InRetail buys Makro stores in Peru

Date : 06 January 2021

Oliver Butterworth

Retail Analyst

Peruvian business InRetail has acquired Makro’s cash and carry stores in Peru for US$360m. Makro’s South American operations are owned by SHV Holdings, a Dutch business and one of the world’s largest private trading groups. InRetail has agreed to acquire 100% of its operations in Peru (16 stores), which will help it to bolster its multi-format strategy.

"This incorporation strengthens our vision of developing the modern market for mass consumption products, offering all Peruvians a variety of quality products, at low prices and in safe spaces." Juan Carlos Vallejo, InRetail CEO. 

Background on InRetail

InRetail, which is part of Intercorp, operates supermarkets, pharmacies, and shopping malls in Peru. It leads the market in all three sectors. Its Supermercados Peruanos supermarket chain operates as a multi-format retailer with supermarkets, compact hypermarkets, and discount stores. In 2018 the business ventured into cash and carry stores, opening its first store under the Economax banner.

InRetail, as of Q3 2020, operated five Economax stores. It previously said it wants to expand the banner, but the number of openings has been stable for over a year. The acquisition of Makro could enable it to expand Exonomax, as well as grow its rapidly expanding Mass discount banner. 

Source: Peru Retail

The move follows sale of Makro stores in Brazil

In February 2020 Carrefour acquired 30 Makro stores in Brazil, to enable it to accelerate the expansion of its Atacadão atacarejo (cash and carry) banner. Carrefour planned to convert all 30 stores to Atacadão in 12 months of closing the transaction. However, by the end of Q3 2020 it had opened just seven stores under the banner, suggesting its expansion plans had been restricted by the effects of the Covid-19 pandemic.

Despite selling the stores, Makro did not exit the Brazilian market and continues to operate 24 stores in the country. Makro said the sale was aimed at making its Brazilian business more profitable.

Why are Makro selling stores?

In Latin America, the main customer group using cash and carries has evolved. Traditional cash and carry stores, which used to primarily serve SME’s and professional customers, are shifting to atacarejo, a wholesale/retail hybrid business model that serves B2B and B2C customers equally. This is particularly the case in Brazil, where atacarejo is the country’s fastest growing channel.

54% of Makro’s customers are end customers and the business recognises if it wants to create stores that appeal to these, it needs to adapt their look and feel. For stores to be desirable to final customers, they need to feel safe and provide comfortable environments to shop with families. This is a costly change, which has possibly led to Makro exiting Peru and selling stores in Brazil with a low return on investment.

So, what next for Makro?

Makro continues to operate 111 stores across four countries in South America, with its largest concentration of stores in Venezuela.

Source: IGD Retail Analysis

It is updating its stores’ look and feel and is implementing new layouts. In-store services, including bakery and butchers, are being modernised, with a design closer to that seen in a hypermarket.

Makro differentiates through its own brands (Aro, Ternez, M&K) and has a strong focus on the quality and price of these products. Its product assortment is carefully selected to meet the demands of both B2B and B2C customers. The business also leverages the quality of its perishables to drive footfall.

Source: Makro

In other areas it has added faster checkouts to reduce waiting times and has rolled out free Wi-Fi in all stores.  

New features at Makro’s latest store in Colombia

Source: Makro

Our view

These are challenging times for traditional cash and carry stores and in certain markets they will need to adapt their business models to meet changing consumer demand and stay competitive. Makro is reacting to this and will be an interesting retailer to watch in the medium-to-long-term.