The strength of a simple model... ATACADAO

The strength of a simple model
Roberto Müssnich
The Wholesale market: more than
50% of the food market in Brazil
The Wholesale market is estimated at over € 40bn and
comprises of:
Coffee shops and restaurants – € 13bn
Small retailers – € 25bn .......
..... and more, for Atacadão, direct final customers
Primarily large consumers of C, D and E clusters
Source: ABAD 2008
A large majority of the population is
part of the C/D/E clusters
Clusters C/D/E represent more than
80% of the Brazilian population
The emergence of the middle class
“C” is creating new opportunities:
More money means more to
spend on better food
Growth %
A/B
C
D/E
Source: IBGE, publication of Ministry of Finance
6%
37%
- 21%
The strength of a simple model...
ATACADAO: a 46 year-old company leader on this market
A strong and recognized brand
A distinctive culture for its 11,000
employees
41 stores and 4 wholesale units
Over
€ 2.4bn in gross sales
More than
40m tickets per year
The business is focusing on food to serve small traders in
general, as well as big consumers from C,D and E clusters
… delivering a perfect fit for the
targeted market
To serve this market, we built a model on some core
competencies:
A strong culture and a highly motivated team
A standardized store format
Masters of food retailing
Operational simplicity
Atacadão has outperformed the
wholesale market over the past 10 years
Atacadão growth in
terms of sales
and number of stores
o
Wh
CAGR
7%
.
avg
e
l
a
l es
cad
Ata
49
CAGR
23%
ão
42
35
7,000
38
6,000
5,000
4,000
17
14
14
3,000
14
2,000
1,000
0
1996
1997
# stores
Gross sales
Fonte: ABAD/ Internal analysis
1998
1999
2005
2006
2007
2008
Expansion & growth through a simple
store format
Opportunities ....
The market is growing
continuously
Many places are still to be
developed
Our objective: Maintain our
leadership by building a sustainable and
competitive advantage
Our resources: A
defined store model, strong
cash-flow generation and a
continuously trained pipeline of store managers
A strong geographic presence in
high-density regions*
2
RN
2
4
PE
BA
MT
4
DF
4
GO
1
MS
SP
4
RJ
PR
3
* (as of April 2008)
3
18
Mastering food distribution and
retailing to win customers
What we are...
A reference in food distribution and
retailing for mass market
Position built on a strong price
perception by our clients
Our objective:
Increase the focus on profitable
products
Develop the range of brands that our
clients look for
Capture the synergies in terms of
purchasing power (food) and product
offer (non food)
Our resources:
Strong knowledge of products, pricing
management, clients and market
Efficient assortment, with a supplier
relationship rather than category
management
Simplicity in range,
with a supplier and
purchase strategy, and
a defined value
proposition
Management by
supplier
(full responsibility)
93% food
7% non-food
7,000 SKUS
Range definition
Purchasing
Supply & Distribution
Pricing policy
Sales target
Stock turnover
Client perception: low and consistent
prices rather than promotion or
marketing…
REAL PRICING
PRICE COMMUNICATION
PROMOTIONS
!
OK
PAYMENTS OPTIONS
PRIVATE LABEL
Yes
Yes
NO
Yes
MEMBERSHIP
Yes
Yes
NO
NO
ANNUITY
Yes
NO
NO
NO
BEST
NO DIFFERENTIATION
BETTER
WORSE
Source: Client Survey
Our qualitative positionning
ELITE
• MORE EXPENSIVE
• SERVICES/ATTENTION
• SPACE/WARMER ENVIRONMENT
Who is the Client ?
wealthier people, elite, big restaurants,
entrepreneurs, middle-class ...
• MEMBERSHIP
• STORE LAY-OUT
• NON-FOOD
• BETTER PURCHASE EXPERIENCE
POPULAR
• BETTER PRICE IMAGE
• LESS SERVICES/ATTENTION
• LESS COMFORT
• SMALLER
• LESS ORGANIZED
Fonte/Source: Client Survey
• MORE OBJECTIVE PURCHASE
Who is the Client?
all kind of people, including
homemakers, small retailers,
bar, restaurants, mom&pops...
Culture and values:
Retaining and developing people
Atacadao is more than a company. It is a model that reflects a
strong work ethic, shared values and perpetual low cost
Our objective:
Retain our talents
Our resources:
A trained team with less than 20 %
turnover
A priority: our people
Our Manager Trainee Program:
Strengthening the culture and
managing growth
Internal talent development:
Promoting people from our team
Culture:
Focus on keeping people motivated
“Perpetual “low-cost”, a competitive
advantage built every day
What we believe:
EDLC as a culture, included in every
single routine and decision-making
process
Our objective:
Keep our store and back office
operations simple
Synergies: Carrefour brings to
Atacadão
More funding and aggressive leverage to grow faster
Strong supportive back-office and best practice sharing
Opportunity to optimize store portfolio
Synergies: Switching to the
Atacadão banner
In 3 months, we rebranded
2 Carrefour hypermarkets
Gross sales (April YTD)
CAGR
67%
2006
Source: Internal analysis
2007*
! Gross sales x2
2008
Synergies: Atacadão brings to
Carrefour
An optimal format to target the fastest and largest growing
customer segment in Brazil
A new and growing customer base to cater with additional
services (gas stations, pharmacies etc)
Strong expansion opportunities
Greater bargaining power
Conclusion: going forward!
Strongly accelerate our growth while
preserving our culture
Take advantage of our cross synergies
Continue to deliver strong operating
results and cash flow to reinvest in
even more growth
Conclusion: everything to stay
number 1 in Brazil!
Since the acquisition of Atacadao,
Carrefour Brazil is leader in the
country
Integrating Atacadao opens new
opportunities for strong and profitable
expansion to keep our lead in the
Brazilian market!