista. The business aims to open a further 10 stores in 2019, taking total stores under this banner to 30.

Remodelling underperforming banners to cash and carry…

Grupo Éxito has been converting underperforming Surtimax stores into the Surtimayorista banner. In Q1 the business opened four stores in Colombia, of which two were Surtimayorista/Surtimax conversions (as well as two new Éxito stores). A further seven cash and carry conversions are currently in progress.

Surtimax, Bogotá
Surtimax, Bogotá
Source: IGD Research

Grupo Éxito could take learnings from GPA in Brazil…

Casino Group could share best practice from its cash and carry operations in Brazil, where the channel has quickly become its fastest growing. In Brazil, Casino, under the GPA banner, has remodelled many of its underperforming Extra Hiper hypermarkets to its Assaí cash and carry format and sales at these stores have more than doubled as a result.

Assaí store, São Paulo, Brazil
Assaí store, São Paulo, Brazil
Source: IGD Research

Surtimayorista, Bogotá
Surtimayorista, Bogotá
Source: IGD Research

The stores which have been converted from Surtimax to Surtimayorista are already seeing improved sales partly due to lower operating costs. Grupo Éxito currently has 101 stores under the Surtimax banner. It’s unclear how many of these are underperforming but if Surtimayorista continues to grow, these units could provide the foundations to further expand its cash and carry presence in Colombia.

Further expansion of Wow and Fresh Market…

In 2019 Grupo Éxito plans to invest approximately COP270.0bn (US$80.6m) in to store optimisation and innovation in Colombia. It plans to open c. 20 stores as a mix of new stores, conversions and remodels.

Grupo Éxito’s Wow and Fresh Market banners were both launched in 2018. The two stores that were converted to Éxito Wow in 2018, and the six converted to Fresh Market both delivered double-digit sales increases. The business said it will open “at least” five stores under each of these banners in 2019.

Carulla Fresh Market, Bogota
Carulla Fresh Market, Bogota
Source: IGD Research

Grupo Éxito forecasts that over 20% of its 2019 sales will come from innovative developments across its Wow, Fresh Market, Cash & Carry and omnichannel operations.

Encouraging omnichannel growth in first quarter…

In Q1 the business grew its omnichannel sales by 38%, reaching COP104.0bn (US$31.0m). For now, omnichannel sales are a small part of the business overall, representing just 3.9% of sales. We expect this to continue to grow but, based on what we have seen in other markets, we believe this will be at a slow pace.

Grupo Éxito is the ecommerce market leader in Colombia. Sales through exito.com and carulla.com increased by 24% in Q1 and orders grew by 18.4%. The business relaunched its Éxito and Carulla apps taking learnings from GPA’s apps in Brazil. In the first quarter downloads across both apps reached almost 460,000.

Successfully bridging the gap between online and bricks and mortar stores…

Click and collect is now available in 254 stores, which is preferred by shoppers wanting non-food items delivered. Digital catalogue/ordering points have been installed in 173 stores and orders made through these have increased by c. 40%. Gross Merchandise Volume (GMV) through its marketplace has grown by almost 50% and the business now works with c. 1,300 vendors, offering customers more product choice online.   

For time-poor customers Grupo Éxito can now fulfil home deliveries within 35 minutes through its partnership with last mile delivery app Rappi.

Rappi
Rappi now available in 57 cities across 7 Latin American countries
Source: Rappi

Grupo Éxito’s mid-term strategy

The retailers said that in the short to mid-term it will put further investment in to its innovative new store concepts, expanding its cash and carry banner and further enhancing omnichannel operations.

Grupo Éxito’s CEO, Carlos Mario Giraldo Moreno, said "Grupo Éxito is developing an innovative strategy in the region, focussed on omnichannel and digital transformation. The strategy is already bringing positive results to our operations; Colombia and Brazil posted net sales growth driven by modern formats and brands, Wow, Fresh Market and Cash and Carry”.

The business’s various omnichannel initiatives are successfully creating more of a seamless shopping experience between online and physical stores. As we have seen in other markets, this is a fundamental step in meeting changing consumer demands and enhancing the in-store experience.

