global convenience symposium

GLOBAL
CONVENIENCE
SYMPOSIUM
growing demand,
changing structures
Individual presentation
from session 2:
CONDITIONS RIPENING FOR
GROWTH OF C-RETAIL IN BRAZIL
CONDITIONS RIPENING FOR
GROWTH OF C-RETAIL IN BRAZIL
Rick Parra
Director,
Retailer Services in Latin America
BRAZIL’S EXPANSION TREND
UNTIL 2010
GDP Growth, %
Drivers for growth
Political Stability
Economic Stability
CPI evolution, %
Social Programs
Fiscal Austerity
Unemployment rate, %
Source: GDP, CPI and unemployment rate data – LatinFocus Consensus (April 2011)
CONSUMERS HAVE REASONS
TO BE CONFIDENT
Unemployment (% of )
Average Income (US$)
2010
2011
YTD/12
2010
2011
YTD/12
5.3
4.7
6.8
882
905
925
2010
2011
YTD/12
2010
2011
YTD/12
12.2
6.7
5.8
45.3
49
50.1
Retail Business (% Var SPLY )
SPLY – Same Period Last Year
YTD until May-2012
USD Rate; R$ 1.86
Source: IBGE, IEAP, BACEN
Credit Volume – Proportion % of GDP
CONSEQUENCES OF GLOBAL FINANCIAL CRISIS:
MILDER FOR BRAZIL
14
GDP Evaluation (%)
12
10
8
6
4
2
0
-2
-4
2008
2009
2010
2011
2012
-6
-8
Brazil
China
USA
Eurozone
GDP Evaluation – World Economic Outlook 24/01/2012. Source: FMI
IN 2011, INFLATION APPEARED AS A MAJOR
THREAT TO BRAZIL’S GROWTH
GDP Growth, %
4.0
6.1
7.5
5.2
4.2
4.5
4.7
4.7
Inflation Targets
Mar
2011
2009
2010
4,5%
-0.6
2006 2007 2008 2009 2010 2011 2012 2013 2014
6,5%
base target
Government Spending
CPI evolution, %
3.1
8.4
4.5
5.9
4.3
5.9
5.8
4.8
4.5
4.6
External Debt
+43% (Dec’09 to date) = US$284B
Base rate
(current: 12,25% per year)
7.5
6.8
6.8
5.3
6.7
Restrictions to credit access
Unemployment rate, %
Sources: 1) GDP and CPI data – LatinFocus Consensus (April 2011)
2) Unemployment rate data – World Economic Outlook (IMF report, April 2011)
3) Inflation Targets data – Brazil Central Bank (www.bcb.gov.br)
COUNTRY NEEDS IMPROVEMENTS IN BASIC
INFRASTRUCTURE AND EFFICIENCY
G7
GLOBAL
COMPETITIVENESS
INDEX
BASIC
REQUIREMENTS
EFFICIENCY
DRIVERS
INNOVATION AND
SOPHISTICATION
FACTORS
5.14
#53º
4.61
Brazil’s Position
Global
Competitiveness
Ranking Total
142 countries
4.32
5.16
4.83
4.33
5.46
Basic
Requirements
4.55
4.40
5.22
104th – Infrastructure
(transport)
4.09
4.02
BRIC
BRAZIL
115th – Macroeconomic
Environment (high
public debt and interest
rates)
Efficiency
Drivers
115th –
Quality
Education
Source: Global Competitiveness Report 2011-12 (WEF) / ECLAC
AN IMPORTANT CHANGE CAN BE OBSERVED IN SEL STRUCTURE
LOWER LEVELS ASCENDING TO THE
TOP OF PYRAMID
1993
2003
SEL A/B
6,0%
7,6%
SEL C
31,0%
37,6%
2011
11,8%
55,1%
SEL D/E
63,0%
54,8%
33,2%
Examples of products added to SEL C basket
• Convenience (frozen food, yogurt)
• Healthy (light, diet and functional)
“Classe C incrementa carrinho de compras”
Source: “Supermercado Moderno” website (www.sm.com.br)
Brazil Socioeconomic Levels Evolution- 1993 to 2011
Source: FGV | CPS (Social Politic Center)
GROWING URBANIZATION GENERATES DEEP
