Brazilian Retail News

Year 09 Issue # 365 São Paulo, November, 22th, 2010 Phone: (5511) 3405-6666

Brazilian retail sales up 11.8% in

September

Brazilian retail must end 2010 with its best re-

sult in the decade, after ending September with an
11.8% year-on-year sales rise. In Q3, sales rose
11.1% over the same period in 2009, due to more
accessible credit and unemployment rate in the
lowest level ever. Except for cars and autoparts,
whose sales fell 4% year-on-year, all segments in-
creased performance at least around 10%. GS&MD
– Gouvêa de Souza forecasts retail sales will go
up around 10% and 11% this year.

E-commerce sales to soar 40% this Holiday season

e-bit said internet retail sales shall rise by 40% this Christmas season over the same period in 2009, to
R$ 2.2 billion (US$ 1.26 billion). Average sales are expected to be in the R$ 370 (US$ 211.43) range and the
best-selling categories will be Books, Electronics, Computing, Home Appliances, Cosmetics and Beauty.

Drogasil increases Q3 sales and profits

Drogasil, one of the country’s largest drugstore chains, said in Q3 its net profits rose 10% over the same
period in 2009, to R$ 21 million (US$ 12 million). Gross sales went up 13.2% year-on-year, to R$ 536.8 million
(US$ 306.74 million), with 8.6% growth in same-store figures, boosted by a 27.9% growth in stores with up to
three years of operation. Average sales rose 4.6% year-on-year, while store traffic jumped 8.1%.

Brazilian Retail News 1 11/22/2010

Brazilian Retail News
Year 09 Issue # 365 São Paulo, November, 22th, 2010 Phone: (5511) 3405-6666

Shopping center sales to rise by 15%

this Christmas

Sales in the Brazilian shopping centers are expected

to grow up by 15% over the same period last year, accord-
ing to the local trade association Abrasce. In the country’s
401 malls, there shall be opened 175,000 temporary jobs.

MVNO regulation approved in Brazil

National Telecommunications Agency (Anatel) made official last week the Mobile Virtual Network Operators
(MVNO) rules. From now on, any company will be able to offer virtual mobile services, partnering with phone
operators TIM, Vivo, Claro and Oi. Retailers as Pão de Açúcar, Casas Bahia, Pernambucanas and Carrefour
reportedly have MVNO projects and banks are still interested in the matter.

Brazilian Retail News 2 11/22/2010

Brazilian Retail News
Year 09 Issue # 365 São Paulo, November, 22th, 2010 Phone: (5511) 3405-6666

Momentum
Increasingly global franchising
Marcos Gouvêa de Souza - CEO, GS&MD - Gouvêa de Souza

A virtuous sum of factors has been bringing a fast franchising expansion all over the world:

1) Emerging markets, as China, India, South Korea, Australia and Russia, are growing faster than more mature
markets and will continue to do so, leveraging global investments. However, these are markets with very own charac-
teristics, far from the standards of the global corporations. Franchising is the way one can expand penetration in these
markets partnering with local players to help adjusting international models to each country’s or region’s reality, besides
putting on the table some level of investment, thus reducing the global corporate investment and the risk involved.

2) Many countries have created and kept restrictive rules regarding the expansion of global retailers. In one
extreme is India, that only allows the growth of foreign companies through franchising, do not accepting direct in-
vestments in private-owned chains, unless it is to service moms-and-pops retailers, as Walmart has been doing in
the country. Other emerging countries, as China, have created not-so-radical restrictions to restrain an uncontrolled
expansion that could jeopardize local retailers. In mature countries, specially European, as Germany, France and
Italy, but also in Japan, there are rules restraining the expansion of large chains, specially regarding large-surface
shops, as a way to protect small retailers. Franchising becomes, for large retail corporations as Carrefour, Casino,
Leclerc and 7-Eleven, an option to keep growing, bringing in independent retailers to operate under one single fascia
and at the same time complying with the regulations.

3) In the global market it is more and more critical to be close to consumers to ensure real-time knowledge,
relationship and a one-of-a-kind sales channel. This is why global manufacturers, suppliers and brands have been
creating exclusive channels, looking for a strategic growth condition and more market control. But how to build such
a vast strategy in a broad, global and fast way, considering the risks, the size of investments and the retail culture far
different from the industry one? Franchising can provide these brands and suppliers the feasible alternatives to the
creation of exclusive stores and channels, sharing investments with franchisees and being integrated to the reality
of each place, at the same time expanding fast and globally. This is why Nike, Adidas, Puma and many others have
been growing globally this way. In Brazil the strategy is even more aggressive, with many suppliers, in several seg-
ments, working this way. Todeschini, SCA, Criare, Springer-Carrier, Hering, PUC, Scala, Via Uno, Bibi and Café do
Ponto are just a few examples of this process, that tends to keep growing.

This article continues next week

Gouvêa de Souza & MD Desenvolvimento Empresarial Ltda.

Av. Paulista, 171 - 10º floor
Paraíso – São Paulo – Brazil – Zip Code: 01311-904
Phone: (5511) 3405-6666 – Fax: (5511) 3263-0066
E-mail: gsmd-de@gsmd.com.br
Home-page: www.gsmd.com.br

Brazilian Retail News 3 11/22/2010