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1. The Argentinean Market

1. The Argentinean Market. Introduction to Argentina’s Food Retail Market.

lysandra-crawford
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1. The Argentinean Market

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  1. 1. The Argentinean Market

  2. Introduction to Argentina’s Food Retail Market • Argentina, with a population of 40,519,000 inhabitants, is the third largest market in Latin America - following Brazil and Mexico-, with total sales that, during the 2010 fiscal year, reached a total of USD$ 16,244 million, representing an increase of 23.58% compared to the previous year. • The Argentine food retail market consolidated during the 90’s, with the arrival of large international chains to the country. The modern channel was then heavily impacted during 2000 with the deep crisis that fell upon the country, when it experienced a return to the traditional channel. Currently, with more out of pocket, the country is living a resurgence of the modern channel. • Part of this reactivation can be found in the increase of total modern channel commercial surface which, during 2010, grew by 4.7% as a consequence of the launch of 48 new stores. • The top three food retailers in the country – Carrefour, Cencosud and Coto –, concentrate 57.2% of the total retail market, reaching sales for USD$ 9,295. 6 million.

  3. Argentina Food Retail Data – Modern Channel 40,519,000 8,662.9 10,7% Population PBI per Capita Inflation Source: ILACAD World Retail - INDEC

  4. Argentina : Food Retail Formats Modern Formats Kiosks: Independent stores that sell cigarettes, candy and drinks for the most part. This format extended greatly during the 90’s. Wholesale/ Cash & Carry: Stores of over 9,000 square meters that sell products by bulk. Used to cater to the Hotel and Restaurant industry. Hypermarkets: Stores of between 4,500 and 15,000 square meters that offer between 30,000 and 50,000 references. Wide range of non-food items Supermarkets: Segmented between supermarkets of between 850 and 1,200 square meters, and mini hypermarkets, of 1,200 and 4,500 square meters. These offer the same products as hypermarkets in a smaller more convenient format. Specialized Formats Traditional Formats Auto service Mini supermarkets where Chinese stores concentrate a large portion of the market. They are positioned as proximity stores. Pharmacy: Traditional or auto service, these sell pharmaceutical products, in addition to hygiene and toiletries as well as some food items. Minimarkets: Stores similar to convenience stores with a commercial surface of between 250 and 500 square meters. Neighborhood Store: Traditional neighborhood store with employees attending. Gas Stations: Convenience format developing in the country. Source: ILACAD World Retail 41

  5. Top 10 FoodRetailers in Argentina • Sales of food retail not including home center sales • ** Includes Mini Hypermarkets (83 stores) of an average surface of 4.250 square meters Source: Information provided by retailers, INDEC 44

  6. Total Retailer’s Evolution in Argentina Variation 2009 2010 • Annual Sales in Local Currency (Ar$)* 50,089.2 64,491.7 • 28.77% 13,144.2 16,244.8 • Annual Sales in Dollars (U$S)* • 23.58% • 2,505,618 • 2,623,811 • + 118,193 m2 • Total Square Meters • 4.72% • 1,633 • 1,681 • Total Number of Stores • + 48 PVD • 5,245.9 • 6,191.3 • Sales by Square Meters in dollars • 18% * In millions Sources: Information provided by retailers, INDEC – ILACAD World Retail

