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The Journey to Cencosud Peru

Lima, July 2010

Agenda

Welcome to PERU Full immersion in the Supermarket Industry in Peru Cencosud Peru journey Challenges towards the future

Some Highlights
Population of 29.5 million habitants (9 million in Lima) which 66% is between 15-64 years old. Total area comparison to the world: 20th largest country. Boundaries: Bolivia, Brazil, Chile, Colombia, Ecuador 25 regions and 1 province Gross Domestic Product (GDP): US$131 billion Services sector represents 60% of GDP (industry 32%, Agric 8%) Private consumption represents 70% of the GDP Import Partners US 23.4%, China 10.5%, Brazil 8.7% Inflation 2010(e): 2-3 % (food contribution 15%) Public Debt: 25.7% of the GDP Direct foreign investment represents 29% of theGDP

Stable Macroeconomic Environment (cont.)

Source: IMF, World Economic Outlook Database

Latin-American 2010
COLOMBIA PPP per Capita: $ 9,092 PPP GDP: $ 413.8 bill Population: 45.5 mill ECUADOR PPP per Capita:$ 8,022 PPP GDP: $ 114.8 bill Population : 14.3 mill PER PPP per Capita:$ 9,108 PPP GDP: $ 269.1 bill Population: 29.6 mill BOLIVIA PPP per Capita:$ 4,576 PPP GDP: $ 47.7 bill Population : 10.4 mill CHILE PPP per Capita: $ 14,940 PPP GDP: $ 256.8 bill Population : 17.2 mill MEXICO PPP per Capita: $ 14,151 PPP GDP: $ 1,537.2 bill Population : 108.6 mill VENEZUELA PPP per Capita: $ 11,727 PPP GDP: $ 342.2 bill Population : 29.2 mill BRAZIL PPP per Capita: $ 11,066 PPP GDP: $ 2,138.5 bill Population : 193.3 mill PARAGUAY PPP per Capita: $ 4,711 PPP GDP: $ 30.2 bill Population : 6.4 mill URUGUAY PPP per Capita: $ 13,961 PPP GDP: $ 46.9 bill Population : 3.4 mill ARGENTINA PPP per Capita: $ 15,030 PPP GDP: $ 609.0 bill Population : 40.5 mill

* PPP = Purchasing Power Parity


GDP P/C : US$ 8,047 (World US$ 9,068) PPP* P/C : US$ 11,022 (Mundo no data) Fuente:FondoMonetarioInternacionalOctubre2009

SEG - Socioeconomic Groups (Homes, %)


5.5 16.5 31.8 30.1 16.1

53.8

5.2 17.7 33.1 30.2 13.8

56.0

Source: APEIM Peruvian Market Research Association, 2010

There is a new middle class that has a lot of unsatisfied needs. They now have access to high valued products and the consumer behavior is changing.

Supermarkets in Peru
We have great opportunities not only in Lima, but also in Provinces
There is a low formal retail penetration. By March 2010, there are 3 supermarkets chains, totaling 135 stores. In July 2009, Makro (Cash and Carry) started operations in Lima with 3 store openings so far. There are many strip and shopping centers projects going on that will boost supermarket growth plans.

We outlook migration from traditional retailing (mom & pops, fairs) to supermarkets (formal retail) because we see:
Concentration of a wide variety of products in one place (one stop shopping). Competitive prices, healthy and safety environments. Products Traceability is highly value by customers. Access to credit increase the turn over rate.

There are limited room of growth for new players


Current players are achieving scale economies and have heavily. covered the high and medium SEGs, specially in Lima. The 3 main players in Peru has an Integrated retail strategy. We developed a deep local shopper knowledge.

Supermarkets in Peru (cont.)


Retail Sales Evolution
CAGR : 14%

Source: Apoyo y Asociados, Empresas Mayo 2010

Supermarkets in Peru (cont.)


Sales Floor Evolution

Source: Apoyo y Asociados, Empresas Mayo 2010

Thousands of Sqm

Supermarkets in Peru (cont.)


