New Star Emerging in Chilean Retailing
Over the course of two years, entrepreneur Alvaro Saieh has forged SMU from an amalgamation of 35 local supermarket chains, including Unimarc, El Pilar, Deca, Korlaet and Bryc. (In addition, Saieh holds a 40 percent stake in the 30-store Montserrat supermarket chain.) With approximately 250 stores and estimated sales of $1.7 billion in 2009, SMU has become the third-largest food retailer in the country after Cencosud and D&S, and is a key player in the Chilean capital.
Saieh acquired Unimarc’s assets in October 2007, and just a few weeks later reached an agreement with Supermercados Deca owner Juan Rendic to merge those companies. SMU has acquired myriad companies subsequently, the latest being Casa Rabié in September.
The retail sector has not been severely impacted by the weak economic situation in Chile; in fact, the industry enjoyed growth of about 4 percent in the 12 months leading up to September 2009. Retailers have therefore continued to expand with a general view that economic recovery will begin in 2010, when GDP growth is forecast to reach 4 percent.
Turnaround under way
SMU’s shopping spree added new regional chains to its store count, as well as a 20 percent stake in department store Ripley. This latest move follows a model of retail growth in Chile used by leading retailers Cencosud, Falabella and D&S — integrating grocery operations with department stores and DIY businesses.
The retailer also decided to unify its multitude of fascias around its best-known brands — Unimarc for supermarkets and Mayorista for its cash & carries. Furthermore, SMU is carrying out a general upgrade of its operations that includes the centralization of logistics, a focus on food and the launch of the Club Unimarc loyalty program.
Smaller player, same steps
Argentinean-Chilean investment fund Southern Cross has also positioned itself within the Top 5 in Chile via its Supermercados del Sur retail division. The company has overtaken Falabella, with estimated 2009 sales of $700 million. Supermercados del Sur now operates about 100 supermarkets — including the Keymarket and Bigger chains — with plans to open another 80 units over the next three years.
The retailer is going to invest about $20 million to remodel 60 of its existing outlets and convert them to the Bigger banner, which has been chosen as the main brand name for the company.
2010 outlook
As there are few remaining independent chains left to acquire, SMU will concentrate on growing organically. It will invest $300 million in the opening of 50 new supermarkets, which will take it to the 300-store mark by the end of the year and grow sales to $2.9 billion by 2011.
Meanwhile, Supermercados del Sur will invest $50 million to open between 20 and 25 Bigger stores, half of them in Santiago. Overall, the retailer plans to invest $200 million through 2012. As for the other major players, D&S has unveiled plans to invest $200 million next year, and it is unlikely that Cencosud and Falabella will let the competition erode their market share without putting up a fight.
