Wal-Mart Gets More Aggressive In Campaign to Dominate Brazil 

Miriam Jordan / Wall Street Journal 25may01

SAO PAULO, Brazil -- Once considered a sleeping giant in Latin America's largest market, Wal-Mart Stores Inc. is training its sights on a big slice of Brazil's retail sector.

Wal-Mart Thursday opened its first neighborhood-style store in a blue-collar suburb of Sao Paulo, Brazil's biggest and richest city. On Monday, it opened a distribution center outside Sao Paulo that is large enough to service 100 outlets, an indication that it aims to grow significantly beyond the 20 supercenters and Sam's Clubs it has opened since arriving in Brazil six years ago.

Wal-Mart says it plans to open five more outlets in Brazil this year, and company officials don't deny industry speculation that the Bentonville, Ark., retailer is interested in buying an existing chain to jump-start expansion. Last year, Wal-Mart lured away Peter Hardtmeier, a Brazilian supermarket veteran, from a regional retailer and named him "director of new businesses." Mr. Hardtmeier has concentrated on building a new format, Wal-Mart Todo Dia, a smaller, stripped-down version of the company's supercenter.

Located along a busy avenue in a sprawling, working-class district, Todo Dia, which means Everyday in Portuguese, looks and feels like a warehouse. Its floors are concrete, it lacks air-conditioning, and its products, a narrower selection than Wal-Mart supercenters, are often displayed in the boxes they arrived in from the factory. Todo Dia will sell food and household items for 5% less than neighboring stores, which are mainly family-owned supermarkets and drugstores, says Mr. Hardtmeier. And because of its simple construction, a Todo Dia can be built in about three months. "This is our first store, and we want many more," he says, without being specific.

* Sales figures converted from Brazilian reals at current exchange rate.

Number of Wal-Mart outlets around the world as of April 30, 2001

"This format has huge potential in Brazil," says Claudio Felisoni de Angelo, professor and coordinator of the University of Sao Paulo's school of retail management. "It makes sense for two reasons: the low income level of the general population and their difficulty in traveling long distances" to reach big discount centers outside the city.

Criticized in its early years in Brazil for stocking leaf blowers and American footballs, Wal-Mart's Todo Dia strives to adapt to local tastes: A stand in the heart of the outlet sells fried Brazilian pastries called "pastel." Shoppers can scoop out black beans, the national staple, from a barrel.

Winning customer loyalty is key in a market where 68% of all shoppers surveyed last year by University of Sao Paulo said they always buy their groceries at the same outlet. So, even before opening its doors, Todo Dia began to entice residents of Sapopemba district with a credit card; anyone with an identification card, social-security number and monthly income of $70 can get one. No interest is charged for merchandise paid for within 45 days of purchase. A green van -- the same color as the store and credit card -- roams the neighborhood with a loudspeaker inviting people to apply. More than 4,000 have enrolled.

Wal-Mart has large overseas operations and is now the biggest mass-merchandiser in Mexico. In Brazil, it ranks sixth. With sales there totaling about $500 million last year, it is minuscule compared with market leader Pao de Acucar Group, a Brazilian chain, and second-ranked Carrefour SA of France. Like Wal-Mart, Carrefour is preparing to introduce its own neighborhood-store chain, Dia%, after concentrating on large discount centers for more than two decades.

"I am sure that the moment Wal-Mart decides to make Brazil a priority, it will compete tooth and nail with Carrefour," says Mr. Felisoni, the retail expert. "Its neighborhood-store initiative seems to signal that this moment has arrived."