Company to watch: CBD/Brazil
São Paulo-based Companhia Brasileira de Distribuicão, or CBD, Brazil’s largest retailer, is shifting its emphasis away from groceries to non-food items to escape food deflation.
While CBD’s sales of non-food products rose 12.5% in 2005, they still account for less than one-quarter of the company’s sales. “The space we have to grow in non-food products is very big,” says Abilio Diniz, CBD chairman. This sector didn’t suffer from falling prices, he noted in a conference call last month to announce a 42% decline in earnings in the fourth quarter of 2005. CBD’s predicament reflects big changes in Brazil, where consumers once purchased extra refrigerators to store their food before prices rose.
As it expands outside of food, CBD faces growing competition from foreign retailers Wal-Mart of the US and Carrefour of France, which are making a push into the Brazilian market. Last year CBD ceded joint control of the company to the Casino Groupe of France, previously a minority shareholder.
CBD operates more than 550 stores in 12 Brazilian states. Meanwhile, its FIC credit venture with Itaú is expanding faster than expected, with 308 units in operation as of December 2005.