  7. Food Retail Trends in Argentina 2010: The Consolidation of the Modern Channel and a Shift to Smaller Surfaces • The Argentine food retail market continues to be one of the most promising and dynamic in the region, being the third largest market in South America, with sales reaching USD$16,244 million by the modern channel in 2010, only behind Brazil and Mexico. During the last year the country experienced, in addition to a 12.6% rise in sales in dollars, an increase in its sales surface of 4.7%, with the incorporation of 48 new stores in the country. • The consolidation of the modern channel was also evident due to the increase in the number of clients visiting this channel in order to make their grocery shopping. In Argentina, and as it was revealed by the fifteenth edition of the Shopper Key Account study of ILACAD World Retail –that took place during April and May 2011–, over 85% of the Argentine population choose to do their grocery shopping within the modern channel, that is to say, opting between hypermarkets, mini hypermarkets, supermarkets, minimarkets and discount stores. This number grew by 8 points from the 77% reached at the beginning of 2010, and is proof of the rise and consolidation of this channel faced against the traditional one. • As for the format evolution, during 2010 hypermarkets fell behind while the country saw flourish a large number of new and smaller stores that aspire to fulfill daily shopping needs and, for that reason, are located at short distances from residential areas or office districts in an effort to allow clients to gain both comfort and time. Examples of this new tendency include the opening of Carrefour • Express and Market stores, SúperVea supermarkets of Cencosud, Coto’s minimarkets and the new “Chinxpress” format of Chinese auto service store – of 300 square meters – , which plan to expand to close to 350 stores by the end of 2011. • Compared to the number of hypermarkets that opened their doors during 2008-2009, which reached 13, during the 2009-2010 period this number fell short of half way, with the launch of only five new stores. However, the number of super and minimarkets launched during 2010 rose considerably compared to the values of the previous year. Source: ILACAD World Retail

  8. As for the performance of the large retail chains operating in the country, Carrefour was once again the leading retailer in the country. During 2010 the chain not only acquired nine Best minimarkets, but also launched the Carrefour Market emblem, rolling out an ambitious conversion plan that will end in 2011 and which aims to unify brands across its international operations. By this process Carrefour Express stores will be converted to Carrefour Market, while former Carrefour Mini stores will disappear and become Express stores. • Opposite to small surfaces, during 2010 the Argentine market witnessed shifts in the wholesale segment, with the acquisition of Cordoba’s Tarquino company, by Makro, in addition to the opening of Yaguar, Makro, Diarco and Vital, as well as the arrival of the firs Atacadao store by Carrefour, which took place in 2011. • Walmart was once again the fifth most important retailer in Argentina during 2010, year when the group experienced a strong expansion of the Changomás format with the launch of 15 new stores all across the country. The retailer launched three hypermarkets during the same period. During 2010 Walmart began operating it’s e-commerce strategy in the country, making the group an additional option to the retailers currently selling online, such as: Coto Digital, Disco Virtual , Jumbo a Casa or LeShop. • The Chinese store option grew considerably during 2010 through the launch of different initiatives to compete with modern retailers such as: a) the launch of the new Chinxpress format, which will begin operating in 2011 and is planned to compete with the new smaller format stores; b) the roll out of 150 new private label brands; c) the launch of their own credit card. • Argentine consumer habits also changed during 2010 as a consequence of the inflation levels in the country, close to 25% according to non official entities. For this reason, Argentinean shoppers began planning their shopping mainly by the promotions and discounts offered by retailers and/or banks. The use of cash increased in proximity stores given the restrictions for the use of debit and credit cards, while in super and hypermarkets the use of these payment methods increased due to bank related promotions. Another trend registered during the period was the use of e-commerce given that clients search for comfort and time efficiency. E-commerce sales rose by 50% during 2010. Fuente: ILACAD World Retail

  9. 2. Key Account Analysis

  10. Carrefour 1 • The French retailer Carrefour was once again the leading retailer in the country during 2010, with sales that reached Ar$19,959.4 million, representing a 32.5% increase compared to the previous year. • Carrefour has presence in 22 provinces, becoming the retailer with a more national reach in the country. • By the end of 2010 Carrefour operated five formats in Argentina, including Hypermarkets, Mini Hypermarkets, Supermarkets, Minimarkets and Hard Discount. • In addition, during 2010, the retailer began a process of emblem reorganization following the lines proposed by their French headquarters, leaving the supermarket format under the Market emblem, the minimarket format for the Express emblem and the traditional Carrefour banner for hypermarkets. • This shift was done to reach clients with different shopping options that adapt to their needs. USD$ 5,027.6 Sales in 2010 (expressed in millions) In 2011 Carrefour began operating a new format in the country with the launch of the first Cash & Carry in Argentina under the Atacadaoemblem. This new store has a selling surface of 5,700 square meters, and it opened its doors during April in Laferrere, located in the Province of Buenos Aires. Source: ILACAD World Retail – Retailer information