DISTRIBUTION CHANNELS
IN CONSUMER MARKET
MARKET SHARE, MAR. 2010
Tottus 16% GSW 47%

150
Supermarkets

15%

Convenience Stores

49%

190,367

Traditional Markets

22%

62,627

SPSA 36%

Others

15% Sales %

54,446 No Retails

Source: Axur Source: Estimation from Cencosud Commercial Intelligence

Grupo de Supermercados Wong (GSW)


Founded by the Wong family in 1983, it has become the leader in the Peruvian supermarket industry with the half of the market share. Cencosud SA acquired 100% of GSW SA equity by January 2008. the acquisition included the whole supermarket business, satellite businesses, support areas and the real estate division, including Plaza Lima Sur Shopping Center. 2009 Net sales were US$1,042 millions and the EBITDA margin was US$84MM (8,1% of sales). GSW contributes with around 10% of the Cencosud total sales and is expected to be one of the growth engines of the group. As of June 2010, GSW operates 59 stores, with a total sales area of 192 thousands square meters

14 Wong Supermarkets

2 Wong Hypermarkets

32 Metro Supermarkets

11 Metro Hypermarkets

Cencosud Peru Organizational Chart


Cencosud Peru Corp- Areas
Finance. (M. Holzapfel)

General Manager
(Juan Manuel Parada)

Financial Business (M. Campodnico)

Commercial Food (A. Arruiz)

Commercial Non Food (F. Bayly)

Commercial Planning (O. Bonfil)

Operations (W. Ceballos)

Processes (N. Muoz)

Marketing (M. A. Merino)

Real Estate (J. P. Escudero)

Logistics (T. Rodrguez)

Legal (M. Moreyra)

IT (F. Los Ros)

Human Resources (Juan C. Justo.)

Int. Auditor (P. Gamm)

In 2008 we started a journey


Net Sales
3.500 3.000 2.500 2.000 1.500 1.000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 mar09 mar10 SHAREHOLDERS VALUE
729 744 1.982 1.535 1.729 1.994 2.406 2.118 2.149 2.687 3.029 3.014

THE JOURNEY TO CENCOSUD PERU

CAGR : 12.8%

A strategy aiming a transformation


CUSTOMER/CONSUMER Enhance client culture & innovation Revitalize the Wong brand Improve price image in Metro Reinvent the client experience in Wong FINANCIAL STRATEGY Service for the Excellency Financial Flexibility CAPEX and OPEX discipline Achieve Project goals Synergies

TO DRIVE GROWTH

SHAREHOLDERS SHAREHOLDERS VALUE VALUE

TO DRIVE PROFIT

OPERATIONS Improve operating effectiveness & efficiency Bring best practices from Cencosud Revamp our operating model

ORGANIZATION Polish the diamond Redefine the Group organization Enhance company values

Financial Business
Financial Business Project in Peru, operated in a first stage through Cencosud Supermarkets, and in a second stage through a Bank owned by Cencosud.

Objetives:
Providing financial solutions to customers of Cencosud formats in Per. Making Cencosud cards the primary payment through the chain.

Strategy:
Issuing Credit Cards in order to facilitate and increase the marketing of goods and services in the Metro Wong Supermarkets. Capture synergies between the financial business and retail business. Develop Business Insurance. Deepening Customer focus: Fidelity Program and Metro Credit Card database. Implement Retail Financial Centers, which integrate into a single space: Cards, Insurance and New Business related .

15

The Picture after 28 months


Cencosud best practices implemented and delivering results Cencosud Peru corporate areas fully integrated to Cencosud S.A. Knowledge exchange activities taking place Global sourcing improved Peru's margins

A whole new company within a love mark aura

The Competitive Situation Raises Several Challenges

Invest more than 230 MM USD Improve of Market Share Increase in Same Store Sales Cost Control while we are growing Keep a Solid Financial Position while Minimizing Exchange Rate Risks.

OBJECTIVES

We have an aggressive Investment Plan We are launching our own private credit card We are increasing efficiencies in Working Capital Balance in the exchange ratio (liabilities in Soles)