‘Pão de Açúcar will return to being a premium supermarket’, says president

For years, customers of Sugar Loaf 🇧🇷PCAR3) saw the stores decline. Accustomed to being treated well – and paying more for it -, they saw the departure of packers, sommeliers, specialists in bread, cheese, coffee and even the kindness of most of the employees.

Investors, on the other hand, saw the company lose muscle, especially after the exit from Assai 🇧🇷ASAI3) of its structure. With reduced profitability and growing less than inflation, the result appeared in the portfolios: throughout 2022, the actions of GPA lose more than 9%.

At the age of 49, President Marcelo Pimentel was called in April to change this scenario. Responsible for a recent restructuring overshadowed by the pandemic in Marisa stores 🇧🇷LOVE3), arrived at the supermarket chain with the plan to bring back the profitability and weight lost by the brand, in the next three years.

“My mission is to make Sugarloaf Mountain once again the premium supermarket from Brazil,” he told the Estadão/Broadcast🇧🇷 Below are the main excerpts from the interview:

What marks the new strategy of GPA?

The focus of the strategy is the premium format. We want to go back to being the premium supermarket in Brazil. We are the only one that can do this through capillarity, with more than 190 stores in this format. As they are well established, we saw the opportunity to form an extension, with Minuto Pão de Açúcar. The model is to be in class A and B neighborhoods, which customers can reach in 5 minutes on foot – and we have more points available for proximity than supermarkets, especially in cities where we are already present. For the current expansion, we do not plan to enter new states. We are going to open 50 supermarkets in three years, which is quite a bold challenge.

How will the new stores be financed?

The proximity model is financed with our capex (separate resources for this purpose). In the supermarket model, however, it is done on a build-to-suit basis (when another company builds and, once the supermarket is operational, the store’s rent pays the rent).

At Marisa, Mr. made a “turn” seeking to leave the “fast-fashion” proposal. Is the reasoning similar in the case of Pão de Açúcar?

Is no different. In that context, we were leaving “by the heaping”, but still for customer C and D. Not here. While we experienced the advance of cash and carry and strong competition with the hypermarket model, class A and B customers were being neglected. The idea is to change that. The purchase option (for this consumer) needs to have a larger assortment, in addition to a differentiated offer of perishables. We are working so that, in Pão, we do not have competition with hypermarkets and cash and carry. The customer seeks quality here.

But today he can’t find it in stores…

But we have already started to change. What appears in the store is the materialization of a negotiation made with the supplier. We’ve been doing a whole lot of fruit review work and in the bakery, for example, we have a French specialist. These are areas that have grown, as well as in butchery, in specific cuts. The most popular cut in Pão is the filet mignon. We have sought to increase the share of perishables in the store. On average, the share of these items is 44% of each purchase. In these remodeled stores, it already exceeds 50%. Perishables are very important because they bring recurrence and better margin.

Credit Suisse compared the performance of Pão de Açúcar stores with those of St Marché, and the account was favorable to the competitor. Are they the goal to be achieved?

On the contrary. Pão de Açúcar was the forerunner of the premium food retail experience in Brazil. From the brand, new models were born. Pão de Açúcar is the company’s most profitable model and is growing. That’s why we’re doing this work, reviewing the assortment and focusing on perishables. The proposal to have 190 stores and grow with another 50 has no equal (in the competition). Nobody in Brazil has the capillarity of a premium food retail offer like Pão de Açúcar. My focus is not on using them (St. Marché) as a reference, but on using the customer as a reference.

Is the brand gone?

We have held many customer listening groups, and what they basically talk about is “making Pão go back to what it was historically”, that is, premium retail. We returned with packers, specialists in wines, cheese, coffee and the quality of fresh products. In the first quarter, Pão de Açúcar had an NPS (brand approval methodology) of 44. We are ending the year with an NPS of 76. We invested more than 200,000 hours in employee training. We train absolutely everyone in cashier operations and specialists in meat, bakery and fish.

Would the difference, in relation to competitors that deal with the A/B public, be the size of the operation?

Exactly. I already have many more stores (than comparable competitors), and the expansion plan is much bigger. The challenge is different when you have 10, 20 stores than delivering that consistency across more than 200 stores for all customers. It is a “turn around” process that will take three years. I’m not promising miracles. We started in 2022 and will continue until the end of 2024. It is a recovery that involves several points, including the products that the customer is looking for in the store and the quality of perishables. We improved our breakage by 5 percentage points (shortage of products).

And in relation to the service, also the subject of a complaint?

We invested 200,000 hours in training, from the technician to the service coordinator, a function that had been extinguished.

But won’t there be a reduction in personnel, as was discussed with analysts?

Reductions were made at headquarters, not stores. We are committed to protecting them to return the customer’s shopping experience. The market wants to see Bread returning to be the best premium retail model, with the best profitability. There is no option not to do this.

Will the investor wait three years to return to profitability?

He’s not going to wait three years because it’s a gradual trajectory. Next year, we will grow above inflation, something we haven’t been able to do so far. We are beginning to see very positive signs regarding this inflection. For the first time in years, we regained market share. For three months, we gained premium customers again, which are very valuable. One premium customer represents the equivalent of nine traditional customers.

How do the financial problems of GPA’s controller hinder the resumption of the brand in Brazil?

The business plan for the next three years has no correlation with the shareholder’s reality outside Brazil. What we have been working on in the domestic market (eliminates the) need for foreign input. The reality we are experiencing is one of alignment and commitment, as well as a mandate from the board, for this growth to occur. Even for Bread, which today has a very depreciated market value, to recover. We have the opportunity to make this asset grow a lot, and for that we need to invest again. Pão needs to go back to being the Pão it was, which needs to be recognized by customers. That done, I have no doubts about the value of this role. Doing nothing is the worst option. We have the most valuable brand in Brazilian retail. In contact with customers, we realized that the customers are unanimously rooting for Pão to become Pão again. The customer was left without this option.

What does this mean in terms of numbers?

We will end the year with 110 remodeled stores that prioritize perishables, services, living spaces. They have, on average, seven percentage points of sale above unrenovated stores. Perishables increase penetration from 44% to 51%.

The information is from the newspaper The State of S. Paulo.