Moreno states that “the omnichannel model also contributed to results, positioning the Company as the strongest platform in South America. Grupo Éxito is leading a strategy adapted to changes in consumer trends in a retail market expanding within the digital world".

Oliver Butterworth

Oliver Butterworth

Retail Analyst - Latin America

We look at five themes, including the growth of discounters and the continued strength of the atacajero format, that are set to shape the region's grocery markets in 2019 and beyond. With case studies from Brazil, Colombia and Mexico, amongst others, and retailers like Carrefour, GPA and Walmart, the presentation highlights the challenges and opportunities the region is expected to provide manufacturers in the short term. 

In this round-up we share our key highlights and trends that impressed us over the last few months in the course of our store visits. Within this report we present examples from retailers in a number of markets including Sainsbury's, Aldi, Lidl, Kroger and many more.

See the latest industry news on Latin America.

Mexico-based FEMSA, which operates the OXXO convenience store chain, has announced a 5.6% increase in consolidated revenue for Q1 2019. This includes the business’ proximity, health and fuel divisions. On an organic basis total revenue grew by 3.7%.

Same-store sales for FEMSA’s 540 gas stations fell by 7.5% due to gasoline supply shortages at the start of the year.

OXXO proximity stores are key to driving revenue growth

In the quarter, revenue for OXXO proximity stores saw an increase of 9.3% (3.2% in same-store sales). This was driven by increased sales, higher customer traffic and 234 new store openings, which were predominantly in Mexico.

OXXO’s main operation is in Mexico (more below), where it is the third largest retailer in revenue terms.

Eduardo Padilla, FEMSA’s CEO, commented: “During the first quarter we were able to leverage the resilience and confidence of the consumer in Mexico to deliver a robust set of numbers at FEMSA Comercio’s Proximity Division, despite a difficult comparison base driven by the [Easter] calendar shift.”

The rapid expansion of OXXO

OXXO operates stores in Mexico, Colombia, Chile and Peru. The business opened 1,372 stores in 2018 and an average of 1,274 stores per year over the last three years. The 234 OXXO stores opened in Q1 takes the total number of stores in Latin America to 18,233.

According to FEMSA, on average it opens a new store every six hours and every day approximately 11m people make a purchase in an OXXO store.

Mexico is by far the biggest market…

At the end of 2018 there were 17,839 OXXO stores in Mexico and 160 across the rest of Latin America. By comparison, the next largest convenience retailer in Mexico is 7-Eleven, which is almost 10 times smaller with c. 1,840 stores.

…but it continues to expand its reach into new markets

In FEMSA’s investor presentation in April 2019, it announced plans for a sustained organic growth of OXXO in Mexico and medium-term objectives to “test additional international markets”.

We are already starting to see signs of this strategy in action. In 2018 OXXO opened its first store in Peru and by the end of April 2019 had opened 18 stores in the country. In October 2018 FEMSA announced plans to open 300 stores in Peru by the end of 2020, which seems achievable given the scale of annual openings in Mexico.

GPA has announced consolidated sales growth of 12.4% for Q1, despite an unfavourable Easter calendar effect. It also reported same-store sales (SSS) growth of 7.5% and said that it had seen its strongest customer traffic growth in several periods.

GPA has been optimising its store portfolio for all its multivarejo (all non-cash and carry formats) stores to better meet changing customer demands. Since it began converting stores to its new banners SSS have increased. In Q1 SSS were up by 4.8% and market share gains were seen at all multivarejo banners.

GPA’s evolving portfolio

Source: GPA

Revitalising Extra Hiper stores leads to improved sales performance  

Many underperforming Extra Hiper stores were converted to the Assaí banner and sales at these stores more than doubled as a result. The Extra Hiper estate is now performing well (+2.7% SSS in Q1) due to various promotional campaigns and growth in non-food sales. We anticipate that the number of Extra Hiper conversions into Assaí will begin to slow and future Assaí openings will be mostly organic new stores.

