Brazil Retail Market

[slideshow_deploy id=’1581′] Brazil retail market is the largest in Latin America. The south-American giant dethroned the United Kingdom as the world’s sixth  largest economy in 2011, according to the  Centre for Economics and Business Research in London.  Brazil’s economic success is the result of policies that have dramatically improved per-capita  GDP and delivered close to full employment; the catalysts for growth of a  population  close to 200 million in 2012, and whose affluent middle class has become the engine of consumption and  is projected to reach 58 percent in 2014. brazil retail marketBut Brazil’s roaring GDP years may be  over for now.  GDP in 2012 was a timid 2.5%, slightly below the 2.7% achieved in 2011 and much less robust than 2010’s 7.5% . The economy’s cooling down tapered off M & A activity in 2011 and the consensus remains similar for 2012. Brazil’s main macroeconomic concerns are  inflation and the strength of the real, which make Brazilian exports and doing business in Brazil too expensive. To boost the flagging economy, the Brazilian government has devalued the real and has announced recently a $60bn stimulus package aimed at infrastructure projects.
The accumulated economic gains, growing middle-class population and increased consumption have brought about enormous opportunities to Brazil retail market, which is estimated at  $230 billion .  Although there is strong domestic and some international retailer presence in Brazil, the retail market is far from maturity. Brazil is the world’s third largest cosmetics/toiletries market, the third for computers, the fourth for cars, and the  fifth for internet and mobile phone use. Brazilians spend 31 percent of their income dining out. Brazil’s ascendancy as an economic power has attracted luxury brands such as Gucci,  Burberry,  Louis VuittonSalvatore FerragamoZegna, Armani, Christian Dior,  Leroy Merlin, as well as premium and mainstream brands such as  LacosteDieselTommy Hilfiger TimberlandPuma and Adidas. In the QSR universe, MC DonaldsBurger King, and several other global brands already call Brazil home.
The world’s  heavy retail weights are increasing their stakes in Brazil’s market, but in order to do so they must be prepared to form alliances or  face tough local competition and challenges. At the development level, General Growth Properties is boosting its investment in Brazil’s Aliansce Shopping Centers,  Simon Property Group plans to develop outlet centers with local BR Malls,   Westfield GroupCBL & Associates Properties, DDR and Kimco Realty, are also active in Brazil through local partners. At the M&A level, Cencosud recently acquired Prezunic. But not all retail activity in Brazil is smooth sailing, Carrefour announced a $722 million loss due to accounting adjustments in 2011 and Wal-Mart is facing resistance from local associations to its aggressive pricing. On the flip side,  Zara has been achieving double-digit annual growth for more than a decade.

Retail development is gradually moving away from the traditional and saturated magnet centers of Sao Paolo and Rio to less dense areas in the North and Northeast.  GLA penetration is 54/1000, a fraction when compared to 2,192/1000 in the U.S. In 2011 there were 430 shopping malls with a total GLA of 10.3 million square meters and 43 new projects in the works for 2012. 319 malls (75%) are located in the south and southeast, 59 (14%) in the northeast, 37 (9%),  in the midwest, and 15 (2%) in the north.  Total mall projections for 2015 is 500 and 137 million GLA. Shopping center sales represent  18% of Brazil’s total retail sales at an average of $6,315 per square meter. The North and North East are increasingly attracting investment and offer the greatest retail growth opportunities, although with lower per-capita incomes than the traditional power centers of Sao Paulo and Rio.

With a large and mostly urban population, surging retail sales, and significant investments planned for the upcoming  Fifa’s 2014 World Cup and 2016 Olympics , Brazil is Latin America’s largest retail economy. Our view is that Brazil is a stable, pro-business market and one where retail opportunities still abound, albeit red tape , barriers to entry, and corruption remain a concern.

Interested in Brazil’s retail market? Please contact us at: 

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