The Brazilian retail industry plays a substantial role on food distribution and may present feasible opportunities for U.S. exporters willing to enter the market. The primary goal of this report is to inform U.S. companies about how this industry operates, who the major players are and how they have performed during the past year.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
Required Report - public distribution
GAIN Report Number: BR110024
Fred Giles, Director
Agricultural Trade Office
Fabiana Fonseca, Agricultural Marketing Specialist
The Brazilian retail industry plays a substantial role on food distribution and may present feasible
opportunities for U.S. exporters willing to enter the market. The primary goal of this report is to
inform U.S. companies about how this industry operates, who the major players are and how they
have performed during the past year.
Sao Paulo ATO
SECTION I. Market Summary
RETAIL SECTOR GROSS SALES INDEX
The numbers for the Brazilian retail service in the past year were remarkable. The Brazilian
Supermarket Association (ABRAS) considers 2010 a benchmark for consistent growth, as the
market shows enormous potential. In 2010, the sector?s sales amounted to R$ 201.6 billion
(US$121.4 billion, considering exchange rate of the last day of December 2010, US$1 = R$1.66), 171
7.5 percent growth compared to 2009. The forecast for the following years clearly assumes an
upward trend if the industry continues to make substantial investments. Projected investments for 158
2011 are expected to reach R$4 billion (US$2.4 billion, considering exchange rate of the last day of
De 148cember 2010, US$1 = R$1.66). The retail sector has also expanded its physical capacity. In
2010, the total number of stores reached 81,000, 3.6 percent growth compared to the previous
year. The number of check-outs also went up to 199,000, a 4.1 percent increase and the floor plan
expanded to 19.7 million square meters, an increase of 2.8 percent. In number of employees, the 134
net total went up 2.2 percent. Approximately 20,000 jobs were added in 2010, reaching 920,000 126
emp 124 124 124loyees. 121 125 126
95 96 97 98 99 00' 01' 02' 03' 04' 05' 06' 07' 08' 09' 10'
Source: ABRAS/AC Nielsen
The numbers generated by the top 300 supermarket chains are even greater. This group accounted
for R$ 148.6 billion (US$89.5 billion, considering exchange rate of the last day of December 2010,
US$1 = R$1.66), 74 percent of total national sales, and reached 15.7 percent growth - more than
2 times the sector growth of 7.5 percent. In 2009, the top 300 retailers accounted for 68.3
percent of total sales; while in 2010 their share increased 5.7 percent, demonstrating a robust
process of investments.
Retail analysts also use another breakdown to further investigate growth, investments and
concentration. They divide the group of top 300 into 2 groups: top 20 and 280 others. While in
the previous years the top 20 chains had a prominent role in leading the growth of the 300; in
2010, the group of 280 has pointed to a different trajectory.
The top 20 retailers maintained a leading position in the group - 78 percent of the group?s revenue
or R$115.8 billion (US$69.8 billion, considering exchange rate of the last day of December 2010,
US$1 = R$1.66), however, its growth was not as vigorous as the 280 others. In 2010 the group of
20 grew 13.3 percent and the group of 280 others grew 25.3 percent, pointing to a new trend.
Gross Sales N? of N? of check- N? of Retail
(R$) stores outs employees Space
Retail 201.6 81,128 199,376 919,874 19.7
Top 300 148.6 7,291 64,873 603,248 9.3
Top 20 115.8 3,497 43,710 429,238 7.1
280 0thers 32.8 3,794 21.163 174.010 2.2
Source: ABRAS/AC Nielsen
CONCENTRATION TREND IN THE BRAZILIAN RETAIL SECTOR
In 2010, there were no major changes to the level of concentration. The top 20 retail companies
responded for 57 percent of total sales, increasing two percentage points compared to the previous (% gross sales)
year. As per the groups of top 10, top 5 and top 3, the three groups increased 3 percentage points
each. In 2011, figures are expected to change as the top Brazilian retailer, Pao de Acucar, will 64
consolidate the numbers from its merger with Casas Bahia, a giant home appliance group. Perini 60
and 57 Irmaos Breta will also be added into G Barbosa?s figures, 4th in the rank. 55 5858
In 51 53 2011, the French press announced Carrefour?s interest to merge with Pao de Acucar. The 52 50
rumors spread based on the difficulties Carrefour has faced: mismanagement, accounting 46 47 4846
irregularities and legal disputes. The merger would create a super chain of global reach. Group 45 46
Casino, Pao de Acucar 43 43 41?s partner had firmly opposed the merger. The litigation between Pao de 41
Acucar and Casino became public. The business was initially su3ppor4 3938ted by the Brazilian 40 4141
Development Bank (BNDES) and BTG Pactual Bank but th3en w4ithdrew. The deal?s suspension left 3636
room for another giant: Wal Mart, is expanding and probably interested in acquiring Carrefour.
