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Companhia Brasileira de Distribuiçao

Companhia Brasileira de Distribuiçao

Avenida Brigadiero Luiz Antonio 3142
Sao Paulo, Sao Paulo 01402-901
Telephone: (55) (11) 3886-0421
Fax: (55) (11) 3886-7686
Web site:

Public Company
1948 as Doceira Pao de Açúcar
Employees: 63,484
Sales: BRL 15.3 billion ($5.22 billion) (2004)
Stock Markets: Sao Paulo; New York
Ticker Symbols: PCAR3; CBD
NAIC: 443111 Household Appliance Stores; 443112 Radio, Television and Other Electronics Stores; 45211 Supermarkets and Other Grocery (Except Convenience) Stores

Companhia Brasiliera de Distribuiçao (CBD), much better known as Grupo Pao de Açúcar or simply Pao de Açúcar, vies with the Brazilian subsidiary of French-based Carrefour S.A. for the title of largest retailer in Brazil, operating more than 500 hypermarkets, supermarkets, and stores that specialize in furniture and electronic and home-appliance products. It has a close partner in a rival of Carrefour, Casino Guichard-Perrachon S.A.

Development of a Retailing Empire: 194889

Valentim Dos Santos Diniz, a Portuguese immigrant, arrived in Brazil in 1929. He established a pastry shop named Pao de Acucar (Sugarloaf) in Sao Paulo in 1948. By the end of 1952 he had added two branches, and in 1959 Pao de Açúcar acquired another chain, and with it, its first supermarket. There were 11 stores in 1965. The following year the enterprise added its first store outside Sao Paulo, in Santos.

Pao de Açúcar established the first Brazilian around-the-clock, 24/7 supermarket in 1969, in Sao Paulo. At this point it had 55 stores. The following year it was the first Brazilian retailer to open a store abroad, in Lisbon. In 1971 the chain opened the first Brazilian hypermarket, called Jumbo, selling a variety of goods as well as food products. That year it also introduced its own private-label brands, beginning with a detergent, and launched auto dealerships and auto-parts stores under the Pao de Açúcar name.

Pao de Açúcar acquired a travel agency in 1972 and a second one in 1974. In 1973 it opened a Jumbo in Luanda, Angola, and acquired the Carisma supermarket chain in Belém. The company opened Nell's, a restaurant chain, in 1974, and acquired the CompreBem supermarket chain, consisting of 15 supermarkets in the states of Pernambuco and Paraíba, in 1975. This raised the number of its stores to 100. The following year the enterprise acquired Electroradiobraz, consisting of 26 hypermarkets, 8 supermarkets, and 16 department stores. With the acquisition of three chains in 1978, Pao de Açúcar now had 236 stores. The following year it introduced Minibox, a chain of no-frills stores for low-income shoppers, with a limited number of items and very competitive prices. At one point there were more than 300 Minibox units.

Pao de Açúcar began the 1980s by opening Sandiz, a department-store chain, and launching Superbox, a big food discount chain. In 1981 it merged the eight chains of the retail division of Grupo Pao de Açúcar into Companhia Brasileira de Distribuiçao (Brazilian Distribution Company). Three more chains were acquired in 1983. The group had 657 units in 1985, 170 of them in greater Sao Paulo. In terms of sales, it was the largest nationally owned private enterprise in Brazil. By the end of 1986 there were 50 Pao de Açúcar stores in Portugal, making it the 22nd-largest enterprise in that country. In 1987 the company introduced First Express, a joint venture with Shell Brazil Ltda. that placed convenience stores within Shell's service-station properties. It sold the Sandiz department-store chain in the same year. Also that year, the company built a $15-million supermarket in Moscow. By 1988 the Pao de Açúcar group consisted of 22 enterprises with 55,000 employees and $2.1 billion in annual sales. It had stores in all but five Brazilian states. And in 1989 yet another chainExtrawas introduced. This was a hypermarket chain offering a large variety of both food and nonfood products.

All was not well, however, within Pao de Açúcar's Diniz clan. The founder, now 74, had yielded day-to-day management of the group to the eldest of his six children, Abílio. His privileged position was resented by Valentim's two younger sons, Alcides and Arnaldo. The Sandiz sale, which was Alcides' work and opposed by his father, brought in $60 million, some of which went to the children, but it left Alcides still unhappy. In 1988 he surrendered his 8 percent holding in the group to his father. In terms of liquid net worth, this amounted to $21 million, but in an attempt to keep peace within the family, Valentim awarded Alcides land, two enterprises, and cash that was valued in total at $120 million.

