* What's new?
Following the publication by Brazilian newspaper El Globo of an article on bribery allegations at the government level, the Brazilian market pulled back significantly (Ibovespa down -9% at the time of writing) and so did the Brazilian Real vs. the major currencies (down -6.5% against the Euro at the time of writing). In this short note, we quantify European grocers' exposure to Brazil.
* Bottom line:
Three of the top sixth grocery retailers in Brazil are controlled by European-based retailers: Carrefour is the largest grocer with a market share estimated at 17%, CBD Pao de Acucar (controlled by Casino) is a close second with a share of ~16%. As for DIA, it has a more modest market share (slightly above 2%), but given the size of the Group, Brazil is nevertheless an important market for the retailer. While Brazil represents a great share of consolidated sales and EBIT for Casino, Brazil is actually more significant for Carrefour when looking at a sum of the parts valuation, given significant differences in ownership: Casino has an economic interest of only 33.2% of its Brazilian subsidiary, while Carrefour owns 88% of its subsidiary in the country. We are Underweight Casino shares and Equal-weight Carrefour's and DIA's.