Wal-Mart news briefs: $316 million going into Brazil, Chinese grocery bid, Walmart To Go remodel

by Talk Business and Politics (staff@talkbusiness.net) 122 views 

Wal-Mart Stores continues to invest in growing its global footprint, from tweaking it’s first convenience store in Bentonville to a multimillion dollar investment going into its lackluster Brazilian business, and also bidding on a grocery chain in China.

BRAZIL INVESTMENT
Brazil has been an underperforming business for Wal-Mart Stores compared to its other Latin American interests. But the retail giant is not yet throwing in the towel. Wal-Mart plans to invest $316 million in Brazil through 2019 to update about 120 stores under the Hiper Bompreço and BIG banners, according to Peter Muccciolo, spokesman for Walmart International.

“We’ve already done about 10% of it this year,” said Flavio Cotini, CEO of Walmart Brazil, who addressed the media recently at the Latam Retail Show in Sao Paulo.

Wal-Mart runs several formats in three separate divisions in Brazil. It set up shop there in 1995 and has struggled to grow marketshare in the past 22 years against French retailer Carrrefour and Grupo Pao de Acucar.

Clint Lazenby, founder ofBentonville consulting firm #OnShelf, told Talk Business & Politics that Wal-Mart continues to struggle in Brazil and having listed the business for sale with no takers a couple of times in the past few years, it looks like Wal-Mart is trying to improve its position. He said there are challenges in Brazil out of the realm of Wal-Mart’s control, such as the structure that prevents the retailer from consolidating its three divisions located in the North, Central and Southern parts of the country. Lazenby said some of the Wal-Mart real estate locations are not in the greatest condition when competitors are also raising money for store upgrades.

Carrefour is expected to aggressively add to its store count in Brazil over the next three years behind a recent IPO. Grupo Pao de Acucar also raised funds for future store investments, according to Goldman Sachs.

Lazenby said aside from economic challenges in Brazil, Wal-Mart competitors operate highly promotional businesses with blue light specials on the hour and lots of excitement in the retail centers. He said Every Day Low Prices didn’t broadly resonate in that culture and it’s been a hard sale for Wal-Mart, whose store traffic counts are weaker than its competitors. He said the fragmented structure has also kept Wal-Mart from leveraging national supply chain and distribution grid.

“It’s impossible to scale a business in Brazil much like in India,” Lazenby said. “Wal-Mart really doesn’t have a choice but to invest and try and improve its store formats in Brazil, which is a tough place for retailers.”

In January 2016, Walmart Brazil shuttered 60 of its weakest stores in the country, which accounted for about 5% of the retailer’s sales in that market. The last time Wal-Mart broke out the same-store sales for its business in Brazil was in fourth quarter of last year. Comp sales were flat against the year-ago period with traffic down 2.4%. Net sales for this division were down 4.1% from the prior-year period.

CHINA GROCERY BID
Wal-Mart Stores is reportedly one of five companies bidding for the Lotte Group’s supermarket chain in China. Lotte is based in South Korea and its Chinese grocery banner Lotte Mart is valued around $743 million. Goldman Sachs is handling the sale for Lotte Group, but reports indicate bids have been 30% below the expected value. Wal-Mart has not confirmed nor denied its interest in Lotte Mart.

Wal-Mart has actively invested in China, but doing it largely through taking a larger stake in JD.com and then using its store formats with JD.com’s online expertise to reach a larger share of Chinese consumers. Wal-Mart Stores CEO Doug McMillon announced in May a new Chinese flagship Walmart store on the JD.com platform that allows consumers to chose from 1,700 items of food, consumables, general merchandise, toys and apparel which can delivered same day in many first and second-tier cities. This was the sixth initiative between JD.com and Wal-Mart since June 2016.

Wal-Mart Stores hold about 10.1% of the market share in China, which is considerably more than the 1.1% share of Lotte Mart, according to Euromonitor Research. Lotte is in a difficult position in China, according to Jason Yu, of Kantar Worldpanel. He said the retailer’s limited presence has made it tough to build any economy of scale or an efficient supply chain.

CONVENIENCE REMODEL
Wal-Mart has completed the first remodel of Walmart To Go, the convenience format located at 1300 S. Walton Blvd., in Bentonville, a store that is tethered to Store 100, and located down the street from the Wal-Mart home office.

The Walmart To Go opened in 2014 and was the precursor for the new smaller convenience stores located on supercenter parking lots. The store is 5,000 square feet and twice the size of the newer model that was rolled out after executives studied the unique format. The remodel was fairly minor with the permit value of the work totaling $73,000, according to city building permits.

The larger convenience format in Bentonville features a walk-in cooler for beer and wine, which isn’t part of the smaller formats, and it also has a larger ready-to-eat food area located at the back of the store which sells pizza, hot dogs and other deli items. The store originally leased that space to a local restaurant and deli but has since taken over that space. There is also a larger healthy food section which features the retailer’s private label “Market Side” salads, sandwiches and wraps. The format also features a larger beverage center of soft drinks, shakes and coffee. The store opens at 5 a.m. and closes at midnight.

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