POS Patriotism.

Author:OGIER, THIERRY
 
FREE EXCERPT

Brazilian retailer Pao de Acucar wraps itself in the flag to ward off foreign competitors and the economic crisis.

THE BRAZILIAN FLAG IS ALmost always draped over the entrance to Pao de Acucar supermarkets. As customers enter each store, they are handed yellow ribons that say, "I do believe," as in "I do believe Brazil will overcome its latest economic crisis." Once inside, large placards display the country's most famous icon, which gives the chain its logo and name: Sugar Loaf Mountain (Pao de Acucar).

With international retailers storming into a depressed local market, the Brazilian supermarket chain is unsheathing patriotism and optimism as marketing weapons. "This [campaign] is essential right now. Brazil is going through a period of economic transformation, and the nationalist appeal has a great impact on a large part of the public," says Ricardo Florence. planning director at Pao de Acucar in Sao Paulo.

The flag waving is just the latest maneuver in the Brazilian retailer's all-out effort to gain market share. Last year, the company doubled investments to just under US$800 million, buying competitors left and right, remodeling existing stores and opening "everything under one roof" hypermarkets everywhere. The calculations are not terribly sophisticated: More selling space will equal more sales, improved selling space will equal improved sales, and a wider variety of selling formats will equal a wider variety of clientele. And it's working.

Get big or get eaten. With 32% market share last year, France's Carrefour still is No. 1, but Pao de Acucar (28%) is closing fast. Carrefour's sales exceeded Pao de Acucar's by 75% in 1992, the difference fell to 50% in 1997 and 25% last year. In local currency terms, sales grew at the astronomic rate of 42% last year against an average of 6% for the retail sector. Profits amounted to about US$130 million on sales of $3.6 billion in 1998.

Like many companies in Latin America, Pao de Acucar's newfound focus has everything to do with competition. While Carrefour has been in Brazil since 1971, Wal-Mart, Dutch Royal Ahold and the Portuguese chains Sonae and Jeronimo Martins have entered the market in the last few years. Acquisitions have become the order of the day. Based in Sao Paulo, the nation's most competitive market, the Brazilian retailer had a choice: get big or get eaten.

Under the guidance of CEO Abilio Diniz since the early 1990s, Pao de Acucar is choosing a high-calorie diet of...

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