Why Brazil’s biggest retailers are evolving their supermarket propositions

Date : 09 October 2019

Oliver Butterworth

Retail Analyst

The fastest growing channel in Brazil recently has been the atacarejo (cash and carry). A growing number of customers are migrating to it from supermarkets and hypermarkets. As a result, the major retail players are having to re-think their strategies for these channels to remain relevant.  

Why is atacarejo so popular with customers?

The atacarejo channel is unique compared to other markets as the stores are predominantly non-membership and are designed to serve both B2B and B2C customers alike. They offer a wide assortment of predominantly branded products at competitively low prices.

They also stock a variety of pack sizes, including irregular sizes that can only be found in these stores, enabling customers to purchase products as either individual units or in bulk. Despite the range being more streamlined than in hypermarkets and supermarkets, this provides customers with a low-cost alternative.

Beans and pulses sold in a wide range of pack-sizes
Assaí, Jaguare, São Paulo
Source: IGD Retail Analysis

Soap sold as individual bars or in packs of nine
Atacadão, Santo Andre, São Paulo
Source: IGD Retail Analysis

 

The stores are popular with small businesses as these customers often manage shops/restaurants, with limited storage facilities. They, therefore, visit atacejeros more frequently to replenish their stock as it runs out, almost treating the store like an off-site stock room. This also gives them better flexibility over their product range and promotions in order to quickly adapt to changing consumer demand.

How are customers shopping at atacarejo stores?

Business customers visit the stores every two to three days, whereas individual shoppers typically visit weekly/bi-weekly to perform their main shop. Roughly 70% of customers who shop in atacarejo are individuals, with 30% small to medium sized businesses. Although total spend across both groups is broadly equal due to their differing average spend.

Large numbers of customers have moved to atacarejo from other channels

Many customers have migrated their main/weekly shop away from hypermarkets and supermarkets to atacarejo. This has led to large number of customers cross shopping atacarejo with supermarkets, with the latter being increasingly used to purchase perishables and top-up items.

Carrefour and GPA, who dominate the cash and carry sector in Brazil, recognised they had to evolve their non-cash and carry store portfolio to better meet changing consumer demands.

Inside an Atacadão store, Osasco, São Paulo
Source: IGD Retail Analysis

 

What can we expect in the future?

In the medium term both businesses will maintain their aggressive expansion of their Atacadão (Carrefour) and Assaí (GPA) atacarejo stores and this will naturally lead to more customers migrating to the channel. Currently both businesses operate their hypermarket and supermarket propositions as separate, but complimentary to their atacejeros. Therefore, they are having to find ways to encourage customers to shop across both formats.

At Carrefour Brazil’s investor day in March 2019, the business provided a case study where it opened an Atacadão store adjacent to one of its hypermarkets, in what was already a highly competitive catchment. Initially this seemed like a risky move in terms cannibalising sales of the existing store, but by consolidating the presence of both stores their sales doubled. This highlights the success of Carrefour and GPA’s multi-format approach and the ongoing opportunity to expand the channel further.

Plans for the Atacadão store in Osasco, São Paulo
Source: IGD Retail Analysis

 

In the coming weeks’ we will take an in depth look at GPA and Carrefour and how both retailers are evolving their supermarket propositions to retain customers and to encourage cross-shopping across other store channels.

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.

With internet penetration and smartphone ownership growing in Latin America we explore the growth of online grocery.

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