  11. Cencosud 2 • The Chilean group Cencosud takes on the second place in the ranking of Argentina’s top 10 retailers, having reached sales for Ar$10,694.4 million, representing a 24.3% increase compared to the previous year. • During 2010 the Argentinean market generated 30,7% of the group’s revenues in the region, becoming the most important market after Chile. • With a total store network of 256 stores in the country, excluding the 49 home improvement centers Easy, the retailer reached a total of 455,808 square meters of selling surface. • The group, present in Chile, Peru, Brazil and Colombia, operates its largest store network in Argentina. • During 2010 the group opened a new Jumbo hypermarket in the capital, with a selling space of 5,000 square meters which demanded an investment of 46 million argentine pesos. USD$ 2,694.3 Sales in 2010 (expressed in millions) In June 2011 Cencosud opened a new supermarket format in the country under the Jumbo emblem, thus far reserved only for the hypermarkets in the country. This new store, of 1,336 square meters, is located in the exclusive Puerto Madero Neighborhood of Buenos Aires, and required an investment of Ar$14 million. Source: ILACAD World Retail – Information Retailer

  12. Coto 3 • Coto is a food retail company that, through an aggressive publicity strategy and competitive offers, has managed to place itself third in the country’s retail ranking, competing with international chains such as Carrefour and Cencosud. • Geographically, the group’s strategy has centered itself in the Capital City and the Greater Buenos Aires area, as well as in the provinces of Entre Rios and Santa Fe. The retailer has said it has plans to continue its expansion to more provinces. • During 2010 Coto opened two stores, one in February, in Ezeiza; and one in October, in the North area of Buenos Aires, in Tortuguitas Open Mall. • In total, the retailer added close to 27,700 new square meters of selling space, demanding an investment of close to Ar$186 million. Sales in 2010 (expressed in millions) USD$ 1,573.7 As for 2011, the retailer has so far launched a new store in La Horqueta neighborhood, in the northern area of Buenos Aires, and is making progress in the works of a new hypermarket on Ruta 3, in La Matanza, which will require an investment of Ar$76 million pesos. Source: ILACAD World Retail – Information Retailer

  13. Walmart 4 • Walmart is the leading retailer in Latin America, with sales that during 2010 reached a total of U$S 45,299.2 million. • During 2010 Walmart Argentina escalated one place in the country’s leading retailers ranking, coming at fourth place, with sales that grew an estimated 62%. • In the last year the retailer placed its bet on the supermarket format Changomás, (under its various banners: Changomás -25-, Mi Changomás -5- and Changomás Express -7-), adding a total of 15 new stores to its commercial network. In addition, the group added three new Supercenter hypermarkets. • Walmart has great presence in the whole of the country, with stores in the Capital City, the Province of Buenos Aires, Córdoba, Corrientes, Mendoza, Neuquén, San Juan, Santa Fe, San Luis, Tucumán, La Rioja, Salta, Santiago del Estero, La Pampa, Formosa, Chaco, Rio Negro and Entre Ríos. Sales in 2010 (expressed in millions) USD$1,494.5 EzequielGómezBerard, President of Walmart Argentina, announced this year in the group’s Annual Shareholders Meeting that the retailer aims to open 24 new stores during 2011, reaching a total of 87 stores by the end of the year. These openings will demand an investment of 110 million dollars. Source: ILACAD World Retail – Information Retailer

  14. La Anónima 5 • La Anónima is the fifth largest retailer in Argentina with estimated sales for 2010 that reached close to Ar$ 4,739 million, a rise of 22% compared to the previous year. • The retailer operates with national capitals, and has great presence in the Southern provinces of Chubut, Neuquén, Santa Cruz, Rio Negro and Tierra del Fuego, where they are leaders. • During their last fiscal year the group opened its third supermarket in the city of Esquel, in the province of Chubut; in addition to a new store in Eduardo Castex, La Pampa, and its second store in Pico Truncado, Santa Cruz. La Anónima also acquired the Azul supermarket network of Toledo, in Buenos Aires. • From these new openings, the retailer managed to add close 10,600 new square meters of selling floor. Sales in 2010 (expressed in millions) USD$ 1,193.7 In June 2010 La Anónima completed the acquisition of Carrefour Best store network, located in the neighborhoods of Microcentro, Barrio Norte and Tribunales, in the Capital City. Source: ILACAD World Retail – Information Retailer