However, the Brazilian anti-trust regulator, the Administrative Council for Economic Defense
(CADE) could oppose the transaction on grounds of anticompetitive practices, which could lead to
price controls and diminished individual initiatives.
1 to 3 1 to 5 1 to 10 1 to 20 1 to 50
2005 2006 2007 2008 2009 2010
Source: ABRAS/AC Nielsen
Each year ABRAS surveys retailers to set a profile of Brazilian stores. The stores are grouped into 5
categories: category 1 (up to 250 square meters); category 2 (from 251 to 1,000 square meters);
category 3 (from 1,001 to 2,500 square meters); category 4 (from 2,501 to 5,000 square meters);
and, category 5 (above 5,000 square meters). In the past years, the market experienced
consistent growth of stores with less than 250 square meters. In 2008, the trend reversed to then
grow again. Compared to 2009, category 1 increased 110 percent in 2010. Category 2 and 3 had
a similar growth rate, 15 and 18 percent respectively. Category 4 increased 28 percent, while
category 5 had a modest growth of 5 percent.
SALES # STORES AVERAGE # of AVERAGE FOOD ITEMS
AREA CHECK-OUTS # of ITEMS (%)
2009 2010 2009 2010 2009 2010 2009 2010
CATEGORY 1 1,086 2,280 2 2 2,177 2,584 89.5 72.6
CATEGORY 2 1,787 2,107 3 5 7,608 6,647 66.3 78.2
CATEGORY 3 1,500 1,727 11 11 14,566 14,931 62.9 79.5
CATEGORY 4 309 396 23 20 17,115 24,156 80.0 79.2
CATEGORY 5 233 245 40 38 44,339 36,277 57.0 58.5
Source: ABRAS/AC Nielsen
Although the proportion of food items has oscillated when examining stores by size, on average the
share of food items has not suffered significant changes in the past years. In 2010, the average of
food items in Brazilian supermarkets reached 73.6 percent, a 2.5 percent increase compared to
2009. On the other hand, the share of food items in supermarket revenues was a little below 67.7
percent in 2010 against 66.4 percent in 2009.
SHARE OF FOOD & NON-FOOD ITEMS AT BRAZILIAN SUPERMARKETS
Source: ABRAS/AC Nielsen
To capture supermarket performance, ABRAS establishes the format of a typical Brazilian
supermarket, which comprises of the following food departments: dry grocery, liquid grocery,
perishable (frozen and refrigerated), produce, bakery, meat, fish and delicatessen (ready-to-eat).
Growth in expenditure on grocery items (dry and liquid) kept pace during 2010. Following a
pattern set in 2009, sales in 2010 were driven by the trading-up pattern of lower-end consumers.
In 2009, dry grocery represented 22.9 percent of supermarket sales, while liquid grocery
represented 11.7 percent. In 2010, these departments increased their share to 23.4 percent and
12.2 percent, respectively. Together they concentrate the major commodities that correspond to
the basic needs of Brazilian families, making up 35.6 percent of total sales. Sales of perishable
products have oscillated in the past years. The demand went consistently up until 2007, dropping
in 2008 and 2009. In 2010, the share of perishable items was kept steady compared to 2009.
Other departments such as produce, bakery, meat, fish and delicatessen maintained their sales
level. When breaking down sales of food items by category, ABRAS presents the following picture:
SHARE OF FOOD & BEVERAGE ITEMS BY CATEGORY AT BRAZILIAN SUPERMARKETS
Source: ABRAS/AC Nielsen
Organic and imported products are considered niche markets. Sales of these items are geared
towards high-end consumers as these products are in the premium price category. According to
ABRAS, sales of organic products amounted to 0.54 percent of total supermarket sales in 2010,
while imported products accounted for 2.1 percent of total sales. Industry analysts state that a
favorable exchange rate guarantees the presence of imported items in Brazilian supermarkets,
however, their availability is restricted to a few categories such as wine, beer, pasta, tomato
sauces, canned products, and fish products.
Given this outlook, it becomes clear that the supermarket sector is an important distribution
channel in Brazil and producers who wish to access it should be aware of major challenges and
Retailers offer foreign goods to differentiate Brazil is self-sufficient in food supply. In 2010
themselves, develop new niche markets and the local food industry launched 15,000 sku?s.
gain high-end consumers? attention. Imported products are considered luxury
Price is not always the determinant purchasing High-end consumers are more demanding
criteria for high-end consumers. regarding other aspects of products such as
innovation, packaging, status, new trends,
Brazilian importers are frequently searching for Importers tend to buy small quantities to test
new-to-market products as they must update market. US companies are usually not
their portfolio from time to time in order to predisposed to sell small quantities.
