How Mass has rapidly become one of the biggest discounters in Latin America

Date : 30 April 2020

Oliver Butterworth

Retail Analyst

Peruvian grocery retailer Supermercados Peruanos S.A (SP) began to expand its Mass discount banner in 2015. In the few years prior to this it had very few discount stores and up to 2015 the business was primarily focused on growing its Plaza Vea supermarket banner.

However, SP now operates over 400 Mass stores and has opened over 100 stores annually in the last three consecutive years, making it one of the fastest growing discounters in Latin America.

Source: IGD Research

Background to Supermercados Peruanos

SP is Peru’s grocery retail market leader. The Peruvian business is owned by InRetail, which also operates pharmacies and shopping malls, leading the market in all three sectors.  SP is a multi-format retailer with supermarkets, compact hypermarkets, and discount stores. It has recently ventured into cash and carry stores (more below). It operates more than 500 stores in 17 cities. However, the majority of its stores are located in and around Metropolitan Lima.

SP distribution of stores in Peru

Source: InRetail

Background to Mass

Mass follows the hard discount model. Stores are modestly sized (between 150 and 200 sq. m), with a basic range of predominantly ambient groceries, many of which are sold directly from their box. Stores have a high penetration of own brands, most namely its Mass and Bells labels. Private label, coupled with an efficient store operation and supply chain, enable Mass to sell products cheaper than its competitors.

Source: InRetail

Source: Sigral

All 405 Mass stores are in Peru’s capital city Lima. Their small footprint make it easier for SP to find new locations, and therefore expand, and open stores in smaller neighbourhoods. Peru has a high population of low to lower-middle-income customers who will be attracted by Mass’s low prices. Proximity of location and speed of shop are also desirable features.

Source: Sigral

Traditional retail will be most impacted

Peru has a low penetration of modern retail. The traditional channel accounts for around 75% of the market. This makes it an attractive country for modern retailers to invest in. Modern formats are slowly gaining share, predominantly driven by the recent rapid expansion of the discount and convenience channels.

Mass is likely to gain most of its share from the traditional channel, as the banner can compete on both price and convenient locations. SP will be targeting new store locations in middle to low income social economic neighbourhoods. Private label penetration has seen strong growth over the last year in Peru, which demonstrates how customers are prepared to move away from mainstream brands.

Rapid expansion set to continue…

In a short space of time SP has opened more Mass stores than it operates across all its other banners combined. Sales for the banner account for 7% of SP’s total revenue. Over the next three years, SP plans to invest two thirds of its Capex into new property developments. It will maintain the aggressive expansion of Mass, opening around 100 stores annually till at least 2022.

In 2018 SP announced plans to open 150 stores annually with an average sales area of 150 sq. m. In its 2019 annual report this had reduced to 100 stores, but with an average sales area of 200 sq. m. Therefore, it is opening fewer stores, but with a larger footprint.

…and further expansion of cash and carry

SP opened its first Economax cash and carry store in 2018. It now has five stores under the banner. It plans to open one Economax in 2020 and one or two in 2021 and 2022. Despite this growth being minimal compared to Mass, if the cash and carry channel proves popular with Peruvian consumers, as we have seen in Brazil, this could change significantly.

Chilean retailer SMU operates its Mayorsa wholesale banner in Peru and closed 2019 with seven stores. According to El Mercurio, SMU will focus its efforts on strengthening its wholesale operations in Peru, with five new stores and two remodels expected in 2020. SMU clearly sees growth potential in the market. Cash and carry could be an interesting channel to watch in the future.

We take an in-depth look at the discount channel in Latin America. We focus on key markets, like Brazil, Colombia and Mexico, and the retailers driving growth in the channel, including ara and Bodega Aurrera.

We review the five key trends set to shape the Latin American grocery market over the next 12 months and beyond.

See the latest industry news on Latin America.