Retrenchment and Recovery in the 1990s

A severe economic recession forced Pao de Açúcar to restructure its operations in 1990, a year in which it lost $60 million. The enterprise was so short of ready cash that it was in arrears of its taxes and its payments to suppliers. Abílio Diniz went to London and offered the enterprise to the investment bank Morgan Grenfell & Co. Ltd. for $400 million but was able to attract only half that as a counteroffer. To save itself from bankruptcy, Pao de Açúcar borrowed $120 million from banks and sold its headquarters buildingdubbed the "Glass Palace"for $55 million. It closed many stores (including the Jumbo and Minibox chains), fired workers, and disposed of its noncore businesses. The number of outlets dropped to 233, the number of employees from 45,000 to 18,000, and the group fell to second place in Brazilian retailing, behind the French company Carrefour. By late 1992 Arnaldo Diniz, the youngest son, was ready to defect and sell his share of the family holding company, but he rejected the amount offered. The net worth of this holding company, Pao de Açúcar S.A. Indústria e Comércio, had fallen by about half because of Brazil's hard times. The dysfunctional family was again in the news in 1993, when Abílio persuaded his fatherover his mother's objectionsto turn over enough of his shares to give him 51 percent majority control. The sale that year of Supa, the group's Portuguese branch, brought in $300 million and allowed Abílio to buy out Arnaldo and two of his three sisters.

By this time the Brazilian economy had recovered, and Pao de Açúcar had regained its stride. The Extra hypermarket chain, pursuing a policy of aggressive price cutting, was accounting for nearly a quarter of the group's revenues. In 1994 Pao de Açúcar equaled the peak revenue of $2.3 billion that it had attained five years earlier, although the number of its units had now fallen to 216. In 1995 it introduced the first electronic supermarket in Brazil, Pao de Açúcar Delivery, which became Internet-accessible the following year. As CBD, the group went public in 1995, selling $112.1 million worth of preferred shares on the Sao Paulo stock exchange. Two years later, CBD became the first Brazilian retailer with a listing on the New York Stock Exchange, raising $172.5 million by selling preferred American Depositary Receiptsthe equivalent of shares.

The Minibox format was reintroduced in 1998 as Barateiro (Cheap), the name of a chain, Rede Barateiro de Supermercados, that had recently been acquired by the group. Also that year, the group introduced, in Sao Paulo, Pao de Açúcar Kid's, an educational supermarket. In 1999 Pao de Açúcar acquired two chains and leased three more. During the year Casino Guichard-Perrachon S.A., a French-based giant multinational retailer, paid more than $1.3 billion for about 21.3 percent of CBD's voting capital, plus debentures convertible within five years into a potential maximum of 40 percent of the voting capital. The money was earmarked to help Pao de Açúcar continue making acquisitions and to service its BRL 1.5 billion ($692 million) of debt.

"This is not the fall of the last Brazilian supermarket operator," Abílio Diniz told Geoff Dyer of the Financial Times. "We will continue to be a Brazilian company controlled by Brazilians." He said that the principal advantages would be technological, plus access to a global system of sales. Casinoa principal rival of Carrefour in Francewas used to operating in markets that were extremely concentrated and competitive, and it had a large line of its own private-label products, a field in which Diniz acknowledged that Pao de Açúcar was deficient. Casino also had lessons for its new Brazilian partner in the fields of efficient operation of distribution centers and operating such other retail formats as convenience and discount stores.

Challenges of the 21st Century

Pao de Açúcar's acquisitions helped increase the group's annual revenues to $3.2 billion. It was the first food chain to keep many of its stores open around the clock and the first to popularize its own brand of food items. The stores in Sao Paulo's better neighborhoods carried gourmet treats in the bakery sections; those in the city's Japanese and Jewish neighborhoods included ethnic fare. Yet the company was still left second to Carrefour's Brazilian subsidiary and apprehensive of the looming presence of Wal-Mart Stores Inc. In 2000 it closed the gap on Carrefour by adding 80 stores, most of them from five chains that it acquired. And the next year it purchased ABC Supermercados S.A. in the state of Rio de Janeiro, thereby adding another 26 stores. In 2002 Pao de Açúcar acquired the Sé Supermercados chain60 stores in 16 cities of Sao Paulo statefor BRL 250 million (about $85 million). These additions enabled Pao de Açúcar to pass Carrefour in sales volume but increased its debt-to-equity ratio to 50 percent, compared to only 15 percent after selling stock shares and debentures to Casino.

In 2003 Diniz relinquished his position as chief executive officer of the group, assuming instead the supervisory post of chairman of the board. He passed over Ana Maria, the oldest of his four children and vice-president of operations, selecting as his successor Augusto Marques da Cruz, administrative vice-president and chief financial officer.

Company Perspectives:

The company's mission is to ensure the best shopping experience to all our customers, in each of our stores.

Pao de Açúcar made another major transaction in late 2003 by forming a joint venture with Grupo Sendas S.A., operator of 106 stores in Rio de Janeiro. Once the largest supermarket chain in Rio, Sendas had fallen on hard times and was operating in the red and having difficulty paying its suppliers. Pao de Açúcar added its own Rio stores to those of Sendas and turned Sendas into a low-priced chain similar to its own CompreBem in Sao Paulo, reducing the number of items sold, selling one of the two Sendas distribution centers and its fleet of refrigerated trucks, but also providing a large infusion of funds for modernization.

Pao de Açúcar entered, in 2004, in an agreement with Banco Itaú S.A.Brazil's second-largest private bankto establish Financeira Itaú CBD S.A. The partnership was aiming to issue 9.3 million credit cards by 2014 to retail shoppers such as Pao de Açúcar's own customers. It also intended to offer other products, such as insurance and real-estate loans.

