Although the COVID-19 pandemic brought adversities never imagined, the Brazilian convenience store market continues to expand and evolve. New consumer habits and needs made the channel rush to adapt and come up with creative solutions.

As essential businesses, c-stores quickly adjusted to the new reality, ready to serve an even more demanding customer. In addition, COVID-19 has drawn consumers’ attention to convenience stores, which became more relevant than ever—from both the retailer and the consumer points of view.

There are about 8,100 c-stores operating at service stations in Brazil. The channel has consistently grown in stores and in revenue over the past 10 years. Since the opening of the first convenience store 34 years ago, the channel has always adjusted to the market.

About 60% of c-stores are franchises of major fuel brands—Ipiranga (AmPm), Petrobras (BR Mania) and Shell (Select). There are networks of licensed operators (e.g., EntrePosto and Aghora brands), owned c-store chains (e.g., Mime and Sim), as well as independent stores.

There remains a lot of space and potential for expansion in the Brazilian convenience store market. According to data from the sector’s last Yearbook, c-stores are present in only 20% of the country’s service stations.

PROXIMITY STORES

Proximity retailing is a trend in Brazil, and in response to consumer demand, savvy hypermarkets and supermarkets have launched. In recent years, smaller versions called “proximity stores” offer not only products for small purchases, replenishment and emergency purchases but also foodservice items.

Chains such as Carrefour Express, Minuto Pão de Açúcar, Hirota Food Express, Minimercado Extra, among others, are experiencing a fast-paced expansion, and competition is fierce. According to NielsenIQ, in 2019, there were already more than 3,100 markets of this format in Brazil, which represented a growth of 35% in three years—a movement driven mainly by large retail chains. During this period, the share of households that shop at neighborhood markets went from 19% to 26.4%.

This growth trend is expected to continue, following ambitious development plans. And new brands will try to capture pieces of the market. Although proximity stores feature some c-store attributes, Brazilian consumers still associate “convenience” with the stores inside gas stations, which is a competitive advantage for operators—and an important incentive to increase the presence of convenience in sites that have not yet entered this thriving business.

Brazilian consumers still associate ‘convenience’ with the stores inside gas stations, which is a competitive advantage for operators.

The increased need for more convenience resulted in petroleum brands also launching stand-alone stores as proximity markets.

AUTOMATED STORES

A creative innovation that emerged during the pandemic was the new convenience format—automated stores within residential or corporate condominiums. Before COVID-19, the Brazilian market had a few stores inspired by Amazon Go (e.g., ZAITT chain High Street stores). The virus prompted drastic routine changes and habit shifts for consumers—from working from home to social distancing, it forced people to concentrate most activities at (and around) home, which made this business format increasingly compelling. The promise of “hyperproximity” and convenience coupled with artificial intelligence allowed the expansion of such stores launched by multiple technology startups. Omnibox, Onii, Zuper and QiSar Home are some of the companies that specialize in autonomous retail—they’ve established their businesses inside containers or rooms in condominiums.

The Hirota supermarket chain and its proximity retail format Hirota Food Express launched Hirota em Casa, and it is booming. There are already more than 20 stores in condominiums in São Paulo, fully automated with self-checkout and digital wallet, selling beverages, beer, snacks, candy, ready-to-eat meals, edible and non-edible groceries, health and beauty products, among other categories. Euromonitor International has highlighted Hirota em Casa as a worldwide example of retail innovation during the COVID-19 pandemic.

IT’S RIGHT THERE

“It is right there” is the new positioning of AmPm, operated by Ipiranga, part of the holding company Ultrapar. AmPm also promises: “everything you need close to your home.” AmPm is the largest convenience store chain in the country, with more than 2,000 points of sale. With a well-formatted bread offering, AmPm has the largest bakery chain in Brazil, with more than 900 units.

Before COVID-19, Ipiranga was already developing the “new AmPm” project, based on different consumer journeys and demands, and launched it at the beginning of 2020. The innovations—from contemporary design to technological disruptions—are a perfect fit to meet the needs of today’s reality. The new concept has a wider assortment, especially in the foodservice category, including items such as pizza, sandwiches and pastries.

Ipiranga is focusing on the omnichannel customer shopping journey and has introduced digital solutions for a fast and fluid experience, whether at the point of sale or using an online marketplace. The digital drive-thru, for example, allows customers to scan a QR code at the forecourt to access the menu and make their purchases without leaving their vehicle.