1970
1980
1990
Latin America
2000
Mexico
2005
2009
Brazil
594 million people (2011)
Access To Education
Access To Health
Skilled Labor
Increased Value Of
Convenience
Shortage Of Time
Aging Population
Better Informed &
Demanding
Consumers
Access To Technology
86.0
77.5
78.9
76.3
77.5
81.2
74.7
75.3
74.8
71.4
70.6
67.4
66.3
64.9
55.8
59.0
57.0
% Urban Population
84.2
CHANGES IN THE ENTIRE REGION
A LOOK AT BRAZIL’S
AGING POPULATION
Women
Men
years
80+80
years
up
70 to 79 years
60 to 69 years
50 to 59 years
40 to 49 years
30 to 39 years
20 to 29 years
15 to 19 years
10 to 14 years
5 to 9 years
1 to 4 years
- 1 year
1980
2010
Source: IBGE
MORE WOMEN BECOMING A GREATER PART OF THE
BRAZILIAN WORK FORCE
women already
represent 53,6%
of PIA*
(vs 48,7% in 2000)
18,5 million
households are
headed by women
28,8% of total
*PIA: Active population age
CONSUMER CONFIDENCE INDEX
Q2 2012 Nielsen Consumer Confidence Index
Changes Q2’12 vs. Q1’12
2 -5 -1 -4 5 4 -4 -5 1 -3 6 -1 -1 0 -4 0 -2 -2 1 6 6 0 1 -1 -5 0 -2 -5 3 -1 -5 3 1 -6 6 10 -3 -1 -12 2 -2 1 -1 6 -1
▲▼ ▼ ▼ ▲ ▲ ▼ ▼▲▼ ▲ ▼▼
▼
▼ ▼ ▲ ▲ ▲
▲▼▼ ▼ ▼ ▲▼ ▼ ▲ ▲ ▼ ▲ ▲ ▼ ▼ ▼ ▲ ▼ ▲ ▼ ▲ ▼
0 1 11 -1 -1 1 0 7 -4 2 -2
▲▲ ▼ ▼ ▲
▲ ▼ ▲▼
Global
average
Base : All respondents n=30939
91
LOWER SE CLASSES ARE MAJOR CONTRIBUTOR TO
INCREASED CPG CONSUMPTION
5.7
TOTAL
1.2
7.9
ALCOHOLIC
BEVERAGES
9.6
NON ALCOHOLIC
BEVERAGES
3.8
HOUSE
CLEANING
C1
C2
D/E
2
18
21
23
36
4
23
22
22
29
34
% Growth
Contribution
0.7
24
3.9
-0.9
22
18
2
9.3
DAIRY
PRODUCTS
BEAUTY CARE
B
Spend
1.8
SWEET
GROCERY
DRY GROCERY
Pop.
1.6
A
3.7
Base: 52 categories | Deflation
value growth: 2,9%
Source: Nielsen | Homescan
2.9
1.9
5.6
0.0
YTD10 x 09
YTD11 x 10
% Volume evaluation | YTD (OND)
Base: 132 categories – Total Brasil – Source: Nielsen | Retail Index
DESPITE DIFFERENCES BETWEEN SOCIAL CLASSES,
BASIC FOODS LOSE IMPORTANCE IN BRAZILIAN DIET
20082009
RICE
17,4%
16,2%
BEAN
6,6%
5,4%
SOYBEAN OIL
10,1%
9,7%
MILK
4,8%
4,4%
FLOUR
RICE
PASTA
SUGAR
MILK
COFFEE POWDER
OIL AND OLIVE
MARGARINE
% Imp. do alimento nas calorias ingeridas Fonte: Pesquisa
de Disponibilidade Alimentar IBGE – 2008/2009
Source: Nielsen | Retail Index - Var. Volume 2011 vs. 2010
20022003
OTHER FOOD CATEGORIES ARE
BEING EMBRACED
reflecting the search for products that offer convenience
Source: Nielsen | Retail Índex – Var. Volume 2011 vs 2010
Frozen salted
Juice ready
Mineral water
Cheese
Soy beverage
Fermented milk
Cereal
Liquid tea
Cereal bars
The Brazilian has
improved their eating
habits and are
consuming more Fruits,
Juices and Milk
Derivatives
Ready Juice, Soybased Drink and Cereal
Morning won new
shoppers compared to 2010,
the most come from homes
of lower and middle class
Refrigerated pasta
Sources:
Search Food Availability - IBGE – 2008/2009
Nielsen | Homescan
HOW ARE CHANGES
IN THE SOCIOECONOMIC
AND CONSUMPTION SCENARIO
INFLUENCING THE RETAILER
DYNAMICS IN BRAZIL?
