Forgot your password?

Choose a newsletter

Premium access provided by ENSTA

Your premium access provided by ENSTA

Enter your email to begin

Premium access granted to you by NRC Q

You been given free premium access to Worldcrunch for 8 weeks thanks to NRC Q.

Enter your email to begin

Premium access granted to you by EM-LYON

You been given free premium access to Worldcrunch for 8 weeks thanks to EM-LYON.

Enter your email to begin

Premium access granted to you by Goldsmiths

You been given free premium access to Worldcrunch for 8 weeks thanks to Goldsmiths.

Enter your email to begin

Premium access granted to you by MinnPost

You been given free premium access to Worldcrunch for 6 months thanks to MinnPost.

Enter your email to begin

Premium access granted to you by Expatica

You've been given FREE premium access to Worldcrunch

Enter your email to begin


Why Walmart Can't Beat The Competition In Brazil

Article illustrative image Partner logo Walmart, pushing forward in Brazil

BRASILIA - There’s a strange section on Walmart Brazil’s website, strange at least for a retailer. It’s not the usual invitation to apply for a job, “Work with us,” but an invitation to make real estate deals with the huge multinational company. “If you own land or a building where it would be possible to install new Walmart Brazil stores, fill out the following form.”

That little announcement is evidence of Walmart’s insatiable appetite for expansion, an desire for growth that led to criticism of the company when the New York Times revealed last April the company’s massive use of bribes to expand in Mexico. Walmart used the bribes to accelerate the process of buying property and to secure store permits from public officials.

The scandal made the company's stock prices drop in Mexico and New York, and forced it to postpone plans for expansion in Mexico and Central America. It also led to a lawsuit by several pension funds in the United States, whose portfolios were affected by the decreased stock price. In Brazil, the company is not thinking about slowing down, but it still suffering from the effects of the scandal. And all eyes are on Walmart’s next moves.

Last year was a difficult one for the giant retailer’s global operations. The damage to its reputation from the corruption scandal left a mark on all of the company’s operations in the region. That is certainly the case in Walmart’s second most important market, Brazil.

According to the Brazilian Association of Supermarkets (known as Abras), Walmart Brazil had sales of $11.5 billion in 2011. The American company did not manage to beat the French giant Carrefour, which had $14 billion in sales the same year. Pão de Açúcar, which is also owned by a French company, is undeniably the market leader and had sales of $25.7 billion in 2011. Around 80 percent of Brazil’s retail market is controlled by foreign companies, which is one of the reasons there has been so much growth in that domain, as foreign capital is infused into the market.

Projections for the retail market in Brazil are promising. According to consulting firm A.T. Kearny’s Global Retail Development Index, Brazil has had the highest growth in the world in this sector for two years in a row, and a 15% increase just in this last year. Brazil is followed by Chile, China, Uruguay and India.

Eternal Third Place

Walmart first arrived in Brazil in 1995, and is currently present in 18 states, counting some 81,500 employees. But even with strong growth, the fight against Carrefour and Pão de Açúcar has been hard, and Walmart has not been able to gain an advantage.

For retail analysts, there is only one explanation for Walmart’s struggles in Brazil: the lack of synergy between the nine different brands and five different formats it is operating in the country. The company currently operates three different kinds of supercenters, three supermarket chains, a cash and carry wholesaler, a chain of smaller local stores and Sam’s club buyers’ club.

“Although it has been in the market for 17 years, Walmart has not yet been able to centralize its management,” said Roberto Nascimento, professor of business at the School of Publicity and Marketing in Brasilia. “Today the network has three different realities, one in the Northeast, one in the Southeast and on in the South. The differences in leadership among the different companies can explain this situation.”

Walmart Brazil’s CEO, Marcos Samaha, understands that perfectly well. In a teleconference with analysts to disclose the company’s results from the first trimester of 2012, he emphasized that the group would start the process of revamping its Brazilian operations. The idea is to unify communications between all of the different brands.

Another modification in progress is an effort to reduce the company’s cost structure in Brazil. The initiative includes a strategy called “Every Day Low Price” (EDLP). “We are seeing that this new strategy allowed us to reach much better results this year. In the first trimester, for example, we grew 8.6 percent,” Samaha stressed, adding that the chain is going to invest $636 million opening new stores. 

Mexican Contagion

In spite of the fact that the bribe scandal happened in Mexico, Brazil is also cited as one of the countries with the highest risk of corruption for the company. "They are just accusations. I can assure you that were always working with our focus on integrity,” Samaha says.

In Mexico, the company is accused of having spent at least $24 million to pay mayors, town councilors and authorities that helped Walmart to expand. In that way, they were able to get building permits or they avoided the inconvenience of negative environmental impact studies. That same need for expansion is what prompted Walmart to advertise loudly its need for land and buildings in Brazil. In fact, the Mexican scandal has the Brazilian authorities watching the expansion process closely.

However, the path towards higher share values still has a major obstacle: Pão de Açúcar, and its leading role in the Brazilian retail market. French group Casino took control of the company last June after an abortive attempt by the previous owner to sell the company to Carrefour. Analysts are expecting that the new owners will pursue an even more aggressive strategy, which could mean increasing its lead over Walmart.

Sign up for our weekly Global Biz & Innovation newsletter now

Be a part of the conversation. Click to show comments
About this article source Website:

America Economi­a is Latin America's leading business magazine, founded in 1986 by Elias Selman and Nils Strandberg. Headquartered in Santiago, Chile, it features a region-wide monthly edition and regularly updated articles online, as well as country-specific editions in Chile, Brazil, Ecuador and Mexico.

Worldcrunch brings top stories from the world's best news sources into English for the first time.

- Find out how we work
- Stay connected with our newsletter
- Try premium access for just $0.99

Want to get in touch or report a bug? Find us at

Load More Stories

Unlimited access to exclusive journalism, the best world news source across all your devices

Subscribe Now Photo of Worldcrunch on different devices

Your premium access to Worldcrunch is provided by

University of Central Lancashire

Please register to begin

By registering you agree to our terms of service and privacy policy.