Cencosud to invest US$1.8 bn over the next three years

Date : 22 January 2021

Oliver Butterworth

Retail Analyst

Cencosud S.A. is a Chilean-based multi-format retailer with operations in Argentina, Brazil, Chile, Colombia, and Peru. The business has announced plans to invest US$1.8 bn between 2021–2023. This will be mostly invested in renovating and constructing stores, as well as developing technology and launching a new proximity supermarket banner.

Heavy investment in renovating and constructing new stores

Cencosud has given the following breakdown for its investment:

  • US$740m to refresh all Cencosud stores across the region, and to open dark stores in Argentina, Chile, and Peru
  • US$340m to construct 144 new stores
  • US$420m to refurbish eight shopping centres, expand five, and open two new malls
  • US$300 to be invested in technology, logistics and ecommerce.

It says its investment plan will be financed entirely by free cash flow; “We are not going to take on new debts or make capital increases to finance them." Matías Videla, Cencosud CEO.  

The business will invest US$820m in 2021.

New store banner will facilitate online and offline purchases

Cencosud is launching a new proximity supermarket banner, called Spid 35. Although this will eventually be a physical store banner, initially it has been launched digitally and will have a strong focus on ecommerce.

Source: verietyinfo.com

Spid 35 is being launched in three phases:

  • Phase 1 – Spid 35 was launched as a digital format on 15 January 2021. The banner was made available in the Cornershop delivery app and shoppers can currently order grocery deliveries in three districts in Chile (Las Condes, Providencia, and Vitacura)
  • Phase 2 – Cencosud will launch a Spid 35 app in early February (2021). Delivery will be offered in the major cities in all five of its operating countries
  • Phase 3 – before the middle of 2021, Cencosud will start operating physical stores, which will be built using existing space, as well as newly leased units. The stores will operate partly as dark stores (for picking online orders), as well as serving the public.  

This is a unique proposition, which Cencosud says will be targeted towards a younger customer base. Orders made through the Spid app will be delivered to customers in under 35 minutes.

“It is a format that does not exist in the region, aimed at the public between 18 and 30 years old, with an assortment of 1,600 products and a delivery service in less than 35 minutes.” Videla.

Cencosud leveraging partnership with Cornershop…

Cencosud announced its long-term strategic partnership with Chilean last mile delivery business Cornershop in August 2020. Although this is not an exclusive partnership, it is one that has enabled the business to bolster its ecommerce operations and offer quicker deliveries. It has also unlocked delivery from some supermarket banners (e.g., Santa Isabel), which were previously ran solely as offline businesses.

…which is now owned by Uber

Uber Technologies announced its acquisition of the Cornershop app in October 2019 and this was finally approved in December 2020. Eduardo Donnelly, Uber Eats CEO, stated; “This milestone reinforces our commitment to Latin America…our fastest growing market in food delivery intermediation and where millions of people already use our entire platform."

Uber and Uber Eats users in the Latin America can now place grocery delivery orders whilst on the Uber platforms.

Placing an order through the Uber app (example below from the US)

Source: Venturebeat

Dark stores are key to Cencosud’s strategy

Cencosud and Cornershop’s partnership agreement included a joint investment in building dark stores, which were dedicated to ecommerce picking. Some of these have already opened and others are under construction. The businesses will continue to build and optimise dark stores, which will shorten the delivery time to the end customer. Shortening the last mile will also save on operational costs, including fuel.

Our view

Cencosud reported disappointing results throughout 2020 and it was clear that it needed to take action to drive the business forward. It recognises that it needs to develop its online channel and improve its delivery services, as well as modernising its physical stores. Its heavy investment and its strategic partnership with Cornershop will certainly help it to strengthen in these areas and we look forward to seeing the businesses evolve over the next three years.

Retail Analysis newsletter

Keep up-to-date with the latest retail developments shaping the industry. Twice a week, direct to your inbox.

Sign up for our newsletter »