EVOLUTION OF ECONOMIC FUNDAMENTALS HAS
DIRECTLY AFFECTED RETAIL STRUCTURE
Hyperinflation
Economic growth
Hypermarket
- Price-seeking
- Monthly grocery
shopping
Inflation
under
control
• Restocking grocery shopping
• Convenience
Shoppers'
Key Drivers:
Development
of Small Retail
Inflation under
control and
greater
economic
development:
• Convenience
• Assortment
• Competitive Prices
Mid-sized/Neighborhood
Supermarkets
Convenience
Cash & Carry
Traditional Retail
loses competitiveness
Timeline:
Retail formats
ECONOMIC CHANGES ARE AFFECTING
CHANNEL RELEVENCE
new players gaining prominence
% Participation expense per shopper channel
Self-Service
Traditional
Stores
Drug/
Perfum.
Door to
Door
Cash &
Carry
2008
76,1
9,6
4,9
4,3
2,1
2009
75,0
9,0
5,1
4,6
2,9
2010
73,2
8,9
5,2
5,1
3,1
2011
72,1
9,1
4,9
4,2
4,2
Source; Nielsen | Shopper Visions™
SHOPPING FREQUENCY AND CHANNEL
PENETRATION IS SHIFTING
100
100
SS
Shoppers are purchasing more
frequently...
TRAD STORES
2010
2011
DOOR TO
DOOR
120x
year
124 x
year
86
87
81
80
63
65
DRUG
42
46
PERFUMERIES
34
37
BAKERY
...and selecting new channels
CASH &
CARRY
CONVENIENCE
26
30
4
4
2010
2011
Number of visits to POS and Channel Penetration
Source: Nielsen | Shopper Visions™
FACTORS DRIVING
CONSUMPTION
reasons for which the consumers shop in the regular store they typically visit
Proximity to home or work
58
50
34
62
74
Good prices
49
45
33
43
62
Good Offers
35
36
43
25
36
Value for money
31
31
31
35
30
Lots of variety of products and
brands
26
25
32
25
27
You can buy everything at once
21
17
24
28
21
Quality fresh products
16
16
22
22
10
Quickly in buy / Easy to find
13
15
19
12
8
Attention and friendly staff
11
13
11
18
3
Home delivery
4
7
3
2
-
Nice atmosphere
4
6
-
5
1
Quality private labels
5
5
3
6
4
Extended opening hours
6
4
6
5
8
Study ”Thoughts and Attitudes of a Housewife” - II Sem 2010 Source: Nielsen
INTERNET USERS ARE
ON THE RISE
Evolution: 2007-2010
Brazil
79%
Mexico
76%
30
Colombia
110%
21
Argentina
63%
Chile
60%
LatAm
43%
75
USERS (MILLIONS)
67
55
42
27
20
17
10
16
20
20
2008
26
8
7
6
5
2007
17
20
2009
2010
Source: América Economía intelligence 2010
Source: www.internetworldstats.com
BRAZIL 2007-2009:
ONLINE SALES GREW BY 170%
Total amount by country
Country
Brazil
Mexico
Argentina
Colombia
Chile
TOTAL
USD$
2007
4,898.70
1,377.00
561.50
201.30
687.50
7,726.0
2008
8,572.60
2,010.00
732.80
301.90
919.50
12,536.8
2009
13,240.40
2,624.90
875.00
435.00
1,027.90
18,203.2
B2C* Online Transactions
Source: América Economía intelligence 2010
*Business to consumer
CONVENIENCE STORES AND THE
COMPETITIVE SCENARIO
BRAZIL 2011:
CONVENIENCE STORES SHOWED 14% GROWTH
3.837
3.371
Evolution of convenience stores revenue
Main
Convenience
Stores in Brazil
2.798
2.487
2.158
1.891
1.177
1.018
702 789 876
12
2000 2001
11
2002
16
16
2003 2004
1.365
AM-PM
BR MANIA
39
16
2005 2006
20
14
15
2007 2008
Value sales
14
13
2009
ENTRE POSTO
SELECT
2010 2011
Growth rate
source: Anuário Sindicom 2012
COMPARED TO OTHER MARKETS, BRAZILIAN
CONVENIENCE IS STILL DEVELOPING
16% 49%
of gas stations
in Brazil have a
convenience store
of fuel stations in
Argentina have
Convenience stores
In Brazil, convenience stores are establishments tied
to gas stations, with sales area smaller than
450m2, limited to three check-outs
Source: Anuário Sindicom 2011
WITH LOW PENETRATION, CONVENIENCE CHANNELS FACE
MAJOR COMPETITION FROM BAKERIES
(em mil)
2500
MULTIPLE FORMATS COMPETING FOR: CONVENIENCE
Autosserviços
Supermarket
Eixo y: Saldo de lares compradores entre 2011 e 2010
2000
Self-Service
Pequeno
SmallerVarejo
self-service
1500
Bakery
Padarias
1000
500
Cash & carry
0
0
20
40
60
80
100
120
Convenience
Stores
Lojas
de Conveniência
-500
Eixo x: Ticket Médio (Desembolso a cada ida no pdv)
Source: Nielsen Shopper Visions 2011 vs 2012
BAKERIES ENJOY
STRONG CONSUMER ACCEPTANCE
63,000 stores across the country
Bakeries are characterized by selling primarily
freshly baked breads but also a host of
additional products such as sweets, snacks,
drinks, cigarettes etc.
