Cencosud to continue high-level of investment in 2019

Date : 23 April 2019

Chile-based Cencosud are one of the top five grocery retailers in Latin America, with operations in Argentina, Brazil, Chile, Peru and Colombia. The business has announced plans to invest US$300m in 2019, of which 50% will be invested into new and remodelled stores. A third will be invested into enhancing its ecommerce business.  

Cencosud forecast consolidated revenues of US$15,194m for 2019

Cencosud has forecast it will achieve consolidated revenues of US$15,194m in 2019. This figure incorporates revenues across all store formats and operations, including its non-food offer.

The business anticipates increased sales (in Chilean Peso’s (CLP)) in all its operating markets except Argentina, due to the deprecation of the Argentine peso against the CLP.

US$300m to be invested in 2019

In 2019 Cencosud plans to invest US$300m of Capex into its business. This represents a c. 7% increase on the c. US$280m it invested in 2018.

As in 2018, half of the expenditure is estimated to be invested in store remodelling and new store openings. Cencosud has also said it plans to invest US$100M into accelerating its ecommerce business.

Estimated 2019 Investment Plan


Source: Cencosud

Strategy for enhancing its food business

Cencosud’s focus in 2019 is to implement best practice and to identify synergies across its multiple formats. The business has identified six key aims to achieve this;

  1. Strengthening ecommerce capabilities
  2. Transformation to meet the new digital era e.g. incorporating new technologies/process automation
  3. Store format adaptation and remodelling
  4. Improving commercial processes e.g. price optimisation, promotions and product mix
  5. Identifying opportunities to improve planning, supply processes and logistical capabilities for developing ecommerce
  6. Strengthening private brands/exclusively imported products

 

IGD’s recent visit to Cencosud, Rio de Janeiro

We recently visited Cencosud’s Prezunic store in Rio de Janeiro’s Botofogo neighbourhood.

This high-performing store is Cencosud’s flagship store in Rio, where it operates 31 stores under the Prezunic banner. This is one of four Prezunic stores planned to be remodelled in 2019 with a further four currently underway.


Source: IGD Research

Transforming to meet the new digital era

Despite the store having not been remodelled there already signs of how Cencosud is ‘transforming to meet the new digital era’. In the last three months the store has been working with last-mile delivery app Rappi and has one checkout specifically dedicated to purchases made through it. This will be key for Rappi, a business which operates on speed of delivery. Despite only launching with Rappi three months ago sales have been very strong.

As part of the stores’ future remodelling, self-checkout tills will be installed. Currently a large proportion of customers who shop the store are performing trolley shops. Given the stores’ high-footfall location, there are many on-the-move customers so introducing self-scan tills will allow the store to better cater for different types of shop.


Source: IGD Research

Strengthening private brands

In Brazil private label penetration is currently low, but this is slowly changing. Cencosud is strengthening the quality and range of its private label products, which will support sales in the future. The Prezunic banner has its own private label and Prezunic products can be found in most categories.

Prezunic stores in Rio also have a competitive edge through offering a range of imported branded products which can’t be found in other stores in the city.


Source: IGD Research

Offering budget friendly solutions

Prezunic understands its customers and provides solutions to those on restricted budgets. First, the business provides a service whereby customers can pay for their groceries by credit card in four instalments, interest free. This is desirable for lesser affluent shoppers and those on a tight budget who can distribute the cost of a monthly/bi-weekly shop across the month.

Secondly, Prezunic has a loyalty/reward scheme ‘Dotz’. Customers collect Dotz points when they spend money in store (One Dotz is given for every BR$3 (US$0.77) spent) and these can be accrued over time and redeemed for more products.


Source: IGD Research


Source: Cencosud/Dotz

Cencosud setting itself up for success

Cash and carry stores are currently the fastest growing store format in Brazil. However, many shoppers cross-shop between cash and carry stores and supermarkets. In highly competitive cities, such as Rio de Janeiro, supermarkets need to find ways to differentiate to grow and retain customers.  Cencosud’s strategy to remodel stores and to strengthen its ecommerce and omnichannel capabilities will give its stores a competitive edge over some of the more traditional supermarkets in these cities.

In the long-term Cencosud could gain further traction by continuing to improve the quality, extend the range and raise awareness of its private label.