“Room Service” is another innovation that emerged with the pandemic in stores close to business centers. Accessing the menu by QR code, consumers pay via mobile and then opt for delivery at the office or curbside pickup.

Also, in December 2020, AmPm opened its first street store, initiating operation tests outside the service station. The goal is to bring convenience to the customer, wherever he is, playing the role of a “good neighbor.”

‘Room Service’ is another innovation that emerged with the pandemic in stores close to business centers.

STRATEGIC PARTNERSHIP

The Brazilian convenience store market will be further enhanced by a just-announced partnership between Petrobras Distribuidora (BR) and Lojas Americanas. The new company will operate inside and outside service stations. BR has about 1,200 BR Mania franchise c-stores, and Americanas operates 55 Local stores (Americanas’ c-stores). The BR Mania brand will remain in the service stations, and stand-alone units will have the Local brand. The alliance is expected to foster the expansion and strengthening of the convenience channel.

Shortly before the start of the pandemic, Petrobras Distribuidora stations and BR Mania stores launched a new, modern and dynamic design. Over the last few years, BR Mania had been implementing several digital innovations, and in 2020 the chain accelerated the adoption of newer technologies and ways to facilitate consumers’ routines—digital touchless payment methods, cashback, online ordering offering delivery through third-party apps, along with safety measures to protect both customers and staff.

OXXO IN BRAZIL

In August 2019, an announcement created a buzz among players in the Brazilian convenience market—the formation of the joint venture Raízen between the Brazilian sugar and ethanol company Cosan and Shell and Femsa Comercio. The latter is a leading Mexican multinational company in the convenience and proximity store segment in Latin America, with more than 19,000 stores in that region.

A year later, the partnership resulted in a new company—Grupo Nós. Operations comprise around 1,200 convenience stores under the Shell Select brand at service stations and OXXO proximity stores. The company opened its first OXXO store in December 2020 in Campinas, São Paulo. Less than three months after inception, there were already nine units in the city.

Bringing the concept of convenience to a mini-market and practicing competitive prices and promotions, the stores have a broad product range—bakery items, fruits and vegetables, edible and nonedible grocery items, meat, beverages, snacks, among other categories. Fresh-baked bread is one of the highlights of the new store. There is an important focus on foodservice, too, with a wide variety of sandwiches, pizzas, pastries, ready-to-eat meals, desserts and hot and cold beverages. Another differentiator of OXXO stores, when compared to similar proximity stores, is the offer of cold non-alcoholic beverages and beer in a walk-in cooler.

The Shell Select chain, whose vast majority of stores are franchised, is a key player in the growth strategy. Its new generation of stores launched in 2018 present a more modern layout and a simpler and more profitable operation for the franchisee, with lower operating costs. The average sales of the stores in the new format increased by 20% versus the previous year.

As it happened with the channel in general, the COVID-19 pandemic rushed implementation of processes to meet the new habits and needs of consumers. The delivery service, in partnership with marketplace companies, was put in place. Home delivery and the offers of bakery items, foodservice and nonperishable products have helped stores secure sales in times of lockdown and mobility restrictions.

Over the next three years, Grupo Nós plans to open 500 additional stores in the southeastern region of Brazil—Shell Select at service stations and stand-alone OXXO proximity stores.

OPPORTUNITIES

New trends and technologies triggered by COVID-19 are here to stay. The idea of omnichannel is now stronger. Brazilian consumers who engage with the integrated physical and digital shopping experiences want them to be frictionless, faster and practical. Convenience stores must strive to keep up with solutions for those demands. Brazilian convenience continues to focus, now with more intensity, on foodservice, and the pandemic has driven a shift to healthier foods. Delivery and drive-thru options will continue to grow. Loyalty and cashback programs are likely to be more relevant.

The concept of convenience has been amplified in the eyes of the consumer and, as paradoxical as it may sound, the pandemic has brought this “advantage” to the channel. Gas stations without a c-store are rethinking their businesses and considering entering the segment that is likely to stand out going forward. In addition, large retail chains are also contributing to bringing convenience closer to the customer, extending their reach in proximity markets, so competition will grow.

This article is excerpted with permission from Global Convenience Store Focus, a newsletter from Insight Research. To subscribe, visit www.globalconveniencestorefocus.co.uk.