Among the bread consumed in Brazil, 86%
correspond to bakery craft breads
(58% french bread)
São Paulo is the state which concentrates the
largest number of bakeries in the country (12.7
thousands stores), followed by Rio de Janeiro
(7.4 thousands), Rio Grande do Sul (6.0
thousands) and Minas Gerais (5.4 thousand)
Source: ABIP (Associação Brasileira da Indústria de Panificação e Confeitaria)
HIGH PERCENTAGE OF PRODUCED PRODUCTS
DIFFERENTIATE BAKERIES FROM CONVENIENCE
Billing average
Grocery
composition
Beverages
Industrialized Meat
Frozen
Dairy
Cigarettes
Candies
48
Ice Cream
Self-Production
Milks
7
9
10
6
3
5
2 3
7
Fonte: ABIP
Despite the products offer increase in bakeries, the french
bread is still the only product capable to maintain the sales
flow and attractiveness of the customers, thus ensuring 49% of
companies baking revenues.
Fonte: Sebrae
“The convenience stores Oxxo should arrive in Brazil in
less than five years”, says José Antonio Fernández Carbajal, Presidente of
Administrative Board and Femsa general director Femsa, in Monterrey, in Mexico
Source: Uol Notícias 10/25/2011
CONVENIENCE STORE SALES ARE DEPENDENT ON
THE CORE CATEGORIES
12,2
4,8
3,8
81,1
22,9
37,4
Cigarrette
Beer
Soft Drink Chocolate
Goma
Top 5
Importance of the main categories for convenience stores
Source: Nielsen Retail Index 2011
ACROSS CORE CATEGORIES , CONVENIENCE PRICES ARE
ABOVE MARKET AVERAGE
89%
items in common are more
expensive in the Convenience
and the channel than in the
Traditional Self Service
89 e 96%
items, respectively, are more
expensive in convenience
channel than in the Traditional
Self Service
The Brazilians seem willing to pay more for
convenience
Competitividade dos itens em comum entre Conveniência e AS
e entre Tradicional e AS das categorias: Cervejas e Refrigerantes
Fonte: Nielsen Retail Index 2011
NON-PRICE RELATED INCENTIVES DRIVE
COMPETITIVE ADVANTAGE
"Despite the slightly higher prices, we offer the convenience
of being 24 hours"
Businessman Marcelo Baptista, franchisee of six convenience stores in Esso RJ
"... the sector has undergone an evolution. We traded the
traditional hot dog and a coffee machine for a range of
freshly prepared sandwiches with bread baked in the store
and improved coffee quality. "
Luiz Felipe Barreto, food service manager of Esso in Brazil
"Providing food services at convenience stores is a market
trend. Five years ago, 8% of sales came from this segment.
Today, already represents 15% of sales. "
Cesar Guimaraes, product manager sectoral Sindicom
FOR FOOD “FRESH” PREPARATION,
STORES OPT FOR SELF-PRODUCTION
suppliers purchase or franchise system
DEVELOPMENTS IN
FOOD SERVICE
Frozen foods such as
sandwiches and pizzas
are on the rise, as well as
snacks "healthier"
FOOD SERVICE
OUTSOURCED
Partnerships between the
networks of convenience
and famous brands have
shown good results
SIX POINTS TO
REMEMBER
● Economic development has had a positive impact on the Brazilian
population
● Demographics trends, social mobility, and technology are factors driving a
greater demand for convenience in products, services, and retail shopping
options
● Supermarkets in Brazil still command the highest share of business, but
alternative channels, with clear differentiation, are growing
● Gas Convenience stores are expanding in Brazil, although still small
● Food service is a trend, having shown good performance in convenience
stores
● Given growth dynamics, shifting consumer preferences, and greater choices,
opportunities in convenience retailing are evident moving forward in Brazil
Thank You
rick.parra@nielsen.com
CONTACT US FOR
MORE INFORMATION
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meet us at the relevant global c-events
Sep 23rd, London, Future of Convenience Conference
Oct 08th, Las Vegas, NACS Show
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