Brazil's biggest retailer, Pao de Acucar, is merging with another local retail giant, Casas Bahia, to form a $23 billion group that will be twice the size of Walmart in one of the world's fastest-growing major markets. Casas Bahia is Brazil's biggest advertiser, with a 2008 media budget of $706 million, according to an online story about the merger by Brazilian trade publication Meio & Mensagem, an Ad Age international partner.
Pao de Acucar, a supermarket operator, just overtook Carrefour to become Brazil's No. 1 retailer in June 2009, after acquiring the Ponto Frio home appliances chain. With the latest deal, Pao de Acucar is further diversifying from food into the broader retail sector to grow faster in Latin America's biggest market.
That's Walmart's goal, too. In Brazil since 1995, Walmart is the third-biggest retailer with annual sales of about $10 billion from 385 stores. Despite Brazil's growth potential, the strength of local companies keeps Walmart from dominating the market as it does, for instance, in Mexico where Walmart is the no. 1 retailer.
Meio & Mensagem is Brazil's leading weekly magazine and website devoted to covering advertising, media and marketing in Latin America's largest market.
As incomes rise, Brazil's middle class has grown from 44% of the population in 2002 to 52% now, according to a study by Euromonitor International. Retailers like Casas Bahia are even opening stores inside Brazil's favelas, or urban slums, as poorer Brazilians see their spending power rise too, the report noted.
Casas Bahia works with Young & Rubicam in Brazil. New partner Pao de Acucar is Brazil's 19th-largest advertiser, spending $74 million in 2008 through inhouse agency PA Publicidade, according to Meio & Mensagem's ranking.
Family-owned Casas Bahia was founded in Sao Paulo in the 1950s by Polish immigrant Samuel Klein, a Holocaust survivor. He grew the business by letting low-income customers pay for products in monthly installments and was often referred to as Brazil's own Sam Walton, founder of Walmart. His son, Casas Bahia CFO Michael Klein, will be president of the new unit formed by Pao de Acucar and Casas Bahia and his grandson, Raphael Klein, Casas Bahia's marketing director, will be CEO.
Pao de Acucar will have a controlling 51% stake in the merged group.