The US food industry is able to respond to Consumers perceive US food products to be
consumer demand promptly, regardless of the overly processed and relatively unhealthy.
segment of products.
SECTION II. Road Map for Market Entry
I. Entry Strategy
Starting in 1994 with the implementation of the Real Plan, imported products became a true
alternative to domestically produced goods. Brazilian consumers became familiar with a wide
variety of products, from different origins. With the 1999 crisis, the scenario changed and an
unfavorable exchange rate brought about a shift in trends. The supply of imported products
became more restricted and prices quite prohibitive to the average Brazilian. From that period on,
foreign goods were mostly found in the carts of affluent consumers.
When approaching the Brazilian market, exporters should be aware that most imported foods and
beverages are not price-competitive compared to locally produced products. This is due to the low
cost of locally produced goods, local high tariff system. The Brazilian food industry is well
developed and the ever-expanding presence of major multinational companies contributes to
making the sector very competitive. Products imported from Mercosul members (Argentina,
Paraguay and Uruguay) enjoy duty-free status and Chilean products face a reduced duty rate.
According to importers, the shelf price of imported goods is 2-5 times the FOB price at origin. As a
result, U.S. exporters must evaluate the extent to which their products can compete and maintain
Because approximately 80 percent of food and beverage distribution takes place through retail
stores, developing a relationship with retailers will be more likely to guarantee visibility and
country-wide coverage. The commercial power of the retail industry vis-?-vis food suppliers has
steadily increased over the past years. Retailers are well aware of their importance in the food
distribution system and of their advantageous position in comparison with suppliers. They exert
considerable purchasing power as they reach the overwhelming majority of Brazilian households.
For retailers, foreign products may be imported directly from the processor or distributor or
purchased locally from an importer. When conducting an import operation, both follow the same
purchase pattern for initial purchases, wide variety and small quantity. Despite the size of the
company, retail or importer, the conservative profile is a common characteristic for testing a new-
U.S. exporters should always consider the local U.S. Agricultural Trade Office (ATO) as an initial
source of information and market guidance. The ATO maintains direct contact with the major
players in order to facilitate market entry and is also able to provide assistance on Brazilian
legislation and standards for imported goods. U.S. companies can test market through ATO
marketing activities and also profit from its market intelligence.
II. Market Structure
Imports of foods, beverages, ingredients or consumer-ready products may occur directly or
indirectly. As per retail imports, volume is the determining factor. If the volume to be imported
does not justify the operation, retailers will prefer to purchase imported items locally from
importers/distributors. While avoiding the middleman is a general goal, it only happens if retailers
are able to fill containers and keep overhead costs in check. When launching new-to-market
products, Brazilian buyers are hesitant to purchase full containers of single products and, on the
other hand, U.S. suppliers are often unwilling to deal with small volumes.
MARKET STRUCTURE FOR IMPORTED PRODUCTS
IMPORT COMPANY RETAILER
Oftentimes exporters are cautious to do business with a single supermarket chain as their
perception of reaching consumers through a single source does not seem attractive. This
perception does not always correspond to the reality. It is a matter of strategy, as retailers may
achieve significant market penetration. To demonstrate the potential of each Brazilian region and
state, ABRAS divided supermarket revenues geographically. This information may guide U.S.
exporters when designing their entry strategy into Brazil and help them evaluate whether or not a
supermarket chain may or may not represent a potential opportunity.
The Southeast region of Brazil, which comprises the states of Sao Paulo, Rio de Janeiro, Minas
Gerais and Espirito Santo, continued to be the great economic engine driving supermarket sales. It
generated more than half of revenues in 2010 - 54.1 percent. However, this result is 3.3 points
below the previous year. The South region, composed of Parana, Rio Grande do Sul and Santa
Catar Retail distribution per region %ina, made up 19.3 percent of the sector gross sales but also lost 3 points compared to 2009.
On the other hand, the North and Northeast region gained representation. The 16 states of Acre,
Amapa, Amazonas, (by sales) Para, Rondonia, Roraima, Tocantins, Alagoas, Bahia, Ceara, Maranhao, Paraiba,
Pernambuco, Piaui, Rio Grande do Norte and Sergipe pushed supermarket sales and placed
themselves second in the ranking. While sales results in 2009 were 6.5 points below the South 57.4
region, in 2010 the North-Northeast region went ahead and reached 19.7 percent of6 total0 sales, 3.9
points above the previous year. The Central-West region also concluded 2010 with gains, 2.3
points above 2009, reaching 6.9 percent.