Casino raised its equity stake in Pao de Açúcar in May 2005, and took 50 percent of the common shares of a holding company that would partly own the enterprise. Casino and Diniz would have equal membership on the boards of both bodies. The complex arrangement included Casino's payment of BRL 1 billion (about $400 million) for 60 Pao de Açúcar real-estate properties. The infusion of funds was expected to enable the enterprise to pay down its debts and fund an expansion program aimed at opening 160 more stores in the next four years.

In August 2005 Pao de Açúcar unexpectedly announced that Cruz would be leaving the company. Although neither he nor Diniz would speak candidly about the circumstances, the Brazilian business magazine Exame reported that associates of Cruz said that Diniz had continually interfered with Cruz's administration of the enterprise, and that Casino was dissatisfied with the profitseven though net income increased by 51 percent between 2002 and 2004. A committee headed by Ana Maria Diniz was said to have narrowed the choice of Cruz's successor to six, with the final decision to be made by her father.

Pao de Açúcar had five retail chains in 2005, with a total of 553 stores operating in 13 states. The largest, in terms of units, was Pao de Açúcar, with 185 stores. It had a neighborhood supermarket format and was aimed at higher-income consumers with a cosmopolitan lifestyle. CompreBem had 177 supermarket stores. It was aimed at working women and emphasized low prices and fresh produce and meat. Sendas, with 66 stores, was very similar to CompreBem. By far the largest chain, in terms of selling space, was the Extra hypermarket chain, offering a large variety of food and nonfood products at competitive prices. Extra's 75 stores had 578,208 square meters of selling space, or about half of the total in the group. Extra Electro (the successor to Electradiobraz) had 50 stores. It specialized in electronic and home-appliance products but also sold furniture and bazaar items.

Pao de Açúcar's gross revenues came to BRL 15.3 billion in 2004, or $5.22 billion, based on the average value of the currency in relation to the U.S. dollar during the year. Of this sum, Extra accounted for almost half (48 percent), followed by Pao de Açúcar, CompreBem, Sendas, and Extra Electro. The net revenue (less taxes and returns) was BRL 12.57 billion ($4.29 billion), and the net profit BRL 369.83 million ($126.22 million). Although net revenue was up 18 percent from the 2003 total, Pao de Açúcar fell behind Carrefour's subsidiary, Carrefour Comércio e Indústria Ltda., in sales.

Principal Subsidiaries

CBD Technology Inc.; Golden Auto Posto Ltda.; Sé Supermercados Ltda.

Principal Operating Units

CompreBem; Extra; Extra Electro; Pao de Açúcar; Sendas.

Principal Competitors

Casas Bahia Comercial Ltda.; Carrefour Comércio e Indústria Ltda.

Key Dates:

Valentim Dos Passos Diniz establishes the Pao de Açúcar pastry shop in Sao Paulo.
Pao de Açúcar opens its first supermarket.
Pao de Açúcar opens the first Brazilian hypermarket, called Jumbo.
The group's eight retail chains are merged into Companhia Brasileira de Distribuiçao.
Introduction of the Extra hypermarket chain, which becomes the group's largest.
CBD becomes the first Brazilian retailer with a listing on the New York Stock Exchange.
French retailer Casino takes a large stake in the enterprise.
Additional acquisitions allow Pao de Açúcar to regain its rank as top Brazilian retailer.
Pao de Açúcar's five retail chains have a total of 553 stores.

Further Reading

"Agora tudo vai ser diferente," Exame, August 24, 1988, pp. 99-100.

Blecher, Nelson, "Como Abilio manteve seu poder," Exame, May 25, 2005, pp. 50-53.

Carvalho, Denise, and Nelson Blecher, "Troca de comando," Exame, August 31, 2005, pp. 54-55.

"Cidao dá exemplo," Exame, October 14, 1992, p. 69.

Correa, Cristiane, "Dois lados de un casamento," Exame, November 10, 2004, pp. 62-64.

Dolan, Kerry A., "Outmuscling Wal-Mart," Exame, May 10, 2004, pp. 80-81.

Dyer, Geoff, "Casino takes stake in Brazilian store chain," Financial Times, August 11, 1999, p. 22.

Katz, Ian, "Clicking for Groceries," Business Week, May 8, 2000, p. 20.

Netz, Clayton, and Joaquim Castanheira, "As liçoes que o abos,p traz," Exame, April 12, 1995, pp. 44-50.

Ogier, Thierry, "The Handoff," Latin Trade, July 2003, p. 52.

Rosenburg, Cynthia, "A empresa de um rosto só," Exame, April 18, 2001, pp. 47-56, 58.

Samor, Geraldo, "French Retailer Casino to Boost Its Stake in a Brazilian Grocer," Wall Street Journal, May 5, 2005, p. B8.

"Sócia, esposa, mae e guerreira," Exame, February 3, 1993, p.45.

Whitefield, Paul, "Casino boosts Brazilian interests," May 4, 2005,

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