  15. Cooperativa Obrera 6 • Cooperativa Obrera is the seventh most important retailer in Argentina in addition to being one of the most important regional retailers and the second largest cooperative group in Latin America. • The retailer began operating in the 1920’s, in the Argentine city of Bahía Blanca, and currently operates in 40 cities of Buenos Aires, La Pampa, Neuguén and Rio Negro. • During 2010 Cooperativa Obrera reached close to Ar$3.292 million, representing 5.1% of the total national food retail market. • During its 2010 fiscal year Cooperativa Obrera concentrated its openings in the Province of Buenos Aires, with the launch of four new stores in Coronel Suárez, Gral. Lamadrid, M. Buratovich and Médanos. USD$ 829,3 Sales in 2010 (expressed in millions) In January 2011 the retailer opened its 90th store with the opening of a new outlet in Villalonga, in the province of Buenos Aires, with a commercial surface of 354 square meters. Source: ILACAD World Retail – Information Retailer

  16. Makro 7 • Dutch group Makro gets 11.2% of its total revenues from operations in Latin America, where the wholesaler is present since 1988. • During 2009 the group completed the acquisition of Basualdo stores, specialized in hygiene and cleaning products, and, during 2010, the retailer announced its plans to expand its reach to more that 20 new stores up to 2015. • Also, the group announced its plans for the acquisition of Cordoba’s company Tarquino. • Makro’s estimated sales in Argentina during the last fiscal year rose close to 28%, to an estimated Ar$2,266 million. • In Makro stores the client will be able to find a wide assortment of private labels in six exclusive lines which include food items, cleaning products, stationary, electronic goods and outdoors and gardening items. Sales in 2010 (expressed in millions) USD$ 570,8 Source: ILACAD World Retail – Information Retailer

  17. Casino 8 • The French retailer Casino draw sales for Ar$1,798 million during 2010, year in which the group made important structural changes in the country. • During 2010 the retailer finalized the sale of its 26 Leader Price stores to Super Eki which began operating its 18 store network in the capital city and eight in the greater Buenos Aires area. • Following this sale the retailer will center its attention on the Libertad hypermarkets, chain that the group acquired in 1998. • Libertad launched its first wholesale autoservice store in Córdoba in 1989, with a surface 2.500 square meters, and currently operates 15 stores in Córdoba, Tucumán, Chaco, Santiago del Estero, San Juan, Santa Fe, Salta and Mendoza. • In addition to the traditional hypermarket, Libertad has commercial surfaces that incorporate new services and recreational space such as Hiper Casa, Apetito and Planet, as well as a game area for children, becoming the first Hipercenter of the country. Sales in 2010 (expressed in millions) USD$ 453 Source: ILACAD World Retail – Information Retailer

  18. Atomo 9 • Atomo is the ninth most important retailer of the country, and has remained in this position since 2009. • In 2010 group sales are thought to have raised by 28%, up to Ar$1,087 million. • The chain bets on its preexisting stores, with efforts being placed in remodeling and revamping stores instead of opening new outlets. • During 2010 Atomo launched a new store in the country. • The retailer is number one in Mendoza, and also operates in San Juan, San Luis and Córdoba. Sales in 2010 (expressed in millions) USD$ 273,7 Source: ILACAD World Retail – Information Retailer

  19. Super Eki 10 • Super Eki comes in the ranking of Argentina’s top 10 food retailers at number 10, with sales that during 2010 where estimated at Ar$878 million. • The retailer began operating in Argentina in 1996, with a hard discount strategy, although it today operates more as a supermarket, both for the selection of products as well as the presentation in store. • Part of the rise in the groups earnings can be found in the consolidation of sales of the 26 Leader Price stores that Super Eki bought to French retailer Casino, and that began operating under the Super Eki Plus banner. • Super Eki has an assortment of private labels that represent 15% of the group’s offer, including food items, drinks with and without alcohol, hygiene products and toiletries, dairies and fresh produce. Sales in 2010 (expressed in millions) USD$ 221,3 Source: ILACAD World Retail – Information Retailer

