Market Structure, Growth and Competition in the Supermarket sector in Latin America

Oct 26, 2015

Market structure, Growth and Competition in the Supermarket Sector in Latin America – Juan Delgado (Global Economics Group)

Supermarkets have become the primary point of sale for food and household products throughout the world. This process of drastic transformation in the food retail sector was facilitated by several intersecting elements of supply and demand: On the demand side, we see changes in the habits of consumers who, due to time constraints and a greater available wealth, tend to do all their shopping in a single stop. On the supply side we find innovations in logistics and distribution, as well as economies of scale and scope made possible by the sheer size of supermarket chains. These have brought important reductions to distribution costs and improvements in stock-handling and variety.

The growing role of supermarkets as points of entry into the market has resulted in better stocks of available foodstuffs and lower distribution costs. At the same time, supermarket chains have accrued greater bargaining power against both providers and consumers, which could give rise to anti-competitive practices.

The speed and scope of this transformation varies across different countries throughout Latin America. Here we find countries with a high degree of supermarket penetration, such as Brazil, Mexico and Chile (where supermarkets account for over 50% of food sales) alongside countries with low penetration, such as Colombia, Venezuela and Argentina (wher