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Walmart is one of the most dominant retailers in the world.
In 2017, Walmart ranks number one in revenue of all major retailers worldwide.
Walmart operates over 11000 locations under 55 banners across 27 countries.
You can find a Walmart anywhere from Botswana to the UK to Costa Rica.
But despite its success abroad, the brand has struggled to stay afloat in one of the biggest markets in Latin America,
After years of hyperinflation and the GDP growing 1.5% from 1980 to 1993 in Brazil,
the country's economy was on the rise. Brazil introduced economic reforms in the 1990s and according to
The Washington Post Brazil attempted to move the economy from a period of state-run monopolies to a free market.
Brands like Walmart saw this as an opportunity to expand their global reach with an emerging market on the rise.
By 1995, Walmart announced that they would be entering the
Brazilian market and by 1996, the company opened five stores.
By 2000, Walmart had 14 stores in Brazil but it wouldn't be long until Walmart began rapidly growing in Brazil.
In 2004, the company made an acquisition of Bompreco and its 118 stores for $500 million.
And in 2005, one more finalize a $757 million acquisition of Sonae's 140 stores across Brazil.
Walmart believed that these acquisitions would improve the company's position as a national retailer in Brazil;
operating 295 stores in 17 of Brazil's 26 states.
At the time, Walmart Brazil's then president stated "We're looking forward to getting to know the habits of the local
customers and strengthen relationships with the regional suppliers."
But understanding the habits of the local customers would be something that would end up hurting Walmart's expansion plans.
At its peak, Walmart Brazil had 558 stores across the country.
This included Walmart and Sam's Club, along with local banner brands such as Bompreco and Maxxi.
But that was in 2013. By 2018, Walmart had closed 120 of its stores in Brazil.
Walmart Brazil has been hemorrhaging cash and making very little movement in revenue growth.
The company grew too fast and it wasn't seeing much of a return on its investments.
According to Reuters, Walmart posted operating losses for seven straight years.
Partly due to trouble with labor, inefficient operation, poor store locations and uncompetitive prices.
CNBC reached out to Walmart but the company could not corroborate the report from Reuters
Through 2014 to 2018, Walmart's participation in the market share stayed flat to 2.5%.
While its main competitors both Carrefour and Casino, French retailers, they saw a increase in overall retailing market shares.
And over the 23 years it's been in Brazil, it's failed to reach the local crowd of consumers.
The reason?
Well, Walmart didn't adapt to the local consumers needs
and the company didn't capitalize on how Brazilian shoppers spent their money.
The local spender was not all that interested in Walmart's famous "Everyday Low Prices" and its one-stop-shop business model.
That's just not how the typical Brazilian shopper spent their money.
Although it works very well in the U.S. and other countries, such as Chile and Mexico, it backfired in Brazil.
Brazilian consumers are very attracted to promotional sales.
But promotions deals are only effective in Brazil if they are punctual.
So since prices were low every day, Brazilians didn't actually perceive value in the promotion.
According to McKinsey and Company, they would proactively search for savings and oftentimes they
wouldn't even shop at multiple stores to find the best deals available.
From discount chains to cash and carry format stores.
One type of retailer that Brazilians don't utilize is e-commerce shopping.
In fact in 2018, Walmart Brazil announced that would be winding down its first party e-commerce business in the country.
The most popular option for today's Brazilian consumers are the cash and carry format stores known as "Atacarejos."
It combines words like "Atacado" which means cash and carry and "Varejo" which means retailer.
That's because these stores are mixed between the two retail formats.
The atacarejos rise in Brazil is mainly tied to the economic crisis that has affected Brazil in the last couple of years.
So while the atacarejos and the hypermarkets are similar in model
so both have a large array of products they have big selling spaces and attractive prices.
Brazilian consumers which were already price sensitive and with now a limited purchasing power, were forced to-
to think strategically how they did their grocery shopping in the month.
From 2017 and 2018, these kinds of stores grew 11% and raked in $12.5 billion in sales. In that same time frame,
supermarkets and convenience stores only saw small growth of 3.7%.
As for Walmart, 60 of its stores were closed in 2018 alone. Walmart trails behind companies like Carrefour
and Casino who are leaders in the cash and carry format stores according to Kantar.
And Walmart has continued to struggle to find its footing in Brazil competing against these kinds of format stores.
In 2017, Carrefour raked in $16.5 billion and Walmart in less than half of that; making a little over $6.7 billion.
So what was its method for success?
Well, there's no membership fees like other warehouse stores which can cost anywhere from $45 to $100 a year.
Cash and carry stores traditionally have lower operating costs and are able to offer lower prices for products.
And according to Euromonitor, between 2012 and 2017, warehouse clubs in cash and carry stores in Brazil grew 99%.
Brands like Carrefour's Atacado, offers customers low interest credit cards that can only be used as stores under the Carrefour umbrella.
As of 2018, there are 2 million Atacado credit cards, which leads customers to spend 15% more on the cards.
Despite these missteps, Walmart pursued a footprint in Brazil.
The company tried to position itself to acquire a different banner stores in Brazil to widen its hold on the country.
One of its successful banner stores was Maxxi, which was a cash and carry format store. But since there are
only 44 stores in Brazil it isn't enough to keep Walmart afloat.
In addition to closing down stores across the country, it
remodeled a 120 stores as leadership fluctuated under four different CEOs in less than a decade.
In June of 2018, Walmart announced that they will be selling 80% of their business in Brazil to a private equity firm called Advent International.
They want to invest more in the atacarejo model.
So they want to rebrand some of the less profiting hypermarkets into the atacarejo.
They're going to cut costs as much as they can. Raising different suppliers. That they wouldn't seek new
suppliers that would raise Brazilian products into their shops.
In a statement about the deal, Walmart said that they will continue to have stake in Walmart Brazil and will
continue giving the Brazil business the best opportunity for long term growth.
CNBC reached out to Walmart but the company did not respond to any questions regarding its struggles in Brazil.
The deal with advent would allow Walmart at 20% stake in the Brazil market but the company expects to record a net loss of $4.5 billion.
Advent looks and turn things around for Walmart's remaining 438 stores in Brazil without opening any new stores.
For now.
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Why Did Walmart Fail In Brazil?

187 Folder Collection
PENG published on March 28, 2019
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