  20. 3. Province Analysis

  21. Total Sales by Province 2010 Salta*Ar$92233,5+% Other Northern Provinces1Ar$2,552+35.3% TucumánAr$1,393+30.9% Santa FeAr$3,232+31.8% Other Center and West Provinces2Ar$2,552+35.3% Entre RíosAr$1,205+29.8% MendozaAr$4,059+27% Buenos Aires City Ar$11,205+26.1% Rest of Buenos AiresAr$9,099+33% NeuquénAr$2,110+27,7% 24 Districts of Buenos Aires Province Ar$16,035+27.6% CórdobaAr$11,315+23.6% ChubutAr$1,977+25.8% Other Southern Provinces 3Ar$4,440+32.4% • Corrientes, Chaco, Formosa, Jujuy, Misiones and Santiago del Estero • Catamarca, La Rioja, San Juan and San Luis • La Pampa, Rio Negro, Santa Cruz and Tierra del Fuego • Source: INDEC Total Sales (in million Ar$ - *in thousand Ar$)Sales Evolution (2009/2010)

  22. Total Sales by Province 2009-2010 Sales by Province Modern Channel (in million Ar Pesos) Sales Sales From this data we can observe a greater concentration in sales in the 24 districts of Buenos Aires, where sales during 2010 reached Ar$16,035 million, an increase of 27.6%. According to official data, sales grew in every province of the country, with a higher percentage rise in the Northern Provinces, which registered a 35.3% increase while, although still reaching good results, Chubut was the province with a compared lesser growth, with a rise of 23.6%. The city of Buenos Aires has the highest sales after the 24 Districts of Buenos Aires, followed by the rest of the Province and Córdoba.

  23. Share of Province Revenues in Argentina’s Modern Channel 2010 Share of Province Revenues in Argentina’s Modern Channel 2010

  24. Square Meters and Stores by Province 2010 Other Northern Provinces 1117,515 M2 (47)+2.2% Salta40,856 (16)+21.1% Tucumán65,785 (20)+1.5% Santa Fe147,775 M2 (70)+3.6% Other Center and West Provinces286,912 M2 (41)+5.3% Entre Ríos49,479 M2 (34)+8.8% Mendoza166,238 M2 (111)-0.1% City of Buenos Aires 393,058 M2 (390)+1.9% Rest of Buenos Aires359,641 M2 (258)+4% Neuquén8,235 M2 (48)+5.5% 24 Districts of Buenos Aires Province741,227 M2 (412)+7.2% Córdoba217,483 M2 (99)+2.7% Chubut51,033 M2 (40)+6.7% Other Southern Provinces3106,574 M2 (95)+10.5% • Corrientes, Chaco, Formosa, Jujuy, Misiones and Santiago del Estero • Catamarca, La Rioja, San Juan and San Luis • La Pampa, Rio Negro, Santa Cruz and Tierra del Fuego • Source: INDEC Total Square Meters (total stores)Square Meter Evolution (2009/2010)

  25. Square Meters and Stores by Province 2009-2010 Total Square meters Modern Channel Argentina (Square meters) Selling space SqM 2009 Selling space SqM 2010 As for the expansion in selling surface during 2010, in total Argentina added 118, 193 new square meters to its store network, registering an increase of 4.72%. The 24 districts of Buenos Aires increased its sale floor by 7.2%, as a consequence of the launch of 10 new stores. Meanwhile, in the rest of the Province and in the Capital City the selling surface increased 4%, 1.9% more due to the launch of 15 new stores in total. In the Provinces, Salta and the Southern provinces registered the highest increases in selling space, with 21.1% and 10.5% increases.

  26. Store Network by Province 2009-2010 Total Store Network by Province in the Modern Channel Argentina (Units) Number of Stores 2009 Number of Stores 2010

  27. Share of Province over Total Store Network Modern Channel Share of Province in Total Store Network of Argentina’s Modern Channel 2010

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