GPA grows sales through revitalising its store portfolio

Date : 07 May 2019

GPA has announced consolidated sales growth of 12.4% for Q1, despite an unfavourable Easter calendar effect. It also reported same-store sales (SSS) growth of 7.5% and said that it had seen its strongest customer traffic growth in several periods.

GPA has been optimising its store portfolio for all its multivarejo (all non-cash and carry formats) stores to better meet changing customer demands. Since it began converting stores to its new banners SSS have increased. In Q1 SSS were up by 4.8% and market share gains were seen at all multivarejo banners.

GPA’s evolving portfolio

Source: GPA

Revitalising Extra Hiper stores leads to improved sales performance  

Many underperforming Extra Hiper stores were converted to the Assaí banner and sales at these stores more than doubled as a result. The Extra Hiper estate is now performing well (+2.7% SSS in Q1) due to various promotional campaigns and growth in non-food sales. We anticipate that the number of Extra Hiper conversions into Assaí will begin to slow and future Assaí openings will be mostly organic new stores.

Solid performance of Pão de Açúcar’s latest G7 store design

In Q1 the Pão de Açúcar banner delivered SSS growth of 4.6%, versus 2.2% in Q4 2018. Since the start of 2018 GPA has remodelled 26 Pão de Açúcar stores, of which 20 have been converted to its new G7 design.

The G7 stores have a stronger focus on health-food and providing an enhanced customer experience. The layout and product mix have been revitalised, with fresh produce brought to the front of the store. They also feature a new health-food zone, which brings together healthy products from multiple categories into an area adjacent to the fresh produce. This makes it simpler for customers to navigate and purchase healthier products.

Source: IGD Retail Analysis

Source: IGD Retail Analysis

Sales at these stores are significantly outperforming the average sales of Pão de Açúcar overall and the sales now account for c. 25% of gross sales for the banner. GPA plans to convert between 10 and 15 stores to the G7 concept in 2019.

Mercado Extra and Compre Bem delivering double-digit sales growth

In Q1 GPA converted seven Extra Super stores to its Mercado Extra banner and since the start of 2018, 13 have been converted to the Compre Bem banner. As a result, sales growth across the three banners (Extra Super, Mercado Extra and Compre Bem) have increased from 4.7% in Q4 2018 to 7% in Q1 2019. GPA said that Mercado Extra and Compre Bem stores are delivering double-digit growth in sales, customer traffic and sales volume.

Source: IGD Retail Analysis

Compre Bem stores have a wider selection of perishables than was previously available in the Extra Super banner. The stores have a discount-oriented pricing strategy and target social classes B, C, D and E.  Compre Bem stores fulfil the role of the regional supermarket and the product mix is flexed to suit local catchments.

Source: IGD Retail Analysis

he stores have an average of c. 7k SKUs compared to an average of 12k SKUs in an Extra Super. Having fewer SKUs releases sales-floor space which is used to incorporate services such as a butcher and a bakery. Adding these services has been positively received by customers and the stores that have been converted to Compre Bem have increased sales by c. 50%.

Source: IGD Retail Analysis

Same-store sales growth of 20% for proximity banners

Same-store sales for GPA’s proximity formats grew by 20% in Q1. The business has reported consistent double-digit sales growth since the second half of 2018.

A combination of initiatives, including adjustments to its product assortment, aligning promotions to those in larger store formats and a stronger focus on its private label offering is growing sales volume and customer traffic. In Q1 GPA converted two Mini Extra convenience stores into its Minuto Pão de Açúcar banner, which is thought to be the better performing banner.

Source: IGD Retail Analysis

Gross sales at Assaí increase 26% year-on-year

Gross sales for the Assaí banner were 25.6% higher in Q1 2019 than in Q1 2018 and the banner saw a 10.7% growth in same-store sales. Gross revenue reached BRL$6.9bn (US$1.7bn), up by BRL$1.4bn (US$353M) year-on-year (YOY).

GPA will continue its rapid expansion of the Assaí banner, with plans to open 20 Assaí stores in 2019. The business opened one Assaí store in Q1, which was an Extra Hiper conversion located in the North of São Paulo city.

GPA driving expansion in private label

At the end of 2018 GPA announced ambitious plans to increase private label from 10% of its total offer to 20%. Private label penetration is now 11.6%. GPA has c. 3,000 private label SKUs, of which 90 were launched in Q1. GPA plan to launch a further 500 products in 2019.  

Source: IGD Retail Analysis

Growing ecommerce capabilities and the launch of James Delivery

GPA is the market leader in Brazil’s food ecommerce channel. It said its online food sales now account for 4% of Pão de Açúcar’s gross sales.

GPA’s improved ecommerce performance in Q1 was partly driven by expanding its ‘Express’ and ‘Click & Collect’ delivery services across the country. Online order collection services are now available in 76 stores nationwide and GPA aims to implement this at a further 40 stores by the end of 2019.

In April 2019 GPA launched ‘James Delivery’, a multiservice last-mile app which offers fast delivery of products sold across GPA’s supermarkets and drug stores, as well as food from participating restaurants. For now, the service is limited to São Paulo and Curitiba. GPA’s Extra Hiper store in the Itaim Bibi neighbourhood is being used to train staff in how to use the technology. The business aims to have the James Delivery service available in 10 cities by the end of 2019.   

Source: GPA

Loyalty programmes gaining traction

18.5m customers are currently registered to one of GPA’s various loyalty programmes. Loyalty card penetration at Pão de Açúcar stores is c. 85% and c. 60% for Extra stores.  

GPA’s loyalty and customisation tools “My Discount” and “My Rewards” are seeing higher penetration. In Q1 there were 8.3m downloads of the My Discount app, which was a 62% quarter-on-quarter increase (70% increase versus Q1 2018). GPA said the average monthly spend by app users is double that of non-users.

In the quarter 100,000 new customers signed up to Assaí’s Passai credit card, which enables them to pay wholesale prices on single product purchases and allows delayed payment for up to 40 days. 720,000 customers have a Passai card, which was launched in 2017. Compared to other formats, penetration is currently low, at 5%, but steadily growing. As more customers sign up to the card, the business will be able to better utilise the sales data for targeted promotions and range optimisation.

Source: IGD Retail Analysis

Newly launched initiatives are helping to differentiate its offer

GPA has strategically partnered with local food tech start-up Cheftime, to offer meal-kit solutions in the Pão de Açúcar banner. The kits contain simple, healthy meal kits, which serve two. These are currently available in a few stores in São Paulo. The business aims to roll this offer out to 25 Pão de Açúcar and three Minuto Pão de Açúcar stores in 2019.

Source: IGD Retail Analysis

The business has also recently launched Pão de Açúcar Adega, an online platform for selling wine/alcohol. The platform has nationwide coverage and has a differentiated assortment of 1,200 SKUs of wine, 200 SKUs of spirits and 150 beer brands. This new initiative helped sales in the wine category to double in Q1.

As well as the online platform, GPA recently opened a physical Adega store in the Jardins neighbourhood in São Paulo. Store staff are trained by an external wine expert. Although at its infancy, this initiative seems like a good opportunity for the business to diversify and further showcase its commitment to quality and service.

Source: IGD Retail Analysis

Source: IGD Retail Analysis

Source: IGD Research

Source: IGD Retail Analysis

Oliver Butterworth

Oliver Butterworth

Retail Analyst - Latin America

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