Southeast South North-Northeast Center-West
Retail distribution per region %
(by number of stores)
17.2 20.5 17.9
Southeast South North-Northeast Center-West
Source: ABRAS/AC Nielsen
III. Company Profiles
In Brazil, the top three retail chains Pao de Acucar, Carrefour and Wal Mart are responsible for 43
percent of total sales. The power these companies have in the market is unquestionable; however,
smaller retailers may have unique characteristics to attract high-end consumers, perhaps an option
to be considered by U.S. exporters when approaching the market.
TOP 10 BRAZILIAN RETAILERS
COMPANY OWNERSHIP SALES Share # LOCATION1 PURCHASING
(R$million) (%) STORES AGENT TYPE2
1. Cia. Brasileira de Brazil/France 36,144.4 17.9 1,647 AL, BA, CE, DF, ES, GO, LFP, DI, LI
Distribuicao MG, MS, MT, PB, PE, PI,
-P?o de A??car PR, RJ, RN, SE, SP,TO
2. Carrefour France 29,000.2 14.4 654 AM, CE, DF,ES, GO, MS, LFP, DI, LI
-Carrefour MG, PB, PR, PE, RJ, RN,
-Carrefour Bairro RS, SP
3. Wal-Mart US 22,334.0 11.0 479 AL, BA, CE, ES, GO, MA, LFP, DI, LI
-Wal-Mart MG, MT, MS, PB, PE, PI,
-Sam?s Club PR, RJ, RN, RS, SC, SE, SP
TOTAL (3) 87,478.6 43.0 2,780
4. G. Barbosa Chile 3,501.4 1.7 131 AL, BA, CE, PE, SE LFP, DI, LI
5. Cia. Zaffari Brazil 2,490.0 1.2 29 RS, SP LFP, DI, LI
6. Prezunic Brazil 2,449.0 1.2 30 RJ LFP, DI, LI
7. DMA Distribuidora Brazil 1,930.3 1.0 92 ES, MG LFP, DI, LI
8. Irmaos Muffato Brazil 1,926.0 0.9 30 PR, SP LFP, DI, LI
9. A. Angeloni Brazil 1,813.0 0.9 21 PR, SC LFP, DI, LI
10. Condor 1,728.7 0.8 30 PR LFP, DI, LI
TOTAL (10) 103,316.9 51.0 3,143
11. Sonda 1,577.7 0.8 24 SP LFP, DI, LI
12. Supermercados BH 1,542.2 0.8 109 MG LFP, DI, LI
13. COOP 1,522.2 0.7 30 SP LFP, DI, LI
14. Y.Yamada 1,508.4 0.7 21 AP, PA LFP, DI, LI
15. SDB 1,345.1 0.7 38 AM, RR LFP, DI, LI
16. Lider 1,289.6 0.6 14 PA LFP, DI, LI
17. Savegnago 993.1 0.5 24 SP LFP, DI, LI
18. Zona Sul 965.5 0.5 33 RJ LFP, DI, LI
19. Carvalho e 949.1 0.5 50 MA, PI LFP, DI, LI
20. Giassi & Cia 789.3 0.4 11 SC LFP, DI, LI
TOTAL 20 115,799.0 57 3,497
No 1te : AM (Amazonas), AL (Alagoas), BA (Bahia), CE (Cear?), DF (Distrito Federal), ES (Esp?rito
Santo), GO (Goi?s), MG (Minas Gerais), MS (Mato Grosso do Sul), PB (Para?ba), PE (Pernambuco),
PI (Piau?), PR (Paran?), RJ (Rio de Janeiro), RN (Rio Grande do Norte), RS (Rio Grande do Sul), SC
(Santa Catarina), SE (Sergipe) and SP (S?o Paulo).
No 2 te : LFP (local food processors), DI (direct imports) and LI (local importers).
Source: ABRAS/AC Nielsen
SECTION III. Competition
In 2010, Brazil?s imports of consumer-oriented food products stood at US$3.1 billion. Compared to
2009, imports of these items rose by 41.2 percent. This result reflects a combination of factors:
economic growth, favorable exchange rate and income increase, which led to new consumption
habits (middle class consumption patterns reproducing values and behaviors of the upper class).
As mentioned before, most imported foods and beverages considered consumer-oriented are not
price competitive compared to domestically produced goods. Exporters from non-Mercosul region
face difficulties to compete with products from Mercosul and Chile, as this group of countries
benefits from tariff exemptions. In this environment, U.S. exporters mainly compete with EU
suppliers, as both enter the market under similar conditions. For this reason, imported products
from the U.S. and EU are positioned within the premium price category and, as such, premium
attributes are expected to be offered.
