Air-conditioned, well-lit stores with high ceilings, space for a cellar, cold cuts, butcher and cafeteria. “Luxuries” so common to supermarkets and hypermarkets are beginning to be part of wholesales — a traditionally spartan sales space, where pallet stackers share space with customers in the aisles.
Assaí, vice-leader of the sector, with annual sales of R$ 46 billion (only behind Atacadão, which had R$ 59 billion in 2021), is taking the opportunity to renovate the points it acquired from Extra in October in order to meet the growing presence of the middle class in its stores.
Pressured by galloping inflation – the IPCA reached 11.30% in the 12-month period up to March –, higher-income families started to frequent the wholesale market in search of 15% lower prices, on average, according to the consultancy Nielsen|IQ.
“About 25% of our public belongs to classes A and B, while in the average of the population this percentage is 14%”, he told Sheet Belmiro Gomes, president of Assaí. The presence of the higher income public should increase this year, he says, since the wholesale flag will also be closer to the central regions, after the acquisition of 70 points of the former Extra hypermarket.
Nielsen|IQ data confirm this preference: in the Brazilian cash and carry market (which moved around R$200 billion last year, up 25% year-on-year), A and B families represent 34% of the public. In food retail in general, A and B account for 28%.
“Consumers from the upper classes are attracted to the cash and carry format”, says Jonathas Rosa, Nielsen|IQ’s retail service leader, referring to the technical name for wholesale. “Class AB goes to this type of store to buy supplies, with a medium-high ticket, something that is only possible for this income bracket”, says Rosa, noting, however, that the increase in the wholesalers’ public goes through all social classes, since inflation affects the population as a whole.
According to Nielsen|IQ, today, 2 out of 3 households (66%) in Brazil make purchases from wholesalers. In 2017, it was 59%. “The average number of visits to the wholesalers is one and a half times a month, that is, the public makes a purchase of supplies and sometimes comes back to make a replacement purchase”, says Rosa.
Within the grocery stores, the categories that grew the most in the last two years were those of fresh perishables – which include fruits and vegetables, butchers and fishmongers, precisely where inflation in recent months has been the sharpest.
What weighed the most on food inflation each month
|Month||Product||Variation (in %)|
|April 2021||long life milk||2.4|
|June 2021||long life milk||4.03|
|August 2021||chicken in pieces||4.47|
|September 2021||chicken in pieces||4.42|
|November 2021||Ground coffee||6.87|
|December 2021||Ground coffee||8.24|
|January 2022||Silver banana||11.73|
|February 2022||English potato||23.49|
Source: IBGE – Broad National Consumer Price Index
In the first quarter of this year, cash and carry sales increased 21.1% compared to the same period last year, while pharmacies grew 11.5%, large supermarkets 7.7% and, that of small supermarkets, 4.2%. “The format of hypermarkets is still in crisis and fell 7.1%”, says Rosa, noting that only Carrefour still maintains a competitive model in this segment in Brazil.
Not by chance, the Extra hypermarket disappeared to make room for Assaí — controlled by French Casino, which is also the main shareholder of GPA (Grupo Pão de Açúcar), former owner of Extra. According to Belmiro Gomes, bringing the wholesalers to the neighborhoods of big cities means breaking a growth frontier for this store format.
Previously restricted to avenues close to highways or with a high flow of trucks, Assaí begins to go to the neighborhoods, after the agreement for the purchase of 70 points of the former Extra for around R$ 4 billion (up to now, 60 points were absorbed and the others should integrate Assaí by the end of May). The estimate is that 40 Extra stores will be converted into Assaí in the second half of this year and the others by the end of the first quarter of 2023.
“In São Paulo, we will have stores near Congonhas airport and in Butantã [na avenida Corifeu de Azevedo Marques]for example”, says Gomes. “Most of our customers are no longer willing to take a car and drive to one of the marginals to make a purchase — this goes for both the general public and restaurant owners”, says the president of the group, which currently has 216 points of sale in 23 states and the Federal District.
The renovations of the points are intense, according to Gomes. “The floor of a hypermarket is designed to support between 800 kilos and 1 ton. On the other hand, the floor of a wholesale store must support 3.5 tons”, he says, who also increased the space for storing products in the new stores in order to speed up the replacement, in addition to increasing the space for the cold room and installing air conditioning, which requires a more robust electrical network.
“Even being more central, the new Assaí stores were already at points that allowed truck traffic, which will be adapted according to local legislation”, he says, in relation to the impacts of logistics on traffic in the neighborhoods.
Of the 70 points inherited from Extra, 67 had galleries for shopkeepers – who were harmed with the closing of spaces for renovation, as revealed by the Sheet. In these cases, the tenants’ agreements were like GPA. According to Gomes, Assaí is interested in keeping most of the galleries: in only three places were the spaces removed, because they were on escape routes, he says.
“We want to offer services such as opticians, pharmacies, cell phone repairs, lottery and beauty salons, for example”, he says.
Assaí’s goal is to reach the end of 2024 with more than 300 stores in operation and a turnover of R$ 100 billion. Now, with a store model that goes far beyond the original, conceived in the past to serve transformers such as dogueiros and confectioners or small retailers. “We’re not going to get to Oscar Freire [centro de compras de luxo na capital paulista]. But we will be closer to those who spend the most”, he says.
Sale of Makro stores in São Paulo should intensify competition
The fight between the attackers is fierce — especially between the first two, Atacadão and Assaí. Carrefour, Atacadão’s controller, bought the Big group in March last year, which gave it the Maxxi Atacado network, today with 63 points, which are being converted to Atacadão. Part of the Big hypermarket network will also be transformed into cash and carry.
Makro, owned by the Dutch group SHV, sold most of its stores to Carrefour in 2020 (29 stores for R$1.95 billion). The company sold 14 other points and maintained its network of 24 stores in the state of São Paulo, where it intended to focus efforts.
But now it feels pressured by the intense competition with Atacadão, Assaí, Tenda and Roldão and intends to give up its presence in the country, found Sheet.
Makro hired Santander bank to find a buyer for its 24 stores, for around R$3 billion. The information was given by the newspaper Valor Econômico and confirmed by Sheet. In the network’s assessment, the “cash & carry” market is promising, but requires a high investment to increase capillarity, which is not in the Dutch group’s plans.
Makro has long been dominant in Brazil, with a robust operation nationwide, says retail consultant Alberto Serrentino of Varese Retail. “It was a traditional wholesale, which never wanted to open for retail, so much so that customers needed to have a CNPJ to buy in the store”, he says.
But, with the rise of Atacadão in Brazil, guided by the expansion of Atacadão and Assaí, Makro was increasingly pressured. “They lost competitiveness and, when they decided to open up to the wholesale format, the market was already taken”, says Serrentino. They started selling stores, most of them bought by Atacadão. “Now it’s not strange that controllers want to move the business forward.”
Collaborated with Leonardo Vieceli, from Rio