Solid performance of Pão de Açúcar’s latest G7 store design

In Q1 the Pão de Açúcar banner delivered SSS growth of 4.6%, versus 2.2% in Q4 2018. Since the start of 2018 GPA has remodelled 26 Pão de Açúcar stores, of which 20 have been converted to its new G7 design.

The G7 stores have a stronger focus on health-food and providing an enhanced customer experience. The layout and product mix have been revitalised, with fresh produce brought to the front of the store. They also feature a new health-food zone, which brings together healthy products from multiple categories into an area adjacent to the fresh produce. This makes it simpler for customers to navigate and purchase healthier products.

Source: IGD Retail Analysis

Source: IGD Retail Analysis

Sales at these stores are significantly outperforming the average sales of Pão de Açúcar overall and the sales now account for c. 25% of gross sales for the banner. GPA plans to convert between 10 and 15 stores to the G7 concept in 2019.

Mercado Extra and Compre Bem delivering double-digit sales growth

In Q1 GPA converted seven Extra Super stores to its Mercado Extra banner and since the start of 2018, 13 have been converted to the Compre Bem banner. As a result, sales growth across the three banners (Extra Super, Mercado Extra and Compre Bem) have increased from 4.7% in Q4 2018 to 7% in Q1 2019. GPA said that Mercado Extra and Compre Bem stores are delivering double-digit growth in sales, customer traffic and sales volume.

Source: IGD Retail Analysis

Compre Bem stores have a wider selection of perishables than was previously available in the Extra Super banner. The stores have a discount-oriented pricing strategy and target social classes B, C, D and E.  Compre Bem stores fulfil the role of the regional supermarket and the product mix is flexed to suit local catchments.

Source: IGD Retail Analysis

he stores have an average of c. 7k SKUs compared to an average of 12k SKUs in an Extra Super. Having fewer SKUs releases sales-floor space which is used to incorporate services such as a butcher and a bakery. Adding these services has been positively received by customers and the stores that have been converted to Compre Bem have increased sales by c. 50%.

Source: IGD Retail Analysis

Same-store sales growth of 20% for proximity banners

Same-store sales for GPA’s proximity formats grew by 20% in Q1. The business has reported consistent double-digit sales growth since the second half of 2018.

A combination of initiatives, including adjustments to its product assortment, aligning promotions to those in larger store formats and a stronger focus on its private label offering is growing sales volume and customer traffic. In Q1 GPA converted two Mini Extra convenience stores into its Minuto Pão de Açúcar banner, which is thought to be the better performing banner.

Source: IGD Retail Analysis

Gross sales at Assaí increase 26% year-on-year

Gross sales for the Assaí banner were 25.6% higher in Q1 2019 than in Q1 2018 and the banner saw a 10.7% growth in same-store sales. Gross revenue reached BRL$6.9bn (US$1.7bn), up by BRL$1.4bn (US$353M) year-on-year (YOY).

GPA will continue its rapid expansion of the Assaí banner, with plans to open 20 Assaí stores in 2019. The business opened one Assaí store in Q1, which was an Extra Hiper conversion located in the North of São Paulo city.

GPA driving expansion in private label

At the end of 2018 GPA announced ambitious plans to increase private label from 10% of its total offer to 20%. Private label penetration is now 11.6%. GPA has c. 3,000 private label SKUs, of which 90 were launched in Q1. GPA plan to launch a further 500 products in 2019.  

Source: IGD Retail Analysis

Growing ecommerce capabilities and the launch of James Delivery

GPA is the market leader in Brazil’s food ecommerce channel. It said its online food sales now account for 4% of Pão de Açúcar’s gross sales.

GPA’s improved ecommerce performance in Q1 was partly driven by expanding its ‘Express’ and ‘Click & Collect’ delivery services across the country. Online order collection services are now available in 76 stores nationwide and GPA aims to implement this at a further 40 stores by the end of 2019.

