As one of the largest retail companies in South America and the largest in Chile, Cencosud has transformed itself from a self-service supermarket back in 1962 to a multi-format retailer with 1009 stores across Latin America today. It operates through different store formats including supermarkets (Jumbo), home improvements (Easy), shopping centers (Santa Isabel), financial services (Costanera Center) and department stores (Paris). Today, it’s also the most profitable retailer in Latin America with a leading presence across the major markets in South America including Chile, Argentina, Brazil, Colombia and Peru. Continuously, it seeks as it says its mission "to be the most profitable and prestigious retailer in Latin America, based on excellence in our quality of service, respect for the communities we live and the commitment of our team of collaborators with the basic tenets of our company's vision, challenge, entrepreneurship and perseverance ".
Looking back at the history of the company, started in Chile by the Chilean-German businessman Horst Paulmann, the company’s origin was a small self-service deli. Expansion started in 1970s with the innovative idea of becoming “hypermarkets”. The process of internationalization started in 1982 with the opening of the hypermarket “Jumbo” in Argentina. The company stood itself out with its focus on its core values: diversity, value for clients, commitment with employees, respect for local culture and entrepreneurship. Nowadays, Cencosud has a strong brand position in Chile where it has over 50 years’ presence.
1) Well-organized brand portfolio
The company’s premier business portfolio consolidates its market position across the world. Today, Cencosud is the main operator of the retail sector of the country. It is the largest operator in supermarket industry in both Peru and Argentina, a leader in home improvement industry in Argentina and Chile and the second participant of shopping centers in both countries. Currently, it also involved in the administration of department stores in Chile and the financial business through financing to customers through its own credit cards.
2) Business Model
The company operates a multi-format scheme that enhances and complements its business. For example, by locating Jumbo, Easy and Paris into its own holding company, Cencosud strengthens the business of shopping centers to generate a significant number of people. Meanwhile, the supermarket business usually brings up customers on a more regular basis, thus making the whole business less sensible.
3) Strong and Well-positioned brand
The concept Jumbo has a strong and clear market positioning in the segment that is targeted in Chile and Argentina, allowing it to maintain positive sales margins and profits higher than the average supermarket industry. Easy stores in Argentina have a privileged position and brand recognition as well. Meanwhile, Paris stores, due to a long tradition of 100 years in business and strong investment in advertising, is positioned as one of the most important department stores in the country. Also, the department store format has a high level of acceptance by consumers.
1) Risk associated with foreign operations and over-expansion The development of Cencosud’s business strategy requires it to maintain high management capacity, competent staff, efficient distribution systems and inventory controls. This brings up high level of investments and makes the company’s abroad operations susceptible to any deficiency of the above elements. Furthermore, the future profitability may also be affected by the saturation of certain geographic markets where Cencosud participates. 2) Risk of investments abroad
Regional expansion gives the company opportunities for growth and the possibility of strengthening its position as a regional provider. However, the credit ratings of the foreign countries like Argentina,...