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Brazilian Retail News

Year 10 - Issue # 387 - São Paulo, May, 16th, 2011

Phone: (5511) 3405-6666

Brazilian retail sales step on the brakes

Brazilian retail sales had in March a 4.1% year-on-year growth, according to statistics agency IBGE. The performance
was way below the 8.6% reported in February, leading Q1 sales to rise by 6.9% over the same period in 2010. Sales
slowed down significantly in March, due to the calendar effect (Carnival in March reducing sales, without Easter to offset),
food inflation and measures the Brazilian Central Bank took in December to lower credit.

Brazil highly awarded by Outback

Brazil, once again, was the most awarded country
in Outback Steakhouse’s international convention. The
Brazilian branch of the restaurant chain received 60 out of
78 prizes distributed. Twenty-four out of the top 27 foreign
restaurants are in Brazil, including the top 17. The Brazilian
stores got eight of the top ten spots among the fastest-
growing restaurants last year.

Investors start racing for Burger King stores

There is a race for the Burger King franchised stores in Brazil. Three large players are in this process: BR Partners bank,
Itaú’s Kinea private equity fund and Vinci Partners. Two weeks ago, BR Partners purchased BGK, Burger King’s largest
franchisee in the country. Now, market sources say BR will merge BGK with Paraguay’s Vierci, another franchisee, thus
uniting all São Paulo state shops under a single management. Kinea has been trying to purchase a share in franchises
in Rio de Janeiro, while Vinci has contacted Burger King Corp. to become a master franchisee.

RE/MAX to reach 200 stores in Brazil

RE/MAX, one of the world’s top real estate franchising
chains, present in 86 countries with almost 7,000
franchisees, has today 144 stores sold in Brazil, 55 of them
already running. The company expects to end this year with
220 franchised stores sold until the end of the year, with a
657-store chain in 2015, anticipating in five years the initial

FMCG sales to top US$ 123 billion in 2011

This year, the Brazilian population shall spend R$ 205.27 billion (US$ 123 billion) purchasing fast moving consumer
goods (FMCG), as food and cleaning products, according to IBOPE institute. Southeastern consumers shall spend more
with food, an average of R$ 1,313.18 (US$ 791.07). In the South there will be the leading spending on cleaning goods:
R$ 92.72 (US$ 55.86) per consumer.

Brazilian Retail News 1 16/05/2011

Brazilian Retail News
Year 10 - Issue # 387 - São Paulo, May, 16th, 2011
Phone: (5511) 3405-6666

McDonald’s increases sales in Brazil by

21.3% in Q1
Arcos Dorados, the world’s largest McDonald’s
franchisee, running the company’s operations in Latin
America, said in Q1 its sales rose 23.2% year-on-year, to
US$ 826,7 million. Same-store sales rose 12.5% and the
company’s net profit soared 59.4%, to US$ 35,5 million. In
Brazil, sales rose 21.3% in the quarter, to US$ 429.89 million,
or 52% of Arcos Dorados’ total sales.

Consumer demand for credit slows down in April

The number of people looking for credit fell 3% in April month-on-month, although recording a 10.6% rise over the same
month last year, slightly below the 12.9% year-on-year rise reported in Q1. According to Serasa Experian, the growth has
been impacted bt the measures the country’s Central Bank adopted to reduce spending and control inflation.

Droga Raia increases Q1 sales by 22%

Droga Raia, Brazil’s number two drugstore chain in
number of stores, said in Q1 its gross sales rose 22% over
the same period in 2010, to R$ 507.1 million (US$ 305.48
million). Same-store sales went up 10.9%, boosted by a
27.8% increase in generic drug sales. The chain’s Ebitda
jumped 68.4% year-on-year, to R$ 22.4 million (US$ 13.49
million), and the retailer managed to revert the loss reported
one year ago, ending the quarter with a profit of R$ 10.2
million (US$ 6.14 million).

