Why GPA is evolving its supermarket proposition in Brazil

Date : 23 October 2019

Oliver Butterworth

Retail Analyst

Many shoppers in Brazil are now using atacarejo (cash and carry) for their weekly/bi-weekly shop. This has affected the way that they shop in other formats. GPA’s 2018 strategy saw the business shift its focus to store optimisation, particularly of its supermarkets.

Optimising existing stores

GPA had 184 stores under its Extra Super supermarket banner. To make them more relevant to changing consumer demand, it launched two new supermarket banners in 2018; Compre Bem and Mercado Extra. At its Q3 2019 results, GPA said it had converted 82 to Mercado Extra and 23 to Compre Bem. The business will convert all 184 Extra Super’s to these two new sub-banners. As a result of the conversions, both banners have seen increases in sales, ticket and volume growth.

GPA had also remodelled 28 of its premium Pão de Açúcar supermarkets to its latest G6 and G7 designs. As a result of these remodels, same-store sales have increased by 12%. In its Q3 results GPA said it will renovate a further 20 stores to these designs by the end of 2019.

Supermarkets are becoming more localised

Many of GPA’s supermarkets sit in the heart of neighbourhood’s where they serve the local community. It is encouraging higher footfall in these locations by being more flexible with their range and by offering more regionalised products tailored to the needs of the catchment. This has seen it enhance its counter offer and widen its range of quality fresh fruit and vegetables.

Compre Bem

The Compre Bem (Buy Well) banner is targeted at C, D and E socio-demographic groups, which has led them to provide more of a value proposition. GPA said the stores are “consumer-focused and close to the community”. It said in its annual results that its aim for Compre Bem is to be “the best market in the neighbourhood”.

To achieve this, it has modified the range to better meet local needs. Counters have been implemented and there is a much greater focus on perishables. The stores now have a broader selection of fresh fruit and vegetables, a bakery, butchers and deli offer. These features have been key components to the banners’ early success.

 

Produce and meat counter in a Compre Bem, São Paulo

Source: IGD Retail Analysis

The addition of counters has meant stores have had to have a leaner assortment of ambient products. However, with over 7,000 items the range is still big enough for customers wishing to perform their weekly shop. Some of the higher footfall stores also feature self-scan tills, enabling customers to perform quicker shops when buying a handful of items. 

Mercado Extra

Mercado Extra stores are between 700 - 2,000 sq. m and are aimed at B and C income groups. The stores have a market-style look and feel, with a much wider assortment of produce, which is very high quality. The proposition is more focused on practicality and providing shoppers with a high-quality service. As with Compre Bem, a counter offer has been implemented and includes a bakery, butchers and fishmonger.

Close attention has been placed on the merchandising of perishables at the counters, giving customers a greater sense of quality and freshness. Mercado’s range includes more of GPA’s exclusive private labels, giving prominence to its popular Qualitá label, which is not available in its Assaí atacarejo.

 

Source: GPA

Supermarkets are becoming more service and experience focused

Pão de Açúcar G7 concept

Brazilian customers are highly service driven and value interaction with store colleagues. The size of the sales floor in most cash and carry store does not lend itself to staff being able to provide personal customer service. GPA’s latest Pão de Açúcar stores have a stronger focus on the customer experience and providing quality service through more interaction with customers. 

GPA has revamped its counter offer and has staff on hand to engage with customers about the products, for example cake specialist and a wine sommelier. GPA said that the G7 stores are “totally geared towards enhancing the shopper experience”. 

Source: IGD Retail Analysis

Leading with fresh and promoting ambient health-products

In its Pão de Açúcar stores, GPA places greater emphasis on healthy and organic products. Its latest G7 concept stores have a modern design with fresh-focused layout, which brings fruit and vegetables and health categories to the front of the store.

Ambient health foods are grouped into a designated zone, making it easier for customers to shop across several health-focused or dietary specific categories in one place. Customers wanting to perform a healthier shop but keep costs low can choose to bulk buy staple foods like rice and beans from atacajero and buy more niche healthy products in a Pão de Açúcar.

 

‘Saudáveis’ (Healthy) zone and produce area in a Pão de Açúcar G7, São Paulo

Source: IGD Retail Analysis

Supermarkets showcase full range of private label

GPA’s private label sales penetration for its food categories is currently at 12.7% (Q3 2019) and it aims to increase this to 20% by 2022. GPA’s Assaí atacarejo has a limited range of private label products, which are exclusive to the banner (e.g. Chef and Econo Bom). The business utilises the greater number of SKUs in its Mercado Extra and Pão de Açúcar supermarkets to showcase its full private label portfolio, which are becoming more popular.

This article follows on from a recent article we wrote on why Brazil’s biggest retailers are evolving their supermarket propositions. This can be found here. In the coming weeks we will be taking a look at how Carrefour Brazil is doing this. 

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 consider the trends supporting the channel's expansion across the region, including private label growth and the targeting of core shoppers, and the implications of the channel's growth on suppliers.

This report covers six examples of Brazil-based retailers celebrating their fresh ranges. This covers a mix of store formats located in Rio de Janeiro and São Paulo. 

See the latest industry news on Latin America.