In April 2019 GPA launched ‘James Delivery’, a multiservice last-mile app which offers fast delivery of products sold across GPA’s supermarkets and drug stores, as well as food from participating restaurants. For now, the service is limited to São Paulo and Curitiba. GPA’s Extra Hiper store in the Itaim Bibi neighbourhood is being used to train staff in how to use the technology. The business aims to have the James Delivery service available in 10 cities by the end of 2019.   

Source: GPA

Loyalty programmes gaining traction

18.5m customers are currently registered to one of GPA’s various loyalty programmes. Loyalty card penetration at Pão de Açúcar stores is c. 85% and c. 60% for Extra stores.  

GPA’s loyalty and customisation tools “My Discount” and “My Rewards” are seeing higher penetration. In Q1 there were 8.3m downloads of the My Discount app, which was a 62% quarter-on-quarter increase (70% increase versus Q1 2018). GPA said the average monthly spend by app users is double that of non-users.

In the quarter 100,000 new customers signed up to Assaí’s Passai credit card, which enables them to pay wholesale prices on single product purchases and allows delayed payment for up to 40 days. 720,000 customers have a Passai card, which was launched in 2017. Compared to other formats, penetration is currently low, at 5%, but steadily growing. As more customers sign up to the card, the business will be able to better utilise the sales data for targeted promotions and range optimisation.

Source: IGD Retail Analysis

Newly launched initiatives are helping to differentiate its offer

GPA has strategically partnered with local food tech start-up Cheftime, to offer meal-kit solutions in the Pão de Açúcar banner. The kits contain simple, healthy meal kits, which serve two. These are currently available in a few stores in São Paulo. The business aims to roll this offer out to 25 Pão de Açúcar and three Minuto Pão de Açúcar stores in 2019.

Source: IGD Retail Analysis

The business has also recently launched Pão de Açúcar Adega, an online platform for selling wine/alcohol. The platform has nationwide coverage and has a differentiated assortment of 1,200 SKUs of wine, 200 SKUs of spirits and 150 beer brands. This new initiative helped sales in the wine category to double in Q1.

As well as the online platform, GPA recently opened a physical Adega store in the Jardins neighbourhood in São Paulo. Store staff are trained by an external wine expert. Although at its infancy, this initiative seems like a good opportunity for the business to diversify and further showcase its commitment to quality and service.

Source: IGD Retail Analysis

Source: IGD Retail Analysis

Source: IGD Research

Source: IGD Retail Analysis

Oliver Butterworth

Oliver Butterworth

Retail Analyst - Latin America

We look at five themes, including the growth of discounters and the continued strength of the atacajero format, that are set to shape the region's grocery markets in 2019 and beyond. With case studies from Brazil, Colombia and Mexico, amongst others, and retailers like Carrefour, GPA and Walmart, the presentation highlights the challenges and opportunities the region is expected to provide manufacturers in the short term. 

In this round-up we share our key highlights and trends that impressed us over the last few months in the course of our store visits. Within this report we present examples from retailers in a number of markets including Sainsbury's, Aldi, Lidl, Kroger and many more.

See the latest industry news on Latin America.

Presentations

25/06/2019
We visited one of GPA's latest stores which has been remodelled to its new G7 concept. One of 20 stores opened in this format in 2018, the store has a new layout and product mix which focuses on fresh and healthy categories.
19/06/2019
As it looks to pivot away from its largest stores in France, get closer to shoppers and integrate its channels in all market where it operates, Casino is investing heavily in its proximity stores globally. For retailers, therefore, it is a source of inspiration of how they could evolve their convenience store operations. For manufacturers, Casino provides a view on how the channel could develop and how they may need to prepare in future.
04/06/2019
This figures-based deck summarises the forecast for the Latin American grocery market to 2023 and comes complete with a dataset.
22/05/2019
We look at Walmart's strategic priorities for the next five years, what it's going to take to lift sales to $635bn and how it’s developing an ecosystem that will become its platform for growth in future years
View all presentations

Key presentations

We take a look at the five key themes that are set to shape the Latin American retail sector in 2019 and beyond.

This figures-based deck summarises the forecast for the Latin American grocery market to 2023 and comes complete with a dataset.

We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Retail Analysis the most reliable and robust source available for data of this type. 

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