Build-A-Bear opens store in Brazil

The enterpreneur Alberto Mayer gathered a group of
friends to build an aggressive business plan. In the end,
they brought to Brazil Build-A-Bear toys chain, famous for
its “fluff it yourself” Teddy bears. Until the end of the month
the first store will be opened, at Eldorado shopping mall, in
São Paulo. This will be the first shop in Latin America. The
goal is to open 24 stores in the short-term in the country’s
largest cities.

Brazilian Retail News 2 16/05/2011

Brazilian Retail News
Year 10 - Issue # 387 - São Paulo, May, 16th, 2011
Phone: (5511) 3405-6666

Time to add, not to divide , in the global retailing
Marcos Gouvêa de Souza - CEO, GS&MD - Gouvêa de Souza

Carrefour, the world’s second-largest food retailer, next to Walmart, is studying in France a new strategy regarding the spin-
off of its Dia hard discount chain, with initial public offer in the Madrid stock exchange. In an environment the natural order is to
grow to become more relevant, the Carrefour’s alternative seems to be in the opposite way of the trend, as it has been motivated
much more by a short-term financial approach than by a long-term strategic one.

In the more mature and developed countries, however, still engulfed in the consequences of the recent global financial crisis,
competitiveness has grown exponentially, stimulating business integration, as in the distribution (retailing) as in the industry.
There are plenty examples.

On the industry side, one can mention the integration and consolidation the beer segment has been living, led by InBev. In
the food segment, led by Unilever and Kraft. In the beauty and personal care, by Procter & Gamble and also Unilever. And that
has been happening in almost all segments, including cars, with brands consolidating in global conglomerates, as BMW, Ford,
Fiat and others.

In the retail sector, this process advanced a lot by the organic expansion of the large chains, expanding brands, store formats,
channels and businesses to create large global conglomerates, as Walmart, Carrefour, Metro, Tesco and Auchan, specially from
Europe, more relying on the global expansion to expand their businesses, as their home markets have less potential for growth.

Dia chain owns today around 6,400 stores and is the world’s third-largest discount food retailer, with sales around 10 billion
euros and an Ebitda of 504 million euros.

An important characteristic of the Dia operation is that around one third of its stores are franchised, strategy inherited by Carrefour
from the merger with French Promodès in 1999, that made the company the world’s second-largest retailer, then with close to
9,000 stores, being 3,200 discount shops and 680 hypermarkets, besides other specialized operations.

The spin-off proposed by Carrefour, just like the IPO intended in the real estate segment some months ago and also received
with mixed thoughts, comes from a concern with the group’s global figures, that impacted the stock values in 2010 and had been
slightly recovering since January, rising 1.12% in the period. The spin-off aims to address the interests of some stockholders,
looking for better return on their investments.

The spin-off, with different and non-converging motivations for the two resulting groups, would make direct competition grow,
will reduce negotiation power against suppliers, will make Carrefour give away a discount operation that has grown all over the
world, will make the company lose opportunities to improve integration of the logistics and IT systems, and will surely increase
direct costs for the two remaining companies.

In the global scenario, much more integration than disintegration has been seen. Among groups, stores, brands, store channels,
businesses or even, ironically, between global conglomerates and independent players, through franchising. Driven by the
competitive scenario, and also by local retail rules. As in the case of Walmart in India, associated with local group Bharti.

This perspective brings to light a deeper question, regarding the business management focused on a short-term return, a
dominant paradigm in the financial markets and for institutional investors; versus another paradigm, result-oriented and with
strategies focused on the long-term. An eternal and sometimes difficult question that has already made many relevant brands
and businesses lose a lot of value.

Brazilian Retail News (BRN) is a weekly newsletter published by GS&MD - Gouvêa de Souza with the most important news
on the Brazilian retailing. The content can be freely used, once the source is quoted. If you want any information on BRN or our
services, please send an email to publicacoes@gsmd.com.br or access GS&MD - Gouvêa de Souza at www.gsmd.com.br.

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

Brazilian Retail News 3 16/05/2011