The Supply Side: Walmart bolsters position in Chile with $1.3 billion investment

While Walmart has downsized its global portfolio, the retail giant continues to invest in countries where it sees growth opportunities. The company recently said it will invest $1.3 billion in Chile over the next five years. After exiting Argentina and Brazil, Chile remains the retailer’s sole asset in South America.

Walmart CEO Doug McMillon has said divestitures in Argentina and Brazil were hard decisions, but more oxygen was breathed into remaining businesses. Walmart said remaining in Chile allows for consolidation of market leadership in one of the region’s most stable economies. Walmart Chile CEO Cristian Barrientos said the investment is in infrastructure, technology, people and community.

“We are building a better future for everyone, for future generations and for our children. We trust in Chile. We trust in its people. We continue exploring together,” Barrientos said.

The expansion includes 70 new stores in underserved regions, which will extend Walmart’s reach into areas that have traditionally been difficult to reach. The expansion will add 4,000 new jobs, reinforcing Walmart’s position as a key employer in the country.

A new distribution center will be built in southern Chile to service the region. This facility will allow for faster restocking and improved service in urban and rural areas, according to the retailer. Barrientos said complexity of the climate means accessing the southern tip of Chile is not an easy task. The Walmart Lider store in Punta Arenas is more than 2,000 miles from the central distribution center. Also, the weather can be extreme. In 2024, the area saw temperatures reaching minus 15 degrees Fahrenheit.

Walmart said it reacted by creating supply chain routes by land, air, and sea or a combination of routes to reach the southernmost Lider store. When access becomes too treacherous, Walmart uses a reserve storage system called “El Oso” — the bear — to ensure customers can still get the essentials. The Punta Arenas team also created an e-commerce strategy to deliver products via ferry to the 25 residents of Puerto Toro, the southernmost permanently inhabited community on Earth.

“Stories like these are what drive us,” said Barrientos. “For this reason, the impact of Walmart Chile is not only in Punta Arenas; our value proposition aims to reach every corner of Chile: from Putre in the far north to Biobío in the central south. And to so many other places whose inhabitants motivate us to continue seeking new ways to approach, listen to, and serve them … to become their best ally and neighbor.”

Walmart also said it is focusing on sustainability, with plans to install solar panels at more than 50 locations in keeping with Walmart Chile’s goal to source more than 80% of its energy from renewable sources. The plan also calls for 25 new recycling points this year to promote waste reduction.

“This announcement allows us to further enhance our value proposition to customers through low prices on basic products, as well as products and solutions that improve their quality of life,” said Kath McLay, CEO of Walmart International.

WALMART HISTORY IN CHILE
Walmart entered Chile in 2009 with a $1.6 billion majority acquisition of Distribución y Servicio, one of the country’s leading retailers. The Walmart-owned stores in Chile include Lider, Express de Lider, SuperBodega aCuenta and Central Mayorista which number nearly 400 stores making it a large retailer in the country.

Walmart first invested in South America in 1995, with four Walmart stores and two Sam’s Clubs in Buenos Aires, Argentina. Global tensions and economic instability prompted the sale in 2020 of Walmart and Changomas banners in Argentina to Group de Narvaez, keeping only a small minority stake. Brazil was another market where Walmart struggled to operate from 1995 until 80% of that business was sold in 2018. Walmart was unable to grow market share amid local competition and French retail giant Carrefour. By 2022, Walmart was completely out of Brazil when Carrefour acquired Walmart’s minority stake in Brazil businesses.

Chile has a population of more than 18 million, a growing middle class and a stable economic environment that the other countries did not possess. Analysts also said the country’s high internet penetration and expanding e-commerce business provide additional opportunities for Walmart to integrate online and physical store shopping experiences. By 2022, Walmart Chile was the largest supermarket in Chile by revenue, with a market share of about 20% of total retail in the country.

While there have been challenges in Chile from local and international retailers, Walmart said it has been able to adapt and leverage its global supply chain to focus on local consumer needs. Walmart said Chile also serves as a strategic hub for its operations in Latin America, enabling the company to experiment with innovation that can be replicated in other markets.

This latest investment follows news in late 2023 of Walmart expanding its online marketplace to Chile in 2024, joining Canada, the United States and Mexico. The expansion allows U.S. sellers to reach a broader audience and sell products globally. Chile offers a market for e-commerce for U.S. sellers because a free-trade agreement between the U.S. and Chile allows for smoother international transactions. For Chilean sellers the country has free trade agreements with China and the European Union in addition to the U.S.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics, and is sponsored by Harvest Revenue Group.