Although the U.S. has the same capacity to supply the market, Brazilian consumers are more
inclined to purchase European products per their tradition and taste similarities. However, within
the past years, the ATO has registered a significant increase of inquiries from local importers
looking for U.S. food and beverage products.
CONSUMER-ORIENTED AGRICULTURAL TOTAL (US$ million)
2006 % 2007 % 2008 % 2009 % 2010 %
1,422. 100. 1,670. 100. 2,123. 100. 2,219. 100. 3,134. 100.
World 0 0 1 0 7 0 8 0 2 0
Mercosul 1,015. 1,040. 1,436.
(4) 743.4 52.3 816.9 48.9 4 47.8 0 46.9 5 45.8
EU (15) 286.2 20.1 364.0 21.8 480.6 22.6 509.2 22.9 697.7 22.3
Chile 119.1 8.4 149.6 9.0 171.5 8.1 198.3 8.9 286.5 9.1
U.S. 93.7 6.6 112.6 6.7 162.0 7.6 148.8 6.7 203.7 6.5
Others 179.6 12.6 227.1 13.6 294.2 13.9 323.5 14.6 509.9 16.3
Source: Secretariat of Foreign Trade (Secex)
Note: Mercosul (4): Brazil, Argentina, Uruguay and Paraguay; EU (15): Germany, Austria, Belgium,
Spain, Denmark, Finland, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal,
United Kingdom and Sweden.
SECTION IV. Best Product Prospects
I. Products present in the market which have good sales potential
Importers are generally looking for well-known brands and high-end products. Brazilian
importers/distributors usually prefer products with six months? shelf life or more. In addition to the
product itself, packaging, status and level of innovation are important attributes. Products that
combine these characteristics are more likely to successfully enter the market.
In Brazil, all foods must follow their respective Identity and Quality Standards (PIQ), which are
determined by law. In terms of enforcement, the Brazilian legislative principle is ?positive?. That is,
only that which is expressly set forth in it can be practiced. That which is not addressed is
prohibited. Exporters may find it useful to check if the product intended to be sold in the market
complies with Brazilian regulations prior to investing in the market.
Every year the ATO runs an activity called ?American Products Portfolio?. Through this promotional
activity, local importers specify products they would like to import in the short run. Exporters
interested in participating in this activity should contact the ATO. For 2011, the products being
sought are: frozen meat (bovine), cold meats, fish products, cod fish, king crab, alcoholic
beverages, beer, wine, cranberry juice, pomegranate juice, cherry juice, flavored water, sauces
(e.g. Tabasco), ketchup , frozen pizza, pasta, bakery products, olive oil, cheese, lactose free
products , kosher products, organic and natural products, diet products, gluten free products,
snacks, microwave popcorn, marshmallow, candies, chocolate, jelly, toy food, chewing gum, pear
and dried fruits (6 month shelf-life minimum for processed items is required).
II. Products not present in significant quantities but which have good sales potential
Health foods, especially natural and organic products, have a limited presence in the Brazilian
market. The Brazilian food industry has not directed consistent efforts to develop these segments,
as the consumer base is restricted to the higher-end. There are a limited number of suppliers
offering processed organic products in the market, consequently prices for these items are high.
U.S. suppliers may find great opportunities within this segment.
Brazil requires the use of the organic stamp on all organic products. In order to get approval for its
use, organic producers must comply with regulations, which mean that a certifying agent must
ensure the product is produced according to the Ministry of Agriculture?s standards.
III. Products not present because they face significant barriers
Brazilian legislation requires all food items to be approved by Ministry of Health (MS) or Ministry of
Agriculture, Livestock, and Food Supply (MAPA) prior to shipment. Currently, poultry and beef
imports are banned and considerable restrictions exist for products containing ingredients derived
from biotech commodities.
SECTION V. Post Contact and Further Information
Please do not hesitate to contact the offices below for questions or comments regarding this report
or require assistance to export processed food products into Brazil:
U.S. Agricultural Trade Office (ATO) Office of Agricultural Affairs (OAA)
U.S. Consulate General U.S. Embassy
Rua Henri Dunant, 700 Av. das Nacoes, quadra 801, lote 3
04709-110 Sao Paulo ? SP 70403-900 Brasilia - DF
Tel: (55 11) 5186-7400 Tel: (55 61) 3312-7000
Fax: (55 11) 5186-7499 Fax: (55 61) 3312-7659
E-mail: email@example.com E-mail: firstname.lastname@example.org